Man, I really feel like those who are upset about this truly wanted it to be "their Bitcoin" -- the cryptocurrency they got on the ground floor for and were hoping would turn out like BTC has. And to be fair, it sorted started looking that way. But now, as it's been decided to be "inflationary" (like the USD currently), they feel that the party is over.
And I get it. That sucks. Personally, I think it's a great thing for Doge. It'll keep up the current "tipping culture", discourage hoarding, and encourage us doge to trade and share, til we get to the moon. Such wow. Amaze. :D
The thing is its actually less inflation then Bitcoin or Litecoin at least for the next few years anyway. See the following (taken from reddit thread) which shows the inflation amount over the next 5 year period.
People need to keep in mind that dogecoin's inflation is set at 10,000 coins per block forever once mined out. As such the inflation amount will reduce each year as more coins exist, unless of course people manage to loose about 5 billion coins a year. The other thing to remember is dogecoin currently has about 5% inflation a week, so anyone dumping it over this news is a bad speculator.
EDIT before someone jumps down my throat I am checking the numbers now and the bitcoin one looks to be slightly off, please take this as close, but not exact please. If you have the exact numbers pass them on and I will update.
> anyone dumping it over this news is a bad speculator.
Especially considering that XDG is barely a few months old, that this decision won't impact anything before the whole 100 billion are mined (which is years from now) and that due to the open source nature of the software the decision can be trivially reversed should the community decide otherwise.
A dogecoin joke? Are you serious? Bitcoiners have been screaming to the moon for years. But now it's doge's joke? Is there anything else you want to copy without improvement?
yes my friend, you are misunderstanding the exchange rate. There are currently ~40 million "dogecoins" floating around the internet. All the dogecoins combined are presently worth $55 million USD. Therefore each dogecoin is worth $.0014 USD.
Before this announcement, there were only ever going to be 100 billion dogecoin in existence. Now they just decided that they want a 5 billion doge inflation rate per annum, Thereby decreasing the the value of each dogecoin.
Its somewhat similar to the way that the federal reserve pumps money into the market to increase the flow of capital, the dogecoin foundation wants to increase the flow of dogecoin by increasing the supply and access and decreasing the incentive to hoard.
edit the code was already written to be inflationary. The plan was to implement a 100 billion cap in some future version. They scrapped that plan.
It's not so bad in theory, at least it counters the deflationary-currencies-are-evil-and-stupid argument. The real worry is that now some entity has been entrusted with the ability to manipulate the value of the currency, and that the entity may violate that trust by later deciding to further inflate the currency.
Does anyone have a good explanation as to why this is supposed to be hard to achieve? What incentive do miners in the distant future have against inflating a cryptocurrency?
For example, take Bitcoin after the cap has been reached and mining bitcoins only gives fees. If 50% of miners cooperate to make blocks worth real bitcoins again, they will suddenly start raking in more profit. They will be devaluing everyone's stores of bitcoins to do it, but people who hold bitcoins have no say in it, only computing power does. If we assume that miners will be the main owners of bitcoins for all eternity then they will probably never agree to this, but if there are a lot of miners with very little in reserve then why wouldn't they accept devaluing bitcoins a little bit to get more per block mined?
Exchanges and other prominent users would probably also have to agree to the change. Things might get bad if there was a split between miners and everyone else because the miners could perform 51% attacks on the other fork, though.
The Jamaican bobsled team are going to the Olympics based on donations from a cryptocurrency based on a set of jokes centered around a picture of a dog from a blog.
There is a reason William Gibson stopped doing straight sci-fi.
Many people. I personally threw $100 in because why not? Its a small amount of cash to lose. I am willing to bet more then 300 people have spent more then $100.
The inflation rate over time will actually tend to zero, since each additional 5bn coins represents a smaller proportion of the total amount. A constant quantity over time translates into a decreasing rate of inflation.
This is important - anything that a majority of a cryptocurrencies userbase doesn't like won't get implemented because they wouldn't upgrade the protocol, they would fork it.
I'm not bothered. I got 'in on the ground floor', and I don't care that it isn't valuable (although yes, I would have been happier if it did become valuable, of course...). I'll probably stop mining at some point soon, but I have the coins, and having a big number is a nice feeling. Plus, it's funny.
Those were the original rules. The title is misleading, people are disappointed because they expected the devs to eliminate the perpetual generation of coins in the original software. The decision was simply to do nothing.
Those weren't the original rules. Their development team made a mistake and the inflation problem was introduced. Bitcoiners warned them about this, they didn't listen.
Is there compelling evidence that inflation discourages hoarding? I don't think anyone would agree that USD-centric societies discourage hoarding, unless you think something like investing in mutual funds doesn't fit the term.
I don't think anyone would agree that USD-centric societies discourage hoarding.
