Deflationary structure does not provide incitation for use of money

IMO, I prefer a currency that has greater purchasing power in the future vs a constant or inflationary one. I’m better-off if I can buy a meal for less money than I expected compared to going to the store and realizing my money that could purchase 3 full meals before can’t even buy a slice of bread. It just means my money will last longer than a constant value or inflationary one. If I can’t split the value in very small quantities; and transaction fees are proportionally constant to the value of a unit of the currency then this will be an issue. But it does not appear to be the case with ADA.

Oh… and why do we put our money in a bank on time deposit? So we can fight-off inflation (only a bit).

i dont think it will be deflationary forever. it’s still an early stage for all crypto, few investors are holding and prices are sensible to speculation. But even in a volatile market ada is more stable than other currencies due to the number of available coins. billions in pumps and dumps can move only a few cents of the price.

5 billions to move 0.111…

30 b/ 45b = 0.66
35 b/ 45b = 0.77

300 b /45b = 6.66
305b / 45b = 6.77

in the future if we save ada we could spend ada or convert to a fiat currency when needed.

the conversions may be easier and cheaper, some debit cards already can do this (with btc, dash, usd, euro) but the rates are still unfair… but more services like this will show up soon.

to do many payments we could convert some ada to iota to minimize fees, when these coins become widely accepted.

Like steem and steem dollar?

Hey everyone, thanks for the answers! Let’s review what is being said here. About the comments realtive to having a Phd in economics, I have myself a Ms in economics. I specialised in Microeconomics, but the cases we talk about are mainly relative to economics 101.

Via the governance system everyone can decide if it is better to have capped, constant inflation or variable inflation.

I did not found meaningful info about this governance system. However, if your voting rights are granted in PoS way, it means that the richest users will detain the power. The incitation then for these whales is to limit the supply of the money (in a HODL fashion), in order to make its value go up. However this will increase deflation and prevent a widespread use of the token. That’s why central banks are independent : to avoid capture of their power by private interests (state included).

An alternative allocation of voting rights could be to grant them to users depending on the volume of transactions done in the past: hence the monetary policy would be geared toward the users and not the hoarders.

GDP - compile it from Cardano - then I would know what GDP really is.

A simple way is to evaluate a use metric is to evaluate of goods and services exchanged using Cardano. If we kept a register of the companies accepting Cardano in exchange of tangible good and service (i.e not exchanges), we could monitor their transaction levels (either by automatic reporting on their part, or by analysing transaction data) and derivate an activity index. That’s what national statistics service do.

In other words, any economy where its participants can speculate and invest have the property of being implicitly deflationary.

This is called a liquidity trap, and this is one of the worst scenario you can imagine for your economy.

if you thought that the $20 dollars in your pocket might be worth $20.02 tomorrow you might go ahead and spend on stuff you need and save more.
US dollars used to be deflationary as well, as we’ve turned to inflation policies and low interest rates people are enticed to spend, and now everyone is in major debt.

Indeed, a very slow deflation isn’t a big deal usually. However, it is a major drag for the adoption of currencies, as we explained before. It’s like saying to a sick person that once he will be healed, he will be able to drink a glass of wine a day, so why not drinking a bottle now?

US dollars used to be deflationary as well, as we’ve turned to inflation policies and low interest rates people are enticed to spend, and now everyone is in major debt.

I see often this argument about debt. Well, americans, you’re not the world and many countries can manage a modern capitalist system while saving their money. (link)

ADA and ADA-CASH

Interesting idea addressing the technical problems that @Ikarus addresses later. Maybe we could expand it in another thread. The way I understant It is that you’d have your Ada-cash wallet representing the $ value of your Ada wallet. Just like those bitcoin credit card, but with a fluctuating account balance and a payment in Ada-cash. Is that is?

The most important social pain points are: (etc…)

Clearly the best analysis. Devs read this!

