SafeCoin recycling can function as a value stabilization mechanism

Autonomi Network Token (incl (e)MAID)
21

Okay say we take Safecoin and make that the perpetual coin of the SAFE network as seen in the videos above. We can then use the Safecoin as a commodity in a sort of setup where every user of SAFENET has a personalized bank from the start. They should have the ability to issue their own currencies from the beginning backed by Safecoins.

Just doing that would give Safecoins a value as the unit of measurement. It’s something we could use in our promises to pay in Safecoin via collateral.

Trust in the sense you’re thinking about isn’t necessary because the contracts could be self enforcing. So there would be trust but the trust would be in the code and in the self enforcing contract rather than the behavior of the issuer. Once the deal is made they don’t control their Safecoin at that point (the escrow controls it).

At any time the buyer of their self issued credit currency can trade it back for Safecoin until the redemption date which would mean everyone would be able to get their money back prior to the redemption date simply by sending the currency back to the issuer and triggering the escrow to release the Safecoin to them. It’s no different from backing your self issued credit voucher by gold so that people can always get their worth in gold.

Would you accept Safecoins as a generic token of value? I would if I were running a business or doing science because I could always use more resources and if there is enough demand we can always sell it for Bitcoin and turn that into fiat.

22

Okay say 1 Safecoin gets you 1 gig of harddrive space, and an unknown amount of computing, bandwidth, and additional value from exclusive information only accessible on the SAFE network.

If it’s cheaper to produce harddrives as we can expect then 1 Safecoin could get you 100 gigs later that year and 1000 gigs a year later. You’re saying that fiat prices for 1 gig will keep up with Safecoin prices for 1 gig.

9.31322575 × 10-10 U.S. dollars / byte would be for fiat around $1 per gig.
I would say we are already there even for SSD so this would mean a Safecoin would be under $1 at best if it’s 1 Safecoin per gig.

But if Safecoin ramps up fast enough it could be designed in such a way where if the network produces an over abundance of cheap harddrive space due to farmers then you would think the price per Safecoin would be far cheaper than the price per $.

But there is a unique difference here in that Safecoin isn’t just storage. It’s also supposed to do bandwidth, and computation. If you price that all in then the value of a Safecoin is a bit different now. If you also price in the fact that the SAFE network might have exclusive apps and information on it which require Safecoins to run then you can see that it could become quite valuable depending on the apps.

I cannot say for certain what would happen but I would think if SAFE network is designed right then the model should produce a Safecoin which can buy more resources than the dollar. If I can buy it cheaper from somewhere else there would be no reason to ever use Safecoin or SAFE net.

You have a valid argument here. There are some missing pieces to the puzzle. How do we design the math so that as the cost of producing resources decreases the value of a Safecoin goes up at a faster rate than the dollar? Technological deflation benefits all currencies as you can buy more with less, but we want SAFE network to leverage this trend to the maximum extent.

This would be the argument for limiting the supply of Safecoin. Because it has a limited supply but fiat doesn’t then the inflation of fiat could result in an advantage the buying power of Safecoin. Additionally you could make Safecoin deflationary to give it an undeniable advantage if you think that 1 Safecoin will not be able to get more resources than $1.

I would think with a limit of 4 billion or so Safecoin that you would have a good value if demand is high enough. The concern would be if demand isn’t high enough which would mean a Safecoin wouldn’t get enough buying power to buy enough resources, which would mean problems.

So in my opinion we should want to have a Safecoin which optimizes to have the maximum buying power to buy the resources necessary to power the SAFE network. Creating deflationary elements in my opinion would only work well if Safecoin is divisible (and I don’t know that it is), but if isn’t then the ideal scenario is probably to someday have it where 1 Safecoin is enough to give anyone seemingly unlimited resources.

At that point we will not have to care what a Safecoin is going for in USD because we will have unlimited resources with just 1 Safecoin. Don’t ask me to create the math model to make that happen as I’m not an economist or mathematician but I have enough intuition to know it’s possible.

23

Early in the development and testing of the Safecoin we should either do some simulations or tests where we see how the Safecoins are being used and how the market responds.

You could probably tweak a few things such as make it deflationary if it’s not competitive with the dollar. But we have to get out of the thinking that people should invest in or buy a currency and instead think of Safecoin as a commodity redeemable for resources. Safecoin are like houses built on land and then those houses used for collateral to issue private currency.