No offense, but I think it would be wise to familiarize yourself with the basics of a subject before forming high-confidence blanket opinions about it like that. (The same applies to your other comment about why anyone would think an inflationary economic policy would be desirable at all.)
Sorry if I sound patronizing, but as it happens the link between inflation and hoarding is one of the few well-established empirical facts in economics [1,2,3] with ample historical evidence both from the well-documented shortage effects of price controls [4], to the well-understood effect of changes in bond yields on the money demand [5], which is the cornerstone mechanism of basic monetary policy.
[3] Milton Friedman once said: "We economists don't know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can't sell tomatoes for more than two cents per pound. Instantly you'll have a tomato shortage. It's the same with oil or gas." From http://en.wikipedia.org/wiki/Price_controls.
> No offense, but I think it would be wise to familiarize yourself with the basics of a subject before forming high-confidence blanket opinions about it like that.
High-confidence blanket statement? I was asking a question. The opinion in question was poorly worded-- I understand that inflation means money either loses value or must be reinvested in the economy. I just don't think that inflation prevents a wealth incumbency (which I inappropriately referred to as "hoarding").
> (The same applies to your other comment about why anyone would think an inflationary economic policy would be desirable at all.)
I was referring to how the protocols have an identical economic policy (majority rules), not to inflation vs. deflation as economic policy (which I stated explicitly).
I was mainly curious about whether or not inflation vs. deflation matters in terms of preventing a rich-get-richer society. My admittedly poorly worded question seems to have given many HNers an opportunity to feel good about letting me know they understand a classical economic concept.
Absolutely, mutual funds and all investments assume some level of risk because to keep it in cash means losing money to inflation. There would be way smaller and more risk averse pool of investment capital if the dollar were deflationary. For example many portfolios whose goal is wealth preservation buy municipal bonds which fund public works projects(and certainly have a non-zero risk of default).
Investing in _anything_ productive is the opposite of hoarding. Hardly anyone in an advanced economy hoards large amounts of physical paper money; banks keep it to satisfy customer demand, but would much rather have the money in their central bank deposit account. A couple of central banks in Europe are experimenting with tiny negative rates on these deposit accounts precisely to encourage them to lend it out.
If you _invest_, you're either buying a productive asset, or storing something valuable for a period of time, or giving money to some other business to spend on equipment, employees etc. in the hope of future return.
Traditional economic theory says that inflation discourages hoarding. Inflation forces those with large amounts of capital to put that capital to work through investments to overcome the rate of inflation, or see their wealth decline.
Whether this will hold with dogecoin remains to be seen but is somewhat logical.
Mutual funds are an investment. Hoarding is savings.
One is productive, one isn't. That's the key difference.
The difference is even more glaringly obvious if you think about the difference between equity in a productive company, loans to productive organizations, and simply doing nothing.
Savings accounts have interest rates. The money in savings accounts is used by banks to leverage and invest. It's not really hoarding like holding on to bitcoins is.
The hilarious thing to note here is that -- over the short term -- this is barely different than Bitcoin's inflation rate. Bitcoin halves its inflation rate every 4 years, but 4 years is a long time in internet time. Here, let's lay them out side by side:
So while there is an important distinction between Bitcoin's and Dogecoin's inflation rates (Bitcoin's money supply is convergent; Dogecoin's is divergent despite a monotonically decreasing inflation rate), 8 years after their respective epochs, Dogecoin's inflation rate will be 5.2% higher than Bitcoin's. The horrors! The horrors!
This is misinformation, Shibes. Mean (random) block reward halves every 100k blocks for the first 600k blocks, after which it will be 10k reward indefinitely. The first halving will happen in less than two weeks, at that point, 50b doge will have been mined.
Within the year, it's estimated that nearly 100b doge will be mined. The block target is 1 block/minute, so it will take about 20 years to reach 200b coin in circulation, assuming no irreversible coin loss.
As such, this is nowhere near the "trolling" and otherwise apocalyptic event that the wolves on HN are claiming. It's actually surprisingly sensible economic policy.
Edit: I'm actually a bit disappointed that HN seems to be having such a hard time figuring out how this works.
Assuming this move doesn't completely kill the interest in Dogecoin, and that Dogecoin continues to thrive after this, then I doubt there will be any sort of "inflation effect".
Yes, in theory both Bitcoin and Dogecoin should have inflation until they reach their maximum number of coins, with or without any sort of "built-in" inflation rate. In practice, however, they are both highly deflationary, because they haven't reached their maximum ballpark cap market, which means the demand for them will make its value be highly deflationary, much more than this 5 percent per year figure.
Sorry; I was just working off the "5 billion coins a year" title.