I remember time ago there was a coin controlled by stakers that minted on demand and bought on supply to keep it pegged to the dollar, unfortunately don’t remember its name/symbol. Also right now we have USDT Tether which besides being in the eye of the storm it has accomplished that goal to perfection.

Indeed Tether is backed by the belief that Bitfinex has 1$ for every Tether out there, which allows it to totally control the price of the currency. Modulating money emission is an effective way to control the currency price : that’s effectively what central banks usually do, in addition of having massive monetary and securities reserves for emergency.

First we should ask ourselfs what gives the dollar, eu etc. its value?

Inside the USA, you are legally binded to accept it as a mean of payment. Besides, you can only pay your taxes with $, so that creates a supply and a demand. Also, there’s a massive payment infrastructure that makes it the easiest way to transact.

Outside the USA, you need dollars to buy oil, which is the main ressource of every modern economy. Thus it creates an artificial demand for the currency. A lot of international lending is done in $, so you have as well to get dollars in order to reimburse it => extra demand. This explains why the USA has had a negative account balance for so many years without a collapse of its money : everyone needs dollars to transact.

Some may say that this right is enforced by military power and violence of the american army : all of the recent wars in the gulf have a link with oil and switch from to another trading currency. Others may argue about the currency manipulation of some countries, such as China, who buy in order to devaluate the Yuan.

IMO, I prefer a currency that has greater purchasing power in the future vs a constant or inflationary one. I’m better-off if I can buy a meal for less money than I expected compared to going to the store and realizing my money that could purchase 3 full meals before can’t even buy a slice of bread.

Yeah good for you but then it will be like gold, and not be used for daily exchange. You could buy bitcoins, since the cardano improvements are not really useful in that case. Besides, unlike gold, your currency doesn’t have intrinsic value, so when the market crashes…

I dont think it will be deflationary forever.

Well if you have a limited supply and a growing use, it’s the case. Unless use is already at its peak and your economy experiences a recession. But then you may cry because you can’t pull the lever of monetary policy.

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So we need meters about the circulating of Ada outside exchanges to have a dinámic Ada Emission policies wich will generate enough Ada per year to have a debatible Deflation/Inflation?

Except this issue is hardly debatable. The US was on the gold standard until Nixon nixed it (pun intended :slight_smile:). It seems to me that what IOHK should do, in addition to hiring top academic and engineering talent, is to hire some top notch economists to explain to them why the gold standard was abandoned in the USA and pretty much everywhere in the world. If you’re really trying to integrate into the economy at scale, it behooves Charles, et al, to avoid reinventing the wheel and find out why we’re no longer on the gold standard but instead use fiat money and adjust the cost of borrowing money as a means of invigorating or slowing down the economy.

Even if ADA ends up being inflationary, it’s still a better deal than the way we go about business right now - by printing new money via minority consensus. If the consensus can be shared across a large/r majority, decisions/events such as “quantitative easing”, CDOs which precipitated the collapse, etc that happened, during the 2008 RE crisis will be much more difficult (or impossible) to arrive at. Perhaps if ADA was alive & inflationary prior to 2008, there would not have been anyone “too big to fail”, and all those that were the true culprits, would have failed.

Or perhaps there would’ve been “quantitative easing”, but it would have been arrived at by a much broader consensus. I don’t know how it would’ve turned out.

What I do know is that if ADA is going to become invisible/normal and integrated into the very fiber of world economies, is that it cannot be divorced from a power base which is elected by the will of the people.

It’s not like ADA is going to reinvent human behavior as Charles keenly observed, it will just provide us with better means to conduct decisions, at a rapid pace, with more transparency, and hopefully more accountability.

If Charles, ADA, et al are truly shooting for this kind of absorption into society, then ignoring history, digging your heels in, suffering from conspiracy theory delusions, or refusing to change to inflationary from a deflationary type of currency or at least providing mechanisms to change monetary paradigms within the software itself if need be, is at his, ADA’s and Cardano’s peril.

