Peasants: We have found a witch! (A witch! a witch!) -- Burn her burn her!
Woman: I’m not a witch! I’m not a witch!
Vladimir: What makes you think she is a witch?
Peasant 2: Well, she turned me into a newt!
Vladimir: A newt?!
Peasant 2: I got better.
Peasant 3: Burn her anyway! (burn her burn her burn!)
Vladimir: What do you burn apart from witches?
Peasant 3: Wood!
Vladimir: So, why do witches burn?
Peasant 2: Cuz they’re made of... wood?
Vladimir: Gooood.
So, how do we tell if she is made of wood?
Peasant 1: Build a bridge out of her!
from Monty Python’s The Holy Grail
Image source
The valuation of cryptocurrencies is inherently tied to building bridges (i.e. transactions between users -- transactions that leave BOTH parties of the transaction better off -- thus leading to a net increase in the overall well-being of society and the world).
Burning crypto is about as valuable as burning bridges (or witches), imho.
I have yet to hear a really good argument for burning cryptocurrency (except maybe for crypto that is in a closed system -- where it’s only use case is narrowly defined and fully functioning -- maybe BEE fits this description, and BNB? -- In such a closed system, the crypto token is more an investment mechanism for the ‘system’ or ‘platform’ rather than a currency).
I get the argument that burning tokens reduces supply and thus puts upward pressure on price. However, if you take that to its logical extreme, you should burn all the tokens except 1, and that single token will be, in the case of bitcoin, the first trillion-dollar-coin. Except that, who are you going to trade it with?
With an extreme reduction in supply, there will be an extreme reduction in new hands, and thus a concomitant reduction in (future) demand. With a modest reduction in supply, there will be a modest reduction in new hands (and thus maybe upward pressure on price, but the loss of new hands might just offset the upward price pressure, and it could possibly go the other way -- see @urun’s comments about $DOGE at the end of this post ). With a tiny reduction in supply, there will be (imho) zero increase in value -- it’s just not something that gets people’s attention and thus does not move the needle (at all, imho).
Again, look at $DOGE -- it is being mined at an unbelievable rate (14.4 million new $DOGE PER DAY), yet nothing seems to stop its valuation from going up (thanks, Elon!). (As a side note, the fact that $DOGE can be bought as a speculative investment via RobinHood etc. does the long term valuation of $DOGE no favors -- solid valuation will come from people holding actual $DOGE tokens in actual wallets. So, if you are curious about $DOGE, track the number of accounts holding it rather than the current market price).
Also, for you $DOGE lovers out there, check out this 2-minute video comparing U.S. currency to $DOGE.
Quite honestly, I don’t think REDUCTION in supply by burning affects the valuation of a token in a significant way, and for a token that is struggling to find its way into the hands of new users (and doesn’t this include all tokens, to some extent?), a steady increase in supply is a good thing, as long as that supply is finding its way into new hands -- and that probably holds true until the token becomes the world’s de facto currency.
One final thought: rather than burning tokens (especially low-liquidity tokens, like POB), wouldn’t it be better if those tokens were used to fund a liquidity pool instead of disappearing into the ether?
Thanks to @calumam (for this post) and @failingforwards (for this post) and others for inspiring me to finally take a few minutes to explain some of my thoughts on this topic.
And, @edystringz recently put together a good summary of some of the previous conversations related to this topic.
I have more thoughts, but the above will have to suffice for now.
That’s my $0.02, 0.0342 HIVE, 0.0331 LEO, 0.0305 DOGE, 0.0129 HBD, 5.72E-6 ETH, 3.51E-7 BTC.
Great post and it really nice to see some answers rather then questions (which I am most guilty of) and the monty python quote :) I think you have again hit a new topic which is how do we get POB into as many new hands as possible? And hands that hold and use rather sale and convert to HIVE.
I guess burns have some use for better matching supply and demand especially with the high inflation tokens that have limited demand.
The problem with most tokens is that there's limited demand beyond a small community of users. Take Hive for example - roughly 50,000 active users per month according to the latest report from arcange.
r/wallstreetbets has 10m degens alone and the dogefather is worth more than all the doge that's out there.
Yes, I think funding a liquidity pool or an incubator to encourage building on pob would be putting those votes to better use.
