Help me to clarify if I understand this correctly:
The transaction fees on the Peercoin network is fixed at 1%, and the fee doesn’t go to miner’s income, but it is rather destroyed. So the more transaction volume = deflation of the currency because 1% of the volume is being taken out of the money supply. Is this correct?
The transaction fee is fixed 0.01 PPC for every transaction, and destroyed.
So basically, as the PPC network grows and the transaction volume increases, the more deflationary the currency will become. Increased level of economic activity (i.e. transaction volume) works to deflate the currency at an increasing rate. So basically PPC becomes more deflationary the more people use it.
Is this correct?
[quote=“coolbeans94, post:3, topic:355”]So basically, as the PPC network grows and the transaction volume increases, the more deflationary the currency will become. Increased level of economic activity (i.e. transaction volume) works to deflate the currency at an increasing rate. So basically PPC becomes more deflationary the more people use it.
Is this correct?[/quote]
Yes, the fees have a deflationary effect.
This is one reason, why with proof-of-stake blocks there is a gain in coins of max. 1% every year, as irritant explaint. This compensates the fees and makes the coin slightly inflationary.
The PoS blocks also substitutes lost coins, which should lead to fairly stabil prices I hope.
If I understand it correctly, the transaction fee is set by an algorithm and currently equals to 0.01 but it might go up or down.
Where can we find more detail about this? It is pretty important, as it has far reaching economic implications if it is adjustable via an algorithm. We need to know what to expect as far as how the system controls the deflationary aspect.
This can be changed only with a hard fork. A problem in my opinion if PPC becomes heavily adopted, and the price is rising.
My wish is that the fee should be adapted automatically, perhaps to the PoS difficulty:
fee; PoS difficulty
0.01; 0 - <10
0.001; 10 - <100
0.0001; 100 - <1000
and so on
This can be changed only with a hard fork. A problem in my opinion if PPC becomes heavily adopted, and the price is rising.
My wish is that the fee should be adapted automatically, perhaps to the PoS difficulty:
fee; PoS difficulty
0.01; 0 - <10
0.001; 10 - <100
0.0001; 100 - <1000
and so on[/quote]
How do you think it will be a problem? Actually, I believe that this is not a problem at all, but one of Peercoin’s greatest attributes. It is a good thing it cannot be changed, because it is what keeps the currency from being debased. It offsets and counteracts all the effects of inflation. It is what sets Peercoin apart from the competition and gives it its store of value. This should never be changed. This is what gives peercoin its stability.
In my opinion wide adoption is desirable. If PPC becomes successful and expensive, the fee could be too high.
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I agree wide adoption is desirable.
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I believe PPC is already successful, and currently very inexpensive; currently the cost for a transaction fee is about $0.0019 USD.
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This is where I tend to differ. The transaction fee is relative to market demand is one of the fundamental things that gives the currency it’s value. The market will determine on its own if it thinks the fee is too high and adjust itself over time. It will never get “too high” because it is determined by free-market forces. Some people may think it is “too high” and others may think it is “too low”. Over the long term, the market will discover and determine the real price of the fee. The thing is, if the fee is higher, then the value of the currency is also higher. What you or I think doesn’t really matter, what matters is what the market thinks is worth it. Overall this generates value stability for the currency over the long-term.
Also, to get around a fee it it is too high for some people, I am sure the financial services industry will become developed for processing “off-block-chain transactions” to enable cheaper fees. It could even become an integration between Using Bitcoin for everyday use (micro-transactions), and Peercoin for large savings as it will be more secure long-term than bitcoin will be due to PoS. For large savers, Peercoin is a perfect place to park their money. Another way to achieve lower fees could be to have opportunities for the financial industry such as a financial institutions (possibly like a bank or credit union) that could hold coins for people and facilitate transfers between people at lower fees (micro-transactions for example).
Then everyone is happy…those who want lower fees can get them; and those who want to can pay the Peercoin fee if they want to hold and save their coins long-term to generate new coins over the years with PoS. What may happen is that bigger transactions will done purely with Peercoin, while your smaller day-to-day transactions would be carried out via 3rd party services with near zero fees, as the 3rd-party financial services would probably be able to work it out someway so that they could receive PoS minting for the “pooling” of depositors’ funds. So people get zero fees offered to them in exchange for the banks getting to collect the interest from PoS minting their pooled funds.
In the long-term, I tend to think that because of this reason above, Peercoin will become the dominant Cryptocurrency out there as BIG MONEY individuals, banks, and financial institutions will want to get on board in this technological revolution. Bitcoin will probably seem too insecure due to 51% attack vulnerability, and Moores Law, etc. and Peercoin will be the perfect fit. They may even convert their fiat currencies over to be certificates redeemable for Peercoin. Peercoin will become like the physical-gold standard once was in the world. Yet Peercoin is environmentally friendly on our environment. If people try to go back to the gold standard or silver, the greed could cause people to rip our beloved planet apart and we could destroy ourselves. Peercoin seems like the perfect fit and solution to everyone’s financial problems, in my opinion. The government/banks out there can have their “taxes/interest” so to speak by generating from PoS minting.
