I find this paper, published by HassenBlasques, to be very interesting and well written for readers who are not economy professionals but know the basics and want to know more in the context cryptocurrencies. Although the paper is about Nxt the contents and conclusions are mostly applicable to all cryptocoins/assets, or all POS coins.
I am not going to repeat the parts that are well known to the peercoin/nu community. I would like to comment on the following -
- store of value (page 5).
About reward for forging. It says the problem so well it deserves to be quoted in full
In the proof of stake system in Nxt, ‘miners’ are awarded according to the amount of Nxt that they already have. In relative terms, everybody profits at the same percentage, everybody enjoys the same return of investment. In absolute terms it is not true. Why? Because the distribution would only be linear if the rich made much more transactions than the poor. This will never be the case because there is no reason to expect that the rich will be more economically active; or at least not proportionally. Even if the fee was not constant but defined as a percentage of money send, the more active users of the currency still support the systems with proportionally higher fees. The incentive in form of a riskless appreciation goes against the wish to spend money. It is naturally true that the more talented and capable businessmen can profit so to cover the fees they pay – but to who’s expense? To the expense of ordinary users of the currency, not the parasites. If a parasite only sits on his money and forges, it is not important that he does not earn by doing business. He experiences some opportunity costs but still his stake grows. In relation to the whole Nxt economy, he keeps getting richer. Mathematically, the gain of all users may never be linear because there is a constant monetary supply. The only case in which the equation can work is when there is no activity and thus no fees at all . In a nutshell, the model of forging is unfavorable for those subject who spend, it discourages of spending. The industrious may never get wealthy at the expense of the big stack bullies like this. It is another stepping over each other’s heads, another race towards the bottom, in principle. Once again, it is never possible for a currency to be optimized for functions of medium of exchange and store of value at the same time.
We can instantly see that the separation of nushares and nubits solves this “never possible” problem of Nxt or peercoin or any other “monocoin”, because the “need to spend” is satisfied by nubits and the “need to mint/forge” is satisfied by nushares.
I think this solution to a foundamental problem of POS should be widely publicized.
- on allocative
Nubits have unique potential to have capital exchange and savings bank because nubits can be both had as credit (printed) and as savings. If the printed part can be colored, it could be possible to control credit bubble.
- unit of account
Nubits will become a widely accepted unit of account if it is widely used as an intermediate currency.
- power
Voting via nushares/peershares is a land mark of enpowerment in the cryptoworld.
- stablizing
A lot have been said in this area on nubits being a stablizer. “The more secure, predictable and stable the anchor … the better…”
- world reserve currency
The author thinks to be a world reserve currency a lot of applications have to be built on it.
edit:
- velocity
This on page 5 under “store of value”
Money is not consumed after being spent. It has a quantum substance – both the number of coins and the speed (the velocity of money) combined determine how much money there is.
brings insigh to how we should evaluate nu economy. Nu economy is bigger than market cap suggests because nubits have a high velocity.