The Price of Safecoin & The Economics Behind It

Autonomi Network Token (incl (e)MAID)
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Hi all

What I’m posting here is purely my opinion based on the facts I know about the Safe network so far. If there are any errors please let me know. Well let’s begin.

Bitcoin is a speculative and volatile currency, that is due to the fact that it’s price is determined by what the market is willing to pay for it, and that it is not backed by any commodity. Safecoin on the other hand is backed by a commidity, that being our computer resources (CPU, bandwidth, storage space etc.). Due to this Safecoin’s price will not be as volatile as Bitcoin’s price, and is also not speculative as it is backed by a real commodity.

What this also means is that we will never see major increases in Safecoin’s price. Let me explain :

The SAFE network will have a total supply of 4.2 Billion Safecoins, Currently there are just over 420 Million “Safecoins” in existence. The distribution of Safecoins will take place roughly in this manner :

Now there are two key points here :

  1. As the number of nodes increase, so do the number of coins being distributed
  2. There is no “difficulty” as in Bitcoin. Each node receives a fixed amount of Safecoin, regardless of the number of farmers
  3. This is the opposite of what happens in Bitcoin where as “difficulty” increases due to growth in the network, the number of coins being distributed decrease. (This is why we see the price of Bitcoin rising - Supply/Demand)

Since there is a fixed amount of Safecoin being distributed to each node, the price has to remain constant to keep both the farmers and the users balanced. If the price of 1 Safecoin were to increase, the nodes will be making large profits, while users looking to store their stuff will have to pay extra fees (possibly higher than alternatives like Google Drive, Dropbox). Why?

Becuase there is no difficulty for Safecoin farming, therefore :

(X) amount of farming will always produce (Y) Safecoins regardless of the the number of farmers on the network

Whereas in Bitcoin, as the number of miners increase and subsequently difficulty increase, the number of coins each miner receives will decrease. Therefore in Bitcoin

If there is 1M Miners in the Bitcooin network (X) amount of mining will produce (Y) Bitcoins
If there is 4M Miners in the Bitcooin network (X) amount of mining will produce (1/4Y) Bitcoins

As the rate of supply decreases and the demand increases, Bitcoin’s price can go higher. Safecoin on the other hand has a fixed supply rate, which means farmers will always receive the same amount of Safecoins regardless of the total number of farmers on the network. This is what makes it virtually impossible for the price of a single Safecoin to increase without losing incentive for users to actually use the network.

*Please note I’m not bashing Safecoin, I’m just trying to view this from the eyes of a Bitcoin user. Hopefully this will cause some constructive discussion about the price of Safecoin.

EDIT : My views on this matter has been swayed. The factors which affect the price of Safecoin were incorrect in my post. Therefore I believe that the price of Safecoin will increase quite dramatically in the future. Read the posts below to see the corrections which lead to my new view on the price of Safecoin

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This isn’t true I think - see What gives Safecoin value and differentiates it from altcoins.

The rewards for farming are NOT constant, but increase if the network requires more storage/farmers, and decreases if it has more than enough.

As the FAQ (linked above) points out, there will be other factors potentially affecting the price too. It is different to bitcoin, you are quite right there, but not in the way you’ve described it.

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Okay with that being said, the dynamic rewards, should create a small fluctuation in price, however since the rewards don’t periodically decrease as more farmers start using the SAFE network (as is the case with Bitcoin), we won’t see the type of sideways price increases that Bitcoin has.

Do you agree with that?

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The safecoin farming is controlled by a single factor (like the bitcoin block reward). This factor is the modulo division number of attempts per Get for a node. So imagine this is 1,000, if the Get messageid plus some other factors (nodeid of the close nodes at that time etc.) all provide a zeo answer then the node can request a reward. This request goe via some other groups to create the reward.

Eventually the group closest to the reward address (which is in the 32 bit field) will confirm all the actors in the scene (node ids closeness messsageid etc.) and with the hash of the culmination of those things look if there is a space == to that in the safecoin space (i.e. has anyone already claimed this safecoin). If there is space the safecoin is created (farmed).

So the difficulty increases as the space fills up (exponentially).

So here is my issue with this. We set this modulo % number as a magic number. This is wrong, simply has to be. It is like the bitcoin 10 minute thing, its wrong and arbitrary.

We have a great opportunity to get rid of this. I see it like this, the network sets this number initially, then (the magic part I have not finalised yet) adjusts that based on supply/demand. We already can do this via the farming rate curve, so make farmers very profitable at network average to that + 20%. If the network can then tell we are oversupplying (to many nodes over the Average+20% it increases the difficulty number (this modulo).

That way what is happening is the external price of safecoin is taken into account as the network can detect over or undersupply, on undersupply make it easier, oversupply make it harder. This way equilibrium of resource supply verses price os safecoin is attained, without the network knowing the price of a safecoin.

There is more to this but basically this would rid us of a magic number and allow supply/demand balance at all times.

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Perhaps the question should be, “Will demand for safecoins increase?” The answer to this is speculation for sure, but what kind of things do we see in our future?

With more apps, more need for resources, more devices joining that are not farming or that only join for a short time so their trust levels are low, more need for instant transactions of value (ie safecoins), consumer devices that will make safecoin ownership 2nd nature (unlike bitcoin). All these things together make me think that a lot of people will eventually own and then want some more safecoin.

