The fundamental point with crypto is that you can design your own with any criteria you want to fit all of your needs, but the problem of adoption still remains. If you make it behave like a currency, speculators will lose interest and it won't get adopted. If you find a government willing to impose it for transaction you will nullify the reason for crypto to exist.
How? There has to be an incentive for people to participate in that market. The Bitcoin market shows that "deregulated and decentralized" incentives, by themselves, attract only a minority of users.
It's difficult to see how. The vast majority of people don't care even a little about that stuff. They just want money they can spend on the things they need with the least amount of hassle and risk possible.
> Don’t trust a certified cheque from “Bubba’s Bank and Trust and Taco Shack”, or from the “Royale Bank of Scottland” branch in the City of Culiacán, Sinaloa, Mexico.
That is actually a little like how US money used to work--badly--before the civil war. A storekeeper would keep a third-party guide behind the counter, regularly published for their city or region. The guide would help them recognize the designs of private notes from different banks, and contain recommendations for what value (if any) someone could place on the note depending on the reputation of the bank and how far away they'd have to go to the nearest branch.
"It costs $3? Okay, here's a $5 from the Far South Bank."
"That's a long ways from here in Middleville, traveler, I'll take it as $4."
"If you can give me $2 from Extreme North Bank for change, then I'll take the deal. Otherwise $1 for something local isn't as useful for me since I'm leaving tomorrow."
"Sorry, today I can only make change in local stuff or Eastern Railroad."
One amazing outcome of the (currently expensive and unweildy) DeFi implementations, is that there is always a maker/taker available for every currency pair.
You can always exchange every cryptocurrency for every other cryptocurrency, 24/7, without having to ask any bankster or do-gooder bureaucrat for permission.
Once wealth-backed dynamic-issuance cryptocurrencies eliminate the need for any Fiat on- or off-ramps, the circuit will be closed -- nobody will ever have to ask a gate-keeper for permission to create wealth, monetize that wealth, or execute a mutually agreeable transaction with that money.
Nor will they be forced to use sub-standard money.
The existing power structures will be ... displeased.
Interesting ideas. I think in any practical system, you'd still need some central authority that determines:
a basket of basic, thickly traded commodities should be chosen; perhaps a basket of specific amounts of basic elements, thermal and electrical energy, and basic food commodities, priced as delivered to several large markets.
and
A control algorithm such as the PID loop used in process control or robotics is employed to adjust K over time.
At a minimum, those aspects of this currency would need to be flexible such that they can be adjusted over time, as needed, to maintain the currency's stability.
An inflexible scheme seems like it would be doomed to failure. And yet, any tinkering could also be its demise and undermine its stability and faith in the system. It's a delicate balance.
Ultimately money is a social construct based merely on shared belief. Algorithms can used to enhance and support this social construct, but I do not see how it could wholly replace human/social interventions.
The "central authority" that determines the composition of the basket -- is the users of the money.
The thing about non-fraudulent, wealth-backed money is that there is no barrier to entry, nor is there a barrier to exit. Unlike usury-based money, a wealth-backed currency can cleanly decrease in usage, down to zero. People withdraw wealth pledged to created the money, by returning the amount of money created, and then take their wealth elsewhere.
Thus, if people don't like the valuations arrived at by the "basket" underlying the value of each unit of money (ie. something becomes undesirably in/deflationary), they can move to another form of money -- ideally, one that constitutes its "basket" based on a more representative set of the society's basic commodities. In the ideal embodiment, this basket would evolve over time (eg. as energy production moves from coal to oil to natural gas to nuclear to renewables over the years, for example, the energy commodity component of the basket would be revised automatically).
As for the PID loop, there are much more advanced controls methodologies that improve error rejection (eg. Kalman filtering), stability (Model Predictive or State Space control), etc. Furthermore, limits on the introduction (or withdrawal) of wealth (and hence newly created units of money) should reflect the current size of the ecosystem to limit shocks that would adversely interfere with the control stability. (ie. you can't create 10x the current size of the economy in newly issued money all at once.)
This is exactly the sort of thing that will make people seek out a replacement central authority. Most people don't want to, and won't, micromanage their "currency" like that.
They just want a medium of exchange that changes value slowly enough that they can be reasonably sure they know what the currency is worth. If cryptocurrency somehow replaces fiat money, people will turn to financial companies and pay an extra fee so that they bring back the advantages of the fiat money.
99.9% of users will just appreciate the fact that their money retains its purchasing power (as measured in civilization supporting commodities), across multiple generations. Not just for a few years; their grandkids will be able to purchase the same amount of "stuff" with it).
Those that want to create wealth and then monetize that wealth to (for example) purchase property or businesses will appreciate the non-corruptible value management features.
> will just appreciate the fact that their money retains its purchasing power
I don't see how cryptocurrency enables this, because I don't think this is the result of currency being fiat. I think it's a result of currency being a token of wealth rather than wealth itself.
