Investors Want Higher Inflation!
This is extremely unpopular opinion at a time like this, which is exactly why it needs to be said again and again. Reducing token supply is not going to make our network have a higher market cap, end of story.
I'm getting very tired of seeing the same silly narratives flip-flopping around depending on Hive's arbitrary price action. Pick a lane and stay there. If you can't handle extremely volatile price action that's decoupled from the market... you're gonna have a hard time here, plain and simple.
If Hive were to x10 tomorrow all of a sudden no one would be talking about how we need to "fix the system". That's a problem. If the system is broken, then arbitrarily going x10 tomorrow hasn't fixed anything. What this is really coming down to is that most people on this network are greedy and afraid and have no idea how this economy works or is supposed to work.
Inflation leeches value from the users that don't control it.
Stake holders used to control 90% of Hive's inflation. Now they control 80% because of the dev fund, and we've had witnesses running around saying, "Oh, maybe it's a good idea if you control 0%". Fuck off already. Thanks.
Everyone thinks the value of Bitcoin comes from the deflationary model of logarithmic hard-capped supply. There will only ever be 21M coins! We've already heard these words a thousand times and we're sure to hear them a thousand more. Unfortunately, that's not what gives Bitcoin value.
The most valuable prospect of Bitcoin's inflation schedule is that the network doesn't have to worry about it because it doesn't exist. It's a wash, meaning that Bitcoin bets on the idea that having a high inflation is simply too big of a honeypot and those in charge would start to funnel that money into their own pockets.
Did you know that Bitcoin Cash recently forked again?
At press time, Bitcoin Cash ABC (BCH ABC) has received no hashpower, meaning that it is possible Bitcoin Cash Node (BCHN) will become the dominant software of the Bitcoin Cash network.
To recap, a group of Bitcoin Cash developers led by Amaury Sechet, known as BCH ABC, proposed an update on the Bitcoin Cash network, which has included a controversial new “Coinbase Rule,” which requires 8% of mined bitcoin cash to be redistributed to BCH ABC as a means of financing protocol development.
YUUUUUUUP!
The dev team on the much less popular fork funneled money into their own pockets and the miners said pass. What a surprise. I guess that means funding the dev team with inflation probably isn't the way to go hm? I mean, sure it's a valid strategy in theory. I've yet to see it work in reality.
Back to Bitcoin
If you control inflation, then inflation is great. It leeches value from those who do not control inflation. With the Bitcoin network, 100% of all inflation is channeled into securing the network, and every 4 years that supply gets cut in half. Amazingly enough, rather than this gutting the network this tends to send the price skyrocketing. Why pay more for security than you have to?
Hive
Why does everyone think we're gonna go like x10 if we cut inflation by 5% or whatever people are suggesting? Seriously no, that's not how this works. LEO has x3 more inflation than Hive, do we see anyone complaining about inflation there? Hm, nope, I wonder why that is.
Perhaps it's because when a token is arbitrarily doing well according to the market we're all riding high on FOMO but when volatility swings the other way we're grasping at straws as to why that is and we blame inflation and whatever else.
Extremely flawed central-bank comparison.
Everyone seems to think inflation bad because central-bank bad. Pay no attention to how fiat currency is actually inflated: by loaning out money to banks that is impossible to pay back. To compare fiat inflation to crypto inflation is a completely non-sensical fool's errand.
Inflation
Every economist knows that inflation creates growth. Inflation causes currency to have a high velocity. People want to spend money when it's being created out of thin air. High velocity and high inflation are good, and most people in the cryptosphere have no idea of this obvious fact because Bitcoin is absolutely killing it on this foundation of "inflation bad".
Stable coin?
In as little as 10 years, Bitcoin could easily have a market cap 2 Quadrillion dollars. That would put 1 Satoshi in parity with $1. When that day comes, it will be impossible to pump and dump Bitcoin. Instead of constantly being under attack by banks/corporations/governments they will all engage in if-you-can't-beat-them-join-them behavior. Who's going to use Bitcoin when transaction fees are $1000+? Probably the richest people in the world transferring millions of dollars between each other.
