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Discussion: Total Supply and Coin Halving Model #9

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ellaismer opened this Issue Dec 18, 2017 · 7 comments

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ellaismer commented Dec 18, 2017

There was a discussion happened on Discord about Ellaism's coin halving model. It is copied here for future reference. Please also feel free to put your thoughts into the comments.

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ellaismer commented Dec 18, 2017

johndis

@ellaismer appreciated, but isn't there a roadmap of upcoming deliverables with estimated dates?
how can the community know what's being worked on?
even if it means detailing what's being worked on without an ETA for the sake of visibility
Also I agree, there should be a far stricter monetary policy
ELLA's inflation is far too high to truly allow any individual ELLA coin to go up in value
Investors will keep away
Nobody wants to get diluted

ellaismer

@johndis All coins have high inflation rate in the beginning. Some coins can hide this fact by putting a large amount of premine, but that is the opposite of the goal of Ellaism. So in this sense, I probably have to agree that this coin is not for all investors.
If you are looking for roadmap, you can find one here: https://ellaism.org/roadmap/ We've seen too many coins with estimated deliverable dates but failed to deliver anything, and we'd better not to repeat the old mistakes. There're certain aspects and practices of software engineering that we should follow. Plus we don't have a strong centralized team. That means developers can join and work on stuff without even first let others know. So from this sense I think giving a monthly community update (showing what has been done) is far better than showing a strict-dated roadmap.

johndis

@ellaismer I agree that most coins have higher inflation ratios upon inception, but ELLA's total supply stands to increase by 100x over its lifetime, which puts it in somewhat of a unique situation
circulating supply that is
its inflation curve is very much different and decays far more slowly than the vast majority of coins out there

ellaismer

@johndis I think there're two things we're probably missing there. First, we're talking about Ellaism, a coin that has no premine and started three month ago. That's why I said coins have high inflation rate in the beginning. After one year (Sep 2018), ELLA's current supply would be 10 million and the total supply would only be 28x. After the second year it would be 14x, the third year 10x, the forth year 7x, and so on.
Second, do note what we're comparing here. On coinmarketup, you will find a vast majority of coins that is premined or not minable. Of those that are no-premine, we also have many coins that deliberately have a long tail emission (Monero being a notable example, whose total supply would thus be unlimited). We don't have a tail emission of significance, but at least not having the emission decreasing too fast can help to avoid it if fee markets haven't formed and/or hashrate drops too fast.

badstars

Just out of curiosity, @johndis , which coins are you comparing with when you reckon Ella has a high inflation rate?

All coins without pre-mine/ICO by definition has an infinite inflation on the first block reward (from 0 to whatever the block reward is). Also, IMHO depending on how a pre-mine is intended to be used, I'm not so sure that it's wise to include the pre-mine amount when calculating inflation.

johndis

@badstars I'm strictly talking about the block halving schedule
ELLA decreases by 20% every 10m blocks, which is ~3 years
That is a very low rate of exponential decay that leaves a very high rate of inflation for years to come
Not even talking about the initial supply, premine or not, or terminal supply
Simply put, ELLA's inflation schedule is far too slow to adequately support a healthy price rise of a single ELLA coin
Which deters investors
By making miners very happy and investors very frustrated you pave the way to killing a coin
The only way to counter that is to have a massive development and marketing output, which I'm not seeing here
ELLA isn't the powerhouse that is ETH and cannot compete with it on those levels (not saying it's a bad thing)
So having such a slow halving curve is just shooting yourself in the foot

Riddlez666

says you now stop

johndis

Just throwing that mathematical principle out there

easy

@johndis#4875 disagree with you about massive development man, since Riddlez with us things goes really fast

Volt

Yes we have witnessed all of the projected 2017 gains in BTC surpassed in June.
All the projected 2018 gains surpassed in November.
All of the projected 2019 gains surpassed in December.
The inflation rate on Ella isn't even linear.(edited)
Ethereum at this time is very undervalued. It should be trading at 10:1 with BTC.
No doubt it will be in the not too distant future. Perhaps even 5:1 given the utility of ETH versus BTC.

Dzoni

Volt are you saying Ella isnt good?

Volt

LOL!
Ella is going to share the heavy lifting with ETH.