I am just taking the number of new coins created in a year, and dividing it by the number of coins already in the money supply. So if Bitcoin was creating X bitcoins per year for the first four years, the inflation rate for year four was X / 3X = 33%. In year 5, they halved the reward rate, so the inflation rate for year 5 was X/2 / 4X = 12.5%, and for year 6 it was X/2 / (4X + X/2) = 11.1%.
If Dogecoin were minting a constant 5 billion coins per year, then the inflation rate is much simpler: it is always (100/N)%, which is the well-known harmonic series.
Accounting for the initial money supply of 100 billion Dogecoins, it basically just starts further down the harmonic series, and Dogecoin's inflation rate would be 100/(20+X)%, which looks like 5%, 4.8%, 4.5%, 4.3%, 4.2%...
Oh, but you conveniently omitted what happens after. 10, 20, 50 years.
The truly important difference is that Bitcoin has an absolute upper limit, but Doge doesn't anymore. It matters. Scarcity is an important factor for holding value.
Bitcoin will eventually become deflationary, and sooner than you think due to loss of bitcoins.
You must be speaking strictly in terms of monetary deflation. I could see dogecoin being deflationary as well, but in a "price deflation" sense.
Dogecoin could also become deflationary. If 6 billion dogecoins worth of value is created in a year and only 5 billion coins to match that increase in value, the economic value of goods created surpases that of the coins created. As a result, you have more goods chasing (relatively) fewer coins, increasing the value of the coin. In other words, less dogecoin gets you more stuff so you actually have (price) deflation.
In the US, during the stupidly-named "long depression" of the late 19th century, prices slowly dropped to about 60-65% of what they were at the start of the period while the total supply of money grew. That's because more goods were chasing (relatively) fewer gold-backed dollars. Monetary inflation coupled with price deflation.
I would also point out that Dogecoin's stated purpose in this move is to stabilize the currency at 100 billion coins. They believe that 5 billion coins fall out of circulation each year; therefore they intend to mint 5 billion new coins to keep the money supply constant at 100 billion coins.
Therefore the Dogecoin money supply after 2015 will be constant: the number of coins in circulation will remain approximately 100 billion, and the value will only increase or decrease as the demand for the currency moves.
Except that the price of doge was driven up by individuals believing they weren't buying into an inflatable currency. The fact that this article got upvotes and the comments around indicate that people are gonna pull out.
Your explanation doesn't make sense. If you actually do look at what happened with the inflationary dollar since the "late 19th century", it lost 96-97% of its purchasing power due to the monetary inflation.
Which means that if your grandma stored her wealth in dollars and wanted to pass it onto you, you can only enjoy 3-4% of what's left.
I was talking about the late 19th century. From 1860 to 1890, the USD gained roughly 50% in terms of purchasing power. Since the federal reserve got involved in open market operations in 1922 the USD has lost about 95% of its value.
Since 1928, the S&P has risen 5506%[1]. Over the same period, the dollar has lost 93% of its purchasing power. If you put a dollar on the market in 1928, it would be worth $808 (1928 dollars). A dollar under the mattress is instead worth $0.07 (1928 dollars). Investing had a return 11500-fold greater than hoarding cash.
I actually do feel that gold is too inflationary to store value. Many people simply don't realize at what scale it's being mined and how much of gold there's in the universe (hint: more than enough to build gold toilets for every human on the planet and not even scratch the surface).
I agree. people will prize a capped currency more than an infinite one even if the infinite currency "inflates" less over the next few years than the capped currency. at this point, it seems the only thing doge has over a traditional fiat currency is a cool and cute theme that is sure to be fleeting. the novelty of doge will get stale. I mean really, does anybody really think doge talk or the coin will be cool a couple of years from now? or that it will be serious? in the interim, the masses could send doge much higher only to have grade school "traders" get burned out of lunch money profits or grandmas lose bingo money. a good deal of the doge appeal is its inviting "my first coin" theme. litecoin and other "deflationary" crypto have the incentive to hold because the coin is ultimately capped and the usage and number of holders vastly outpaces the short term rise in coins. doge coin investor dynamics, however, are dependent on an ever expanding pie of unsophisticated crypto neophytes and an up sloping chart. Doge's demographic seems like a race to the bottom from my experience.
This is the one feature that will uniquely distinguish Dogecoin from other cryptocurrencies:
- It makes the currency much more democratic -- missed the first few months of mining? jump in any time you like and still reap the benefits!
- It neatly circumvents the issue of lost coins -- Bitcoins will keep dwindling over time and there will be no way to keep a consistent number of coins in circulation
- Inflation puts to bed one of the major concerns raised by many traditional economists about Dogecoin; deflation does seem to encourage hoarding
- As a corollary, inflation encourages spending, the growth engine of every modern economy. Like it or not, it works.
