Hacker News Reader

Comment by mmcclure | Hacker News Reader

> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.

I always liked this idea, and I a few cryptocurrencies/blockchains tried to do something like it, including Stellar Lumens[1]. Just looked it up to post this and they abandoned it back in 2019.

    Unlike the tokens of other blockchains, lumens aren’t mined or awarded by the protocol over time. Instead, 100 billion lumens were created when the Stellar network went live, and for the first 5 or so years of Stellar’s existence, the supply of lumens also increased by 1% annually, by design.
     
    That inflation mechanism was ended by community vote in October 2019. And in November 2019, the overall lumen supply was reduced. Now there are about 50 billion lumens, total, in existence, and no more lumens will be created.

[1] https://stellar.org/learn/lumens

View on HN

> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.

This 2-4% number has no fundamental basis, Ampleforth is the only cryptocurrency that seems to solve this basic concept of how much supply and how to distribute it

https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/3/

Yes well, inflation (actually: devaluation) isn't in the [immediate] interests of the currency holder. Terrible if you just want to speculate, which is 99% of the crypto market.

I'm no economist, but inflation should reflect an increse in growth and productivity. The fact that these coins don't tend to consistently devalue might say something about how useful they are for doing the job of a real currency.

> I'm no economist, but inflation should reflect an increse in growth and productivity.

An increase in growth and productivity should reflect deflation: more goods and services with the same amount of currency. Absent intervention, inflation simply does not happen as a long-term secular trend in a growing economy.

As mentioned in another thread, pre-modern US had growth rates higher than the modern US (~4%) with an immaterially changed CPI over a ~130 year period. This was with two punctuated sessions of central banks and wars which issued debt notes (currency).

In addition: it should be noted that Japan has had a deflationary currency for 30 years and is an economic dynamo. The only problematic aspect of that—which can be seen in the BOJ's recent ill-fated attempt to increase the interest rate—is it makes government debt (and all debt) harder to pay back. However the point remains: deflation has had an immaterial effect on standard of living.

Yeah projects like this that take into account more solid macroeconomic principles like Milton Friedman's k-percent rule ( https://en.wikipedia.org/wiki/Friedman%27s_k-percent_rule ) are the only ones that deserve to be called crypto "currencies". Too bad they gave up. The appeal of turning it into a get rich quick scheme for early adopters is just too difficult to resist. The fact that no similar project is popular means that few people care for crypto to be used as a functional currency.

It's really hard for any true cryptocurrency to compete with stablecoins.

Reply on news.ycombinator.com