Those resources are actually not trending toward scarcity. And the technology to provide these resources is deflationary. So you need to give people a sufficient incentive to buy and hold Safecoins and the best way to do that is to make it so the user can redeem more resources with a Safecoin than with anything else. The people who took part in the pre-sale are now owed resources and we all have different opinions on how much.

So when I say 1 Safecoin could someday be seemingly unlimited resources for a person it’s because of the trend I see with the dollar being able to get more resources each year. The challenge is to beat the dollar in buying power the same way Bitcoin is doing (if you can do that then you will win because demand for Safecoin increases dramatically which makes people want to farm).

So how do we make 1 Safecoin buy as much resources as possible so that the SAFE network is the best deal on earth? Anyone have suggestions?

24

This is what I meant by “shopping”, sorry I meant that all these would have to be exclusively safecoin for safecoin to have a value… I’m still pondering the resource/safecoin explanation and expect it to take a while…lol

25

Interesting Perpetual Coin was something I worked on with Paul Grignon (who did this and many more videos) in 2007/8.

In terms of safecoin I see it as cash, the distribution of it is carried out by the network over time. I do think it should recycle if possible 1-3% per year. I see that debate coming sometime well after launch.

I see it as simply that, like bitcoin is not valued on mining rig cost neither should safecoin be valued on farming, although you could by a farmer with safecoin as you can buy and ASIC rig with bitcoin. Where bitcoin mining maybe costs electricity to mine, safecoin costs resources (unused disk space we hope). We are just making these resources available to people. Some may cost money as we go along (network wide computation etc.) and the easiest way to pay for these will be safecoin (which will recycle).

Hope that makes some sense. It’s my opinion and I am a single voice in the community so please do not weight my opinion to much or at all if possible.

2 Likes
26

@ current storage prices that is around 2 cents per gig ish, so next year around 1.2 cents per gig etc

from a recent article:

“compute costs have declined 33% a year since 1990, and bandwidth costs have dropped 27% a year since 1999.”
More to the point, it forces forward-thinking enterprises to make strategic and tactical technology decisions based on the assumption that computing, storage, and bandwidth are not scarce commodities, but abundant ones.

The companies that figure out the implications of that fundamental shift will gain an increasing competitive advantage over time.

I would say that this is the only place that value lies and not only that but this aspect must compensate for the 30-40% drop in resource value wouldn’t it? Therefore safecoin has to be used for pretty much everything or it loses value doesn’t it? Please advise where my brain got twisted. Cheers

27

I am not against individuals giving credit; people are free to do as they please.

I am just pointing out that a monetary base is a prerequisite for credit to be extended. Moreover settlement is preferable to accepting credit.

28

Businesses running on the SAFE network could take advantage of the drop in resource price. Value isn’t going to drop just the cost of doing business.

So you’re correct and this is why I say it’s important to let every user have their own personal currency issuing capability from the start.

At the same time I do see your concern that if the price (you said it’s 2 cent a gig), going down to 1.2 cent a gig next year could be bad news for Safecoin as Safecoin prices could plunge.

If this is the case then you can make Safecoin deflationary and destroy some of it each year. That would be one way of doing it anyway.

We agree there could be a problem if the Safecoin itself isn’t designed to gain in value with the growth/recognition of abundance. How can we fix this mathematically and technologically so that Safecoin functions as it should?

29

There seems to be no evidence that a universal “money” supply or monetary base is required for credit. From my understanding of this anyone can use numbers and letters and money is very much the same way. You only need a unit of measure and a unit of account. Money functions as a way to track the movement of wealth but wealth isn’t the money but instead the products and services.

The unit of measure is held in collateral. This could be any asset such as a house, shares in a business, gold, silver, food, anything which can hold wealth over time.

A currency doesn’t need to hold any value it just can be numbers entered into a ledger to maintain a record of who owes who. It’s not important for anything else really.

So each of us could have our own credit currency. We would need an asset or basket of commodities to back our currency just as a bank would but it’s really just credit.

Currency is just a way to have credit and track debts. If you’re making a new product then perhaps you could release a coin representing that product for presale which people could buy. And then after they but it if they send it back to you by a certain date it gets redeemed and if not then it expires and is destroyed.

There is no need to ask anyone for tokens or buy money. Everyone would be able to generate their own credit as long as they have collateral (and this is critical if you want people to actually run businesses).