I'm mining as much Dogecoin as a I can and will keep doing so. I think this is great news! To the moon!!
The free market takes care of all your points, except the first one, which isn't a big deal, really.
- Lost coins? Analysis can make good estimations of how many coins are lost. The market price will adjust.
- Yes, it puts down concerns from people who believe that inflation is necessary, that is true. Whether deflation is bad is another story, and again, the market takes care of it. If value of the currency goes up over time ("encouraging hoarding"), then the reverse also holds true: merchants lower pricing to encourage spending because they'd rather have bitcoins/litecoins/whatevercoins than the alternatives.
Now, as to whether this decision was good or bad, I think it's fairly neutral. If the currency was capped, then I'd say there wouldn't be much to distinguish it from litecoin or bitcoin. This just seems like a way to add a new-ish aspect to it. I'm all for experimenting with multiple currencies, multiple ways of doing things, and I'm interested in seeing what'll happen. Perhaps 10 billion dogecoin will eventually become irrelevant because its value will be too low (akin to spending a ton of resources to mine a few pennies). Or maybe not. I'm rooting for all cryptocurrencies in general nontheless.
"The free market takes care of all your points [...]"
Do you have any real-world example of free market taking care of anything substantial? Because from my experience it's a fairy tail: Either you need to the state to jump in and make some decisions or you have big players killing the market whatever decision they make (market-wise good or bad).
There is always an incentive to make a product better and as cheap as possible in order to make a profit. That's how the free market works. Your experience shows you that government intervention, which is so prevalent in most markets, kills off competition and leaves the "big players" to make whatever decisions they want. These "big players" exist thanks to the state.
It's a vicious cycle: government jumps in, makes competition harder (whether with taxes or regulations) -> smaller businesses have trouble competing with large players -> larger businesses take advantage by offering worse service to cut overhead costs -> customers complain, ask for more government regulation -> makes competition even more impossible -> and so on.
You can observe this cycle in every industry, including food, ISPs, etc.
Before you bash the free market and show me example of how it doesn't work, first look and realize that what you're pointing out to me is not actually a free market.
> Before you bash the free market and show me example of how it doesn't work, first look and realize that what you're pointing out to me is not actually a free market.
That could be said for Nazism, Communism, Socialism and possibly every other socio-political out there: It's not the system, it's the implementation that's wrong. But I don't buy it. I used to be liberal myself, but now I don't believe in the skilled vs the unskilled, it's more likely to be the trained who had opportunities vs the untrained who had none and most likely you and I are in the first category.
Out of curiosity though, could you answer the following questions:
* Do you believe that education, energy, water, garbage, railways, lines (as in phone-lines, the network) should be private hands?
* What happens when a player is so big that with every move disrupts the market? The state should step-in or let everything flow naturally?
> That could be said for Nazism, Communism, Socialism and possibly every other socio-political out there: It's not the system, it's the implementation that's wrong.
True, those arguments can be said there, but don't apply here. Those are utopian ideas in that they require every individual, including the governing bodies, to be a saint in order to work. Not so with the free market, as a corruption in one organization leads to the ability for others to rise in their place (no "too big to fail" scenarios).
> Do you believe that education, energy, water, garbage, railways, lines (as in phone-lines, the network) should be private hands?
Yes. A lot of this work is already contracted out to private companies, which do a much better job for a much lower price. There's no reason to think they wouldn't do it themselves to make a profit. Which brings me to...
> What happens when a player is so big that with every move disrupts the market? The state should step-in or let everything flow naturally?
The state IS the biggest player so big that every move disrupts the market, thus creating more "big players" =) For example the government makes contracts with the big players, in the billions of dollars. That's tax payer money that's going to corporations instead of local smaller businesses, and the other guys can't compete. This is just one small example.
On the point of "democracy" ... my understanding of Cryptocoins in general is that a miner's majority of 50%+1 could effectively take control of the block chain if such a group were organized
EDIT: What I'm trying to say is that "they" could reverse the decision if they wanted to.
I'm surprised that there isn't a cryptocurrency that uses much more complex rules to determine the number of coins mined in each subsequent block.
It seems like the blockchain could be used to evaluate the health of currency's ecosystem in a way similar to taking a look at the system monitor or result or cat/proc/loadavg on your desktop. Heck, the blockchain could even be used to store 'extra' system state information with every block, like current exchange rates with other currencies, which would then be used to determine the reward for the next block.
I guess all I'm saying is that I'm surprised there's not a version of bitcoin with an algorithmic 'central bank' type of function, rather than a very straightforward 'inflationary' or 'deflationary' algorithm.
Milton Friedman was a monetarist, who believed that the ideal monetary policy was for the currency base to grow in time with real economic growth since this would result in neither inflation nor deflation of prices. If you could deduce economic growth from the blockchain you could make a Friedman coin.
