[Economic Model Suggestion] Fiat engine and XRD gas


#21

@rotane for example Bob from US wants to send 5$ to Tom in Germany. If he wants to do that on Radix with existing econ model (at least i think so) he has to go to AM exchange 5$ to xrd (5usd>5usdt>5(?)xrd) and send them via Radix platform to Toms wallet.
In your proposition Bob will change 5$ to 5usdt and send them directly to Toms wallet. Question is can Radix algorithm track wallet balances without native currency? That is question for Dan. If it can not then your model simply will not work technically. That what settlement banks do, they work as a balance tracker/consensus maker


#22

If fees will go to high people will turn to Paypal, Revolut etc


#23

The DEX will enable trading of any two tokens in the network. As it is intended to enable such trading it must be able to cope with USD token transfers.


#24

DEX will enable trading of tokens but how that trading will work from technical stand point? As far as i now you need to use xrd in any of your transactions. For example if you want to exchange USDt to EURt it works like this USDt>xrd>EURt. Radix algorithm works as settlement bank. But like i have said we need someone to confirm or contradict this


#25

Ok, understood on the concept. This pushes everyone but speculators from holding the token. Your velocity in the system will skyrocket; Nodes will likely sell as soon as they get the XRD to make sure they can cover costs, the price on the DEX will be incredibly volatile, further pushing down holdings, and it will most likely tend towards the price of working capital for the network.

This is an instructive piece on this potential issue: Doubts about the Long-Term Viability of Utility Cryptoassets


#26

Full paper here: https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor's+Take+on+Cryptoassets+v6.pdf


#27

So people don’t hold BTC or stocks because they are volatile?
There is no reason for XRD to be another unit of payment unless you believe in the anarchist point of view, and then XRD backed by Fiat is also a problem.
Use Fiat for payments use XRD similarly to stocks which represent the value of Radix.


#28

@tesslerc, I disagree that only anarchists want another unit of payment. I see great value in having a stable currency that can be used worldwide. Think of countries where there is hyperinflation, for example. Radix could potentially allow those countries to transition to a stable currency.

I like the idea of how transaction fees could be lower for certain regions, but I don’t see how that is practical. If I pay 0.01 Yuan as my fee, the node runner still has to do the same amount of work as for a fee of 0.01 USD. You can’t just translate 0.01 Yuan to be the same amount of XRD as 0.01 USD, or you’re devaluing the XRD. In the long term, I expect that transaction fees could go down as we find the real cost of running a node.


#29
  1. You can use USD tokens world wide. They are backed by the whole US economy. That is very stable. It isn’t “kinda” stable like XRD which can vary +/-20%. I don’t see why a business would prefer some new unknown currency over the USD…
  2. Today you can buy an iPhone in the UK for 900 pounds, in Germany for 900 EUR and in the states for 900 USD. Different prices for different countries yet producing the product costs exactly the same.

#30

@tesslerc your example is correct. I thought about pMin again and I find, that it does not make sense to buy gas at any other price than the current market price.


#31

Hi @piers I don’t disagree with John Pfeffer. But I think his arguments do not apply to my suggested model.
"High velocity will mean that the network value of a cryptoasset (as measured in some external measure of value) will be low compared to the economic activity denominated in that cryptoasset (measured in the same external value measure). This circumstance means that it will not be possible to secure the blockchain in question without reliance on transaction and/or other kinds of usage fees paid in non-native currencies (could be fiat or a dominant non-sovereign monetary SoV cryptoasset)."

If I get him right he basically says: High velocity of the utility token creates a mismatch of network value and economic activity and the token will therefore fail to facilitate securing the blockchain. Correct me if I am wrong. But on Tempo the transaction fee primarily helps discouraging spamers and is in no way correlated to the security of the network, since Radix runs even on simple consumer hardware. Dan stated multiple times that there will be no expensive ASICS-race between nodes.

To be clear: I assume businesses will use AM fiat tokens for their accounting and speculators and network supporters will hold XRD. Bitcoin has become big because of lambo stories, and I think we need to get this part of the crypto community on board as well as Joe the Plumber. You need to please both communities with their very different requirements/expectations. Fiat for stability and XRD for volatility. “One hand don’t clap”.

Melonport has implemented a buy-and-burn engine (see link in section “Credits”) that works similarly and will go live with v1 by start of March 2019. We can then observe the impact on MLN token price Kraken - Market Data.


#32

Volatility of XRD will not influence the fee. Please read the example of Bob. Fee is 0.01USDT (which gets converted into XRD). No matter what the price of XRD, the transaction still costs 0.01USDT.


#33

And what if that stable currency was USDT instead of XRD?

The idea of having different fees for different tokens is an add-on and needs more analysis. I admit, that I do not know what the real cost of running a node will be. But I assume it will come down to cost of electricity, which tends to be very different in different countries. China is known for its extremely low electricity costs, that is the reason why the biggest mining farms are located in China. Hence, lower fees for Yuan could make sense, since most Yuan transactions will happen in China. Does that make sense?


#34

By the way, following the AMA yesterday.
It is also possible to have XRI as the major currency instead of FIAT tokens. This way sometime down the road we will have a fully stable currency against a bag of commodities, assets, etc…
The rest is similar to this proposal, e.g., XRD is the payment method for node runners and it is a way to speculate on the value of the system (similar to stocks). You can also have fees go partially to bag holders in a sort of “dividends” model.