I've been saying it for a while, I could burn my entire stake right now and the price wouldn't move one cent. Burning is overrated if it isn't systematic and marketed.
Reducing supply is good, but most of the time we are talking about a drop in a bucket and it is insignificant and just theater.
Thats why the distribution model of Hive and its tokens can be so powerfull. Social media is the easiest way to put a token into a lot of different hands.
100% agree with this. In POB I don't think it will give the result supposedly sought. Besides POB is just a token without any extra associated value at the moment, compared to other tokens in the HIVE ecosystem, other than the reduced amount of tokens to be produced.
And as you well say here
It is exactly what POB needs atm. Reach more users' wallets, as many as possible. And also that last idea that you put on the table can help to this.
To @proofofbrainio - This is a very good option for some of those POB tokens you were talking about a while ago :)
You, by virtue of @calumam, sold me on this anti-burning sentiment. I do support CZ burning their vaults of undistributed BNB as it never made it out of the vault and into circulation.
I never thought of this. It was always taught us in the economics that price increases in two situations one when supply reduces and second when demand increases. We have been only thinking of controlling supply but the example of doge teaches us that increased demand is far more powerful than reduced supply. Thanks for posting this
This is a strong argument.
The only exception I can think of is for NFT's cards like in Splinterlands where an edition once plentiful becomes rarer but is essential for winning gameplay.
Yes, burning specific NFTs would be a strategic move that could enhance future gameplay.
Also, NFTs are meant to be extremely scarce. A given NFT is not meant to be widely held. If it's widely held, then it becomes a fungible token rather than an NFT.
So, yes, burn all the NFTs you want -- that will only make the remaining NFTs more valuable.
Great idea.....Using the tokens to fund the liquidity pool is a great idea and it will help the POB to become more valuable ...@trostparadox
I actually developed a plan for this several weeks ago. However, when I got initial feedback on it, I was informed that it constituted 'banned' activities and should not be pursued (at least not in its then-current form).
As such, I am developing a DHF modification suggestion that would enable folks to fund a liquidity pool (or anything else for that matter), similar to the way tokens are currently being burned, but in a way that does not violate the rules against comment farming and post farming.
Apparently, this is what we have been trying to say about our token (POB) since the beginning of this week. And here you are showing us in plain language that burning new tokens won't be necessary at the moment. And that is because new users will find it difficult to have access to it.
For the dogecoin you mentioned, I hope that users will try to make its valuation worth it, by actually buying, and hodling, instead of rushing off to buy, and resale for profit
I agree that new tokens should be used to fund a liquidity pool instead of disappearing into the ether too
PS: Yesterday, I had rallied around almost everyone who had something to say about burning, or holding our beloved token POB in a single post. Please do check it out when you have the time, for it has all of your thoughts in there too.
https://www.proofofbrain.io/hive-150329/@edystringz/do-you-think-we-all-have-brains-proof-of-brain-to-the-moon
Thank you
I have revised the post to reference your summary.
Oh thank you very much, sir
I feel so honored.
This.
And this.
Inflation (increase in supply) is not the enemy. Network effects are key. A currency is all about network effects.
I also agree on the idea of funding a liquidity pool with the POB tokens that are burned. POB has low liquidity and a very small number of holders. Using those tokens as rewards for Diesel Pool liquidity providers is a good idea. Do Diesel Pools even have a reward system in place, yet?
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I personally see no reason to burn tokens except to increase price. I think most tokens need an actual use case and sinks. For example, the VIBES community is allowing people to pool their VIBES token in VFTLab to earn VFT. Using these VFT, you can buy some NFTs on WAX. These NFTs should have some type of use case in the future based on their road map.
As for the liquidity pool idea, how would it work? Are you thinking of something more similar to the diesel pool but with rewards? Or is it changing the reward structure to reward PoB to those who pool? I think its a great idea but I am unsure how it would work.
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The witches must have felt really honored and highly valued, when they were burned. :)
Yeah. You convinced me. Seeing the success of inflationary coins like Doge and Banano, shows to a certain point, that something may increase in value, even if you distribute it for free. I only joined POB after earning some free tokens!
