Inflation-Protected Asset vs. Anti-Inflation Parking

[Sabreiib]

Currency should not be inflated at all. People are being stolen by government for ridiculious economics growth excuse. It’s unfair for an honest labor who keeps his hard-earned money for ten years and finally losing buying power in the end. Even a mild inflation still harmful for economics, is small dose of heroin healthy? Would you take a little bit of it to keep your body stronger?

Governments have been cheating in this monetary game for thousands of years . At first the kings mixed cheaper metal into golden coins and nowadays governments issue paper from thin air with monetary monopolization. Only between 1720-1920 these two hundreds years, gold standard prevented inflation “cheating”/“bug” while induced another bad thing–deflation.

Good money, which is neither inflation or deflation, still a dream for humen being.
Bonds is bonds, asset is asset, money is money, there is no anti-inflation money which people can put into their pocket and spend it freely in this world. When you deposit it in a bank, you cann’t use it to buy a bottle of water at all.

However, we have the very chance to launch the first good money in history.

It seems to me to be fairly certain that
a) a money generally expected to preserve its purchasing power approximately constant would be in continuous demand so long as the people were free to use it
b) with such a continuing demand depending on success in keeping the value of the currency constant one could trust the issuing banks to make every effort to achieve this better than would any monopolist who runs no risk by depreciating his money,
c) the issuing institution could achieve this result by regulating the quantity of its issue, and
d) such a regulation of the quantity of each currency would constitute the best of all practicable methods of regulating the quantity of media of exchange for all possible purposes.
Clearly a number of competing issuers of different currencies would have to compete in the quality of the currencies they offered.
It was not ‘capitalism’ but government intervention which has been responsible for the recurrent crises of the past.
----- Friedrich Hayek

In future we should provide a currency unit which is anti-inflation/deflation while people can use it in any time without needing to deposite/park(losing liquidity).

But now, we need focus on NBT first.

[Cybnate]

Agree that anti-inflationary NuBits is more a marketing vehicle than something of real value to the holders. That means that there may be demand for it, but I think the pegging shouldn’t be against USD but a basket of currencies and goods to be really valuable.

If someone wants to bring this to the market I think we should just fork NuBits ourselves, rebrand it, have it’s own website, shares and community etc. and have it competing against NuBits. That way you take any traction away from any competition and still be in charge of the marketing and network to reduce the confusion of two similar coins. Shares in the new fork could just be provided on a 1:1 bases to the current NuBits shareholders to keep things in control, but should be made free floating on launch.

There are probably a few flaws in my line of thinking, so keen to hear what others think.

[Sabreiib]

NBT is Judas, according to some other crypto fans, because we betray satoshi’s dream: to release the world from inflation.

When you stick to USD, you are just fan of FED.

[Chronos]

Here’s what I’ve seen so far:

@willy Option 2.
@Yurizhai Why do either?
@tomjoad Neither. (Focus on core purpose of NuBits.)
@DavidMc0 Option 1.
@Raythma Neither. (Use Peercoin to fight inflation.)
@learnmore Neither. (Weakens the peg.)
@Sabreiib Option 1, but not right away.
@Cybnate Option 1, but via a fork.

The variety of opinions is fascinating. I think I am currently against option 1, because it would undermine both pegs to have shareholder resources split between them. I think option 1 would increase the risk of peg failure.

Good discussion.

[Cybnate]

NBT is transitional model to increase acceptance rates of alternative digital money till we are relieved from the money printers. That may still be a while.

[Sabreiib]

Prof. F. Ametrano, Hayek e stabilia' delle cryptomonete

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2425270

Our competitors have emerged. Sooner or later, the blockchain equipped Hayek moneies will come.

Ferdinando M. Ametrano , a finance expert working in an italian bank, are planing to apply blockchain on good money dream, his solution is provide two units in one wallet(just like us) but with two blockchains(unlike us) , and ditribute more money (stable) to another money(unstable) holders, so called fairness distribution.

[Raythma]

Creating a “Good money, which is neither inflation or deflation” is possible, but it will be volatile as the money is just another good subjected to the supply and demand volatility, this also sounds like Peercoin!

And solving the price volatility by wallet value volatility is just … No, i will handle the peercoin’s price volatility happily.

[Sabreiib]

From economics view, NBT is not stable at all because it decays 2-3% every year.

[Sabreiib]

The italian professor wrote this in his whitepaper.