Bitcoin/Dogecoin is basically a public ledger. Couldn't the system be set up so that this system of rules did destroy coins during a recession by reducing everybody's balance?
It could probably be gamed very easily by speculators going in and out of the cryptocurrency, but there shouldn't be a technical reason why it can't be done. This is in sharp contrast to traditional currencies: You can't send in the police to confiscate 5% of everyone's dollar bills.
If you reduce everyone's balance at once, it doesn't really have any effect on the money supply, all you're really doing is changing the numbers people use.
I've been thinking a lot about this, but the problem you run up against is that it's difficult to distinguish real economic activity from one person shuffling money around, and similarly, it's easy to hide activity by keeping a private ledger. That said, it's possible the inertia of the real market would stop anyone manipulating inflation in this way. I'd really like to see an experiment on these lines.
I didn't realize how much people were consciously trying to get in on a bubble. It's like people are offended that the developers are trying to create a viable currency rather than a ponzi scheme.
Sure, people are stupid. I thought programmers were not, but reading large part of HN's crowd statement's about BTC have changed my views on programmers - they are pretty stupid when they don't understand the dynamic of a subject (i.e. basic economics).
However, the problem with inflation is that might turn the currency not interesting: Why would anyone want to buy an inflationary currency?
Sure gold is inflationary now, but might not be tomorrow and sure as hell comparing any virtual currency to gold is naive.
I'm sure BitCoin was marketed as a currency to outsmart the naives and has successfully done that. It was never designed to act as a currency, it was more of an asset from day 1. We just didn't really get that (from day one).
I'm sure you'll get voted up because the HN crowd loves to hate things, but I'm honestly curious why anyone would think this is objectively a better economic policy.
Regardless of the inflation vs. deflation debate, the same exact thing could happen in bitcoin if it is what the community wants.
Ideally, the money supply grows at the same rate as the economy. In this case "the economy" is the segment using Dogecoin.
If you can't get it right, most people consider it better to have a bit of inflation rather than deflation. This may just be a consequence of people being more used to inflation and able to deal with it. For example, people don't mind prices going up as much as they mind their income going down.
Low, steady inflation is better for an economy than the alternatives humanity has experienced thus far. However, if people had the choice between holding a currency they expected to slowly decrease in value like today's central bank currencies and a currency they expected to slowly increase in value like Bitcoin in a post-adoption world, why would anyone pick the former?
Central banks have only had the ability to steer the economy because they controlled the best currencies available in the eyes of consumers. Dollars are much easier to deal with than gold, so people use them even though they know the dollars will be worth less than the equivalent gold in a year or two.
When Bitcoin is as easy to use for trade as dollars are, people won't choose dollars, nor will they chose inflationary altcoins.
You stuck a "however" in between your first two sentences, but doesn't the second one just explain the first? If people are only going to hold Bitcoin and not trade it for goods and services, then it's a poor currency and will not drive economic development.
I don't understand why you think people won't trade Bitcoin for goods and services. I use Bitcoin at every vendor that accepts it, especially if there's a discount involved. It costs me 1% to replace the Bitcoin since my paychecks are in dollars (for now), but it's a much more reasonable policy than holding and never spending.
Normal folks won't use Bitcoin until merchants pass some of the savings they get to their customers as discounts, or until inflation gets out of control.
> but it's a much more reasonable policy than holding and never spending
It seems to me that what you are doing is actually not "reasonable". If you are assuming that Bitcoin is going to increase in value over time (or at least not decrease), then you should be spending all your dollars first (which are known to decrease in value over time).
The issue of whether merchants can offer discounts based on lower transaction costs would make these crypto-currencies more attractive (if that is the case) but it is not relevant to the discussion of inflation vs. deflation.
Dollars and Bitcoin are easily interchangeable, so the concept of spending dollars first doesn't make sense to me.
The amount of Bitcoin someone holds is based on their belief in Bitcoin's future success, their wealth, their spending needs that can only be transacted in dollars, and their backup plan in the likely event that Bitcoin becomes worthless. Once you've reached the proper balance for your risk tolerance, whether you spend Bitcoin or dollars is irrelevant, other than the 1% fee to switch between the two. Even if you think Bitcoin will triple in price tomorrow, it still makes sense to spend Bitcoin today because you can easily replace it with Bitcoin purchased at the current price.
> Even if you think Bitcoin will triple in price tomorrow, it still makes sense to spend Bitcoin today because you can easily replace it with Bitcoin purchased at the current price.
No, it doesn't make any sense, because you'd have to pay 3x as much to replace that Bitcoin. That's the whole point.
