On Supply Caps

I’m not sure if this belongs in this category. It does touch on potential development ideas on Tezos, but it’s more of a general economics / philosophy piece on supply caps.

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We just added a #philosophy category with the following description:

Discussion about the philosophy and economics of Tezos as a network and cryptocurrency.

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There is good news though, the hard, programmatic, rules do matter a great deal! Our point is merely that they only matter insofar as they affect the social consensus. Changes in the rules governing the supply of a cryptocurrency must necessarily happen at the code/protocol level before if they are to happen at all. Thus, the social dynamic of how those rule-changes are perceived matters greatly to the enforceability of a supply cap.

Hasu also discusses this on his social contract of Bitcoin piece, where blockchains are simply the combination of both the social and programmed order. One doesn’t exist without the other and they each enforce each other.

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Our received metaphors of money and value cannot be overturned (and even ideally, we wouldn’t want to). But it is still helpful to see what the economic equivalencies are so we can work with them.

The creation of new tokens is equivalent to a maintenance tax on all tokens. The idea of a supply cap is, as understood by most people, a trick.

It’s important that everyone figure this out and understand it, but it is especially important that this feature of how cryptocurrencies are paid for is figured out due to its tax implications.

See Section VI in this…

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3466796

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