(script draft) Peercoin Primer #4: Economics

General
16

I actually agree with your criticism here. When I was reading back over the text after finishing my editing, the whole PoS inflation section seemed like it was dedicated to clearing up people’s misconceptions. Rather than trying to get positive information across to the viewer, it was deflecting old myths. It felt defensive, like you said. However I still posted it to see what people thought. Now I know why it felt wrong.

However I don’t agree with the replacement topic you are proposing, that of explaining why we don’t increase more than 1%.

Think about the market we are dealing with here. While the things you say here are true, we don’t want to give people any reason to close the video and leave. A huge number of people are in crypto to make money. Blatantly telling them that they’re not going to earn any money in this way will be a huge turn off and we will likely lose the viewer for good.

I also mentioned above that we will probably be forced to reproduce this video with new updated information once RFC 0011 is implemented, which changes the way PoS inflation works in Peercoin. We really don’t want to have to reproduce the video.

So that’s why I’m thinking it might be a better idea to future proof the video. Instead of talking about rich get richer or why we don’t make the interest higher (pre-v0.9 topics), we very shortly explain how PoS inflation worked at the time the video was recorded. But then we dedicate a larger portion of time to explaining how it will work in the upcoming v0.9 release. This lets us discard the defensive explanations and focus more on the exciting stuff like RFC 0011 and dynamic PoS rewards. Talking about how inflation will work in the upcoming release will be more interesting to people and puts us in a better light where we can get positive information across to the viewer. This way we future proof the video and we don’t need to reproduce it after the network forks to v0.9.

17

When is version 9 expected to be implemented?

18

RFC0011 will certainly be there.

19

I agree with Sentinel’s idea. Rather than spend time on explaining the benefits of 1%, we direct our explanation to the benefits of the new/incoming supply model.

EDIT: just to clarify, we’ve already explained the old inflation in the above draft, yes? So, all that is needed is a section on the new model?

21

In the current draft, most of the PoS section will need to be deleted and started over from scratch. I’ll need to look over Nagalim’s RFC first though. Everything else should stay the same except the last paragraph. I’ve talked to Peerchemist about that paragraph and he agrees with me that it is necessary in order to separate ourselves from Bitcoin economically. Peercoin has limited inflation, so we need to own that and explain why it is superior.

However he wants me to add a different angle to it, so I’ll need to edit the final paragraph as well to alter the messaging somewhat.

1 Like
22

Is this the one?

23

Yes

24

I had made a first attempt here…

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25

I think the “old” and “new” models can be merged into one. For example, the new part of the script can start by saying, "Since Peercoin’s inception, [and then insert explanation of the old model] - and them follow by But, exciting news, in 2020, a new model will be implemented … etc.

26

I need to catch up on this thread, but I dont think we should include rfc0011 in this video. It’s not good practice to talk about big changes that are still undergoing review to noobs. I’ll try to address this point better when I get a chance to catch up.

27

Then we have no plan forward for this script. @peerchemist wants us to future proof the video so we don’t have to reproduce it later. And this was the best way to do that. But I’ll wait for your response.

28

I will constrain my discussion to the two paragraphs that introduce the economic model of proof of stake. Essentially, I think they should be replaced in their entirety. Focus on the 1% inflation number, which is what the current protocol idealizes and rfc0011 focuses on as its consensus mechanism. If we agree on removing the last paragraph, I will absorb it into these.

On the proof of stake side, Peercoin allows for a 1% annual inflation of its supply as a minting reward for everyone who helps secure the network. This economic model is starkly contrasted from the fixed-supply deflationary model of Bitcoin because it promises a continuous and regulated stream of new coins that will enter the system. Global economies have explicitly shown that a well-regulated inflationary model is very beneficial to incentivize the utility of currency as opposed to creating an economy of hoarders. Peercoin does just that, by continually rewarding those that participate in the consensus mechanism proportionally to their level of participation. Those that do not participate in the minting process feel economic pressure to act with their investment, while those that do mint can treat their funds as ‘coins in the bank’, so to speak. The forethought that went into the Peercoin economic model echoes the centuries of financial institutions around the world and codifies it in an incorruptible protocol. Peercoin truly is the best of both worlds.