That's also why you should spend your dollars first. Even if Bitcoin value doesn't change a bit the dollar becomes worth less every day, which means you can buy less and less and less Bitcoin with that dollar as time goes buy. Better to use the dollar while its value is still at a maximum.
With Bitcoin the value will likely keep going up, especially once the supply crunch happens. A Bitcoin you give up today will be harder to recover tomorrow, the day after that, etc.
Accordingly you are wasting money if you're spending Bitcoin now which will be more valuable in a year while you have dollars you could be spending for the same thing that would otherwise be worth less in a year.
You might make the decision to use Bitcoin regardless, but that's a decision based on your own policies and wants, not a decision based on maximizing the value of the currency you spend.
"No, it doesn't make any sense, because you'd have to pay 3x as much to replace that Bitcoin."
No I wouldn't.
I walk up to the merchant. "Oh, you'll accept my $20 payment in Bitcoin? Ok, I'll pay with that." As I walk away, I tap four times on my phone to convert $20 worth of USD to Bitcoin. My loss is the 1% charge to convert, plus the bid-ask spread, not the 200% gain from tomorrow. I still get that.
I consider 1% a reasonable price to pay to promote Bitcoin. I don't think it'll be necessary for much longer.
assuming there are lots of bitcoin retail options (only one in my town and that is me), there are definitely scenarios where using bitcoin is preferable to dollars even if btc is to rise rapidly. some are futuristic: 1. merchant discount (from, say, no chargebacks) 2. merchant slight discount where the cost of not using credit payment processor savings is passed onto consumer 3. ease of use (I would like to touch my smartphone screen to pay for something) 4. more bitcoin exchanges make procurement freeish and immediate (possibly through an app) 5. quasi anonymity (buying something no one else has to know about). 6. ?
> I consider 1% a reasonable price to pay to promote Bitcoin.
Yes, that's why I say you are following policies of your own choosing. ;)
In a way though you're both "right"... you're still spending your dollars after all, only via an intermediate form in pursuit of your desired currency goals.
The ability of central banks to steer the economy has nothing whatsoever to do with dollars being a convenient medium of exchange. It's entirely about dollars being a medium of account - your contracts and sticky nominal prices are denominated in dollars.
Also, what asset people choose as a store of value is also mostly unrelated to the medium of exchange or the medium of account (any relation is due entirely to transaction costs).
This is actually the principle reason I invest in bitcoin - I imagine that (at a very consecrative rate, because it requires a super majority of consensus to bring about a protocol upgrade) it will integrate features from other cryptocurrencies that can be proven valuable. And I don't mean things like scrypt - the status quo of bitcoin like their sha1 hashes. And they don't want proof of stake because they buy expensive mining hardware to get the cash outs from doing work.
But they might (probably, actually) inflate the money base a lot further down the line, and never let it actually cap at the 21 million btc Satoshi advertised.
Where "better" means "more in line with mainstream economic ideas on monetary policy." Of course, the goal of Bitcoin was not to adopt the mainstream economic ideas on monetary policy, so this definition of "better" probably isn't appropriate.
Better for the collective, maybe, but removing selfish incentives for hoarding and mining Alt-coin will lead to low adoption and depreciation. Same problem with Peercoin: http://www.peercoin.net/
Monetary dilutionists (i.e., basically all legitimate economists, and thus almost all armchair economists well) and hard-money advocates (i.e., basically all legitimate thinkers pre-1920 or so) each accuse the other of practicing pseudoscience, or at least pseudoeconomics. The cool thing about cryptocurrencies like Bitcoin and Dogecoin is they finally offer people a way to put their money (so to speak) where their mouth is.
That's very debatable and even if true, would only matter if dogecoin became a mainstream currency, which it certainly isn't. At best it just means a continuous transfer of wealth from coin owners to miners for doing nothing other than wasting electricity on cpu cycles.
This is actually starting to sound like a far better currency than bitcoin could ever be. You know, a liquid medium of exchange rather than a deflationary libertarian wet dream.
Moreover, there is an issue of keeping the incentive to mine. The theory is, that when a coin is mined, and when it will become popular, there will be a lot of transactions, and the fees will make up a large sum worth mining for. But that's only a theory, it wasn't seen yet. I feel it is much better that miners can still mine their 10k doges per block.
Yet another reason is, that certain amount of coins is being lost forever due to human errors. So the increase will be even less.
Hoarding and speculation is killing Bitcoin. I initially discounted Dogecoin, but it seems that smart people are behind it and the whole thing radiates a lot more positive energy than the greed radiating from Bitcoin.
This entire debate is a great example of how people don't understand math or the idea of inflation. A constant rate of new coins trickling into the currency creates a rate of inflation that decreases over time until it reaches equilibrium with the coins exiting the system. The devs have, intentionally or unintentionally, created a coin whose quantity will become roughly fixed (at a number they can't predict exactly), instead of one that where the supply will diminish over time due to loss (as in Bitcoin).
