There is a common misconception in the cryptosphere that investors want lower inflation. This misconception was formed via the dynamic of the Federal Reserve (and fiat in general) vs Bitcoin.
The logic plays out like so:
- The FED prints inflation.
- That inflation devalues my dollar.
- Therefore: inflation is bad.
- Bitcoin has low inflation (logarithmic hardcap)
- My investment is not being devalued (and even doubling every year).
- Less inflation is good.
- Steem crashed 99% in two years.
- Inflation is bad.
False.
The root of this logical fallacy lies in the fact of WHO controls the inflation. If YOU control the inflation, inflation is amazing. If you run the Federal Reserve, inflation is amazing. If you are a Bitcoin miner, inflation is amazing (until the halving event slaps you).
That's the funny part about Bitcoin.
Inflation is given to miners for securing the network, but the miners don't actually control inflation. Bitcoin has never changed their inflation schedule (unlike Steem/Hive) so the inflation is actually determined by network consensus all the way back to the genesis block. Pretty amazing when you think about it, that the original Bitcoin never made any big changes and continues to be the top dog by a huge margin to this day. Let's be honest, that's probably why they are top-dog, because their network is extremely reliable/predictable with first-to-market advantage and branding.
Bitcoin has checks and balances just like a real government; miners are awarded inflation to secure the network but they can't subvert consensus to mint more money for themselves.
What's the point?
My point is that there is a huge group on Hive/Steem that mistakenly thinks that our high interest rate devalues everyone's funds and scares away investors. Nothing could be farther from the truth. The opposite is true!
As I have made quite clear, when inflation gets printed, the people who control that inflation aren't the ones who have their bags devalued. It's the people who DON'T control the inflation that get screwed over!
Yes, I am right.
So for everyone saying we need to reduce inflation so investors want to come here... they are completely misunderstanding the entire economy. If investors are what you want, you make the inflation higher, because investors on DPOS are the ones who control inflation, thus leeching value from the non-investors.
Who are the non-investors?
- gamblers
- currency enthusiasts
- anyone holding liquid coins
On DPOS you are an investor if you stake your coins.
Therefore, anyone who's not staking coins is the one getting devalued by inflation. There are currently 137.5M coins powered up and 360M coins total. Any investor on Hive is seeing a huge return from inflation because they get to control 260% more inflation than their own coins generate.
Liquid coins create inflation but they don't control inflation.
Hopefully we can all see now why inflation is good for anyone controlling it.
- 10% to the witnesses.
- 10% to the Decentralized Hive Fund.
- 15% to anyone with vests (need to change)
- 65% to the reward pool (curator/author)
Therefore, if you are a witness in the top 20, and you have an active proposal, and you have powered up stake that you use to curate, and you create author content that generates rewards... that is the perfect storm of inflation for you. That person should want as much inflation as they can possibly get, because they are leeching value from everyone else that doesn't have those privileges.
Who does inflation leech the most value from?
Traders and bots on the exchanges. Anyone holding money on the exchanges is theoretically getting wrecked by inflation. Are these the people complaining about inflation? Nope! It's the ones who should want it that are complaining about it! It's completely backwards.
Do we need more speculators? Do we need more people gambling on exchanges? No, we don't. No one has ever made that argument. Everyone wants more investors. If that's the case then you want higher inflation so the people actually using the currency as a currency get devalued.
And when I say we should want higher inflation, what I mean is that we shouldn't want to keep changing stuff up and letting the world constantly know that we are completely unreliable network that just changes the rules on a whim.
Often times the correct action is no action.
Bitcoin knows this all too well.
Why don't we?
HBD holders also get devalued.
USD is losing value every year. HBD is the bridge between USD and Hive. Therefore, anyone who holds HBD is also giving the investors free money in the long run, because when someone goes to trade HBD for $1 worth of Hive ten years from now, that HBD has been devalued just as hard as the dollar has. Free money.
Conclusion
I'm tired of people saying it's our inflation that devalues the network and scares away investors. Nothing could be further from the truth. This concept started with Bitcoin, let it die with Bitcoin. Inflation is good if you control it.
I say again, the people who inflation hurts are not complaining about inflation, so why is it even an issue? 8% inflation a year is nothing compared to the exponential gains of crypto over time. The problem with those exponential gains is that they have high volatility. It is that volatility that makes people think crazy thoughts like it's our inflation devaluing the network.
Do the math: we lost 99% of our value in two years and our inflation was only 8%. Obviously inflation had literally nothing to do with that drop in the grand scheme of things. Inflation is a drop in the bucket compared to liquid volatility.
I was going to include it in this post, but this post is now too long:
My next post will be revisiting the idea of bank accounts doubling as CDP and being given good passive returns (something investors highly desire).
Many do seem to not understand it or more would stake up and maybe even invest. I'm a little more understanding on the investing part as it is complicated for many of us with little crypto background to jump through the growing hoops. However, if you can jump through them to cash out then there should be fewer complications in reversing this action.
