Voting on interest rate

I just wondered what you guys think about voting on inflation. BTSX and NuShares allow to manipulate money supply by the users, but parking or burning is not necessary to do so in my opinion. I think there is some innovation that Reddcoin can provide once we get to ReddID that would make Reddcoin stand out even more from other currencies and pass over more power to the users.

Inflation like with Reddcoin is not a problem, in fact, sometimes it is needed e.g. to make people spend their money. Traditionally, this has been done by a central bank and the money owner had no means to act against those decisions (but maybe voting for a party that they would expect to change money policy of a central bank - depending on the country but also in general, this is no real democratic strategy). By allowing to vote for an inflation rate from within the client this eventually allows the users and owners of the money to decide upon inflation. There may be times in which lowering inflation would make sense. Users will understand that and get into discussion about what would be the right money policy.

Of course, manipulation the inflation rate will raise doubts due to the intransparency of the process no matter to which cryptocurrency it would be applied. With Redd-ID implemented Reddcoin would have a relative advantage if manipulating the inflation is tied to owning a Redd-ID so the full process is visibly connected to identities within the network.

While this is certainly highly complex in the implementation it seems to me one crucial step to turn (any) cryptocurrency into real money, because once a currency scales up, money policy will become more relevant.

Hoping for an interesting discussion!

Although this probably isn’t the best topic for me to discuss in a foreign language due to the complexity, but in easy words:

Why would people vote for low inflation? I think there is a reason, why in the real world Inflation isn’t regulated by the people. nobody who has RDD would vote for a high oder really low inflation who knows a little about the whole financial stuff.

I’m in no means an expert in all this stuff, but if people would vote for inflation, we probably wouldn’t be on the edge to deflation in Europe at the moment although there is far too few money in circulation.

Would u mind to eloborate why a voted inflation would be an added value to RDD? :slight_smile: In my oppinion, people who would be allowed to vote for inflation would never vote for low inflation, because people want to get interest on their savings and it would be always in a 2-5% range imo.

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EchseKuhTor

Sure, I can elaborate, even though I believe you already gave the answer to yourself. Your argument here is that people want to get interest on their savings, right. I think you can´t compare people in national economics with cryptocurrencies. In cc peoples are shareholders, so you could well ask why people are not asking huge dividends from the enterprises - they don´t. Why? Because they don´t want to ruin the enterprise they invested in. Of course, what´s low and what´s high is relative. Imagine someone would grant you 500%/day return on your savings - who wouldn´t like to have 500% for just leaving your money where it is just one day, right? But the owner of a currency may rather get worried about the instability of the market. The interest in larger % only works as long as not everyone gets it. You´re rising your capital because you´re rising your capital relatively. In an economy rising inflation will affect everyone and therefor drive prices, so in the end you will end up with no relative advantage. This is just to show that there is no reason why people would be generally in favour of higher inflation.
I agree with you that mostly the range will remain the same and somewhere between 2-5%. But this is under “normal” circumstances. There may be a time where people have a strong interest in create more scarcity. Money will not work the same all the time, there is no “good” inflation, same as there is no “bad”. Money is a medium and inflation is a tool that can be really useful to react to whatever happens in the world. If whales would be that ignorant to over/hyperinflate their currency, they will essentially destroy the currency. They won´t do it. The more you are in, the more you will consider your actions to keep the currency stable.

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artiscience People believe deflation because the inflation is extremely too much.

I think the interest rate is okay. The model is already in compound interest mode if you are active.

Assume you have a thousand RDD on hand. Put in for a year, assuming you minted successfully once a month, 1000*(1+0.05)^12

However the story changes if you have 1% of the total, the triggering may be faster, more triggering, the higher usually it is.

I think bigreddmachine clarified an important point the other day when he said that the purpose of staking was not to earn interest but to secure the network. This point should not be forgotten when discussing the rate of money supply with POS cryptocurrency.

Another point is that obviously, the cryptocurrency “economy” is nothing like the “real-world” economy. We are too small, insignificant and experimental to be able to make much useful comparison at the moment. There is not enough data.

Which brings me on to my last point which is that, in my view with such a lack of historical economic data and metrics, setting the interest rate on a POS coin is quite an arbitrary process. Cryptocurrency is an experiment and being such an unusual hitherto-unseen mix of money/software/end-product/share/dividend or whatever, there is a fair bit of trial and error involved.

That said, why not aim for a figure that makes sense to people based on their experience with bank accounts, investments, etc. - something healthy but still safe and realistic. Once that is in place I think it would be best to leave it until there is enough data for the devs to be able to make a proposal to the community if it looks like changing the rate may benefit the economy. Oh, and having a dev who is also a mathematician is probably a good idea too. :wink:

In my view asking the community to vote on the interest rate simply to give “power” to users is just going to add more randomness to an already highly experimental situation! That is not to say that there should not be discussion - it is an interesting subject.

In principle I can imagine a situation where a cryptocurrency project might propose a higher level of interest to compliment some kind of realistic plan to stimulate fast adoption. But again this is all just test scenarios and experiments - there is not enough history and information available to make a thorough case, in my opinion.

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I’m against the idea for a number of reasons:

  1. Reddcoin is trying to make things simple for end users. Voting on interest rates complicates the experience.

  2. Most people will vote for what benefits them most, regardless of it’s effect on Reddcoin’s economy.

  3. A few percentage points in either direction is unlikely to affect most users.