Sure, what IOHK/Cardano’s doing is revolutionary, but only in the technological aspect. Cardano/ADA’s ultimate destiny, if they truly aspire to greatness, will be to serve what Charles calls “the legacy”, i.e. the 7 billion inhabitants on earth - including the 3 billion served and underserved.

Can his be pulled off? Yeah. But it’s much, much, much, galaxy size bigger than Charles, IOHK, ADA and Cardano alone.

Wasn’t there a saying in America? Those who fail to learn from history, are doomed to repeat it. Kind of like UNIX, those who fail to understand it, end up reinventing it :slight_smile:.

Good luck.

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I hope that one day, we don’t have to convert to FIAT.

By the way, how do people get to spend their dollar prior to Aug 13, 1971? Or was it December 23, 1913? Were people HODLing their USD because it was backed by gold? The USD was deflationary prior to this point in time right?

Agree with your thoughts on this as a coin for monetary transactions. Cornell economics graduate here. Cardano is much more than a crypto currency though. It incorporates smart contracts, fast and secure transactions that offers interoperability with legacy systems (think etherium and ripple).

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This is a bit of a longer read, but I found myself nodding in agreement with most of the points made:

Why Bitcoin is stupid

Let’s not be stupid in Ada land.

Yes, they spent it even when we were on the gold standard. I’ll let you read up on what led to the removal of the gold standard, but before you do that, here’s a couple of questions you need to ponder on as you are reading and researching through data, stats, opinions, facts, etc - Bitcoin, according to the founders vision, was supposed to be used as currency for micro transactions that will put visa and mastercard out of business by drastically reducing their standard 3% transaction fee - how is that working out for Bitcoin and Mr Nakamoto (or rather, the original founders hiding behind the pseudonym)?

And knowing yourself and other humans’ nature - is it not painfully obvious that we are uber selfish creatures at our core? In other words, what exactly do you think drove up Ada’s price from 50-60 cents to a dollar in a matter of days? Some notion of altruism, or a desire to see the coin used as currency? Hell to the hell to the NO! People are SLAVES to their desire for gold, money, and wealth.

Deflationary currencies only reinforce rather than weaken this desire. Someone will subsist by sleeping in his car, eating in public food kitchens, piss and defecate on the street, mooch public wifi and avoid incurring any extra costs of living just so he can feed this desire in perpetuity. The problem is his nature - even when he saves up enough money, he could up his standard of living a tad without breaking his back, but he won’t only because his end goal is “more”, rather than enjoying life.

If you’re betting on most people who are investing in crypto right now on being generous at heart, or motivated by something other than greed, you are in for a rude awakening.

Inflationary currencies were “invented” to help moderate this inborn human desire for money and hoarding by slowly devaluing the value of the currency across the arc of time, so that HODL-ing :slight_smile: ad nauseum does not pay off, hoarding, laziness and risk averseness do not get rewarded but instead punished.

Even Charles himself doesn’t strike me as 100% pragmatic on this issue because he and the team started Ada off as a deflationary currency, which may work for the time being… But in the final analysis,.the perpetual survival and mass, worldwide adoption (G20 + the rest) of this coin can only be assured under a PoS/consensus driven, inflationary monetary paradigm, if hopes of infinite scalability, a preferred means for micro transactions, stability are to ever materialize

If you want Ada to succeed where literally all others have failed, then it inevitably will become PoS/consensus based, inflationary in nature, such that it can be controlled by an elected power base representing the will of the people. The control of the monetary policy aspects of Ada, if it hopes to become de facto currency for major economies will reside in the hands of the people and its duly elected power base, i. e. its stakeholders. All ada and cardano is doing is lifting up the current system into one that is more transparent and a lot harder to manipulate - you’re still going to have whale stakeholders, like investment institutions, large corporations, etc, representing a sizeable chunk of the block chain, but the little guy, me and thee, also get to sway the vote/consensus too, provided the math Charles et all is creating works as expected.