When Bitcoin has a higher market cap than the institutions trying to manipulate it, it will become THE stable asset; more stable than any other fiat currency. However, unlike fiat, Bitcoin will continue gaining value every year rather than being guaranteed to lose purchasing power like fiat. I imagine that will be quite the sight to behold. Bitcoin will usurp worldwide unit-of-account and everything will be priced in Satoshi instead of fiat, all around the globe.
The point here is that other networks that actually have inflation will vastly outperform Bitcoin in the long term. Bitcoin will have very low velocity and very low growth once it acquires those stable-coin powers. Instead of doubling in value on average every year it may 'only' gain 25% or less. It will be the projects with high inflation allocated correctly that have high velocity and continued exponential growth.
Example
Your favorite coin has 100% inflation per year. Wow, what a disaster! All your money is being inflated right from under you! Just kidding! You control the inflation, so even if the price dips 50% you still have 100% more coins... that's just how it works with crypto. Again equating fiat inflation with crypto inflation is nonsensical, and that will only become more obvious over time as high-inflation network begin to prove themselves.
Proof-of-burn
Hive and LEO need even higher inflation; as high as it can go while still giving day/swing-traders a reason to hold. Imagine that we had a few dapps around here that required users to destroy coins if they wanted to participate. If dapps like this became popular enough we'd clearly have to raise inflation to accommodate the demand. Because every stake holder controls inflation this is a win for everyone. The only people who lose are the ones who don't control inflation.
By adding deflationary mechanics to the network so we can justify increasing inflation, the velocity of money around here (volume) will hit absurd record-breaking numbers.
The gamblers
Think that day traders care about 10% inflation per year when they are looking to net 10x gains via risky gambling through technical analysis? Of course not! Ironically enough, the people around here complaining about inflation are the ones who are 100% powered up and trying to support the network as much as they can. It's pretty frustrating to see the people who benefit the most from inflation simultaneously complaining about it the most. Give it a rest, fellas.
Conclusion
The supply/demand tokenomics of crypto combined with exponential growth so massively outweigh token burns and lowered inflation that these supposed mechanics to increase value do absolutely nothing. A 5% reduction of inflation APR isn't going to do anything to raise the price when you're looking for gains of 1000% or more. The only thing that can create those gains we're looking for is legitimate development and adoption combined with massive bursts of speculation; something we see happen all the time. Focus on capitalizing on that instead.
I grow quite weary of the users around here scrambling every time we hit our 10 cent support range. Lowering inflation will do nothing. Lowering the powerdown period will do nothing. In fact, changes like this only serve to lower the value of the network by proving to the world that these decisions can happen on the whim of a few dozen users. That's not going to inspire any kind of confidence from outside the network, I guarantee it.
The obvious rule of thumb is simple. If we find ourselves trying to 'fix' Hive's problems when price is low but then totally forget about those 'problems' with the price is high, then we were wrong to ever mention it in the first place. Problems don't appear and disappear based on fickle price-action. That is a fact.
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I'm so tired of hearing this argument, it just the lazy cop-out, the path of least resistance, if you want token prices to go up, give more users for the token simple as that. Even if you jink the maths, and everything else is the same you'll get the same net sellers selling at the same price
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Hive
Why does everyone think we're gonna go like x10 if we cut inflation by 5% or whatever people are suggesting? Seriously no, that's not how this works. LEO has x3 more inflation than Hive, do we see anyone complaining about inflation there? Hm, nope, I wonder why that is.
Perhaps it's because when a token is arbitrarily doing well according to the market we're all riding high on FOMO but when volatility swings the other way we're grasping at straws as to why that is and we blame inflation and whatever else."
It's having. what's called a FOMO moment, in the middle of a bull market. don't worry. In the future you'll have years, and years of bear action for the precious LEO as well. It's a lot of circle jerking at the moment, which is fine, not that LEO is abad inherently, but you know well the dominos will fall at the peak of the bull market. Better sell them all!
No, cutting 5% inflation will do nothing. Remove rewards ENTIRELY from the native token would have a big increase in price, HIVE shouldn't have any rewards or any inflation on the native token!
BTC THE Stablecoin? No. Hive is a lot closer to a stablecoin. 10-12cents for 90% of it's existence, similar like Steem. But Steem actually has more pumpamentals currently.
