This is the “Bait and Switch” scenario I was worried about awhile back when we discussed it on the Dev list. Alluding the price will rise initially then try to stabilize it afterward. I actually ran the math and I’m familiar with economics.
I agree with you that Safecoin is more like a commodity. I think all of us want the fiat value to rise. The interesting thing about crypto currency is they can also function as a medium of exchange. Safecoin is divisible, mentioned in the whitepaper in (Section 6. Safecoin Data Structure).
How can we make Safecoin more Deflationary than Fiat?
Safecoin must buy more resources in the future.
There are 2 types of deflation.
- Collapse in aggregate demand. (Bad)
- Surge in aggregate supply. (Good)
Obviously, we want option #2. I’ll make a very simple model to demonstrate how it can be accomplished. Safecoin’s storage purchasing power is related to how much storage is available. An increasing supply of Storage compared to Safecoin causes deflation, which increases purchasing power within the Network Ecosystem. Regardless of the fiat value of Safecoin, the “storage purchasing power” of Safecoin remains deflationary in a predictable pattern.
Here’s the Math using the following variables.
- I will apply a 30% annual Safecoin deflation.
- I will apply a 40% annual Storage increase.
- I will apply a 120% annual Farmer growth.
- I will ignore free user allocations for simplicity.
( January 2015 )
1000 Farmers provide average of 1000Gb = 1,000,000Gb of storage space.
1 Safecoin buys 1Gb of Storage, therefore only 1,000,000 Safecoin can exist.
( December 2015 )
2,200 Farmers provide average of 1400Gb = 3,080,000Gb of storage space.
0.7 Safecoin buys 1Gb of Storage, therefore only 2,156,000 Safecoin can exist.
Compared to Google Drive.
$0.02 buys 1Gb of storage per month, or $0.24 per 1Gb for 2015.
0.014 buys 1Gb of storage per month, or $0.168 per 1Gb for 2016.
If the total storage amount explodes to astronomical numbers, Safecoin will keep pace and continue to increase in storage purchasing power. If the total storage amount contracts, the Network absorbs the recycled coins until it matches the limit.
Possible Issues.
- There has already been 430million Safecoins issued. Will we have 430,000,000Gb at launch?
- What happens to 100yr old data, or if the user dies?
- In order to facilitate more farming activity, the Network must charge on a monthly basis. Otherwise, when the current limit is reached, there will be no Safecoin to farm until it is recycled, which may be a long time. To farmers, this may seem like a drought and give up farming.
- How does this affect builder apps?
- Will free user accounts diminish demand to buy storage?
I am wondering if using Safecoin to buy storage is practical. I have not seen MaidSafe’s algorithm to handle storage pricing, so I’ll wait and see what they come up with.