There is also a cap to the number of safecoins and I know there is lots of talk of recycling but even with recycling we are talking a very small percent that will be recycled.

I’m hoping that we see a relatively slow increase of value over time.

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Sometimes it is preferable to have a transaction recorded on a permanent public ledger(bitcoin) sometimes not (safecoin). If safecoin finds its way into the bitpays and coinbases of the world, which, i think, would make them better, it will change your analysis.
Is there a mechanism to keep the cost of storage space aligned with market value?

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There was a looooooooong discussion about this in the past. I’ll see if I can find it and add a link sometime today unless someone else finds it first. And I think @dirvine is hinting at that here, but the answer was that the cost of resources would fluctuate as the value of safecoin fluctuated I believe… correct me if I’m wrong anyone.

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I don’t understand what you are saying enough to agree or disagree. I agreed it is different to bitcoin, and in the FAQ I speculate (similar to @chadrickm’s comment) that the price will rise over time, and I also suggest that the link to farming could act as a damper. If you read the FAQ post I linked to you’ll get my very amateur speculative views on this. I don’t pretend to understand this stuff well enough to predict, and I certainly have a selection bias towards wanting to see things happen that increase demand for Safecoin over time, and towards wanting its value to increase over time.

One can imagine the same kind of hikes in value if suddenly speculation happens that MaidSafe will be the new bitcoin. I don’t see anything being able to stop that. The link to farming will only dampen it so long as the volume of farming to speculative movements are not too different. While speculation in bitcoin was limited, but had a big effect because it was still such a niche and relatively small network, in SAFE’s case the network might be bigger, but the confidence in crypto, and the much wider interest in this kind of tech, that exists since bitcoin could produce far greater volumes of speculation.

In short. Who knows! Its all speculation IMO.

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Ok, so an increase in safecoin value will make farming more profitable, bring in more farmers, increasing storage thereby brining down the cost of storage. More data stored on the network doesnt absolutly mean more safecoins. The data has to be accessed to produce a reward. Right?

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I’m not sure if you might be confusing two factors:

  • the market value of Safecoin (ie how many bitcoin, dollars etc it costs to buy). This is what I take “the value of Safecoin” to mean.
  • the level of mining reward, which is received in Safecoin

The two adjust independently, one according to market demand for Safecoin, and the second according to a different “market” force, the network’s demand for storage.

If by “an increase in Safecoin value” you meant an “increase in the mining reward” then yes, what you say is absolutely correct, but the terminology not quite right.

The two things affect each other, but are not directly linked. Safecoin value indirectly affects mining reward, but if this brings in more (or less) farmers than the network needs, the network will automatically adjust the mining reward to compensate and keep the farming capacity about right with respect to demand from users.

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This is really true, I think.

The other end of it is to consider the attributes of safecoin as a currency. As confidence grows in the solidity of the network-- and thus the veracity of safecoin–the anonymity, transaction velocity, etc., of safecoin will certainly cause it to increase in value, perhaps fantastically, due to speculation as well as supply and demand. This will only drive farmer participation and thus expansion of network resources and stability, builder participation, etc. The more resources the network gets, above what is being used, the harder it will be to get a lot of safecoin by farming, but everyone should be able to get some, increasing its network effect, and thus its value.

Safecoin creation will always be linked to the management of resources, but its external value as a currency could easily gain a life of its own, which will only tend to cause network infrastructure, software, etc., to be built even stronger. All the while, as the network gets slicker and more useful, it will become the place to be regardless of the farming aspect, thus increasing the network effect even more, and thus the value of safecoin.

Pretty neat dynamic potentials.

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Thanks for the discussion everyone and for making me aware of some new factors which affect the Safecoin price. You’ve swayed my view on this matter. I’ve edited the OP so that newcomers to this thread are aware of this.

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What about bandwidth? What if I want to offer Internet access by flying unmanned solar drones over a neighborhood or using balloons?

How would I earn Safecoins? How do we separate the price of Internet connectivity from storage?

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Bandwidth is priced in to hosting the data - you have to be able to deliver what you are storing or you are not providing a service.

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Did you guys jump into the wrong topic?! :slight_smile:

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So I should charge you to access the Internet in Bitcoin instead?

The point is people aren’t just after data but also connectivity. If there is no Internet then what?

So how would I provide access for a fee and get paid in Safecoin?

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There is no reason you couldn’t accept safecoin for whatever you want to. It is the rate of creation of safecoin that is tied to the network directly. Its value for other things is straight market driven.

What you are talking about here is being an ISP that accepts safecoin.

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Isn’t all connectivity just data?

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Connectivity is building the actual infrastructure which is the backbone of the Internet. Whether it be wireless balloons, satellites, drones, how exactly do we reward or provide incentive for people to build that out?

They have to be able to farm their Internet connections.

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So I want to share my bandwidth as a resource and earn Safecoins. Suppose I’m willing to build autonomous drones, nodes, balloons, all kinds of innovations but only if I can be funded in Safecoin.

How would I do it? How do I know Safecoin will have enough value and how will I get the Safecoin to build out? It’s not just about storing data but also about building the mesh Internet.