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But this presumes that people participating in the same economic network shouldn't benefit from the productivity of the network based on a further presumption that this would prevent investment. We already have numerous examples of investment funds that specifically take into account the hurdle rate of bitcoin when determining whether to invest or not. I dont think either of the previous presumption are axiomatic. In fact, I think devaluing the money to spur investment is exactly the problem. For example, if you impose 2% inflation, all you're doing is modifying down the hurdle rate organically established by the growth of the economic system proportionally. It's exactly the same thing just inorganically modified by an inflationary policy. To me this is just arbitrary.

Hanshan 7mo ago

but its not the same because you allow for economic expansion by lowering the hurdle rate.

If you have an *only deflationary environment (as under a capped money standard) you incentivize hodling. Its just a fact, we already see why.

But sure, the inflation rate is arbitrary. Lacking a trustless way of doing it, an informed but arbitrary rate is selected and the economic network will adjust to that.

But a low and arbitrary inflation rate is better than an arbitrary cap on the number of units.

In an only deflationary environment we probably wouldn't have much monetary deflation at all

but only because we wouldn't have much economic expansion.

A small amount of monetary inflation is a healthier situation.

essentially I'm suspicious of the idea that a fixed number of units somehow magically sets the hurdle rate at the "best" level.

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Discussion

SuiGenerisJohn 7mo ago

It doesn't magically do so, the market does so. Arbitrarily adding inflation just changes the hurdle rate by dilluting all participants. When given the choice between the market determining the economic value of money vs the same thing +plus arbitrarily dilluting those participants, I don't see a strong argument for adding dilution to the analysis.

2Pac 7mo ago

It’s just a different way to pay for proof of work then just paying fees, fees tax the tx, inflation taxes the entire network evenly it’s just a different solution to the problem of how to pay miners.

Hanshan 7mo ago

thats the other network security argument 👍

having subset of users (transactoors) bear the burden of the security budget is also a bad incentive structure.

Hanshan 7mo ago

exactly because it lowers the hurdle rate.

theres no good argument for "we should have the hurdle rate as high as we possibly can"

and the "dilution" isnt really dilution in the context of economic growth. it simply makes it easier to use the money to create economic activity, the overall context is likely still deflationary.

and if growth slows for a while and its .5% inflation, so what?

the hard cap alternative is a situation where the greater the economic growth, the greater the incentive is to simply hodl the money.

which is a really terrible incentive structure.