Quanta emission change to 2 Quanta per minute #21
Conversation
emission is currently close to 6 Quanta per minute and will be exponentially reduced to 0 in aproximately 200 years. Reducing the emission to 2 Quanta per minute will reduce the availability of Quanta. lower emission rate will most likely increase demand of Quanta, the price, and people who are willing to point their mining rigs to qrl which will enlarge the network.
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If implemented in upcoming hardfork alongside a mining algo change to RandomX i support this QIP. |
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I understand the desire to decrease the amount of QRL that is sold each day and therefore increase the price, but I don't think it would have that effect. The emission rate also determines the security of the network, and one's coins aren't worth anything if the network isn't secure. Since botnets and malicious actors do exist, higher hashrates are better to protect the network from reorgs, and the lower the emission rate, the lower the hashpower. It's a case of economic incentive. The demand for QRL is not changed by the emission rate. Even if the price happened to go up after the emission rate was lowered, it would only benefit those who already had QRL. For those that don't own QRL, gaining the same amount of QRL (which will later influence things like POS rewards and voting power) will be more expensive, skewing the power toward current holders and disincentivizing new investment. This can be seen with BTC, as those who mined and bought a lot early on have a great deal of power and influence on things like price and forking. This is inevitable if QRL price increases, but it is better for decentralization if the price increases naturally instead of artificially (like suddenly capping emission rates). Moreover, price is affected by demand, not the other way around, so a higher price does not necessarily lead to higher demand. But the incentive to mine is directly affected by emission rates. There are two ways to obtain QRL: mine or buy. If mining costs less in electricity than buying, people will mine. If the electricity used to mine costs more than buying, people will buy (or they will point their rigs at more profitable coins and use proceeds to buy, which amounts to the same thing). Either way, the demand is the same, but the number of people mining is not. And the less people mining, the less secure the network is. Before ASICs/FPGAs were pointed at QRL, the network hash rate was about 6-8 MH/s with CNv7. Someone with 2 x Vega 64s would make about 4 QRL per day mining (based on benchmarks here: https://monerobenchmarks.info/), which would be ~$0.56 at current price. Math: 2 x Vega 64 Hash Power: 3700 h/s Those Vegas consume 375 Watts (see benchmark site) All this math says that even at the current emission rate, mining is about twice as expensive as buying (assuming the same ratios hold on RandomX), which means that the network hash rate would likely drop to the RandomX equivalent of ~4 Mh/s of CNv7. And if the emission rate was dropped to 2 QRL/block, it would be closer to ~1.33 Mh/s. At that point, the network would be very vulnerable. There are larger miners that own that much power by themselves, nevermind bot nets. Such low network security would likely decrease demand, and it would certainly raise the risk of 51% attacks, which, if they occurred, would have a drastic effect on price and demand. Even if no one 51% attacks, it will again be the bigger, more centralized mining operations that will be able to afford to mine, and they are the ones who will be selling all that they mine to stay in profit. Smaller miners are ones who are more likely to hold, but mining wouldn't be profitable enough for them, so they would point their rigs at another coin and maybe use their profits to buy QRL (so, equal or less overall demand). In summary, lowering the emission rate would decrease availability, but I argue that it would also decrease the demand, or at least not increase it, which would have a neutral or negative effect on price. Less people would point their mining rigs toward QRL because it would be less profitable to mine, and less people mining decreases the security of the network, which would decrease the demand for a coin that is supposed to be the most secure coin out there. If an increase in demand is desired, the best step in the near future may be to temporarily increase the emission rate when the mining algorithm is switched. This would cause more people to mine (leading to higher network security), and some of those people might look into the coin and decide to hold instead of selling for speculative profits. (Note: I'm not advocating for an increased rate, but I do think it would be better for increasing demand than lowering the rate). I am against the lowering of the emission rate. |
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There is nothing wrong with proposing changes which are motivated by a desire to increase the value of the network, but I don't think changing the emissions rate is the way to do it. One of the fundamental appeals of a cryptocurrency (IMO) is a predictable emissions rate which cannot be tampered with by any central entity. I believe changing it without overwhelming network support (like a coinvote of 90%) would set a bad precedent and damage the QRL network in the long run. As @IMac318 noted, it would make it less appealing for new miners to join the community and could decrease the security of the network. It could also damage QRL's legitimacy to outside observers, and decrease the odds of new people acquiring QRL (for fear of huge future emissions increases). I believe the eventual hardfork to PoS, along with increased awareness about the threat of Quantum Computers to BTC and ETH, will go a long way towards increasing the QRL price without setting the precedent that the emissions curve of the network can be altered. For that reason I do not support this QIP (even though I share your aims). |
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doctor-gonzo, very true. And if we will change the mining algo to RandomX, where are no need to change emission curve. |
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My initial support of this QIP was based on the idea that Quanta is, or would be a Veblen good. A Veblen good has an upward-sloping demand curve, which runs counter to the typical downward-sloping curve. If this is not the case for Quanta this QIP is Counter productive. I share the conserns from @IMac318 @doctor-gonzo and @cooper7777. Due to the uncertainty of the economic fallout of this QIP i have changed my opinion on this QIP to neutral. |
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Thanks Imac318 for your detailed explanation of being against this qip. That is exactly why do think these qips are a great way of getting the community to interact, and am very excited on the coming onchain voting ability with the next hard fork. Let me just be clear: I do consider this qip a success regardless of the outcome. We as a community are starting to talk and are voicing our thoughts. That, I think, shows the strenght of a decentralized ledger. (even though we are not very many right now, I think there will be a lot more of us in the future) Your case against the lower emission rate is basically lower emission rate = equal demand = less people mining That´s were we have different opinions, I would write the equation as: lower emission rate = higher demand (because of higher scarcity) = more pople are mining (because of higher rate of return) again, I do understand your reasoning, I just have a different opinion of the outcome. Of course there are many outcomes in between, for example: lower emission rate = higher demand (to a certain degree that the mining/return ratio is the same) = the same amount of people are mining There are many possible outcomes in this scenario, which we all can just speculate, and I am willing to take the risk of seeing that outcome. |
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I agree with Ottslayer and support this qip. Furthermore, reducing emission should be seen as a sequential step towards the transition to POS. In fact, I would support a more aggressive qip which reduced the emission rate to 2 initially and decayed until the implementation of POS. |
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I find the reasoning behind this QIP very flawed.