30

The only way I can see it working is if safecoin is the universal currency traded only against bitcoin/fiat. Everyone has vault wallet app thingy. The thing is that to my mind we have to do everything feasible to ensure safecoin does not depreciate or investors will rightly have a grievance. Otherwise the IPO is an IPO in the sense that they are actual shares in Maidsafe the company. You cannot under any circumstances launch with the intrinsic property of safecoin losing value - it will kill the project dead even if not too concerned about investors. The trolling and PR would see to that.
I just hope this is being seriously thought through logically by better brains than mine. That’s all I essentially want to be assured of.

2 Likes
31

One thing you have to remember is the wealth isn’t the Safecoin unless you give Safecoin itself some inherent reason to appreciate. This would mean we have to either accept that Safecoin must be a commodity and at least from the sake of a design and metaphor perspective be treated like something designed to appreciate or if it’s a currency it’s not going to hold value because currencies aren’t designed to store value in if it’s supposed to be perfectly stable (not volatile).

So the development team needs to separate commodity from currency and determine whether Safecoin will function like a commodity or a currency. If you want people who bought Safecoins in the presale not to lose wealth then you have to make sure they get the best deal in terms of the wealth generated by the SAFE network.

How much wealth does 1 Safecoin track compared to 1 dollar? That is what should be compared. How much resources can I get from my purchase in Safecoins compared to if I would have not gone with the presale at all and just used dollars? If I can get the same amount of resources or similar amount with dollars then there is no reason for me to ever buy Safecoin and something else will come along if not a fork.

So you have to figure out how to make it so that 1 Safecoin represents more resources than any kind of fiat at least. I don’t think you can solve it by piggy backing on Bitcoin either because once again why would people use Bitcoins if Safecoins aren’t of great utility?

The people in the presale took great risk because they believed the whitepaper which says that 1 Safecoin will be able to be redeemed for a greater amount of resources each year. The whitepaper basically shows a graph which says that as the cost of resources go down the value of Safecoin goes up.

I ask the question: goes up compared to what?

The same applies to the dollar as you have proven. So if it’s not more deflationary than the dollar it’s a waste of time. So the technical and economic challenge is to make it the most deflationary (when compared to any fiat currency) in terms of resources. If Safecoin cannot do that then it is indeed worthless and I’d sell them for dollars knowing the dollar will be able to buy more resources next year than Safecoin.

Change whatever you have to change in the Safecoin protocol to make the economic behavior in the chart below true or Safecoin as a project will definitely fail:

2583×1775 94.9 KB

32

I don’t view Safecoin as an IPO or as shares in MaidSafe. I view it as shares in the SAFE network perhaps or as a commodity which promises that 1 Safecoin will be backed by a greater amount of resources on the SAFE network over time. I don’t really care what technical mechanisms or math have to be used to make this true after the fact, so if Safecoin has to be deflationary and made more like a stock to accomplish this goal it should be considered a mission critical -no fail- goal.

That means I expect: 1 Safecoin should be able to get us more resources over time but this isn’t a good enough promise as the dollar is deflationary too in that regard. For the SAFE network to keep it’s promise to all who pre-ordered there should be a huge discount compared to what they’d get if they used anything else. It also has to reward people who bought early rather than the people who waited because the people buying today are taking all the risk and paying for all the development.

So if next year 1 cent can get me 1 gig then will I get 100 gig from 1 Safecoin? That is the kind of discount that we the community expect from the presale.

If a year from now it’s still not much of a better deal than we could have got if we just purchased with dollars then it was just a bad deal.

If David Irvine himself and the Safecoin team working on these issues can promise they will make sure that the economic behavior resembles what they promised in the chart and that they’ll use any reasonable technical and economic means to achieve that then I would be satisfied that at least we are all on the same page.

We can work toward making the economics of Safecoin work if we all agree that it should work as the chart in the whitepaper says it should work. If we all agree with that then we might have to accept that Safecoin should be volatile by design and trend upward.

33

I’m just thinking everything should be in safecoin, just as all commerce in Europe is all denoted in Euros, then everything in safenet land is safecoin- :I don’t see any viable alternative at least for first year or two and see how that goes, rather than see how a potential disaster goes. Safe coin will essentially devalue against whatever you trade it against. App devs etc won’t want to be paid in something that loses value either, so it falls down there too unless we do this I think.

34

And I think if you do that you’d inherit everything wrong. We don’t actually need the Euro except to pay taxes. We don’t actually need Safecoin except to pay for resources. Trying to force Safecoin to be both a commodity and a currency is exactly the problem in my opinion (it’s a commodity and will never be a currency because as you’ve pointed out it can never be stable and as the whitepaper points out it’s not intended to be stable).

