How Do We Talk About Money Like a Professional?
Like it or not, building projects on cryptocurrency is not going to free you from a money discussion.
Cryptocurrency is highly ideology driven technology. Lot’s of memes about Bitcoin’s 21 million issuance cap. Even in a developer culture driven Ethereum, there’s ultra sound money, which is still originated from Bitcoin’s monetary idea.
I think during my life as a developer. My mentaility is more like “talking about money is unproductive.” As long as the protocol token has greater than epsilon value, all the security assumptions for the protocols hold.
So why think about monetary stuff now?
The first reason is just I’m curious. I want to know what’s the difference between the professionals and amateurs. What makes grandpas lecturing in Harvard different from ones on a boulevard?
The second reason is it helps to think about the political econ structure of cryptosystem. The design of current monetary system reflects the real world constraints on how people are organized. The parellelism can be drawn on the crypto-system.
How crypto people think about money?
Practical problems:
I’m picking econ related problems. There are also not too econ but more technical problems, such as privacy.
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Need issuance as security budgets for consensus security. [TODO: populate this]
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Fee burn. Transaction fee as source of income. [TODO: populate this]
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Credible Neutral principle.
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Stable coins
How real world money works?
The fundamental issues
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A government requires tax income to provide public goods.
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There are good times and bad times. It is inefficient to raise tax in bad times, because people would evade tax.
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The efficient way is to raise debt in bad time and pay back in good time.
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The government must commit itself not to print money to pay the deb, change the interest rate to make debt cheaper to pay back, or default.
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The government build central banks to make sure it makes independent decisions on money printing and interest rates.
The problems economists care
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Eventually it’s about growth. Econ growth kind of solves all the problems, poverty, inequality, disease, and environmental issues. Growth means abundance and innovations.
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Inflation is something eocnomists care. It is not too important in terms of growth. But it is annoying and slightly negative to growth.
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More ...
Methodology
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Money is connected to the price level. How people spend money and work, how firms produce projects and hire, how banks raise money and lend, and how govenment collect tax and spend all have to be incorporated in the framework.
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General equilibriums: Take all actors actions into accounts and figure out the results.
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Bellman equations: People make decisions under uncertainties and across time. Their expectations matter, which would drive their behaviors. All these should be modelled.