Original Model (I think)


#1

Just wanted to put it out there as to how I believed the original model from years ago worked where the price of a rad = $1. No range (pmin or pmax), but simply 1XRD=$1. Granted, this is a simplistic overview, but I think it’s conceptually how it would work.

At the start only the genesis wallets have supply
User XRD balance %of total supply


A 10000 20%
B 15000 30%
C 25000 50%
Total: 50k

New external demand comes in for 10k (at the same fixed $1 price) on the DEX

The 3 genesis holders don’t sell as they each want appreciation/inflation. (or for whatever reason)

Economics kicks in to gear every minute to increase supply when there is no actual seller on the DEX

After a while the balance holders accounts look like:

User XRD balance %of total supply


A 20000 20%
B 30000 30%
C 50000 50%
Total: 100k (double the original supply, but their %s are the same)

User C decides “Ok, that’s enough” and decides to sell 10k of his holdings on the DEX

Now we have:
User XRD balance %of total supply


A 20000 20%
B 30000 30%
C 40000 40%
D 10000 10%
Total: 100k

Wash/rinse/repeat forever.

So what happens if there is no additional demand and someone wants to sell their XRD?

Answer:
Nothing. They can’t sell them and they are stuck with their tokens just like the world works today with useless fiat paper that is worth nothing if no one wants it.

Rational behavior options for existing members:

  1. Sell to others before inflation outstrips demand (global chicken game) and so they don’t wind up with worthless tokens
  2. Encourage others to join economy (yeah, that’s a quasi-ponzi)
  3. Build and continue to build utility on top of the network to increase demand for the token

Option 3 is the primary one that drives a “real” economy forward over the speculative Option 1 scenario, but option 1 is probably the one that will happen the most initially as the battle rages between those that just want to trade vs. those that expect new utility to increase overall demand.


#2

That’s how I was seeing also the economic model to be honest, once you’re in, if nobody wants to buy from you, then you’re stuck there. And I don’t see any problem with that. Same thing in the real world as well with fiat. I don’t see Venezuelans cashing out from their current Fiat currency. Less drama in my opinion and pretty simple.
And this would be also an anti whales system because they can’t game the system unless they have good intentions to contribute to the system.


#3

This must be quite an old model. During the last two years we’ve always heard “not pegged to fiat” and “holders’ share will get diluted”.


#4

Yep, that’s basically the old model afaik. And then it was discussed how we can somehow dampen the falling of the price if demand vanishes. Like burning fees and such and we all knew that this wouldn’t be enough.

So I guess the new model came out of this problem.


#5

Do we have details about why this model was discarded?
Some more developed information please?
Maybe it would be easier to rethink this rather than rebuilt everything?
thanks


#6

As far as I was able to understand from Dan:
The issue with the previous model is that it isn’t really stable. It provides increasing market pressure to attempt and stabilize the price. But since it increases supply only by redistribution - it relies on holders selling quickly; and since it decreases supply only by burning fees - it requires the fees to be substantial for that to have any effect.

Bottom line is, the previous model is asymptotically stable. Meaning that when the market will be large and there is enough money flowing around, the price won’t move very fast and this approach will be capable of preventing it from swinging too high. But, in a small market (Stage 2 of the current economic model) it will take a long time to have any real effect and it will lead to huge price swings (up and down).


#7

So the issue is mostly on the burning needs on low volumes markets.
Stop of interests redistribution, increase of fees to burn supply = death of the DEX because no more incentives to use it. Thanks for the highlights Tesslerc.

But I dont see how this issue is specific to this system. IMO it is associated with any system with interests and earnings distribution, the last model proposed by Piers had this inherent problematic too.


#8

It’s an issue with any currency. If you want it to be stable, then you need a huge economy.
Or you can bootstrap onto a huge economy (like they are trying to do with Pmin,Pmax and XRI).