> will appreciate the non-corruptible value management features.
I can't comment on this because I'm not really sure what you mean by it
> Algorithmically, it is possible to control how much it costs to mine crypto at any point by modulating network fees (PoS)/block difficultly (PoW). This would in turn have an effect of the supply of the currency because if it becomes cheaper (in USD) to mine than more people will mine it (as it becomes more profitable to do so).
If it's cheaper to mine, it won't be more profitable. See dogecoin. It'll create more token and at a decreased value.
I can't believe people are still falling for this ponzi scheme
The last paragraph is absolutely peak "let cryptocurrency run long enough and they invent every institution they tried to get rid of".
What the author is describing here, a trusted group of institutions that buy and sell currency to maintain an inflation target is called a 'central bank'. Or in this case, a bunch of central banks. In fact even the proposal to automate and do this algorithmically goes back to Friedman.
i agree. although the centrality/instuitionality of the “bank” is negated. the “central” bank is completely decentralized and completely dependent/reactionary to the market.
the idea is old but gains new life to the rise of defi.
In fact, I think there are numerous stablecoins whose peg is maintained through mechanics typically associated with central banks, which have been decentralized. Some (Maker DAO's DAI for example) have been holding at +/- 0.2% of peg, 99.9% of the time, for years.
Wouldn't multiple central banks (each with their own currency) be the best? Or is that what you mean? Then people can choose which currency (and thus which central bank) seems the most stable and legitimate (as long as it can also exchange with the currency they pay their rent and taxes in).
(Theorizing about cryptocurrency is fun as long as you ignore how actually-existing crypto, like actually-existing communism, is working out in the real world. Although that doesn't mean all the underlying principles are wrong...)
> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
I always liked this idea, and I a few cryptocurrencies/blockchains tried to do something like it, including Stellar Lumens[1]. Just looked it up to post this and they abandoned it back in 2019.
Unlike the tokens of other blockchains, lumens aren’t mined or awarded by the protocol over time. Instead, 100 billion lumens were created when the Stellar network went live, and for the first 5 or so years of Stellar’s existence, the supply of lumens also increased by 1% annually, by design.
That inflation mechanism was ended by community vote in October 2019. And in November 2019, the overall lumen supply was reduced. Now there are about 50 billion lumens, total, in existence, and no more lumens will be created.
Yes well, inflation (actually: devaluation) isn't in the [immediate] interests of the currency holder. Terrible if you just want to speculate, which is 99% of the crypto market.
I'm no economist, but inflation should reflect an increse in growth and productivity. The fact that these coins don't tend to consistently devalue might say something about how useful they are for doing the job of a real currency.
> I'm no economist, but inflation should reflect an increse in growth and productivity.
An increase in growth and productivity should reflect deflation: more goods and services with the same amount of currency. Absent intervention, inflation simply does not happen as a long-term secular trend in a growing economy.
As mentioned in another thread, pre-modern US had growth rates higher than the modern US (~4%) with an immaterially changed CPI over a ~130 year period. This was with two punctuated sessions of central banks and wars which issued debt notes (currency).
In addition: it should be noted that Japan has had a deflationary currency for 30 years and is an economic dynamo. The only problematic aspect of that—which can be seen in the BOJ's recent ill-fated attempt to increase the interest rate—is it makes government debt (and all debt) harder to pay back. However the point remains: deflation has had an immaterial effect on standard of living.
> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
This 2-4% number has no fundamental basis, Ampleforth is the only cryptocurrency that seems to solve this basic concept of how much supply and how to distribute it
Yeah projects like this that take into account more solid macroeconomic principles like Milton Friedman's k-percent rule ( https://en.wikipedia.org/wiki/Friedman%27s_k-percent_rule ) are the only ones that deserve to be called crypto "currencies". Too bad they gave up. The appeal of turning it into a get rich quick scheme for early adopters is just too difficult to resist. The fact that no similar project is popular means that few people care for crypto to be used as a functional currency.
> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
This fundamentally misunderstands the point of Bitcoin's creation (and currency). The ideal currency does not inflate at all, which makes it inimical to government spending and debt. As modern fiat is inherently based upon debt, this makes it non-ideal from the perspective of governments, but ideal for everyone else.
Inflation to drive monetary velocity is a ridiculous concept, as is inflation. Inflation is scarcity of goods purchased in the present relative to money supply: fewer goods and services at the expense of more currency. People want goods and services, not currency.
During multiple periods of US history—including much of the 1789-1913 era—the US paid out no interest on US bonds, as the value was in its safety, and the value of the dollar was worth more at its redemption. More goods and services relative to the comparatively smaller increase in currency made savers wealthy without investment. Outside of wars, pre-modern US had a deflationary currency in its run up to becoming the pre-eminent power on the planet.