So basically, the cost of the transaction fee could go up to 10,000 USD and still be fine. If that happens, we are looking at the value of 1 PPC being 1,000,000 USD which is not unreasonable, (long-term). Bitcoin is pocket change (long-term only good for micro-transactions, as 51% attack risk becomes too strong, big money will look elsewhere for long-term safe haven) compared to the potential Peercoin has to offer (short-term good for micro-transactions, and long-term good for big-money-transactions).
It seems to me you are a quite radical neoliberalist. I must stop here with discussion.
A free and fair market works only with a reasonable regulation. Crypto-Currencies try to substitute the government regulation with a suitable set of rules, that every person must rely on. This would not be necessary if the government itself would play fair. I will leave this field, if cryptos should only make the rich more rich, and the poor more poor.
It seems to me you are a quite radical neoliberalist. I must stop here with discussion.
A free and fair market works only with a reasonable regulation. Crypto-Currencies try to substitute the government regulation with a suitable set of rules, that every person must rely on. This would not be necessary if the government itself would play fair. I will leave this field, if cryptos should only make the rich more rich, and the poor more poor.[/quote]
Please don’t misunderstand me, I’m not neoliberal. I am just playing out a possible hypothetical, that may or may not happen.
I’m with you, if people/investors are smart they won’t do pools and such as I said in the above post. The transaction fee is the “control”, it is the controller for the currency and the regulator. So it should eliminate many government roles currently in place.
Basically my point is that I don’t think it is a problem to have an “expensive” transaction fee over the long-term. As the market develops it will keep the balance and will eventually go down too if found it it goes too high.
If the transaction fee is immaterial to the value of the currency. The transaction fee does not determine the value of 1 PPC, the value is determined by the market, and the market can change, and evolve. Essentially Peercoin has the potential to operate similar to the bond market.
If the transaction fee is 10,000 then this is where we will be. Since the currency is inherently deflationary, the transaction fee is basically the stabilizer for the market. What you end up with is essentially a deflationary bond, plus with a guaranteed return after 1 year. This would be bigger than anything if Peercoin replaced the bond market. Peercoin is similar to bonds.
Think about it… 1 PPC is basically like a 1 year maturity treasury bill. The only difference is that on top of the 1% inflation per year, it will also increases in value due to deflation. It is very similar to a 1 year maturity on a treasury bill. The transaction fee on the PPC is recouped after 1 year of PoS minting and on top of it all, you get the added value of deflation. This essentially puts Peercoin in competition with the market for government securities like U.S. Treasuries.
There are many people who are looking for a safe haven to park their money.
Some use gold (deflationary), it has risks. Some use bonds (inflationary, but has interest), it has it’s risks too. Some use Bitcoin (deflationary + doesn’t rely on government).
Then there is Peercoin, (deflationary + interest rate + doesn’t rely on government).
I do not get your point here. For me cryptos are more similar to precious metals, not to bonds.
The best fee is 0. The only important reason for having a small fee, that I know at this time, is to prevent spam.
I do not get your point here. For me cryptos are more similar to precious metals, not to bonds.
The best fee is 0. The only important reason for having a small fee, that I know at this time, is to prevent spam.[/quote]
I am not suggesting all cryptos are similar to bonds, mainly just PPC has potential. I am saying it has the combined benefits that precious metals have as well as the benefits that bonds have - it’s a super safe-haven for long-term value holding. There are trillions in precious metals, and there are trillions in bonds. It could be that trillions could come into Peercoin.
I see the transaction fee as useful. It prevents ponzi-scheme-like activity from occurring.
It fulfills two purposes.
- It deflates the currency whenever there is a transaction, (causing the value to go up).
- It stabilizes the currency too. As PPC’s value goes up, so does the cost of the transaction fee. Since it costs more to do a transaction, the volume of transactions will go down. (causes the value of PPC not to go up too high. It keeps the system in balance)
You have 2 factors: Price and Volume.
As value goes up for PPC, it would naturally cause higher transaction volume. This would deflate the currency even more, causing the value to go up again, and you would get an endless cycle.)
But as PPC value goes up, the fixed transaction price goes up along with it, making it more expensive and less affordable for “some”, but not “all”. (since the affordability goes down for those wanting to get PPC, the stabilizing result is that transaction volume goes down.)
This is what will keep the value in balance to true market demand, and prevent the value from being becoming disconnected with real value. It keeps the value true, and stable.
It would work to keep a balanced level of transaction volume, so a balance level of deflation. The transaction volume would not be able to go up indefinitely, as the cost would limit it. When the price becomes more affordable again, the volume goes up, and it deflates the currency appropriately…a perfectly balance system IMO. That’s not to say that one day eventually PPC may be too expensive for “some” people. It is sort of like Berkshire stock being worth 170,155 USD and not ever splitting it…it creates market stability.
