Why not fund developers with price appreciation?

Market
#1

I’d like to know more about the context behind the decision for an extremely high inflation rate in the early stages of the project. It seems to me like the high inflation rate disincentivizes early adoption. Without early adoption, this causes price depreciation temporarily. My curiosity is why this was wanted? It would seem like the development fund could hold some stake in the project in hopes that adoption would increase overtime in the early stages and therefore development funds would appreciate overtime as well.

To put it another way, rather than holding development funds in BTC, funds could be held in GRIN and with appreciation of price, funds increase as well. This means that development would benefit from market adoption. This would be, in my eyes, a positive feedback loop.

Why was this not the goal when deciding on inflation rates and overall monetary policy?

#2

In some terms, yes. Grin was not designed to be a store of value, but to encourage spending. So the best way to use Grin is to spend it, just like cash!

Just my 2 Grin

1 Like
#3

Right, like dogecoin, and ethereum

#4

The inflation rate of the early stages is the same as most other major projects: linear emission until the first halving (often four years after genesis).

2 Likes
#5

In order to spend, there needs to be a party willing to accept it as payment. If it doesn’t store value well, it would be a risk to accept it as a form of payment. So is it a fallacy to consider that the store of value property is needed foremost?

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#6

I’d like to stay on topic. I appreciate the replies, however unfortunately they deviate from my OP.

The original topic was a question as to why high inflation was chosen by the core developers. What is the benefit for this choice that I am not noticing? And, how does that benefit outweigh the benefit that I made clear in my OP?

#7

you will likely find all the answers to your questions here: https://github.com/mimblewimble/docs/wiki/Monetary-Policy

#8

I’ve read it before, but I took even more time to re-evaluate that document. So far here are my conclusions.

Linear growth is linear growth. Bitcoin had linear growth for the first 4 years of its existence at 50 BTC every 10 minutes, or 5 every minute. Grin has a rate of 60 per minute (supposedly forever). It doesn’t matter if that was 6 per minute, or 1 per minute, as it’s the same linear growth in supply. What should be noticed is that a rate of 5 per minute vs 60 per minute is a 1:12 ratio. If Grin had the exact same inflation as Bitcoin’s 4 year linear inflation rate and experienced the same market cap values over time, then the only difference would be a 12x in price per coin*. If we multiply current GRIN prices (roughly $1) by 12 and compare to BTC historical price, we’ll see that BTC didn’t reach $12 price point until 2 1/2 years into its life. Based on this evaluation, we can assume Grin to be over bought**. My only question is why is it overbought?

I see also the reasoning behind the high inflation to ward off technocrats and whales which have a negative impact on the initial distribution of wealth. So, it makes sense that the monetary policy would discourage buying and holding in order to defend against this. However, doesn’t this also discourages all buying early on? The incentives behind the network early on are not to purchase or hold grin, but rather to mine grin as this is where most of the value is being distributed towards. To make my point brief, I see that miners will be the technocrats created from this network as they’re the ones benefiting the most.

On a broader perspective, Bitcoin also suffers the same outcome. Miners in the Bitcoin network are the “house” in this case, and ultimately, the ones who win the game. It would seem like in order to make the game fair, we’d need to level the playing field for miner participation. It’s obvious that this is the goal with the cuckoo cycle based proof of work, however it’s questionable whether this is the perfect solution; we shall see. It’s undoubtedly a hard problem.

If miners are the only network participants truly benefiting, then why participate at all as a speculator or developer?

*It would have been nice it Grin’s linear inflation was more similar to that of Bitcoin’s earlier linear inflation at least arithmetically. This way the comparison in prices of Grin against early Bitcoin prices would be more obvious for the first 4 years. A supply growth of 5 grin per minute would have achieved this.
**Overbought is only speculating that market growth of Grin should follow similar market growth of Bitcoin. However, this is overlooking many market conditions that may factor into this speculation; number of exchanges trading Grin, amount of overall crypto market capitalizations, general cryptocurrency awareness, etc.

#9

It sounds like a horrible idea. Who’s to say the price is going to appreciate anytime soon? Bitcoin is far more established- In terms of crypto assets, it’s a “safe haven”. Grin is new and more experimental and could take years before it gains traction(adoption) If anything the council funds should be held in USD.

Also, why should the developers have to worry about the price? The last thing we want to do is make everyone more “price focused” then decisions start getting made that ‘benefit price’ in the short term instead of benefiting the project in the long term.

Miners secure the chain, security creates value. Without them Grin is worthless. Developers contribute because they enjoy it/are passionate about it/ like the community/status/ social aspect. Because they are disruptors, contrarians, idealists, people who want to change the world and willing to contribute to tools they want( I.e censorship-resistant digital cash).

Your posting seem way too focused around price. Grin’s emissions schedule is 1 Grin/sec and that’s not going to change- Especially for the sake of trying to boost price.

#10

The idea is specifically to make it hard for developers to make money. It has to very clearly not be a get rich easy scheme. It’s a feature not a bug.

1 Like
#11

I can see how it came across that way. It is true, that my post is concerning itself with price. However, it’s is in light of how price relates to economic incentives for network participants, and not meant to be about “getting rich quick” / “increasing one’s stack”. Price is an important aspect to every cryptocurrency.

#12

Dollar has just been appreciating against GRIN, lately :frowning:

#13

Blockquote Also, why should the developers have to worry about the price ? The last thing we want to do is make everyone more “ price focused” then decisions start getting made that ‘benefit price ’ in the short term instead of benefiting the project in the long term.

It is true that price doesn’t have to do anything with the development. But lets be real. If grin becomes close to worthless in terms of price, it will die. You are saying that miners are keeping the network secure, but miners also need to make some little money out of it, and not mine for a loss, right? Developers also need money to keep developing. They rely on donation from the community, how long would that last if the prices are declining 20% a week?

These are not the bitcoin days 8-6 years ago. Now there are many many crypto projects, and I just hope that GRIN will not become one of the many.

Right now, its Bitcoin and everyone else. :slight_smile:

Just my 2 Grin.

#14

Good point @andro. I was going to mention something similar to that, but I kept it short with saying that price is important.

Also, I wonder why it’s becoming a colloquialism to say “just my 2 Grin”? Is this to say that 1 Grin will be worth 1 USD cent eventually? I certainly hope not. :wink:

#15

They rely on donation from the community, how long would that last if the prices are declining 20% a week.

But if prices will go up, why anyone would donate today? If price will rise, there is a motivation to wait and donate less but later.

#16

I am curious to see when someone of high profile in the BTC community will have the courage to say that “the king is naked” and that the absolute scarcity of Bitcoin has created a perverse mechanism for which BTC is not working and will hardly ever work as a system of payment as defined in the abstract of Satoshi’s paper. There are now enough elements to draw this conclusion. And it’s not a bug that you can fix ex post.

5 Likes
#17

Well, someone has just declared the king naked - succinctly too. Thank you for summarizing my thoughts and comments on this so efficiently.

2 Likes
#18

I believe that the reserve needs to be transfer into GRIN for more motivation. If you don’t believe in your project, then why should others believe in it?

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#19

Not sure how much you invested in GRIN? I heard that ‘never invest more than you’re afford to lose’
In crypto, everything can happen, enjoy your coins and do not put all eggs in one basket.
So no need to get angry when price is going down, it’s nature.

#20

You don’t want to eat your food that you sell to people. It looks very bad. That sounds like hypocrisy.