I read @tromp’s post a while back on half-stable coins, and it got me thinking about how “stable” is defined. The half-stable fund idea makes a lot of sense to me, but if it targets a dollar, then Grin price would inherently become tied to the inflation schedule of the US federal reserve. So I wondered if there may be some other target to get the benefits of stability, without the economics of USD.
So the first natural question that came to mind was: what do we mean by stable? I think, really, the objective is low price volatility, not necessarily a price peg to some other asset or fiat. E.g. a coin which may go from $1 to $0.01 over 100 years is still “stable” if users have some expectation that the exchange rate today wont deviate much in a short period of time. A user should be confident they can accept Grin for goods/services, without it losing 50% value over night.
One idea I had, was pegging to energy (or some filtered/averaged signal from energy) instead of a USD price target. Obviously such a fund would require a liquid trading pair to maintain their operations, so I’m not sure how that would be solved. Perhaps use hashrate/difficulty as a proxy for energy cost in some way? And then create a market place to trade hashrate for grin. I.e. a Grin denominated Nicehash?
Im curious if others have ideas for a “stable” coin that isn’t a fiat peg. Ideally one for which an objective and liquid market can emerge. E.g. pegging Grin to gold would not be practical, as I cant imagine how to create a liquid market without involving more trusted intermediaries.
What I would like would be a decentralized loose bounds to fulfill a not limited, but human work bound basic need.
Examples:
play a song or entertain for at least a minute 0.5 grin
simple meal 1 grin
simple haircut 2 grin
blowjob 10 grin
Even people that can not offer those goods can support the price stability by trading atomic swaps. But if just one Powerful entity raises the price would not be beneficial in my point of view, because that would be a dimension of centralization.
Yes, I agree, I dont think one powerful entity manipulating market prices is a good thing, but that’s more a criticism of the half-stable idea. I was hoping to explore “how we define stability”. What do you consider “stable”? Is there a better metric, other than some USD fixed price, that would be interesting to people?
I agree with you though… People will eventually provide market “stability” as Grin becomes used more for exchange of goods/services and less used for speculation. In the 1000 year plan, a single powerful entity will have no benefit. I only like the idea of half-stability as a potential fund design (there’s potentially a good business there) which may also accelerate Grin’s trajectory towards being used as a medium of exchange.
“stability” is needed to be able to calculate a business case. A swap of goods or services (without force) must be a win win situation to be sustainable business. But the swap comes with costs. The win of the swap must be greater then the costs.
As an empirical guess many if not most swaps have a net win of more than 1% but less than 10%. Swaps with a net win of more than 50% are rare.
A currency can not create an intrinsic net win, that can be extracted. The potential net win comes by enabling swaps, that create a net win greater then the costs.
Next: Calculating the costs of using grin.
Then: Find a heuristic how to use grin that leads to an equilibrium.
@AceKaplin Regarding making Grin a stable coin on something else than FIAT money, I think in a way Grin is already doing that. Not without reason people say that time = money and that time is the most limited resource on earth. Grin’s emission is perfectly correlating with time itself:
1 grin/second
In general I think people are to much hang up on the idea of inflation, they are bothered with how much of something already exists, so they think value depends on total_supply/emission. In the end the problem with fiat money is not that there is “emission” but that the emission follows an exponential growth curve:
Exponential growth curves are problematic for many reasons a) they are explosive, e.g. how a virus can go within months from one person to the whole world population, b) humans cannot comprehend them intuitively, only if you plot them you can see how explosive they are c) the human population stopped growing exponentially since we are facing planetary boundaries, hence any commodity such as money should not grow exponentially.
So my opinion is that we all should change our way of thinking from thinking about current scarcity (inflation) to scarcity of the supply/emission. Grin is doing a bang good job of having a simple understandable emission that emphasis scarcity in supply.
Grin = = money = the most universal limited resource.
= money = the most universal limited resource.