Synthetix in 2019 decided to revamp their tokenomics model in a big way. As you may know they are a synthetic asset exchange using on-chain collateral to mint any synthetic including their own stable sUSD.
In a nutshell what they did was start inflating the SNX token get investors to stake SNX while offsetting the new inflation with protocol fees generated by the exchange.
Synthetix created a sleek app called mintr to manage it all. SNX stakers can claim weekly rewards that go into escrow for year until they can be transfer out. SNX rewards that don't claim go back into the general weekly pool & get redistributed new SNX claims.
They created a good product but the tokenomics were just as important. SNX staked skyrocketed from around 20% staked to in the high 80's. Needless to say it was great for their token appreciation.
Fixed supply puts the entire security model at risk, since future transactional demand is unknown. The cap will need to be lifted to subside the reduction of block rewards. Also, POW needs a much higher issuance than POS models to be fend itself from double spend attacks. e.g. ETC has nearly almost been attacked out of existence.
I believe we'll see Cryptos that will run any application including very low cost payments rails with reducing supplies based on extremely high demand (fee burns). Not so different than what BNB is doing or what EIP-1559 has planned.
Moreover, there will most likely be an elastic gold "stable" currency as well where the supply adjust without dilution.
Bitcoin can still exist but it will need to survive a major evolution if it is to thrive imo.
Since future demand is unknown it puts the entire security model at risk as block rewards halve every 4 years. The way to fix this is minimum necessary issuance model then burning the supply based on demand (fees).
A small but steady rate of inflation is needed to ensure longevity and stability of any currency. Over time currency will be lost and you need a certain amount of inflation to counteract that loss.
Just as cash is lost or destroyed over time, people will lose bitcoin wallets or send coins into the void.
We know that around 4 million bitcoin is already lost, 2.9 million if Satoshi never lost their early keys, which means bitcoin's functional cap has already been reduced to ~17 million.
Optimal inflation is equal to or a hair higher than loss so that your real inflation rate is near zero. Bitcoin may end up needing to hard fork at some point to remove the hard cap to keep a small amount of inflation. If they don't than the currency is doomed to fail.
It is only a flaw if you are using it as the basis for an economic realm that needs to expand.
As a value creator, the cap actually is an asset.
Agreed. It is one of the most misunderstood concepts there is.
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Have you had a chance to study the SNX model of staking. They're basically the OGs of modern day passive yield farming?
-In a non-dilutive way.
No I have not looked at their system too closely. I liked that project from the early days.
Want to give the cliff note version?
Posted Using LeoFinance Beta
Synthetix in 2019 decided to revamp their tokenomics model in a big way. As you may know they are a synthetic asset exchange using on-chain collateral to mint any synthetic including their own stable sUSD.
In a nutshell what they did was start inflating the SNX token get investors to stake SNX while offsetting the new inflation with protocol fees generated by the exchange.
Synthetix created a sleek app called mintr to manage it all. SNX stakers can claim weekly rewards that go into escrow for year until they can be transfer out. SNX rewards that don't claim go back into the general weekly pool & get redistributed new SNX claims.
They created a good product but the tokenomics were just as important. SNX staked skyrocketed from around 20% staked to in the high 80's. Needless to say it was great for their token appreciation.
It's not a flaw, it's a feature. Bitcoin works as digital store of value that can also be used as a currency. It doesn't work for every day payments.
Fixed supply puts the entire security model at risk, since future transactional demand is unknown. The cap will need to be lifted to subside the reduction of block rewards. Also, POW needs a much higher issuance than POS models to be fend itself from double spend attacks. e.g. ETC has nearly almost been attacked out of existence.
I believe we'll see Cryptos that will run any application including very low cost payments rails with reducing supplies based on extremely high demand (fee burns). Not so different than what BNB is doing or what EIP-1559 has planned.
Moreover, there will most likely be an elastic gold "stable" currency as well where the supply adjust without dilution.
Bitcoin can still exist but it will need to survive a major evolution if it is to thrive imo.
I thought this is what it makes it different unlimited fiat supply of central banks...?
Since future demand is unknown it puts the entire security model at risk as block rewards halve every 4 years. The way to fix this is minimum necessary issuance model then burning the supply based on demand (fees).
A superior economic model emerges this way.
decreasing supply > fix supply
A small but steady rate of inflation is needed to ensure longevity and stability of any currency. Over time currency will be lost and you need a certain amount of inflation to counteract that loss.
Just as cash is lost or destroyed over time, people will lose bitcoin wallets or send coins into the void.
We know that around 4 million bitcoin is already lost, 2.9 million if Satoshi never lost their early keys, which means bitcoin's functional cap has already been reduced to ~17 million.
Optimal inflation is equal to or a hair higher than loss so that your real inflation rate is near zero. Bitcoin may end up needing to hard fork at some point to remove the hard cap to keep a small amount of inflation. If they don't than the currency is doomed to fail.