If you want Ada to stay a fringe currency, with lambo type investors, then hope for it to stay deflationary, or your preferred term, non-fiat. :slight_smile:

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Hi guys,

my first view of a topic and straight into deep water, nice ! :slight_smile:

My take from the only economist @Mustrum_Ridcully
is that in the end both inflationary and deflationary are spend as long ass YOU can spend them. That is, adoption is the prime factor!

Also a quick check on the claim that prize does not follow mining difficulty and is 100% speculative :
https://bitcointalk.org/index.php?topic=2473778.0
That is, it does in fact.

Finally, @MartinMKD the Satoshi vision is still alive. BCH transact with speed and the lowest fees of the top ‘money’ tokens. It is truly the core devs screw up IMHO.

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There’s a fork of BTC every time there’s disagreement. This is untenable and will not help mass adoption, therefore BTC is going to remain fringe forever, IMHO. Not to mention that PoW is an ecological disaster in the making. The USD has been around forever and disagreements aren’t solved by swapping or forking currencies. That’s how ADA ought to be if it’s going to take on 7 billion people. It needs to emulate real money to the greatest extent possible.

I know about BCH and I’ve known about BTC almost from the beginning. I wouldn’t buy/hold either even at gunpoint. I did however invest a nice chunk of my own money in Ada - sure, maybe I’ll make some money if it goes up a few points, but ultimately I invested and will be holding because of their motivation and approach to the project as belabored by Charles in many interviews and on the website.

It can potentially, if they play their cards right, take off beyond anyone’s imagination. Call me a true believer. To be honest, that’s why I post here - I do have better things to do with my time, but I really like this project and the people running it.

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@MartinMKD I see your point about how bitcoin turned out and thank you for explaining. Most of the videos I see about the history of the Federal Reserve and governments’ Central Banks is different from the reason you are explaining. This includes how Bank of England came about. Even proponents of Bitcoin like Antonopoulos explains the value of divisibility and deflation differently. I hope more economists like @Mustrum_Ridcully can explain well to non-economists like me. If this can’t be explained well, it will reflect in votes. Like what I mentioned in another thread, experts has to be compelling in their explanation. When normal people can’t relate to the argument, it will be hard to get majority vote. I understand what you mean by the utility of the currency will decrease if it does not circulate. I agree that humans are selfish creatures, however self-interest is the reason why anything gets widely adopted. If it’s not in people’s self-interest to convert money into Ada then Cardano won’t also succeed. We will simply put money into some coin that will increase in value and continue to convert to FIAT when we need to spend. So maybe the question should be: What kind of balance is needed for people to convert FIAT to Ada and yet continue to use it as a currency even for micro transactions? I think game theorists are best for finding this balance. By the way, here are videos that are out on the internet. I have also seen the version of history that the Federal Bank officially says on why there was a bank run during 1907. My question is if there is 1:1 ratio for each bank note to gold coin, why would banks and governments ever fear running out of gold? I believe this is the reason cited that is consistent in both sides of the narratives.

Short version: https://youtu.be/-mejOviGyok
Long version: https://youtu.be/5IJeemTQ7Vk

Regarding the link you provided, it has great points. I agree that bitcoin is stupid as a currency. But it is great as a store of value because, as the author noted, you need trust and cooperation. There is trust in BTC because it is very hard to cheat and cooperation was generated by greed. FYI, I don’t hold any BTC–I hate the transaction fees, energy consumption and doubt it will exist when quantum computing comes.

