Welcome to the Dash Forum!

Please sign up to discuss the most innovative cryptocurrency!

What is the fair value of a currency?

Discussion in 'Economy' started by pablomp, Jun 28, 2017.

  1. pablomp

    pablomp New Member

    Joined:
    Jun 28, 2017
    Messages:
    10
    Likes Received:
    4
    Trophy Points:
    3
    Hello dashers :)

    I've been able to finish and publish the article that explains the Currencies Fair Value rational model I've been working on for so long. I've also dedicated a specific section to Dash in it. I hope you enjoy it. You may also download it in PDF format, the link is at the end of the article:

    https://steemit.com/bitcoin/@pablomp/cryptocurrencies-what-is-the-fair-value-of-a-currency

    This model can address questions such as how much the value of Dash will increase if some units are never created by the treasury. It can also be used to assess the impact in value of an improvement or a marketing campaign.

    Please, feel free to ask me any questions you may have. I think that it is very interesting for the Dash community.
     
    • Like Like x 1
    • Informative Informative x 1
  2. bitcow

    bitcow New Member

    Joined:
    Jul 27, 2017
    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Hi Pablo, great work here! I have a question regarding the long term value of Dash: If the amount of maximum Dash available in the future is capped and no more coins will be ever made. In the long run we will see a decrease of the supply due to people losing their coins (damaged hard drives, stolen phones, people dying, etc) Is Dash destined to dissapear unless a perpetual addition to supply is implemented?
     
  3. pablomp

    pablomp New Member

    Joined:
    Jun 28, 2017
    Messages:
    10
    Likes Received:
    4
    Trophy Points:
    3
    Hello @bitcow,

    No, it isn't, because the minimum Dash unit can always be redefined to be lower. Currently it is 0.00000001. Money can always be divided and it doesn't loose its money condition after division. Apples, for instance, don't hold this property, so they are doomed to disappear if they are not constantly created. As opposing, gold (if we forget about nuclear reactions), holds this property.

    Hope this clarifies your concerns!
     
  4. bitcow

    bitcow New Member

    Joined:
    Jul 27, 2017
    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Thanks for the quick reply! I'm not sure I get it. If Dash can be eternally divided in ever smaller fractions. What's the point of capping the amount of Dash in the first place? Seems to me like perpetual division is no diferent of perpetual emission. The key here is con control the purchasing power of Dash by managing the supply as a function of demand. Money is ultimately a token for trust, if we want Dash to gain main stream trust this needs to be answered for the long run. But I'm new to Dash, perhaps it has already been answered?
     
  5. stan.distortion

    stan.distortion Active Member

    Joined:
    Oct 30, 2014
    Messages:
    770
    Likes Received:
    470
    Trophy Points:
    133
    That's a fine piece of economology! ;) Tbh, I can't say I went through it thoroughly (an awful lot of big sums!), would you say it's suitable for finding a pivotal point across all markets? ie. the anchor everything else can firmly attached to, like the dollar in todays markets or gold in the past.
     
  6. pablomp

    pablomp New Member

    Joined:
    Jun 28, 2017
    Messages:
    10
    Likes Received:
    4
    Trophy Points:
    3
    Hello @bitcow,

    Sorry for the late answer. "Perpetual division" is indeed absolutely different from "perpetual emission". If for instance, the currency today were used ten times more than yesterday, to buy the same asset you'd just need one tenth of what you needed yesterday. Decimal places per se don't change the purchasing power of the currency holder, they just allow for smaller transactions. On the other hand, increasing the supply does reduce the purchasing power of the currency holder. If you hold one unit and the supply is increased, you'll still hold one unit and you'll loose.

    Dividing units is just a change of unit, just a reference. Printing money is not a change of units, it is a real increase of the number of "coins" available.
     
  7. pablomp

    pablomp New Member

    Joined:
    Jun 28, 2017
    Messages:
    10
    Likes Received:
    4
    Trophy Points:
    3
    Hello @stan.distortion,

    Exactly. Like the stocks in the stock market. They have an anchor, a fair value based on the company's free cash flows. That's why they don't move too far from it. People can calculate different fair values if they use different estimations on cash flows, and that is the range stocks move within. Fair value acts like an anchor.

    With currencies it is similar, but not equal. In a very speculative environment (most of the trades being speculative), the fair value is the anchor, but people has to know how to calculate it (like everyone knows how to calculate price to earnings in stocks). Paying something very far from the fair value for a currency is absurd, for they will loose when the normal trades (non speculative) dominate. The thing is, in the end, when the currency is mostly used as a currency and not as a speculative instrument, its value will be very very close to its fair value. And this is almost exact with currencies as opposing to stocks. For when a currency is used as a currency, future transactions are easier to predict than future cash flows.

    I hope I've clarified it somehow...
     
    • Like Like x 1
  8. sanjanasingh17

    sanjanasingh17 New Member

    Joined:
    Aug 14, 2017
    Messages:
    17
    Likes Received:
    0
    Trophy Points:
    1
    The fair price of a currency is a rough idea of what that currency is actually worth, for example as everyone is familiar with property prices, everyone knows roughly what a house in your area is worth. You may not have an exact figure but a general indication of price, if you go to the nice part of town houses are roughly around x amount and if you go to the worse end of town house prices cost y amount, so everyone has a fair understanding of property prices as it is engrained into us from a very young age.
     
  9. pablomp

    pablomp New Member

    Joined:
    Jun 28, 2017
    Messages:
    10
    Likes Received:
    4
    Trophy Points:
    3
    Hi @sanjanasingh17 ,

    The thread topic wasn't meant to be an open question. It is the title of the paper that explains it. You have it in the first post. I hope you find it useful ;)
     
  10. solarguy

    solarguy Active Member

    Joined:
    Mar 15, 2017
    Messages:
    267
    Likes Received:
    117
    Trophy Points:
    103
    Because Dash is so divisible, in theory, 90% of the Dash could be lost, and we could still run a significant portion of the world economy on the reemaining 10%. The more valuable it gets, the more careful people will become with it. And the software and user interface will make it more difficult to lose Dash. Sure, some people will die and their Dash will become unavailable, just like cash buried in the back yard.

    Also in theory, we could increase divisibility to the point where the world economy could run on one Dash.

    And finally, in theory, we could change the protocol to emit a tiny amount of Dash to make up for lost or destroyed Dash based on a fair algorithm that causes neither deflation nor inflation.
     
    • Like Like x 1
    • Agree Agree x 1
    • Winner Winner x 1

Share This Page