Let me stop you right there. You may want that, but that's just, like, your opinion man. Most people, like 99% of people, do not want hard money and the tradeoffs it entails.
It has nothing to do with "hard money" if you mean physical currency. People want wealth, period.
The problem with the idea of inflation (read: "scarcity") to drive monetary velocity is it messes with investment. There is no shortage of people wanting to invest capital for increased returns in the future. But if you force consumption without a plan, you're consuming in the present for the sake of it.
A farmer can plant seeds and return an investment on that, or you can eat your seed crop. Forced inflation is forced returns in the present for lower returns in the future. Due to prices functioning as a regression between the exchange of goods and services, this one-to-one mapping is not as obvious, but it is definitively what happens.
You cannot consume what you do not produce. And investment requires deferred consumption. Forced monetary velocity is forced consumption at the expense of investment.
Assuming the parent poster means neither inflation or deflation (read: platonic, theoretical, likely impossible) then that's good, it means the economy is getting distributed in an seamless and unbiased manner.
That means it doesn't matter if you happened to have most of your economic assets in cash, or in potatoes, or in uranium ore, or in a house, etc. It means that there's no weird externality which is tipping the scales or "choosing" winners and losers.
Slight inflation isn't better than perfect balance, it's just a reluctant compromise, since it's the safer direction in which to fall when dealing with an unstable equilibrium.
To be a currency, you need inflation. Otherwise you have an asset. We can see this from European history: before 1492 it was common to hoard gold as if it was gems, rubies, sapphires. It had limited use as a currency, and only at the highest levels of the economy, never at local levels -- it was traded among the very wealthy, the same as assets might be traded among the very wealthy. Only after 1492, when gold and silver started to pour in from the New World, did gold and silver become useful as everyday currencies. The French historian, Fernand Braudel, spoke of the "the price revolution of the 1500s" because inflation managed to average 1% a year for the whole century, which was likely the longest and largest sustained inflation in history up till that time. It was that inflation that gave birth to the modern world, and gave us a world of currencies and wage-work. Because crypto lacks inflation, it cannot be used as a currency. It will remain an asset.
> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
While a constant 1-2% inflation may be ideal for fiat currency, I think a cryptocurrency should have the simplest and fairest possible emission model of a fixed yearly supply. This gives an inflation rate after n years of 1/n, making the currency disinflationary. While it takes 50 years to get inflation down to 2% this avoids the wealth concentration seen in nearly all existing cryptocurrencies that vastly tip the emission to the first few years.
Not me, since 2013 I have used Bitcoin because I value its properties as a medium of exchange and there are many like me in the Monero and Bitcoin Cash communities, it's just that YOU people only care about its value in dollars so ignore projects that don't sky rocket in price.
The "Number-go-up" cult is run by Blocksteam and Co. and has little to do with actual cryptocurrencies.
It's a broken argument to assume you need inflation for a reasonable money system. If a money system becomes popular then the price of goods becomes cheaper in that money as it is more scarce.
Goods would be less sats over time.
Inflation is bad for everyone apart for the people who print the money, hence the mess we're in.
> It's a broken argument to assume you need inflation for a reasonable money system.
I think it's not so much about "needing inflation" as opposed to "avoiding persistent deflation", which is a much stronger argument for a reasonable system.
A currency everyone believes is going to persistently deflate will seize up and cease to be a real (i e. functional) currency that encourages and lubricates trades. Instead it becomes a hoarded speculative commodity, and users will seek a new replacement currency they can use for regular transactions to avoid touching their collection.
This has arguably occurred with certain cryptocurrencies, where many of the transactions are just wash trading, where someone makes disguised trades to themselves to prop up the price of the speculative commodity.
> Bitcoin was fundamentally flawed due to the built-in scarcity, so obviously the price would go up. The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
Bitcoin is open source, fork it with your preferred settings and convince others to join your network.
Bitcoin maximalists claim tail emission will never happen, but that’s just an opinion.
IMHO, The cryptocurrency "Hex" has the best inflationary mechanism.
First side note, Proof-of-work isn't dead, but it should be. Proof-of-stake is vastly superior (return isn't based on how much electricity you burn, but by putting up risked collateral and running that)
So, Hex. You stake/invest/lock up your coins for a fixed period of time, and the system gives you more back at the end of the term at a fixed percentage; like how so many financial products are supposed to work.
And even better, all "penalties" (e.g. you end stake too early or late) go back to the "on-time" stakers as a bonus.
Richard Heart has been charged by the SEC for the usual crypto scam stuff and spent many months dodging subpoenas.
Charges and subpoenas need their day in court of course but it reads like the quintessential crypto story of embezzlement, fraud, etc for a guy to flash Veblen goods on social media.
Fair take, but I strongly bet he'll beat these charges. The Veblen stuff is interesting game theory actually. He's explained in detail that it's all strategy; he gave millions to charity but no one paid attention, so he's trying that.