People were lead like lemmings to cash their STEEM to HIVE, when in this bull market Steem will greatly out perform it monetary wise.
Again, the whole "let's remove the best part of the network so that we can gain some value" idea falls flat on its face.
You literally just said cutting 5% inflation will do nothing. How much inflation do you think Hive has? Spoiler alert: it's less than 8%, and if you think the witnesses are going to take a pay cut you're dreaming. They clearly aren't going to get rid of the dev fund or the ninjamine either.
So again, how much value do you think Hive gains after we eliminate 8% inflation, have zero network security, zero dev funding, zero reason to power up, and no more social media networking connections? The value of the network is gonna go up? Really? By more than 8%? None of that math adds up.
I might of not said this correctly, I don't think inflation does matter too much, but a asset that is deflationary will generally do better don't you think? I mean look at Bitcoin it's just fixed and leaps better, with mining being deflationary in nature with it's difficulty. With that said, my point was the biggest impact HIVE can do is remove rewards COMPLETELY. It shouldn't be a social network, it's failed at doing that, and it never will prevail you know this in your heart. So why not just focus on the tech, become a layer 2 solution that powers DAPPS like LEO, and let them be a social network?
For the sack of HIVE hodlers we need a native token that is not a social network itself. How can the NATIVE Hive token be treated seriously as a DAPP powerhouse toolkit if it is a social network? Why not just make it fixed amount and let it be a solution protocol? I think Hive could be treated more seriously and instead of .10-.15 would be a $5-$10 token like LINK.
I've seen the price of hive (steem) at its lowest and at it's highest and it is funny that whenever it is low is when people squeal the loudest about how it's broken and what must be fixed. When it's high? What an amazing thing we have built!
Every Keynesian economist knows that inflation creates growth.
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Even that is a trap though because Keynesian economists only understand inflation as it relates to centralized banking. The amount of benefit a network can get from decentralized inflation is astronomical. All the rules change when everyone is a central bank.
Inflation is only bad when it greatly outstrips demand.
On a side note, people weren't wanting to lower the inflation rate to increase the market cap, they wanted to lower it to increase each individual coin's price. Though technically you would have to raise the market cap to see the price per coin go up.
Right, so the market cap stays the same but the token price goes up 5% max? That's not what people want but they somehow delude themselves into thinking lowering inflation by 5% = moon.
Exactly, and to what end?
Because they think they will make more money, which they clearly will not.
In fact, they will lose money. Guaranteed.
Everyone will, because our inflation is one of the best parts about the network.
Many great points you described! It's always the same - when things are going great, we're the best but when things suck, we're doing nothing right.
Just enjoy the ride. Create. Learn. Have fun!
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This.
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High Inflation rate equals devaluation (low price) of coin and becomes a problem when demand is low.
Well we can only hope for the best. Great analysis anyways @edicted, keep creating.
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i tried to find out what happened to BCH... and now i kinda know?
HIVE / STEEM is weird because it decided on a model of paying new posts out of an imaginary pool instead of deducting a bit from each person's account.
It makes people "feel" like they are getting wealthier while stealing a bit from them each post.
Its all a trick of numbers.
But what i really hated in STEEM was that a small group wanted to keep all the pool for themselves, and got really indignant when the price went up and lots of people suddenly made it past the 2¢ line and started getting paid.
This rings true. Adoption and development seem like the yellow brick road.
Hey man, you wrote a post a week or so ago about the "best day trading opportunity of the year" or something... about when the top blows off this local high and then potentially there is a day long flaming crash and then a bounce back up to just below peak levels before a slower descent down to doubling curve yadda yadda...
do you remember the title offhand or have a link handy? I wanted to revisit that but couldn't find it.
You are right that a problem needs solving regardless of the price or when the price is high doesn't mean that the problem is solved. I believe that if HIVE gains more application developed that will drive the rise in price and the ecosystem will grow all together regardless of the inflation. Accelerating the growth should be our premier goal.-
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Oh well, that is kind of the appeal I thought for most of the masses. Something predictable with a finite amount of resources. Fees with mining when the final balance is created. There are enough derivations for doing all sorts of things with BTC I don't think there will be any problem keeping things fresh in the reserve coin of all crypto.