Are the XMR people right about tail emissions? How do you prevent a deflationary spiral on a Bitcoin standard?
Discussion
Why would you want to prevent deflation?
I’ve always thought deflation was a good thing, but I was talking to the AI and it brought up deflationary spirals.
Basically people are less likely to spend as prices fall over time. So low demand -> low profit -> layoffs -> less discretionary income-> low demand -> repeat
So maybe like a 1.5% inflation rate like Monero would be good. It would also keep transaction fees low as mining becomes less profitable.
The AI is repeating the academic consensus that is used to justify fiat currency and a debt/consumption based economy. People will always buy things they need. In a deflationary environment people are more likely use their money for savings than excess luxury consumption. This isn't a bad thing.
Monero inflation is lower than bitcoins and will remain lower for quite a while. It is also continuously decreasing and trending to zero.
Isn’t Monero inflation a percentage of the total supply and not a constant amount?
Bitcoin inflation will be negligible in a couple more halvings. Right now it’s about where Keynesians want fiat inflation
Monero inflation is not a fixed percentage. It's disinflationary tending against 0 over time.
Supply is currently smaller than Bitcoin even more so since its delisted from CEX which means no more fractional reserve shenanigans.
Inflation is currently the same as Bitcoin and about half of gold at around 0.8% per year.
There's a trade off between Bitcoin and Monero auditability.
There's also the privacy/ fungibility trade off.
There's an ASIC vs CPU decentralisation trade off.
There's tail emission (disinflation) to make sure there is enough security budget and not a wildly fluctuating fee market when subsidies become negligible.
There's also a trade off when it comes to quantum computers resistance where Monero has lesser work to do.
If you trust well understood mathematic assumptions and can live with disinflation at a rate half of gold inflation Monero is for you. Especially if you need a private store of wealth. If you are demanded to transact in public want to be absolutely sure (outside of custodian fractional reserves) that supply has not been tampered with and you need a deflationary asset (after losses) then Bitcoin is for you.
Most OGs from 2009-2012 own both and balance according to their needs.
Monero inflation is a constant amount (0.6 xmr every ~2 minutes)
So in relation to the total supply the % inflation is constantly falling closer and closer to zero (but never reaching it)
Oh so it would have the same deflation problems as bitcoin. With non linear population growth, linear inflation is practically equivalent to no inflation
You could make that argument. I've heard some argue that it should be a small % of inflation instead of a fixed amount.
But still, a fixed amount > 0 as far as block rewards go. We'll discover how it works out in practice.
It’s an important concern. The answer has to be sustained blockspace demand if this will all work long term.
block space is very scarce, transaction fees should become substantial over the next few decades
but i will also readily admit i was wrong already on this topic and mempools are empty as fuck
Why is block space considered scarce, when it’s actually infinite?
Scarce like time
its clearly not infinite, it is capped, intentionally
But there is always more of it every 10 minutes. It’s like a hotel that adds a floor every 10 minutes, forever.
It’s a unique type of scarcity that is conditional. It’s more psychological than actual.
Obviously, I’m being philosophical here. I understand your point. But it’s just fascinating how we humans value things.
Not quite — it’s more like a hotel that keeps getting more popular. Every so often, it adds a new floor, but no one’s allowed to stay on the old floors anymore. All the guests have to cram into the newest floor — it’s strictly penthouse living, 10 minutes at a time.
I think we all underestimated how much lightning and ETFs would lead to empty blocks.
Tail emission is basically fine if implemented from the start, but I don't see how it can be introduced to bitcoin post genesis.
It's nice to be able to consider these things.
Deflationary spiral is not a thing. The thing Keynesian called a deflationary speak is actually a default spiral. Things getting cheaper at the rate of real growth is not a problem.
XMR trail emissions are meant to fix the miner death spiral. Which very well may be a real thing but we just don't know.