I read the tech spec and it amazes me that there are people who can come up with this stuff. Completely obvious in hindsight. From the crib notes[1]:
> Grin's emission rate is linear, meaning it never drops.
This sounds more like a real currency, although, without limited supply this thing won't be going to the moon. The deflationary nature of cryptocurrencies thus far has been my main criticism as their viability of currencies (inflation encourages spending, which increases liquidity).
Pretty much everyone with knowledge of mainstream (non-Austrian) economics came up with the idea of non-deflationary cryptocurrency (keynescoins) around 10 years ago. That's how you can tell that everyone who says "it's about payments/adoption/etc not speculation" is lying because why would they make it deflationary.
Also, fixed linear emission is pretty much the second worst possible monetary policy and I think it's basically a way to have plausibly deniable deflation. If Grin adoption follows an S-curve then 50%/year emission won't be noticeably different from 0%. (And if it doesn't follow an S-curve then it has failed anyway.)
A 50% emission rate is incredibly high. Any linear emission rate will tend towards 0% as the number of coins in circulation gets larger and larger (assuming none are accidentally lost).
Deflationary money can theoretically work, its just that instead of having the vendor adjust menu prices every year for inflation, consumers would have to discount their purchases. For instance, during the 2017 boom, I noticed friends often paid each other for dinner with Ethereum at large discounts.
Obviously this isn't price efficient, and the mental calculus isn't a great user experience, but it can work. We would just live in a much more frugal society which saved a little more. We could have lower defaults as we underconsume. A credit system probably wouldn't work however as we're destroyed the concept of time value of money.
Imagine a thirsty tourist in a desert might be unwilling to part with his Bitcoin for a meal, but willing to do so for a bottle of water as his instantaneous discount rate for water is far higher at that point in time and state.
Whether a coin is inflationary or deflationary is a little more nuanced than simple changes in money supply, and has to do with whether these changes are unanticipated and how users form inflation expectations. Imagine if Satoshi's account suddenly awoke and moved, only to burn those coins in another address. There would be momentary hysteria and selloffs, before inflation expectations readjusted back to before.
You'll see that price levels are relatively indeterminate without strong commitments to target inflation rates. In that sense a bank may be better than a non-sovereign currency at maintaining price stability.
> A credit system probably wouldn't work however as we're destroyed the concept of time value of money.
This is spot on and is the main problem. This destroys all lending, which prevents various forms of capital investment - the cornerstone of economic growth.
Like it or not, inflation is a key component to any currency. ...and as you said, increasing the money supply doesn't even guarentee inflation - but contracting it absolutely spells deflation - which is death.
Ideally a "better" cryptocurrency would detect the velocity of money within its own blockchain, and calculate the appropriate amount of inflation (or even deflation) to keep the scarcity of currency stable.
If you imagine that a currency is like blood in a body, then as the body grows (or shrinks), the blood volume must adjust accordingly. Fundamentally, the function of currency is not to save - it is to spend.
Thanks for the commentary. Do you think any cryptocurrency has applied effective monetary policy that addresses the issues described elsewhere in thus thread? Do you think token curated registries might be a reasonable context to explore game theory and monetary policy in a more iterative and experimental fashion?
I think stablecoins are a good idea but curiously (not really) no one accepts them for payments.
I wasn't aware of token curated registries but after skimming the paper (seems to be something like a prediction market?) I don't understand the connection to monetary policy.
Not really a fair comparison, (1) Ether has a finite supply and they have not decided how many coins they will print (it is "an area of active research" ), and (2) they gave themselves a bunch of coins on day zero ("12 Million.. were created to the development fund, most of it going to early contributors..") and (3) they crowdsaled the rest of it on day 1... Grin isn't doing any of these things.
Not true. There's a time bomb in the Ethereum protocol that makes mining more difficult over time. This slows the issuance (and the whole blockchain).
During Ethereum's life, the block reward has been reduced, and the time bomb has been delayed. This is in itself an example of how blockchains depend on an initial human consensus. The Ethereum Foundation is overseeing Ethereum's monetary policy, and the miners mostly approve of it. This is not a bad thing (decentralization != anarchy).
The time bomb has nothing to do with issuance. Its stated purpose is to force the chain to go to POS, but they simply fork it further in the future every time it comes up, and the miners can (and should, for their own profit) continue to do so forever.
The primary benefit of a linear emission rate, as far as I’m concerned, is that it doesn’t depend on fees completely taking over from the block reward in order to provide adequate security against a 51% attack. It’s currently unknown whether a fee market will be stable over the long run in bitcoin, and this means there isn’t as much of an incentive to limit the block size for purely security purposes (there are other good reasons to limit the block size though), in addition to block sizes being harder to change once the network is running.
I think the argument being made is that linear emission is, in the long run, as insufficient as zero emission since it's an ever decreasing portion of the total money supply.
I think if anything the emission rate should increase over time. Unfortunately most crypto currencies seem to be encouraging holding them as an "investment" instead of actually using them as a currency.
> non-negligible amount of coins gets lost or destroyed every year.
This is an interesting point I had never considered before.
Assuming that a mainstream crypto currency would lose a constant percentage of its coins each year (seems reasonable), any mainstream crypto currency with less than an exponential growth rate will eventually hit a steady state of coins in existence.
> Grin's emission rate is linear, meaning it never drops.
This sounds more like a real currency, although, without limited supply this thing won't be going to the moon. The deflationary nature of cryptocurrencies thus far has been my main criticism as their viability of currencies (inflation encourages spending, which increases liquidity).
[1]: https://github.com/mimblewimble/grin/blob/master/doc/grin4bi...