# Cryptocurrency with little to no inflation or deflationsteemCreated with Sketch.

in #cryptocurrency3 years ago (edited)

One problem I see with currencies (especially cryptocurrencies) is the constant price fluctuations.

So I've been thinking about how you could design a currency that has a near constant value.

First I'll tell you my idea then I will explain my reasoning so you can pick it apart more thoroughly. (Please be nice ;) )

What if the way you created new currency was tied to working time. For example, every minute that I spend "mining" I would get one coin.

Ok back to my reasoning, what makes the value of a currency fluctuate. Well I would argue that it is supply and demand just like anything else. So to have a stable currency, you need to balance supply and demand at a certain level. For example, if there is an increasing/decreasing supply there must be increasing/decreasing demand. Likewise if there is increasing/decreasing demand there needs to be increasing/decreasing supply.

I would argue that demand is too difficult to control in any effective way so let's look at supply.

Many cryptocurrencies have deflationary models because the supply is capped or is created slower than the demand which puts upward pressure on the price (More people want it but there is only so much). Most (if not all) so called fiat currencies are inflationary with the central banks creating more supply at a pace that barely stays ahead of demand creating downward pressure on the price. (Most are quite effective at this and have a low inflation rate 3%-10% annually which is relatively stable while still allowing the central banks to make lucrative amounts of money)

So in theory, if we could create a currency that can increase the supply to match demand without a central authority the price would remain stable.

So my suggestion is to have the "miners" be real people (not computers) and somehow make it so that it takes, on average, 1 minute to mine 1 new coin.

Why I think this will work:

If the currency becomes overvalued more people will want to mine it, increasing the supply and putting downward pressure on the price.

If the currency becomes undervalued less people will want to mine it, limiting the supply and putting upward pressure on the price.

The key here is the time, if you allowed people to do it faster it would increase the supply too fast creating hyperinflation.

Also, ease of use. Anyone should be able to mine the currency, it just takes one minute no matter what.

As far as how this would actually work I'm not that far yet, I just thought it was an interesting thought. Let me know what you guys think. What am I missing, or what would be a better way.

Sort:

Forgive me for being a little slow on this one @littlejoeward - more occupied offline than on, as things are!

I like the line of reasoning and especially your basic objective, i.e., a stable currency - as that is exactly what I have been toying with, from even before cryptos came to light!

I like your sentiment of a fair distribution and that everyone should contribute. Your logic of supply and demand relative to the value of the currency also makes sense.

A point I would like to raise though, is whether it would be attractive for everyone to have to do maintenance on their currency perpetually to prevent it from corrupting, when there is already so little quality time to spend doing quality things?

Would it not be more attractive to have a currency defined in such a manner that it remains stable due to inherent qualities is by definition has?

Thanks!

Would it not be more attractive to have a currency defined in such a manner that it remains stable due to inherent qualities is by definition has?

If there was a way to do that I would be interested in it. I have been thinking about maybe having something that worked similar to steem where we would pay people to do useful things to create more tokens but I'm still in the early stages of thinking about that...

I really think that it is possible to have currency that is very simply agreed on to have a purchasing power for a unit of energy.

The fact that energy plays a most fundamental role in production and the fact that production lies at the heart of real economics together really implies that having a currency related to energy is a sensible option - at least as far as I can see..

We all "agree" that the SBD should equal \$1 and there is even a mechanism in place that keeps it from going below \$1. And yet we see that the price is more than \$10 right now. The market doesn't always do what we want it to. The only thing that makes it work in a game is that the banker controls the money supply and the market. It is also short term and not sustainable. The game ends and everyone moves on. What if the game lasted forever. I don't think the currency would stay the same as an orange forever.

Thank you @littlejoeward, for bringing up all these points to iron out.

I am of course never really replying to you personally only. Your questions create the opportunity every time to embroider on ideas that other readers may find thought provoking. I do not see this as a project or agenda of my own that I wish to foist on the community. I see some basic concepts with the potential of us all together getting something sensible going.

I think we are seeing two different scenarios here. The SBD is exposed to speculation on a 'foreign' market here. Steemland treats the SBD internally with care. On the world wide exchanges all kinds of strangers, people that are not stakeholders in steemit, can throw money at, it chasing up the price.

One could have it that in 'Energyland', only accountholders/players in the game will be able to trade amongst one another with the tokens, so all will be subject to the same forces.

And to make it possible for the game to last forever, one can put a limit to the total number of tokens that can be held in an account - say a few million. That will have players store additional value in real assets - property, useful things, luxuries, gold, whatever, while preventing inflation.

The individual accounts will then not be the ultimate sores of value..only to a limited degree. The accounts will primarily be a means by which to fairly and evenly and sensibly inject purchasing power into the economy at a grass roots level, instead of as at present into the top echelons of society, from where it does not "trickle down", hence the poverty at the lower end.

There will never be only one currency either. Virtually any commodity can at any time serve as a means of exchange. And other cryptos can be around as well - why not?

But what if some people don't agree that it's worth that much?

I think someone saying their token is worth more will be walked past and someone paying too much for anything (devaluing their money) will soon learn the lesson - market forces.

The problem with cryptos in general is that they are not backed by anything real. This altcoin is to be backed by actual assets and production without the need to trust a third party; like gold, but it has a yield. Token holders can see their assets being managed through a 512-camera on-site security system accessible 24/7 from any web-enabled device: http://moefarms.com/Business.html

Interesting! I'll look into it. Though I question whether a "currency" needs to be backed by something "real." Currencies are simply a leger system to allow people to barter when they don't agree on what they want to trade. You can always barter a currency because you can trade it with someone else for something you want. That is what gives it value, not being backed by something. That is what makes a commodity different, it has value besides being tradeable. Gold is nice because it can be both, a currency and a commodity. But this unfortunately makes the commodity value of gold go down because the currency value makes the price higher making it unprofitable to use it as a commodity. Hopefully that makes sense. I am writing a post about it right now actually so stay tuned! :)

The idea of a constant value is flawed.

A currency will always be subject to fluctuations. The 'value' depends on many parameters that are always in motion. There is no equilibrium with a fixed value. Preferences will ultimately appear in the 'value' of the primary currency used for trading. This signals something and it would be unwise to take away that 'signal' (unless you want 2008 crisis as regular occurring events).

If everything would be static, the Universe would not exist.

Oh, I see what you're saying. I agree that there will always be fluctuations, I guess what I am looking for is a long term stability so that it would be worth relatively the same amount today, in ten years, and in 100 years.

I'm not trying to argue, just curious. Why do you think this would create large recessions, I'm sorry I'm just not following your logic.

Hi @wekkel - pleased to meet you!

I have to respectfully disagree with what you say here as a blanket statement though.
Kind reagards!

Interesting idea, maybe the people that want 15 dollar a hour minimum wage can mine these coins at 25 cents per coin per minute. They can perform a trivial yet needed task, earn the coin, and sell them on the open market for fiat or make purchases directly to vendors that accept the crypto.

Exactly! I think it could potentially be sort of a universal basic income.

Congratulations @littlejoeward! You have completed some achievement on Steemit and have been rewarded with new badge(s) :

If you no longer want to receive notifications, reply to this comment with the word `STOP`