Obviously I'm not guaranteeing anything, but I find his IRL strategies more interesting and compelling than any theory I've seen. Enough to put real, but not significant, money in.
The author misses the point about why cryptocurrency is stupid, which is that law is the ultimate arbitrator of ownership, not a piece of paper or a magical token. Anything that goes against that goes against the point of having a government and results in stupidity like funding the North Korean dictatorship and slavers running scams in South East Asia.
This adds another layer of stupidity on top, proposing that people buy a deflationary asset that they are not required to own.
ChatGPT hit 100 million users in two months (previous record was TikTok in nine). It’s currently estimated to be at least double that…
In less than two years.
Coinbase has been around since 2012 and has roughly 100 million users.
Yes ChatGPT is free but let’s not kid ourselves - most Coinbase users are on the platform essentially gambling with the hopes of making money. Get rich quick is an extremely powerful motivator…
In terms of actual usage, do some basic analysis of on chain activity for the top X crypto whatever. You’ll quickly discover usage is comically low outside of what is clearly trading and a tiny number of hardcore cryptocurrency nerds swapping around whatever for who knows what use cases.
People are generally good about figuring out what is useful to them, what improves their lives, and what they enjoy. 15 years after the advent of bitcoin the use cases for mass adoption (and therefore users) just aren’t there.
Crypto tech can be interesting but it’s just that - interesting. I have at least a dozen wallets on various chains, I’ve written smart contracts, etc. I can honestly say the entire thing could disappear tomorrow and I wouldn’t know the difference. Other than one friend at a Cardano-related startup I don’t know anyone else who would notice either.
ChatGPT alone, meanwhile, would be a loss I and everyone I know would feel immediately - and that’s just ChatGPT.
Both are bad for the environment, what is your point?
Let me guess you're part of "AI is useful even though we need the compute to burn the planet" crowd.
And on crypto itself:
Crypto cannot ever be used as a currency, we have been over this for 15 years.
They are all too volatile, we have seen that stablecoins like USDT, USDC and the rest of them are at best dubiously not audited and at worst an 'algorithmic stablecoin' scam like LUNA, the tech is entirely bad.
Sure speculation and the rest of it are the main use case of crypto, but let sleeping dogs lie with this bad idea the author is proposing and not use bad ideas coming from crypto which is an even worse system, to fix problems in the current financial system.
My take is that crypto is a scam but fiat monetary system is a scam. The fiat proponents likely corrupted crypto intentionally, leveraging government agencies and financial institutions to prevent adoption and soil its reputation... Same thing as western corporate powers have been doing to developing countries in Africa and elsewhere; corrupting community and national leaders via an extreme punishment-in-one-hand, reward-in-the-other model, impoverishing the masses for the benefit of western conglomerates (read Confessions of an Economic Hitman)... Then fooling everyone into blaming citizens of those countries for their own poor 'voting decisions'.
Everything which is based on either fiat or crypto is also a scam by extension; stocks, bonds, derivatives, etc... Our entire financial system is built on an unsound, virulently corrupt foundation. Much energy is spent on keeping up appearances, but beneath every statistic hides a dark reality.
It probably comes down partly to the sheer number of white collar 'bs' jobs. There exist millions upon millions of 'knowledge workers' who distort narrow slices of the world's knowledge in the pursuit of narrow financial goals... But by the millions, their distortions add up to total surface-corruption of all knowledge. Everything is as rigged as it can possibly be, but looks only just as plausible as needed to continue existing.
IMO, the growing divide between appearance and reality explains the growing divide between the haves and the have-nots. Now we're at a stage that we ran out of people who are smart and corrupt enough to provide enticing justifications for all the contradictions so that's why the system now resorts to censorship and ad-hominem attacks; not addressing questions that are raised because no response exists which sounds coherent; even to the masses of midwits.
We're moving towards an Idiocracy wherein increasingly stupid, arrogant people who cannot see contradictions in increasingly weak official narratives are promoted to positions of power solely for the purpose of maintaining the system's domination by a small number of elites. Literally building a moat out of human stupidity.
A massive problem is that really stupid people, who (subconsciously) know that they're stupid, tend to trust authority figures and experts almost 100%... Because they know, deep down, that they cannot trust their own judgement about anything. These super-idiots actually think they're intelligent because they believe that one's intelligence is directly correlated to one's ability to trust the narratives fed to them by 'more knowledgeable' authority figures.
It's a self-serving view of intelligence, whereby stupid people see their inability to comprehend certain complex concepts as a form of intelligence in itself; they believe that their minds are hyper-efficient because they can reach their material goals without having to do all the tedious intellectual work; they go straight for the reward. Based on this definition, human polymaths with PhDs are idiots and cockroaches are geniuses but OK...