Speculation. There will be lower offer, be not necessarily higher demand.
Speculation. Even IF there is higher demand, remember you want to reduce the block reward so miners will get less QRL. I am against this QIP, and will be against any QIP that wants to change the monetary policies. |
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I agree with you glow-qrl, it is speculation. like I mentioned in my post 9 days ago. there are many possible outcomes. but nearly all our predictions of future events are just that.. speculation. If you believe however in economy, one of the basic principles states that demand and availability dictate price. if you lower availability than the logical consequence would be a higher price. |
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But this doesn't really even reduce supply. It's not like this is a huge token burn or something. It's a restriction of future supply increase of a few percent over a long time. At 6 QRL/block, there will be roughly 3 million QRL mined over the next year. There are 70 million QRL currently. That's an increase in supply of 4.5%. With 2 QRL/block, it's a 1.5% increase in supply. If supply and demand determine price, it's a 3% difference in price over a year assuming equal demand. So for miners/perspective miners, the price increases by 3% in a year, but it immediately becomes 300% more expensive to mine. That's going to do the opposite of attracting new miners. And if the community is arbitrarily changing block rewards with the goal of artificially inflating price, I would expect new people to feel less comfortable investing, let alone new miners joining ("how long until rewards are further reduced?" will always be a question on miners' minds). And if demand falls by 3%, then price is the same and the hashrate/security is lower. I just don't see anything in the math or economic theory that says this will be a good thing for QRL. Are there other examples of coins doing this and it turning out positively? |
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In economic theory you have the concept of a Veblen good. "Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. " https://en.wikipedia.org/wiki/Veblen_good Financial assets can be seen as Veblen good. Most people don`t buy financial assets when the price is decreasing and the financial assets are on sale, but when price is increasing and the price is high. If Quanta is a Veblen good and the price is high and increasing, a supply shock like this will boost the demand for Quanta. However if the price is low and decreasing, the demand for Quanta will go down from a supply shock like this. The Quanta price is now low and has been decreasing and decreasing the Quanta demand for quite some time now. We need a price increase to boost demand. After doing some thinking, and soul searching i see that messing with the supply is not good for the demand, price and immutability of the chain. I am sad to say initial support for this QIP was clouded by my desire for higher prices and not sound long term thinking. I see this QIP and the discussion here as valuable lesson in consensus forming, and the degree of immutability of the chain. I am not neutral anymore. I do not support this QIP. |
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In general, Veblen goods are a class of high-quality, luxury goods that are desired at least in part because owning them is a symbol of status (i.e. "I'm so rich/powerful/important I own x"). I think it's hard to argue that any crypto asset falls into that category. Maybe BTC would if it entered the $1 million+ range, as owning 1 BTC then would probably be a status symbol, but the only reason that BTC would ever get there would be if there was mass adoption. And that seems to be the value driver: network size. Who is using, who is holding, who is mining, who is trading. Significantly increasing mining costs will lower the network size, because only big miners will be able to afford to mine, and with slim profit margins, those big miners will have to sell everything mined. If the goal is to attract smaller miners who might not need to sell immediately and can afford to speculate with mining (which would then create value through a larger network), lowering emission rate would have the opposite of the desired effect. Hopefully the change in algorithms will increase profitability of mining for smaller miners and active the desired effect. |
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My personal opinion would be to defer this QIP decision until a formal on-chain vote can occur post the upcoming hard fork.. |
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I like that approach. on-chain voting could bring more people´s votes on this debatable topic to light. |
emission is currently close to 6 Quanta per minute and will be exponentially reduced to 0 in aproximately 200 years. Reducing the emission to 2 Quanta per minute will reduce the availability of Quanta.
lower emission rate will most likely increase demand of Quanta, the price, and people who are willing to point their mining rigs to qrl which will enlarge the network.