The difference is Safecoin isn’t anything like a currency. The Euro can be created or destroyed as needed and that is the only reason for it’s stability.

Safecoin is 4 billion or so. It’s a commodity/share. It’s supposed to appreciate in value and if it doesn’t it’s completely worthless for what it’s made for as described in the whitepaper.

Honestly rather than looking at the Euro which sucks as a stock we should look at actual stocks and see what mechanisms they use. For example a stock buy-back mechanism is used when a stock is undervalued.

You can also think about it like a sort of commodity but once again if you want it to rise in value overtime and guarantee it then the math has to make it so. You can achieve this by making Safecoin divisible and instead of adding new coins overtime you keep it at the exact amount of total coins you have now and as people redeem you destroy coins so that every year there are less of them forcing people to require less of them for the same amount of resources (because less exist).

Deflation is one of the best ways to increase the value of a stock as proven by the stock-buyback mechanism. Share repurchase - Wikipedia

35

If we think of each Safecoin holder as a Safeshare holder then you can see there are going to be problems.

In the near future the builders will be paid with Safecoin which will dilute the shares of the pre-orders or early adopters. Basically the people who bought in the crowd sale are using their money to give free harddrive space to the people who come after them which means there is no advantage for having bought in early, not even a discount.

This can be fixed by creating the advantages. Will it be fixed? That is going to be the key factor which decides the success or failure of MaidSafe. Is it possible to make Safecoin divisible?

Is it possible to make Safecoin deflationary and use the divisibility so that there are an unlimited number of units? As long as there are enough units then it doesn’t matter if it’s deflationary but if it’s not divisible then it does matter because eventually you run out of coins if its not divisible.

Bitcoin could for example switch to proof of stake and burn all transaction fees to become deflationary on the spot. Many advocate that this is exactly what should happen. MaidSafe could decide today to make the necessary transition, write the necessary code, to make Safecoin as deflationary as possible while also making it as divisible as possible. If you do this then the deflation should at least help to push the price upward as intended while the divisibility would make it so you could use it internally as a currency.

I think if you do it like this then it could work. I still would favor completely separating the currency from commodity and have Safeshares and Safecoin but if you can’t do it like that then you can follow the suggestions I just gave.

36

I’m thinking more a cash currency, not bothered if it doesn’t gain in value, just stays the same and doesn’t lose value - and it is divisible as far as I know. Cash doesn’t gain in value, you just earn more of it and we want to avoid inflation ie devaluing it. I’m trading on masterxchange and have doubled the amount of “cash” I have - worst case scenario I’ve got more cash anyway…lol

37

People have needed credit clearing in the past as settlement was expensive. Moving gold, silver, carrots etc takes much more time and energy, relative to marking a credit.

However, cryptocurrencies are changing that. You can transfer digital assets instantly and easily. As settlement is always preferable to accepting credit, this is a big deal. This is why Bitcoin is creating shockwaves across the financial sector.

I agree that you don’t need a universal money, but a common one is useful due to the network effect. Traktion credit may have different market value to luckybit credit, so mag have a different market price.

Moreover, the idea of rotting currency seems to have little demand outside academia. For good reason too - who would choose to accept something which decays over something which doesn’t, unless there is a marked advantage?

I must have watched those perpetual coin videos over 5 years ago and a lot has changed since. Both ripple and Bitcoin are now with us, for example. People prefer the latter over the former, as settlement is more desirable than credit, if the cost difference is negligible.

38

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.

  1. Collapse in aggregate demand. (Bad)
  2. 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.

  1. There has already been 430million Safecoins issued. Will we have 430,000,000Gb at launch?
  2. What happens to 100yr old data, or if the user dies?
  3. 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.
  4. How does this affect builder apps?
  5. 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.

5 Likes
39

Each bitcoin is currently worth about $650, with no guarantee of any storage.

Demand is a fickle thing. If Safecoin gains utility value for fast, anonymous transactions, the storage cost will only be part of the equation.

2 Likes
40

Cash does gain in value (buying power). The dollar trades against the euro and other currencies. Also cash doesn’t have a set supply, it’s created and destroyed as needed to maintain stability. There isn’t any set number of cash.

The truth is cash is just credit in a bank somewhere and notes are printed up to represent debts which exist in digital form. It’s printed up out of thin air at the whims of banks typically backed by some sort of collateral or something similar but it’s still just debt.

Why on earth would we want to duplicate the dollar and expect Safecoin to be a better dollar than the dollar?