Also (side point here) according to Hivestats, last week my (apr) curation on my stake was 10.8%. And I often vote posts that are not heavily curated, often many hours after posted as I don't use one of those voting bots to snipe best position. This post is an example. Its already valued over 10.00 when I voted. Yet, DESPITE this way of conduct, I still am almost 11%. I've had it as high as 12% using these not so efficient methods of conduct, as I don't feel I want someone on an autovote.
My stake interest to stop my vests from falling due to inflation is about .4 of a Hive per DAY. Per Day. Now that might not sound like much to wealthy holders, but that's 2.8 Hive growth (NOT VESTS) per week. Or, 12 Hive per 30 days. Or 146 Hive in a year. For leaving it parked. And as long as I just let my account grow without sending it out, this will only grow as far as adding curation rewards along with whatever author rewards I may get.
I will admit I bought a good half of my stake. I'm not a prolific writer like many here, and that's ok. I see many who brag for some reason they've never put a penny in (some with sizable holdings) and I never get the bragging on that either. It's like saying they don't believe in this enough to put a dime in. As I quoted from you above, they seem to misunderstand the entire economy. I think if more got the math behind this (especially thinking of this in terms of vests in relation to Hive as opposed to USD) Hive would see a demand unlike other projects.
Inflation doesn't have to be a bad thing (although that early super inflation Hive had to solidify the early miners was insane). A lot of it depends on at what point those who see it, want to benefit from it will soak up more than is being flooded onto the markets. People can say its all Bitcoins fault too, but if people want a project enough, it will shed its Bitcoin dependency.
i like how you think.
I think complaining about HIVE inflation is misguided too it’s not the inflation that’s the problem it’s distribution of inflation if you give more people a taste and they like they’ll gobble up more inflation
Yes more exchanges also means inflation is split in different pools to keep markets a bit more stable and we’ll need more inflation as we list on more exchanges
What people also don’t take into account is also the deflation from the natural processes now of promoting your content or tipping it may seem small now but over time it eats at the inflation
We should also remember we are not a big pool the bigger it gets with users the more people needing inflation to Tap into RCs we also need the inflation for accounts that get lost all those accounts took coins out of circulation
Very true.
Exactly. This is what I've been saying for quite some time. Our inflation doesn't mean shit compared to the 100x potential gains. Also, speculators foot the bill. This platform is a content creators' paradise because we have speculators on exchanges who are glad to pay an 8% annual tax to us for being allowed to play the speculative game. Just fucking think about that for a second. What other platform for content creators has that going for it?
In your other post, you're suggesting that we add a DeFi element to this platform. That's also worth considering. Bringing stability to HBD would be a seriously good thing to boot. DeFi is a paradise for gamblers who like to play with imaginary money. That activity would boost the value of HIVE, thus giving even more value to the coins earned by authors and curators.
Are we getting good value for our inflation, especially compared to similar cryptos?
When I see some of the crap being rewarded, I think we should be able to just vote for more of the rewards part being sent to vested inflation so at least its equitably distributed, or burnt. The amount going to the proposal system should also be dynamic, but based on different indicators such as % currently funded.
It would certainly change things if votes on declined payout posts, beneficiary set or transfers to @null instead went to stake inflation.
Yup, we are rewarded for voting but get nothing if we don't vote. This incentivizes and justifies voting for crap and makes autovotes too popular. Having a similar solution for vote power sitting at 100% would be good too...vote null posts by default at 100%.
There is just too much inefficiency amd exploitation of inflation.
A case of when a quasi intellectual exercise meets reality....(and then tries to sell the idea.lol).
Reality always wins.
Soz matey, this is my going to be my first post on 'mock the weak minded'
note:
The mockery is the style, my medium of choice - and not the content of the message.
Please decipher the difference between the two parts - when (if) reading it.
To paraphrase Churchill:
"Rarely, in the history of human literacy, have I have seen so many logical inconsistencies in so few words...".
Learning is a dish best served with crushed ego on the side, with a generous amount of open mindedness, liberally applied all over.
Snowflakes however, hate the taste of crushed ego, and even a smattering of open mindedness, leaves a bitter taste. Then they melt.
I hope you appreciate the hours of work that I'm putting into this! lol.
Your sacrifice will live on in the annals of history.
lolol- I'm putting myself on the cross right now...
oh, no -that's you up there...
I seem to have the carpenters job today..
Funny you should mention annals (obviously a mispell).
That part of your anatomy is cropping up a lot in the reply.lol
All in good humor, my little commie friend.
Homerun Derby is best played with slow underhanded pitches.
So we should obviously increase inflation and get more investors.
These sheep aren't going to fleece themselves.
Have you been reading my post while i'm typing it, Herr Rothschild? lol
May the mockery find you in good spirits. Posted..lol