For the time being this concludes the generic high-level explanation of how cryptocurrency price stability can be achieved. Cryptocurrencies adopting the monetary standard of elastic fully automatic non-discretionary supply regulated to achieve stable prices with respect to a (commodity) price index36 are defined to be Hayek Money. The departure from Hayek’s concurrent currencies scheme is about how the volume of private currency can be regulated. In Hayek’s scheme the issuing institution would need to buy/sell its currency against other currencies/securities/commodities and contract/expand its lending activities: this is how central banks operate. In the case of a cryptocurrency the obvious superior alternative is to enforce the monetary policy on the block chain itself, directly altering the number of currency units in every wallet. How this can be technically done without relying on a third party authority is the significant challenge of section 6.

You see, he is ready to utilize TWO methods to regulate currency criculation.

1. sell/buy currency with others, that’s exactly what our LPCs do.

2)contract/expand its lending activities. That’s what I suggest so frequently.

Hayek theory is not secret at all, if we don’t start lending business, our competitor will, they are smart.

I guess his solution is below:

basecoin (like NSR)
stablecoin (like NBT)

Both stored in one wallet, your “NBT” balance value is always equal to “NSR” value.

If “NSR” price go up, the protocol will give you some “NBT” to keep value equal. when you send NBT out, your NSR also sent.

“NBT” is stable and “NSR” volatile.

Am I right?

[Yurizhai]

Oh I wasn’t saying why do either. I was showcasing my ignorance on the issue, wondering what such a currency would be used for.

[willy]

I see that I’m lonely with my decision so far… After some thought, I think parking is not the best available choice. I like the idea, but I don’t think “classic NBT” would be suitable for such an implementation.

The NuBits white paper mentions adoption of pegs other than USD like NuEuro etc.
Best advantage: NuShareholders are supposed to control all those pegs on the same NSR chain.
At least this is, how I understood it.
I don’t think that one would need to fork NBT to protect the “classic 1 USD peg” in some way, as other pegs are possible and imaginable with the current white paper.

The idea of an additional inflation-protected USD peg, under a different name, might be worth refining.

[mhps]

If [parking rewards] are instead set to counter inflation, there may be an overconsumption (or underconsumption) of parking, leading to an oversupply of NuBits, and the peg would fail. Basically, tieing parking rewards to the level of inflation would break its ability to stabilise the price of NuBits.

That is what I had in mind to say. Parking reward is artificially printed, with no backing unless there is external revenue generated for the rewards. Using parking to reward hoarders is taking away values from all NuBits owners. Per unit value of Nubits (denominated in USD) will drop as a result of such reward, eventually. (Parking is still a valuable monetary tactic tool. But it’s a different issue)

Think this way: if USD is losing value against goods and services, how can you compensate such inflation by giving people something that is losing value against USD?

Without revenue, Nu is at best zero-sum no matter how you cut it.
Nothing is inflation resistent unless being backed by an inflation resistant commodity (goods and serives) or hedging.

[Cybnate]

The idea of an additional inflation-protected USD peg, under a different name, might be worth refining.

I agree, a fork is maybe too radical. But I think a strong separation between the two regarding marketing, community and policies need to be in place. Users barely know what NuBits are, let alone if you introduce something else from the same community also pegged to USD. It will be hard to explain and sell. It is different with a peg to a Euro or Yuan, those are distinct pegs and different markets.

[Raythma]

The only mechanism discussed in the italian banker Whitepaper was Actively increasing and decreasing the amount of the stablecoins in every body’s wallet to stabilize the price !

I invite every one to read this Whitepaper to realize that there is only two possible ways to create an anti-inflationary currency :

1. By holding a total/fraction reserves of commodities to pack the currency, which can’t be done since we are already worrying about the fiat reserve security so imagine holding commodities, and if it can be done it will be a centralized currency which means it is not a trust free system, and even this cannot insure a long term stability since these commodities can lose their demand or scarcity in any moment due to some technological breakthrough.

2. Stabilizing the prices by pegging it to a scarce CPI “consuming power index” which can be a set of commodities, but since there is no decentralized automated way to provide this index, every miner will suggest this index in the block he mines, and all miner have the incentive to provide a legit index, When the CPI of stable coin decreases the protocol will ACTIVELY decreases your wallet holdings and vice versa !, so this Anti-inflationary currency is not stable at all in the regard of the value you hold.

But again there is no way to make a real stable currency without this manipulations since money are just another good and its value depends only on the supply and demand.