The 1% interest for PoS is similar to bonds. You can give back bonds, but not coins.
cryptos can be compared with gold, but on the other side have many different attributes. Cryptos can be devided into tiny fractions, gold can’t. Cryptos can be encrypted and distributed, gold can’t
This comparison is nice to get an overview, but cryptos are a complete new asset indeed.
I cannot agree. All assets are good for ponzi-schemes, I can’t see a dependency to fees.
[quote=“coolbeans94, post:14, topic:355”]It fulfills two purposes.
- It deflates the currency whenever there is a transaction, (causing the value to go up).
- It stabilizes the currency too. As PPC’s value goes up, so does the cost of the transaction fee. Since it costs more to do a transaction, the volume of transactions will go down. (causes the value of PPC not to go up too high. It keeps the system in balance)[/quote]
- Yes
- Perhaps. If I’m unsure I tend to evaluate the asymptotic behavior. With the first extreme of no fee I cannot see a destabilization. With another extreme with fee is 10% of the money transfer I would expect large destabilization.
[quote=“coolbeans94, post:14, topic:355”]You have 2 factors: Price and Volume.
As value goes up for PPC, it would naturally cause higher transaction volume.[/quote]
I believe you compare with USD. This is dangerous, for someone can loose the view of the real (unknown) value of an asset. The transaction on exchanges will rise or drop, the transaction volume of goods will drop, all measured in PPC, not USD. It’s better to test your view with respect to Bitcoin or precios metal, instead of fiat money.
[quote=“coolbeans94, post:14, topic:355”]You have 2 factors: Price and Volume.
As value goes up for PPC, it would naturally cause higher transaction volume. This would deflate the currency even more, causing the value to go up again, and you would get an endless cycle.)[/quote]
There are two basic strategies in investing, trend and contrarian. You are speaking about the trend strategy, but I’m a contrarian, and there are many more. I will sell on a rising price, not all of my assets, but parts of my gain.
Here you are speaking of transaction of goods, because of the fees. If a billionaire drives up the price, a person that uses the coins for buying a pizza has to pay a fee of 10,000 USD for it. I really don’t get your point.
[quote=“coolbeans94, post:14, topic:355”]This is what will keep the value in balance to true market demand, and prevent the value from being becoming disconnected with real value. It keeps the value true, and stable.
It would work to keep a balanced level of transaction volume, so a balance level of deflation. The transaction volume would not be able to go up indefinitely, as the cost would limit it. When the price becomes more affordable again, the volume goes up, and it deflates the currency appropriately…a perfectly balance system IMO. That’s not to say that one day eventually PPC may be too expensive for “some” people. It is sort of like Berkshire stock being worth 170,155 USD and not ever splitting it…it creates market stability.[/quote]
A high transaction volume is good for any coin, especially if buying goods. So if the coin is massively used, the price will rise, and the fees have to drop.
A high transaction volume is good for any coin
Yes, BUT not indefinitely:
If you look at the Bitcoin network for instance, if it continues to grow like it is, it will soon run into a serious problem because the network has a limit of only being able to handle 80 transactions per second, or 6.9 million transactions per day. For comparison, Paypal did about 2 million transactions per day in 2008. So Bitcoin is unviable for long-term sustainability due to this problem. The transaction fee of PPC solves this problem quasi-automatically.
Even worse:
Another problem with Bitcoin is the block size also limits and caps the transaction rate. The block size limit caps bitcoin at only 463 transactions/minute, or ~7 transactions per second.
I don’t see how Bitcoin is a long term viable [micro]currency, if technical limitations keep bitcoin below 500 transactions/minute.
If Bitcoin is not viable as a micro-currency, then Bitcoin could fall apart rather quickly, and only be safe for holding small amounts of money. It will not longer be a good/safe place for holding your millions. The usefulness of the coin would be diminished, thus diminishing it’s value, thus causing miners not to mine it as much, thus increasing the potential for 51% attack on its network, thus destroying Bitcoin completely etc. Thus, big-money will need to look to find a long-term safe-haven place to park their money, thus, Peercoin’s is the perfect fit for this situation (long-term, big-money investors).
The transaction fee (is basically the cost to get in and keep your money safe long-term) and is recouped after parking your money for 1 year in PoS minting.
This is the main difference, and main value I see between PPC and BTC. It may take some time before people understand this though. PPC and BTC will serve different purposes in the long run, and I believe Peercoin’s value will exceed Bitcoin’s value (eventually).
This is why the fixed transaction fee is a good thing for the long-run, (even if too expensive for micro transactions) it can still serve to be a good thing for improving network security and keeping larger sums of money safe.
The massive scalability of transactions is one of the unsolved problems of all cryptos yet. Discussion on how to make the blocksize adaptive have already started. A higher fee is not a solution. Keep in mind that many people here on earth have an income of only 1 or 2 Dollars a day, and this is not through “free market”.