I disagree. The network reacts to supply and demand, yes, but prices are not set according to supply and demand (in the sense that they are set on the open market).
To make this more clear, if the price for a PUT is too high for a user, they will simply not PUT. If SAFE GB was sold on the open market for SAFEcoin, then PUTters have an opportunity to bargain directly with farmers for the price of their storage.
And if the payout for farming is too low, then farmers will drop off. A network-wide price in either case may suit some farmers/users, but not others, depending on their particular economic situation. That’s why when the government engages in price setting (think USSR), you either get shortages (prices too low) or excessive surplus (prices too high).
Further, as I understand it, the network will raise the PUT price and farming rewards when supply of storage has already begun to approach a certain level. This is a delay in price reaction, as the price increases must necessarily follow storage levels falling. If the price were on the open market, then people on either end (farmers and users), are able to react to changing conditions before the network even becomes aware of it, such as electricity price increases that affect farmer profits. A farmer’s electricity bill rises, and so they raise the SAFEcoin price of the storage they offer, to avoid having a loss. The alternative is to switch off and reduce the total network capacity if they don’t want to continue that loss.
Do we really want the network to be lagging behind real-world economic change, or do we want anticipated price increases to be signalled ahead of time? As far as I can see, the only thing that affects the price is farmers coming on and offline, versus the current level of spare capacity. So the network is ‘blind’ to near-term change. Prices only increase once the damage has already begun.
As it stands, the network does not allow anyone to choose how many SAFEcoin they will trade per GB, only that they will or they won’t. So it’s not, “You can go to another seller to get a better deal if you think you can”, but it’s “Take it or leave it”. This is not a free market mechanism. If I wish to buy a chocolate bar, I can go to the local fuel station and pay a high price if I’m in a hurry, or I can take my time and go to the supermarket and get a lower price. A network-wide price takes options away and sets prices according to an algorithm, not true supply and demand.