The Stable coin is indeed interesting and worth experimenting, but its bazaar characteristics/trade off, must be clear to the community members before deciding investing in and risking with it.

what confuses me, that we are discussing issuing an anti-inflation currency with either pegging a new coin to basket of goods (goods which we can’t reserve nor trade !) or by destroying the peg with even more unpacked liquidity from parking interests !

[desrever]

I also invite you to read this white paper on the very same topic, which presents several interesting ideas. Among them, we should now focus on his idea stabilisation, while we can open other threads to discuss different ideas.

A Note on Cryptocurrency Stabilisation: Seigniorage Shares

I invited both authors on this forum to discuss, but the fact that they are still not here excited about NuBits, imho, is an indication that NuBits is somehow getting in the way of their own projects.

[mhps]

1. By holding a total/fraction reserves of commodities to pack the currency, which can’t be done since we are already worrying about the fiat reserve security so imagine holding commodities, and if it can be done it will be a centralized currency

I agree it is hard. But I think it is technically possible. If many commodity exchanges accept cryptocurrencies and have cryptoassets traded, it is possible to form a decentralized crypto asset that is backed by a basket of real world goods.

a scarce CPI “consuming power index” which can be a set of commodities, but since there is no decentralized automated way to provide this index

Why can’t there be a decentralized index calculated from many data feeds?

the protocol will ACTIVELY decreases your wallet holdings and vice versa !

It’s been done. Demurrage (negative interest) has been practiced by Freicoin for quite some while.

so this Anti-inflationary currency is not stable at all in the regard of the value you hold.

It’s not stable against fiat money. It’s stable against the index.

In short, I agree that there are only very limited options to have an anti-inflation cryptocurrency. Implement them needs to make a few intermediate technological steps (data feeds, goods traded with cryptoassets/currency)

[Sabreiib]

Although Hayek talked a lot about stable currency vs commodities such as sugar, crude oil…, we don’t need to bother ourselves to go that far because crypto cap. is really really smaller than USD market, so we just vote for a CPI and peg to 1.X, 2.X USD.

15 years later, if NBT Cap. is huge and widely used, then we may talk about relationship of NBT vs commodities.

We vote a proper CPI, this number may or may not be the exact CPI in real world, but should be approximately right, and welcomed by free market. Perhaps every NBT user has a different CPI in his mind that means even a exact CPI voted, some people still unsatisfied but our task is to select the most welcomed number.

What I mean is that finding&voting a CPI number by NSR holders is NOT so difficult because free market can feedback our vote, if we vote a bad number, our business will drop and we can change it shortly after that. Since we have a guide—the free market—our decision will be OK.

[mhps]

we don’t need to bother ourselves to go that far because crypto cap. is really really smaller than USD market, so we just vote for a CPI and peg to 1.X, 2.X USD.

For example you issue 1 unit of your anti-inflation currency for 1 USD in 2014. In 2015 you decide CPI is so high 1 unit is 2 USD. The problem comes when people want to redeem (sell) their 1 unit in 2015, which is pegged to 2 USD – Where do you find the 2 USD to pay for it? Remember you only got 1 USD when you sold the currency. You will be broke and the peg will fail. Only with commodities backing can the value of your reserve follow automatically with CPI. At anytime people want to redeem you pay back with the commodity. If you don’t do this you have to do some hedging, e.g. like how bitUSD tracks the USD, or by tranasfering the volatility to another asset such as NuShares.

[Sabreiib]

Hayek already discussed this issue, the extra backing fund comes from profit, and he suggest “issue bank”(just like Nu) should carefully pick up business and make enough profit to support ever increasing buying back price.

In fact, usd annual inflation is only several percentages such as 3%. We can make profit by

1. charge transaction fee/price spread and even build up our own exchange with open transaction.

2. provide nubitmessage service and charge fee.

etc…

If USD inflation rate is 5% while our profit can only support 3%, we vote 3%, a partial anti inflation currency is still more welcomed than those completely inflated.

Anti-inflation is indeed a hardcore competitiveness because the public will love it and the willingness of holding is the key for a private currency’s success.(said by Hayek)

[Raythma]

I can’t agree more, even that i like to have all the profit from transaction fees, loaning business and our exchange , but if supporting Nubits to be an anti-inflationary is necessary to succeed and thrive i am all for i.

So IMHO we should make Nubits profitable first before discussing if we need to make it an anti-inflationary currency.