Perhaps I should know better than to expect reason when it comes to greed, however.
Really, 5 billons appear to be a lot, but it will be only a 5% the fist year after the initial mining period is complete. And after 20 years the annual inflation will be only 2.5% if no doge is lost.
[Disclaimer: I’m from Argentina, where a 5% annual inflation would be really nice.]
This effectively killed my interest in the currency completely. I've stopped mining it.
I suspect this may be what they want: to keep it basically worthless so people keep using it to tip people large amounts and have fun with it, and to drive away investors and people looking to profit.
If this is the case, why not just use the US dollar? At least banks are secure enough to not get robbed every few weeks (or have a security system by a 15 year old php developer).
Eventually, the government will see bitcoin as a true currency, regulate the hell out of it, and all of these things like having no transaction fees will be non-existent.
We should be on 3rd or 4th generation asic scrypt miners by then which maybe means you'll be able to get a $20 usb stick that makes you 10k coins a month with a single kilowatt of power per month.
But when everyone has a $20 USB stick capable of mining 10k coins a month on today's difficulty, that difficulty will go up dramatically. Mining will always be expensive to everyone but those with early access to next generation hardware.
That's not how mining works. More miners = higher difficulty = lower rewards. Plus 4th gen ASIC scrypt in 2015 when there's only one now and no more coming for many months? Unlikely.
It will encourage tipping (giving it away in large numbers), not real trading. As mentioned elsewhere, why sell goods for it if the value will keep dropping?
Probably even closer when you consider that cryptocoins suffer much more "loss" than USD does. People lose wallets, get hard drives wiped, etc., which are deflationary events that partly counter any built-in monetary inflation. Whereas losses of USD due to things like setting bills on fire or losing them in a lake amount to a miniscule portion of total USD outstanding.
Imo it's even plausible that Dogecoin's current loss rate is >5%, in which case the currency would still be deflationary even with the new coins being added.
When banks sit on money and refuse to make loans, or people stuff dollars under the mattress, that has a short-term deflationary effect, for as long as the money is locked up.
We have been lucky to have low inflation for the last several years. My mom was trying to establish her adult life during the double digit inflation of the late 70s early 80s and talks about how hard it was and how high the interest rates were.
Bitcoin went from 10.7M to 12.3M in the last year. That's 15%. But of course it deflated quite a lot in that time due to rising demand.
Doge will add 5% to the total supply in the first year, but that will be less every year -- it's a fixed number, not a fixed percent, assuming the title of the your OP is correct. (Not sure about this.)
Of course, that doesn't account for lost coins. Given how doge is used, I am sure a lot of the new coins will actually be replacing lost coins.
Why would you buy any goods if the value ouf your "currency" keeps going up? BTC is DOA because of its inherently deflationary properties. There will never be a consistently expanding BTC economy as hoarding makes more sense than actually spending it.
The people who like BTC for having a fixed cap on the amount of coins in existence are probably the same people who would like the gold standard back, because they don't understand the economic consequences.
Isn't Bitcoin's success as a currency orthogonal from the negative effects it might have on the economy? If individuals think holding Bitcoin is better for them than holding dollars, they will do it as long as it's legal.
As far as the economic effects, I think we'll be much better at managing a deflationary economy in 2030 than we were in 1930. We have more knowledge, better statistics, and better communication. At its core, the sticky wages problem is a communication problem.
In a world where Bitcoin has already been adopted by the masses, holding Bitcoin would make almost as little sense as holding dollars does today. Sure, its value will go up, but not as much as investing money in companies that make more money would.
>I suspect this may be what they want: to keep it basically worthless so people keep using it to tip people large amounts and have fun with it, and to drive away investors and people looking to profit.
Right and it is indeed a great sign that this drives out the hoarders. Makes for a much more healthy community.
Well on the other hand, this is actually good news for mining because you will always be able to mine. It means that they don't have to worry about incentivising "mining" after all the coins are gone.
> Cool. Thanks for killing the profitability of the currency. Now it's going to be worthless in a couple of years and never reach the value of BitCoin or even anywhere close.
But seriously, Dogecoin was a way-out-there bet. You can't be upset if it doesn't work out. Also, I've seen enough "devastating-end-of-the-world" news on cryptos that make the price tank only to come right back up a month or 2 later. Maybe this'll be reversed after the price tanks & difficulty drops. I'm keeping my doge miners going... You never know. But I'm fully prepared to find out it was all for naught. Easier for me to say since I don't spend anything to mine them. My job gives me limited but free access to cloud servers.
This is a risk when you invest in something where a small number of people can fundamentally change it on a whim. Remember Zynga's warning about its dependence on Facebook in its IPO filing?
