Certainly the size of the oil barrel plays a role in the price. There is a fixed supply of oil, and so the size of the barrel coupled with demand creates the market price. A very large barrel would mean fewer total barrels would be required to hold the world’s oil in comparison to a very small barrel. We can assume a larger barrel will be priced higher than a smaller barrel for this reason. We can assume that any barrel can be further divided into liters, deciliters, centiliter, etc.
Let’s fold this analogy over to crypto to see how it works. We’ll use Bitcoin in this example:
Bitcoin Protocol = World’s Oil
Bitcoin’s total token count = Barrel Size
BTC = Barrel of oil
Satoshi = Barrel’s divisibility into liters, deciliters, centiliter, etc.
It should be pretty clear from the above example that while I might decided to divide up my barrel of oil into 32,000 teaspoons, and you might decided to divide your barrel into 200 Trillion individual molecules, it does not change the amount of oil in the barrel!
Adding resolution of measurement after the decimal places does not make a number larger.
In the case of crypto that resolution is a somewhat arbitrary decision on the part of the developers. The resolution should simply be sufficient to handle the most granular transaction required by users of the network. There is no 'molecule in a ‘barrel’ of BTC and so theoretically it could be subdivided further if 1 Satoshi proves to be too coarse a unit. Doing so would not change the world’s total ‘oil supply’ (Bitcoin protocol) nor the size of the barrel (BTC).
Ok, I get your logic, but it must be that I start with different premises:
My view on things is as follow:
World’s Oil = total amount of the smallest units that allow you to use the Cardano Blockchain for the smallest task. That smallest unit could be 10 Lovelaces as 1 lovelace
Barrel Size = conventional size of the container of X smallest units, for me this is the truly arbitrary decision from developers.
Barrel = 1 ADA
Therefore no matter if you decide that the barrel is bigger or not the amount of Oil will remain the same and therefore the value of all the Oil in the world (its market cap) will remain the same.
For instance the CME Futures Market contract is traded based on Barrels.
If they change the size of the Barrel making it bigger it will change the price of the Barrel but not the overall value of the World’s Oil, that is given from demand/supply rules given from the scarcity of the molecules of Oil.
That’s why I think is wrong to count the BTCs or ADAs amount because we would be counting the arbitrary size of the Barrel rather than the actual supply of the good we are considering.
Now I am not sure Lovelaces is the actual smallest amount, but I am not sure ADA is either. In any case estimates of scarcity made on the count of BTC and ADA could be completely wrong.
What is wrong with my logic? I don’t think your logic confuted mine… But I can be wrong where is my fallacy?
You keep committing to the same basic math error my dude From hotels to barrels you’ve convinced yourself that divisibility is the same as size.
Let’s try this:
a) 1.00000000
b) 1.000000
Which number above is bigger?
Answer: They’re both the same. They both equal 1. They also happen to represent the resolution of BTC and ADA respectively. But they’re still both equal to 1. No matter how many zeros I add or remove after the decimal place, both numbers will still be 1. 1 Bitcoin = 1 Bitcoin. 1 ADA = 1 ADA.
Where you keep getting tripped up is wanting to count ALL of the Satoshis and compare them to ALL of the Lovelaces. This is not how it works. You can’t add the divisions after the decimal place to get a new grand total!
Neither networks are denominated in Satoshis or Lovelaces; they are simply shorthand terms for fractions of their currency which is BTC and ADA respectively.
To believe otherwise would be to believe that if ADA’s divisibility was reduced to 1000 Lovelaces, they would now be 1000x more scarce and thus 1000x more valuable. It would also suggest that if the United states removed all pennies and nickels, they’d make the dollar 10x more scarce and make the nation 10x richer. Neither are true! Pay attention to the decimal place.
Actual supply of what? The network value is an abstract thing and not a fixed physical commodity. The circulating supply IS the only thing worth counting when it comes to crypto because it’s the operative number that divides up the network value. The total circulating supply is an arbitrary number but not irrelevant to the price. The market only knows to price ADA at $0.056 (currently) because Cardano decided on a large circulating supply of 26 Billion ADA. If instead, the circulating supply was 26 Million, then 1 ADA would cost $56.00.
A Lovelace is the smallest fraction of an ADA. An ADA is the smallest fraction of the total network value. Scarcity is measured in total number of ADA, not total number of Lovelaces. Lovelaces come after the decimal and can be increased or reduced without affecting the scarcity of ADA.
Ok, I think this is about as clear as I can explain it… I know this topic can be a mind bender for some people…I see it come up all the time in different crypto forums… I hope this was in some way helpful.
Our difference is that you think there is a sort of agreement where everyone participating in the price discovery of Cardano agrees the real thing is only the whole ADAs and the network it’s just an abstract value.
I instead do consider ADA as a commodity and it’s value given from how desired and scarce it is the service it provides.