It does make me worry a bit about the max supply of POB, because it will lose it's usability at some point. But we're talking about something 50+ years in the future.
I won't burn any more POB. I promise. :)
For POB it is necessary that the same is not burnt, it is already a valuable token. Few tokens are making a living for the residents of Venezuela and other underperforming economies. The price is continuously seeing the upward trend as there is no liquidity in the exchanges. Hence any attempt to make the token liquid can attract more investors and speculators to the token. This would be a great effort in the direction to make the token valuable for the stakeholders.
I agree with this and thanks for reiterating that a token with a low supply gains no real benefit from burning, particularly at this early stage. POB will be burnt to promote posts, but other than that I see no real value and the overall value of the tokens will rise as more adoption comes.
I subscribe to your idea re funding a liquidity pool instead of burning tokens. Maybe there are some valuable lessons to learn from Uniswap's liquidity pool that can benefit POB -- I have to leave the tech part to devs but in terms of marketing they have definitely done a fantastic job in terms of awareness, client acquisition and retention.
It is great to see someone who today holds a lot of pobs with the thought of not burning.
I never thought it was logical to burn. Everything that is money, is not lost, is not burned ...
The pob in the hands of many people can pay bills, help their lives in ways that some people in some parts of the world cannot even imagine.
In my own case, I am paying bills that the pandemic brought me last year. So, I would never burn ...
Burning coins is stupid.
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Your post was promoted by @jfang003
This is one of the biggest dilemmas for all investors... After all, our needs always speak louder.
Agree to some level. There are few cases where burning a token makes sense if that's how it was built at the start. Such as with CUB burning CUB it's a way to burn off the never ending increase of it. The more active and used the site is the more CUB gets burned from fee collection thus this is what gives value to CUB.
However in cases like POB or Hive I feel since it wasn't there in the first place it was already accounted for. Instead of burning those tokens they could instead be used as funds to BUILD, DEVELOPE and grow the ecosystem into something more. This building is what would give GREATER value to the token itself instead of just burning it.
You're also right in saying that people would want it in their hands and the more peoples hands it's in the better. A BURN removes that supply from new people. Instead of burning those tokens take 15 minutes find someone new to the platform that's really trying and drop the reward on them instead. 1000% better!
LOVE the Monty Python scene and anology.
I never had a thorough thought in burning tokens and the net effect. Though I always had a feeling it sounds better than it in the end is. Similar thoughts I have on limited and unlimited supply. Now, I know POB is limited supply, like BTC. But what do we see in the market as we speak, around eg Ethereum? No capped supply, but not far of from half the BTC market cap and approaching fast. Maybe it'll even take over BTC. I think this all has to do with the purpose of the coin. Though BTC has services, the Ethereum chain has many more services, espaically in the DeFi space. The latest run on Ethereum must be related to the successful 'Berlin' upgrade, which should make the chain faster, and push the gas-fees lower. I can't think of better proof that the value of a token is determined by how useful it is. The usefulness of a token has nothing to do with sinks like burning, or even capping the supply. That said, the runup of POB may have everything to do with the limited supply, but that is just a feeling I have :)
I tend to agree with this. With our token I don't think we will burn much, if any.
I LOVE MONTY PYTHON. What else floats in water? SMALL ROCKS!!!! lol. Did you notice there are a few odd scenes in Monty Pythons The Holy Grail where they are just beating a cat against a house for no reason? Another one where a guy is just hitting water in a stream with a stick. Lots of good hidden funny things pop out the more and more I watched it haha.
Thanks for the follow by the way.
If you were ever interested in joining our curation trail that upvotes #informationwar and #deepdives content you can find us over on hive.vote under the informationwar curation trail. We vote manually on posts and we vote a lot so you can be sure your voting power is being used daily. Just thought I would mention it :)
Hi, @trostparadox. I kickstarted Brain Power Up Day two days ago, which is already finished, but I am also hosting next month's. I know you stake most of your tokens, but would you consider contributing to next month's prize pool? This time, I was funding it myself with 30 POB + 50% author rewards for the post, but I plan using 30 POB + 100% of author rewards from the post. Whatever sum you can contribute will also be distributed among all participants. Yes, I'm going with equal distribution instead of picking 10 winners next time.
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