Dzoni

Can you look at PM @Volt

Volt

Some people have been complaining about the inflation rate of Ella for the first few years. They are totally missing where we are at on the exponential curve for the transition from 18th century money to 21st century money.

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ellaismer commented Dec 18, 2017

Jones

@riddlez666 @johndis @badstars @alsc
From our conversation this morning on inflation, I did some more research on inflation and hyper-inflation and I bumped into this article. (link below) I would encourage you to read it and post your thoughts. It mainly focuses on Bitcoin, but you can extrapolate that a crypto currency with a fixed supply will only increase in price due to its rarity.
http://www.zerohedge.com/news/2017-12-12/time-different-part-ii-what-bitcoin-really

ellaismer

IMHO, the only important thing, actually, is just to have a fixed supply and stick to it as a philosophy (i.e. do not change it in a hard fork). Consider this, our coin would have the same supply under a) mining 10 million coins per year, b) still mining 10 million coins per year but also keep 70 million coins premined where the owner can only withdraw after 7 years. Option b, while having the same effect as option a, gives a much lower marketed inflation rate. Option a, however, have the advantage of fair distribution.

When investors invest this coin, they would already have taken the total supply in consideration, and the thing matters to everyone is their share against the total supply. I agree current circulation is also an important factor. However, what we want to avoid in the circulation factor is not whether this is 10x or 20x of the total supply, but a small amount of people holding a large portion of the coin.

We want to favor early miners, but it is also important not to favor too much. In Bitcoin case, we have less than a hundred people controlling more than 40% of the coins. Consider if Satoshi decided to dump all his/her holdings, that would be what puts a real pressure on the market. And that is the thing that Ellaism and many other coins halving and coin distribution model really wanted to avoid.(edited)

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ellaismer commented Dec 18, 2017

johndis - Today at 3:07 AM

@Volt please enlighten me on "crypto exponential time compression"

Volt - Today at 3:08 AM

Already have @johndis. Please feel free to scroll back to 12 hours ago.

johndis - Today at 3:10 AM

Do you mean "Yes we have witnessed all of the projected 2017 gains in BTC surpassed in June.
All the projected 2018 gains surpassed in November.
All of the projected 2019 gains surpassed in December.
The inflation rate on Ella isn't even linear."
@ellaismer that's exactly right - "When investors invest this coin, they would already have taken the total supply in consideration, and the thing matters to everyone is their share against the total supply."
How many investors do you think have decided to stay away from ELLA after having been exposed to it simply because they did not wish to have their investment share diluted by a factor of 100 over time?
Pricing a fundamental in works both ways
I have seen coins rise and fall on inflation alone
It is arguably crypto's single biggest strength - immutable controlled strict inflation that cannot be altered by a central entity
It is a shame that ELLA doesn't employ a stricter schedule

Volt - Today at 3:31 AM

What you mean @johndis "It is a shame that ELLA doesn't employ a stricter schedule" ?
@johndis are you suggesting that investors would be more attracted to ELLA if the market cap were inflated by a large premine that prediluted their investment in advance?(edited)

johndis - Today at 3:46 AM
when did I mention anything about a premine?
zero premine, fair distribution, tighter inflation schedule
pretty simple

Volt - Today at 3:47 AM

What do you mean by tighter inflation schedule?

johndis - Today at 3:47 AM

literally exactly what ELLA is right now, except a tighter inflation curve
It's the only flaw I could find with ELLA

sncs - Today at 3:48 AM

@DARCIA16 31.6Mh? couple of months you can throw away those cards

johndis - Today at 3:48 AM

Meaning stricter inflation than a 20% reduction every 3-4 years
Even BTC reduces the block reward by 50% every 4 years

sncs - Today at 3:48 AM

are we still complaining about inflation?
lol

johndis - Today at 3:49 AM

inflation is the silent killer of coins
so yes

Volt - Today at 3:49 AM

LOL I know WTF?

johndis - Today at 3:49 AM

expect many such discussions in the future
pretty sad to see that you don't care about that critical aspect of cryptoeconomics

Volt - Today at 3:49 AM
Expect the discussion to go nowhere.

sncs - Today at 3:50 AM

@johndis ive never seen you around here, so you're probably trolling

johndis - Today at 3:50 AM

well then expect ELLA to go the way of ETH then

Volt - Today at 3:50 AM

Pretty sad you don't understand it but you think you do.

johndis - Today at 3:50 AM

I've been here for months actually
Please refute my points then

sncs - Today at 3:50 AM

I cant speak about inflation because i didnt make the monetary policies

Volt - Today at 3:51 AM

What you're proposing is more centralized ownership.

johndis - Today at 3:51 AM

you don't have to be the author to criticize the art

sncs - Today at 3:52 AM

@johndis fair enough.
you probably dont mine do you?

johndis - Today at 3:53 AM

I do not

Volt - Today at 3:53 AM

That is exactly what you are arguing for. Early investor should own more forever.

