[ExI] Thoughts on Ethereum?

[Mirco Romanato]

Il 16/03/2014 18:26, Brent Allsop ha scritto:
> 
> 
> Extropians,
> 
> On 3/15/2014 4:58 PM, Mirco Romanato wrote:
>> It all depend on how much people is willing to buy and hold long term
>> ethers just because they are valued (they think ethers will retain,
>> maintain, increase, their value in the future). If no one want keep a
>> significant quantity of ethers for long periods of time (because they
>> prefer Bitcoin or gold or whatever), then the contracts will not
>> take-off.
> 
> Here's my thoughts.  I would love to know if anyone agrees or disagrees.
> 
> Bitcoin has about 12% new coins moving into the market, per year, via
> mining, for more than the next 3 years before it drops to half that.  I
> bet Venezuela, Nigeria, Iceland, and other countries experiencing
> terrible inflation have far less than 12% per year new coins per year
> causing their inflation.  Obviously nobody wants to hold Naira any
> longer than necessary, because of the terrible inflation rates caused by
> less than 12% new coins / year, obviously outpacing their economic growth.

I (with some help) compiled this chart comparing the M0 and M1 inflation
of the US$ and M0 Inflation of Bitcoin.

https://docs.google.com/spreadsheet/ccc?key=0AnWZ8CNHuTE3dGo3RTBoSHdvQnZsZkpZdHB1ZUhQLWc#gid=0

I do not see any serious difference in the current annual and monthly
inflation rate between US$ and Bitcoin. There is a slightly advantage
for the USD, but it is slim and getting slimmer and it is all due to the
increasing of mining power,

The next halving is about end August 2016 (2 years and half), but
probably will be pulled in end June, early July, 2016 by the continuous
increasing of mining power.

> But Ether coins will have 50% / year new coins coming onto the market. 
> That just seems brain dead to me.  I certainly wouldn't want to hold any
> such coins with that kind of inflation.  Doge coin has a similar
> inflation rate.  This is what people do to stop people from hording the
> currency, thinking it will make using the coin, for tips and such,
> easier.  For exactly the reason Micro gives, this strategy will back
> fire and make inflating currencies crash and fail, once they reach their
> maximum saturation of popularity rate.

I looked at Dogecoin and the inflation rate is, at least initially
(first year) a lot higher than the inflation rate of Bitcoin, but it
will fall to 5% per year after the first year and slowly reduce (5
billion new Dogecoins per year after the first 100 Billions were mined,
forever).
	
Inflation (theoretic) rates compared
	Dogecoin	Bitcoin	Litecoin	Ether
2015	5.26		10	33.3		33
2016	5		9.09	12.5		25
2017	4.76		4.1	11.11		20
2018	4.54		4	10		16.6
2019	4.25		3.85	9.09		14.29
2020	4.2		3.7	4.1		12.5

In this we see Ether is more like Doge on long term, because it has a
fixed issuance of new ethers (from day one) where Doge have a fixed
issuance of Dogecoin after one year.

Litecoin e Bitcoin, instead, have a halving issuance every four years
(with a two years advantage for Bitcoin).


> Invictus Innovations Bitshares, on the other hand, will have zero new
> coins coming into production after the initial genesis block is seeded. 
> In my book, this will be a much better investment (I have invested in
> them).  But then, there is unobtanium coins, that takes this theory to
> the extreme, and it isn't doing well either, so who knows.

What hit me, compiling the data above, is even ethers and Doges start
appearing interesting to hold against the USD (Yen, Renmimbi, Euro,
etc.) after a few years.

What could support the value of ethers is the fact you need to spend
them to setup contracts and more complex the contract (more steps it
has), more ethers must be spent on it in fees.
Some ethers must be spent to pay for the various steps of the contract,
so they will be unavailable until the steps are executed. Others will be
linked to the contract and on hold until the contract end.
This could cause a larger share of ethers to be hold and unavailable
compared with Bitcoin.

For example: a transaction using Bitcoin prevent the bitcoins to be
spent for one hour (six confirmations) so the same bitcoin could be
transacted 24 times a day (at most). An Ethereum contract could last
days, weeks, months and the ethers used would be mostly (like 99.9%)
unavailable.


> To me, all these hard coded inflation rate currencies are 'dumb' coins,
> which will never work in the long run, and are nothing more than flashes
> in the pan (although very big flashes).  I think a 'smart' coin that can
> intelligently adjust will easily out compete any inflexible dumb coin. 

I think the reverse.
Any coin flexible will be flexed and gamed by TPTBs for their profit and
our loss.
Any inflexible coin will not and will keep the field leveled.


Mirco