One of major complain about bitcoin is the fact of limited supply of coins. I.e. deflationary currency. But as you can see now - this is nothing more then just an agreement between people using bitcoin (or dogecoin)
If majority of dogecoin owners will not like it - they will fork it. Otherwise we will have nice example of inflationary currency.
I can't help but LOL at anyone who thought this was going to be the next Bitcoin and were going to "get rich" with this.
Seems smart to keep more doge in play, but it'll also kill a lot of the interest in it as well from the people who were buying to "get in" on it. Funny every time.
Seems like one of the major unasked questions - what sort of monetary policy will work best for cryptocurrency. And what will be the decision process for that policy. The technoanarchists have conspicuously elided this question.
Am I the only one puzzled by the fact that the title sounds like something has changed when the linked status says:
"Thanks for contributing to this discussion. Based on everyone’s feedback, we’ve decided to leave the Dogecoin code base as it was originally released, and not implement a change."
Which means that in fact, nothing has changed and it was always like this.
It was advertised as being capped and it turned out they hadn't coded a cap into it. If you read the entire thread, the developers appear to just realize this as well after the issue is reported. They then later decide to keep it as it is, which is a change to what was advertised.
So the thing that's interesting to me is that now you can actually diversify your altcoin holdings and while the value of any one coin can go up or down, the market value you are holding can actually be fairly stable. For example, as Dogecoin loses value as a result of this inflation, you will likely be able to switch to a different coin starting with a new blockchain. In fact, I wonder if the solution to all this is some type of "metacoin" that would represent the averaged out value of various coins.
For example, I used to mine scrypt-based coins, then have them automatically traded for BTC via http://www.middlecoin.com/. It's an interesting concept as I would not be able to mine BTC directly on any hardware I own, but I can mine a small amount of scrpyt-based coins. Perhaps the idea of holding value the same way can be introduced. Sort of like a mutual fund of coins. And a coin industry index (Standard & Bits?)
So why doesn't Bitcoin do this as well? Just their core philosophy that deflation is not an inherently bad thing? This seems like a great move and will attract a lot of people who believe in traditional economics. Now if only I could buy Doges from my Coinbase account...
dogecoin is an interesting dual to bitcoin for experimenting with money. Microtransactions are relatively unregulated / ignored by the tax collectors of the world. Small gifts / capital gains under some quantitiy are usually not reportable. Even children buy and sell baseball cards, comic books, marbles etc... I could imagine children using dogecoin or fedoracoin / TIPS. Are they going to enforce AML / KYC on transacations worth 0.015 cents through a tipbot ?
5B/year is an odd choice, because the rate of inflation starts very high, but will asymptotically approach zero over time. This doesn't seem well thought out.
> Also, the blockchain might require terabytes after a decade.
Imagine saying "the blockchain might require gigabytes after a decade" in 2004. Here in 2014, you can get 64 GB on something the size of your smallest fingernail for $30-$40. Terabytes after a decade won't matter a bit.
I did have 10MBps and a while before that 100MBps just because of the campus network. Today in a residential area I have 22MBps down, 16 up (measured). However, that result might actually be capped by my wifi. I should have 60-100 MBps.
That said, I was thinking of it all, memory bus, disk r/w speed etc.
My understanding was that Dogecoin doesn't want to become a "serious" currency and the sentiment in the community against the BTC-community is that they take themselves far too serious.
This decision makes sense if Doge intends to stay the "great comment, I give you 10000 doge for that" fun-currency and drive out everybody whose primary intention is financial gain.
If they can add inflation they can take it away...
and on another note, inflation (or at least lack of deflation) will increase spending of that currency. In other words, it would help Dogecoins be used more, as opposed to hoarding like bitcoins.
> If they can add inflation they can take it away...
The longer a coin runs, the harder it gets. And if I'm reading this bug report correctly, it's not that they're 'adding inflation', it's that they're declining to change an erroneous setting and maintaining the status quo. The more clients that come out, the more that setting will get locked in...
How are settings like this updated? Is it like the blockchain fork, where the settings are hardcoded into the client, so the longest chain uses whatever settings are in the client most popular with miners?
For example, if someone with a lot of resources wanted to adjust the inflation settings for bitcoin, how would they go about it?
Note that the effect of this inflation, being fixed, lessens each year. After 100 Billion coins, the next year there are 105, for a rate of 5%. The next year, the rate will be 4.76% ; then 4.55, 4.35%, 4.17%, 4.0%, etc. in later years.
And I get it. That sucks. Personally, I think it's a great thing for Doge. It'll keep up the current "tipping culture", discourage hoarding, and encourage us doge to trade and share, til we get to the moon. Such wow. Amaze. :D