Cardano has a long way to go to achieve these points:

  • easy and frictionless trading between people
  • to be widely accepted as legal tender for all debts, public and private
  • a stable value that does not fluctuate (otherwise it’s impossible to set prices)

To think that we are just discussing point #3. It is far easier to debate and criticize than to implement …so good luck to the Cardano team. LOL

Also, if they were to follow the advice (re hard forks) of the article, then shouldn’t Cardano hide the codes and copyright everything? Maybe we’re better-off waiting for Hashgraph™ to release a crypto currency or just use Ripple? …even with these considerations I still trust Cardano more than the alternatives. I find the team both courageous and humble at the same time. They seek the opinions of other experts in their field of work and they are willing to share what they know. This is similar to how Volvo openly shared the three-point seatbelt design to save more lives by not patenting it. If not for their altruism; humility in accepting they are not perfect; and willingness to work with competition to fix problems, I won’t put as much trust in Cardano… but that’s only my opinion. Not everyone will do the same.

P.S. I wish the author of the article didn’t use pharma as an example. Not everyone has a high opinion of drug manufacturers with regards to their pricing.

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I invested in bitcoin couple of years back after learning about the technology for 2 years or so. Then I held it for very selfish reason that it might one day be worth lot more. I also liked the technical aspects of this new innovation. I liked the new algorithms Satoshi came up with. Now I see that my greed has definitely taken over my decisions in the past one month where I am searching and reading all the altcoin proposals to see what the next big ideas are.

The conclusion I come to are that all the new people who finally started to pump money into crypto were not paying attention until recently and now the greed in all of them is causing them to put money into crypto. I see greed more as a desire to make your life better. I do not think it is lazy. The person is doing atleast some research. It is similar to trying to find the next big company stock which is undervalued.

All crypto can be thought of one huge inflationary currency. There are thousands of crypto now each with total supplies of multiple billions. So in a way software coders are printing up currency out of thin air to satisfy the desire of people to own these tokens. I agree that each of this currency is trying to come up with a better system and improve upon the existing crypto protocols. I am assuming there will probably be trillions of tokens in couple of years. So these are highly inflationary. As it happened in the past for the entire history all this probably will burst like a bubble and all of these might be worthless sometime in future.

Maybe the best use of this technology is not for using it as virtual currency created by private people. Maybe the private companies should focus on using this technology to solve some of the other problems and increase efficiency and make standard of living of all humans higher as does technological innovations in the past. The central banks may be the ones who should stay in the business of managing the inflationary currency using the best blockchain technology available today.

In the past US had private currency where each bank used to print their own bank notes and for a while it worked and people were constantly looking it up in the publications to verify the exchange rates. Eventually some banks made bad investments and had bank runs and banking crisis and US government stepped in to end private money as a solution to these problems. Currently in crypto we are in that stage. Big difference is that we have the technology to do the exchanges instantaneously. Once we have multiple equivalent bank runs (computer hacks today or some other problem) maybe all this crypto mania will be shut out.

My conclusion is that the blockchains and cryptography technology should be used to solve current day fiat transaction cost, friction, settlement delay problems rather than trying to be a currency.

Any crypto currency can also be thought of as inflationary as it is just a number. Instead of using Bitcoin if it’s value goes to a million dollar, we can instead use 1 satoshi as if it is one dollar. The numbers in a computer can be divided endlessly to continuously devalue the crypto currency. So hence all crypto currencies are inheretly inflationary. Maybe in the end all this will work just fine. It’s just that people who are holding will not see the gains they hope to see 15 to 20 years from now.

PY = MV, but we haven’t discussed V at all yet.

The argument that fixed M and rising Y must cause deflation only holds if V is assumed to be fairly constant. Otherwise an increase in Y could be accommodated by a corresponding increase in V.

Constant V may have been a good assumption for fiat back in the mid-20th century (when a typical dollar could take a week to cycle from bank to wages van to pay packet to purse to shop till and back to the bank) but it may not be so good even for fiat today, let alone for crypto five years from now.

I sometimes wonder, if a cryptocurrency finally achieves real-world transactional use at scale, might its V grow faster than its Y so it starts decreasing in value?