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Comment by DennisP | Hacker News Reader

The deflation problem is easily solved by creating more cryptocurrencies. A crypto world isn't like a new gold standard, it's more like the system of competing private currencies advocated by Hayek, who claimed it would naturally lead to stability.

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And who determines which new cryptocurrencies can be created and accepted? Because that risks runaway inflation again if anyone can do it and everyone has equal acceptance.

That's what economists like to call a "Market".

There was a market for tulips and a lot of attention and money went there. Tulips have an intrinsic value, but it turned out to be small.

Analogies are good for teaching things you know to be true. But they are not logical grounds for an argument.

Yeah, and the stability of that market is what we're discussing. If this market is either unstoppably deflationary or unstoppably inflationary it become unstable.

Whether "everyone has equal acceptance" is the issue; if there's no shortage of currency then there's probably no demand for a new one. People won't just automatically accept any new currency that comes along.

Hayek argued that the market would effectively govern such an economy and prevent both inflation and deflation. I don't know whether he was right; possibly we'll find out by experiment.

> People won't just automatically accept any new currency that comes along.

Eventually they will. You’ll have assets in billions of denominations, and you’ll be able to pay for coffee with a bunch of fractions of pennies and the markets will clear and consolidate value for you.

The future is not Bitcoin replacing the dollar. The future is the idea of a dollar replacing the dollar.

Anyone can do it. The resulting cryptocurrencies do not have equal acceptance. Neither of these circumstances seem likely to change.

Anyone can make a cryptocurrency. They surely have to deal with the very clear and necessary risks associated with creating what will likely be an unregistered security. Adoption is another story entirely. The cryptocurrency scene has now gone through its 3rd or 4th wave of sh#tcoins and scams, so it's highly unlikely that there will be adoption at a level to be concerned about, unless the token provides real value. Existing tokens had to set their capital controls in the Genesis event, and those tokens that print money haphazardly, won't last. Token economics are delicate, and difficult to get right. In the case of Bitcoin, new tokens can only be minted according to the existing rules, which shift towards deflationary over time.

And sometimes you need to break that deflationary spiral, if for example all wealth has accumulated among a few people who don't want to spend or invest. If we see breaking this as a public good this needs to be initiated in some way by people representing have-nots.

>Existing tokens had to set their capital controls in the Genesis event, and those tokens that print money haphazardly, won't last.

For all the other discussion topics, this is one of the most interesting aspects of crypto-economics for me. We can bake in different economic models and see how they work without it being easy to manipulate them later.

It's sort of disappointing that most platforms I've seen are either going for a basic deflationary model (token emissions dwindle and stop) or a fairly flat inflationary one (every block produces 25 new MeatloafCoins forever).

There's a lot of research that could be done into "how much do we have to expand the token supply to correlate with increases in actual economic activity and attrition while keeping token values flat against real-world goods". Not by actually pegging the value with a backing fund or guaranteed redemption, but rather by a self-regulating algorithm.

There's an interesting rabbit hole there: Can we get a proxy value for "actual economic activity" by crunching the blockchain, or will we need externl information feeds? Can it be made resilient enough to reject trying to game the system?

And then, there's the matter of "does anyone want to botstrap a truly stable currency?" Would you get many early participants if you say "it's explicitly designed to discourage speculative HODL behaviour?"

But up to now, crypto seems to have only led to chaos. Value changing by huge amount, pretty much constant stealing of massive sums by supposedly safe and large institutions. Even the relatively trusted coinbase has endless claims of poor treatment of their customers, losing funds.

I don’t think the thefts were by institutions considered safe or large. MtGox was always a tiny sketchy company (and I held coins there). I never kept more than half of my coins anywhere because I knew they could disappear at any moment. I don’t see how a conscientious person could have concluded otherwise.

Value has changed a lot, but that was expected too. There are stable broad trends. Seeing the stability is just a matter of seeing timescales.

I guess I don’t share your definition of chaos. Chaos means you can’t predict anything reliably. You can predict many things about Bitcoin.

Taken to the extreme, your comment seems to come from a “anything that’s not a US treasury bond is total chaos” viewpoint. But I know that’s not what you intended... perhaps you can clarify?

Why would I want to live in that world?

What would be wrong with such a world?

Instability is not a desirable trait in currency.

Instability is a necessary feature of literally every currency in history. You can’t change scales without instability.

Once these currencies hit their natural scale we will see some stabilize.

Multiple competing private currencies?

Exchange rates between them. Middlemen to pay to perform exchanges before you can actually use the currency to buy something. That doesn't immediately sound worse to you?

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