If there are X people that want to record their land ownership on the Cardano Chain and to do so they have to use 1ADA each, that would make the Cardano market cap more valuable than if to register the land ownership they have to use 0.1ADA.
no one argues the relation between total supply and price, what I argue is what we consider total supply.
Also be careful that all this discussion doesn’t matter when considering only one blockchain, the problem comes when comparing the BTC 0.00000001 to ADA 0.000001.
It’s all love my friend. But I give up! I’ve tried to show you how the mechanics of price works in this space. You have invented some plausible stories that make sense in a narrative fashion but don’t comply to the how the market measures these things in a real way. It’s a backwards math. The divisions of the token can always be expanded for practical use in your land ownership example without affecting the total supply or price. Alternatively reducing the total supply of ADA will affect the price as it reduces the tokens representing the network value. Some ICOs have done ‘token burns’ to reduce supply in efforts to bolster price. They never do “Lovelace” burns. I wish you the best of luck.
I think this argument just lends credit to the novelty of crypto. You’re both kinda saying the same thing, but not - kinda agreeing with each other, then not. It was an interesting read for sure.
My 2 cents - an ADA is an infrastructure investment. It’s worth what ever is running on top of it. The way a road is only good if cars drive on it.
What’s the value of the internet right now? Divide that by 45 billion. (kind of thing)
Edit - I also think that we need to agree on the “discussion” unit - the way we don’t talk about quarters when we talk about US oil trades. 1 ADA is the unit to reference, otherwise you get lost in some financial zeno’s paradox
Thanks my friend for the effort, you actually convinced me more than I let transpire, kind of need to keep the other side till the end for the sake of discussion.
Definitely if there is the possibility to change the division of the Token my rhetoric falls apart.
I understand that the ADA and BTC unit is the metric that everyone agrees on, therefore making it real (making you right) and currently the markets base their valuation on that.
But I still have a doubt that such metric can flex and get skewed in some situations where huge demands can shift the perception of that unit (1ADA and 1BTC) to smaller sizes. In those instances/periods the limited division of ADA compared to BTC division can play a role at least temporarily until further division is set in place (if possible at all) to accommodate the rationale of the unit of ADA/BTC.
If really that rationale of unit of ADA and BTC and its supply is an abstract concept solely kept alive from people’s agreement, you would also agree that human perception can change abruptly depending on conditions and reflexivity.
I think we can all agree that the total value of 2 items (lets say cakes) are equal no matter how many slices each are cut into.
I think we can also all agree that if you have 2 identical cakes and one is cut into 8 pieces and the other is cut into 4 pieces and the price was based on weight one piece from the cake with the 4 slices would cost 2 times the cost of one slice with the 8 slices.
I think we can also agree that 0.00000001 is smaller number than 0.000001.
With all that if one looks at the total current supply of Bitcoin vs the total supply of ADA in the smallest divisible unit (Lovelaces and Satoshis) is very roughly 10X more Lovelace than Satoshi’s which was asserted in the original post do I have that correct?
My next question is it appears the monetary policy of both Cardano and Bitcoin fix the total possible amount of both Satoshis and Lovelaces. One can’t just decide to add more decimal places or print more (unlike dollars). Do I understand that correctly?
As a side not I found this interesting article about fractions of a penny:
No, there are 100x more Satoshi than Lovelace. The OP used this fact to assert that Cardano’s total supply is smaller when measuring by the smallest fraction used by each respective token . But measuring by smallest divisible unit of the denomination is irrelevant to total supply. If the US government decided to phase out both pennies and nickels and decided to measure dollars in fractions of 1/10 (dimes) instead of fraction of 1/100 (pennies) it would not change the number of dollars in the system nor the wealth of the nation. Measuring AFTER the decimal place does not change the number BEFORE the decimal place.
No. See above. Adding resolution after the decimal place does not change the number before the decimal place. Cardano could change the resolution of ADA without changing the total supply. Changing the resolution after the decimal place does not ‘print’ more ADA, it simply makes ADA either more or less granular. The total number of ADA stays the same no matter how many lovelaces are used to divide up one single ADA.
Cardano - each ADA is really worth $0.05 RIGHT NOW… here’s why…
BECAUSE THAT’S WHAT THE MARKET WILL PAY FOR IT !!! Time to put down the calculator and clean out your bong guy… Ok ok… If it makes you feel better to tout Cardowno is worth $429. Then go ahead. Blow smoke up… Me personally, I’m so sick of watching my massive Cardowno bags. Uggg.
Of course, I will buy ADA just to send it to you and receive 10,000X more of what I can buy at the exhanges, and I would repeat this process until your USD runs out or untill my buying pressure on the market makes the price of ADA actually worth $500 USD.
Making me and all ADA holders rich! Contact me! specially if you work on the Federal Reserve!
From hotels to barrels you’ve convinced yourself that divisibility is the same as size.