ɃuzzkillɃ - Today at 3:54 AM

i dont get it, what's wrong with Ellaism again?

Volt - Today at 3:54 AM

You totally ignore the value of the decentralized ownership and how that translates into a larger network effect.

sncs - Today at 3:54 AM

@johndis now i get your anger. its ok buddy

johndis - Today at 3:55 AM

There's no anger at all
Simply expressing the only red flag I see with ELLA
This is hardly an emotional argument
I'm trying to help the project
Yes, early investors will always own more
That's the very nature of early investment
The only way around it is to have a fixed growing and infinite supply

Volt - Today at 3:55 AM

The monetary policy CANNOT be changed.

johndis - Today at 3:55 AM

And you can't have that
Of course it can

mkrieger - Today at 3:56 AM

What if we implement something similar to UBIQ? i think they solvet the inflation issue quite nicely. As long as we have the inflation rate as is in ella, not a lot of people will hold it, miners just dump for profits

Volt - Today at 3:57 AM

Satoshi can never more his coins or the BTC price will crash in an instant. Over weighting to early miners/adopters is a flaw in BTC.(edited)
LOL! None of you anti-inflationists get it!
Its about fair distribution and the network effect.

sncs - Today at 3:59 AM

they just want to be able to buy at the start, hold and get max profits

Volt - Today at 3:59 AM

Exactly!

johndis - Today at 4:00 AM

It's always a fair distribution provided you do not give anyone a heavier stake in the network by illegitimate means
If someone buys more they will own more
How is this trolling?
I am actually engaged in a conversation here

mkrieger - Today at 4:07 AM

or just lower the diff and make block rewards 10x and most of ella gets mined in a couple of months

ɃuzzkillɃ - Today at 4:08 AM
what's wrong with Ellaism again?

johndis - Today at 4:11 AM
nothing wrong with it per se, but its inflation rate is high relative to the vast majority of coins in the space(edited)
In fact, I couldn't find anything wrong with ELLA
I think it's a superb project
especially given the state of ETH

ɃuzzkillɃ - Today at 4:15 AM

what do you mean by inflation rate?
inflation in relation to what?

mkrieger - Today at 4:18 AM

on the other hand most people want inflation rate to be reduced so they can make short term profits...im sure the devs made it the way it is for a reason

ɃuzzkillɃ - Today at 4:22 AM

oh so just purely how much ella is being mined per day

johndis - Today at 4:30 AM

yes, and the decrease in block rewards over time
cumulatively it represents the total supply
@ellaismer I get that you want to prevent centralization of ownership and having market makers the like of Satoshi who'd be able to crash the market in the future. The other extreme end of the equation is having a near-infinite supply that will guarantee no one will ever have a decent chunk of the network
there's an ideal middle ground between the two, naturally
Whether it crosses at the point of 280m and 0.8x every 10m blocks, is debatable

guny - Today at 4:33 AM

@johndis If you don't like inflation rate of Ella then just stay away of this coin. This thing cannot be changed. There are planty of other coins with more strict inflation.(edited)

ellaismer - Today at 4:33 AM

@johndis Yeah so that's what I think makes our current model reasonable. Bitcoin is 3-4 years halving 50%. Ellaism is 3-4 years halving 20%.
@johndis just want to say thanks for being there and I feel we really helped to clarify many points of the coin distribution model for Ellaism.

johndis - Today at 4:34 AM

@guny but you see the issue here right? by saying "if you don't like it then stay away" you open the door to people actually staying away
Do you really want the market to stay away or do you want an influx of investors?
@ellaismer you're welcome of course

