Basic Economics of Monero
alex
Created: 2023-11-12 Sun 10:57
Table of Contents
Introduction
Crypto Vocabulary
Let’s put on the economist hats
- Austrian Economics (Ludwig v. Mises, Murray Rothbard, etc…)
- Apriori economics
Hard Money
What is hard money?
- A money commodity that cannot be produced at will
- Gold was a hard money
- Fiat (Euro, Dollar, Yen, etc) is not hard money
Why is hard money so desirable?
- hard money incentives long term planning
- necessary for saving
Bitcoin is hard money, too
- 1 main reason for bitcoin: absolute scarcity
- hard cap to 21 million bitcoin
- final bitcoin will be mined ~2140
21 Million Bitcoin Meme
Bitcoin Emission Curve
Monero & Bitcoin
What is “Monero”?
- Monero means “coin” in Esperanto
- Monero is an open-source project that implements a (originally cryptonote) cryptocurrency
- It allows anybody to transact value with anybody else in the world without anybody knowing about it
Similarities between Bitcoin & Monero
- Anonymous Founder
- Bitcoin: Satoshi Nakamoto
- Monero: Nicolas van Saberhagen &
thankful_for_today
- Consenusmodel: Proof of Work
- Codebase is open-source
- No company, no foundation
- Strive to be p2p electronic cash
- Money supply managed by code
Differences between Bitcoin & Monero
| Bitcoin | Monero | |
|---|---|---|
| Protocol | Bitcoin whitepaper | Cryptonote-based |
| Transactions | transparent | obfuscated |
| Blocktime | 10 minutes | 2 minutes |
| Blockspace | limited | dynamic |
| Coinsupply | hard-cap | soft-cap (tailemission) |
Basic economics of monero
Soft-cap? Tailemission?
- Tailemission: Monero’s money supply increases by 0.3 XMR every minute (0.6 XMR/block)
- Requirement for dynamic blocks & the fee model
- In order to grow a block, the miner has to provably burn XMR (penalty)
- Higher fees (more urgent transactions) subsidize the miner for growing the block
- The tailemission also makes up for lost coins
What? Monero’s supply is infinite?!
What? Monero’s supply is infinite?!
- Tailemission: Increase the Monero money supply forever
- however, it is a static emission (0.3XMR/min)
- over time, with increasing supply, inflation rate trends towards 0
Soft-cap
Graph
Summary
Take-aways
- Bitcoin has a hard-capped money supply
- Monero has a soft-capped money supply
- Despite the tailemission, Monero’s money supply is de-facto limited
Murray N. Rothbard
“We come to the startling truth that it doesn’t matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of the gold-unit. There is no need to tamper with the market in order to alter the money supply that it determines.”
Further Resources