I’m not sure this fits with everything else, and it may need some editing, but hopefully you’re picking up what I’m laying down.

29

I see what you’re saying. So we drop the final paragraph and move the main idea of it up to the PoS inflation section.

Peerchemist has also asked me to tweak the messaging of that last paragraph to include another idea as well…

So we should get this in there somehow, the idea of transitioning from centralized institutions that abuse inflation to a decentralized form of inflation that is influenced by many people around the world.

30

I think the second to last sentence about codifying the sane economic model into an incorruptible protocol essentially gets this idea across.

31

Before we go any further, we need agreement on whether we are including or excluding rfc0011.

The chief drawback of including rfc0011 is that it will stand out as a key message of the video, and thus be in competition with what Peerchemist is saying, which is that the key message is the explanation of Peercoin’s inflationary model, and why it is important.

If we exclude rfc0011, it will mean a Video 6 in a year’s time (or rewriting Video 4). We presumably want the video series to be self-contained, and not be reliant on update videos, but I think we can get away with just one video as an appendix.

Right now, I’m leaning towards excluding rfc0011. What do others think?

I also think we need to extend the deadline by another week.

32

Yeah I think it’s best to omit it or simply state that some protocol changes are being “discussed” on how to make the minting process more rewarding to those who are active and participating.

33

I agree with excluding RFC 0011. On Saturday I can try working more with what Nagalim has written. And hopefully Sunday I can start on script 5 while I am waiting on feedback for script 4.

34

Subject to a final read-through, we’re happy with POW mining and fees, so the outstanding parts are POS minting and Economic model.

Sentinal and Chronos’ original format was:

Supply increase - POW mining
Supply increase - POS minting
Supply decrease - fees
Economic model

Nagalim is suggesting:

Supply increase - POW mining
Supply increase - POS minting + Economic model
Supply decrease - fees

My feeling is that the original format is the right one, since the Economic model is the strategic aspect. It must come last, after the technical aspects have been explained, and to leave a lasting impression on the viewer.

If we put Economic model as the conclusion, we will need to beef up what we have on POS minting. I refer to my earlier suggested paragraph.

On the proof of stake side, Peercoin is designed to produce a 1% annual minting reward for coin holders who help secure the network. But why is the reward only 1%, why not higher? Well, the 1% is designed as an incentive to mint and so secure the network, not to make minters wildly rich. If the minting reward was set at, say, 20%, those minting would receive an unduly high number of Peercoins which would centralise coin ownership and control of the network, which is not what Peercoin is intended to achieve. So, that 1% is just enough to give people an incentive to mint, to earn a few extra Peercoins, while avoiding the downsides of high inflation.

Sentinel did not like this because it might put off people who wish to make a profit. I agree we don’t want to alienate the profit motive, but most people in the crypto space are investing for asset appreciation, not minting or mining returns. Bitcoin, for example, offers no minting. But I take Sentinel’s point - we don’t want to make any suggestion that people won’t get “wildly rich”! So, how about the following:

On the proof of stake side, Peercoin is designed to produce a 1% annual minting reward for coin holders who help secure the network. But why is the reward 1% and not higher? Well, if the minting reward was set at, say, 20%, this would flood the space with new Peercoins, and the high inflation that results would cancel out the reward in real terms. A 1% minting return provides an incentive to mint, and also a small rate of inflation, the reason for which I’ll explain more about in a moment.

We then explain the transaction fees, before leading into the final economic paragraph where we slot Peercoin’s economics into the wider picture.

How does that sound?

35

Yes, I was looking at this as a conclusion paragraph that wraps up why all these things matter (limited inflation).

I think your updated paragraph is better and less off-putting to the groups that I mentioned. If we could find somewhere to include it, I would also like to add in what Peerchemist said above…

36

some protocol changes are being “discussed” on how to make the minting process more rewarding to those who are active and participating.

I agree that this should be referred to, so that in a year’s time, the paragraph will be seen as compatible with the expected change.