Volt - Today at 4:37 AM

No monetary policy can please everybody. If Ellaism's monetary policy results in a coin distribution that is too fair to satisfy your greed. Then yes, there are other coins.(edited)

johndis - Today at 4:39 AM

Attributing my reasoning to greed will get you nowhere

guny - Today at 4:39 AM

@johndis I think the community will grow faster then total number of coins.

johndis - Today at 4:39 AM

Also I don't see how that's implied

ɃuzzkillɃ - Today at 4:39 AM

saying to stay away from Ella because of this is not reasonable to me
even if someone finds a quirk that they don't like, that's not a reason to stay away from a specific crypto

guny - Today at 4:44 AM

@johndis Anyway this is just an experiment with unknown outcome like bitcoin was.

ellaismer - Today at 4:46 AM

One more point to add: Ellaism has a (roughly) fixed total supply. I totally agree with @Volt on this that once we have a fixed total supply model, we should not change it in any way because investors already have referred it when they saw the coin, and it is an important property.

What I argue is that, once you have a monetary policy (currently only Ethereum Classic and Ellaism have this, for Ethereum-like coins), you basically have a deflation coin. And from this point, one might argue that Ellaism doesn't have the optimal time distribution model due to its halving method, but there's nothing seriously wrong, because now it is only about how coins are distributed over time. Cryptoeconomics is an entirely new field and even economists stretch their heads when even talking about cryptocurrencies' deflation models. Everything is still under debate. Ellaism, as time goes, might to have been proven to have or not to have an optimal halving method, but at least it is a reasonable one compared with Bitcoin (3-4 years 50% and 3-4 years 20%). And because of the fixed supply, the non-optimal part of the halving would get fixed automatically over time.

@ellaismer ellaismer added this to Discussions in Project Management Dec 30, 2017

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ellaismer commented Jan 3, 2018

This is the spreadsheet going into detail of Ellaism's coin supply model with comparison of Bitcoin: https://docs.google.com/spreadsheets/d/1v3T6gRupH4C4Zx3B60fOOIqFiilItSpVTszEHjyIPIw/edit#gid=640070299

Basically, Ellaism is similar to Bitcoin2x -- if Bitcoin's block time is 25 minutes instead of 10 minutes, Bitcoin and ELLA would have similar 50% and 90% checkpoint.

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sorpaas commented Jan 4, 2018

Interesting. I think the philosophical difference between Bitcoin and Ellaism is how long the cryptocurrency market would stabilize? Looking at crossing the 3% annual inflation rate (I think after that it is just tail emission and doesn't really matter much), Bitcoin thinks it takes around 10 years from 2009, but Ellaism thinks the number should be 16 years from 2017? Well.. doesn't sound too unreasonable.

There're other coins with many more different choices. Looks like Litecoin will cross the 3% point around 2023 (12 years). Monero reaches the 3% point in 2018 (4 years). Dash reaches 3% point in 2026 (12 years).

I hope economist can jump in and give some lights for those different "supply models"... but before that, probably nobody would know whether Bitcoin, or any other coins, do this thing more right...

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TomJaeger commented Jan 23, 2018

Inflation with a Crypto is interesting as a whole as it doesn't mirror traditional currencies. One may argue that inflation doesn't happen when coins are mined, but rather when they are in circulation (ex miner sells position). This is one of the fundamental differences in the crypto space (VS government). Which also adds another dynamic to the equation as a whole.

When we discuss supply (coins mined), and inflation I think it's also important to discuss demand and the velocity of money. I'd personally be apt to say that investor interest may be determined more broadly on demand, velocity of Ellaism, utility and uses in the earlier years.

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ellaismer commented Feb 14, 2018

I was asked recently about why the halving block number is 10 million but not anything else (for example, in ETC, it is 5 million). The original consideration is to make the monetary policy to have:

  1. A fixed total supply.
  2. A long tail emission so that block rewards don't drop too early which may cause miners to leave.

Many coins (like Monero and Ubiq) choose to give (2) priority by simply not having (1). So I was looking for a compromise that allows us to have both (1) and (2) with reasonable configurations. Comparing with using 5 million and 10 million as halving points, the former reaches 3% annual inflation rate only 5 years early (13 years vs. 18 years). However, the later halves twice as slower than the former, which gives us a good tail emission. So 10 million as the halving point was considered a good compromise to allow us to have both (1) and (2).

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