Quote from: MisfiringNeuron on January 25, 2016, 02:44:38 PM

A few questions as I work to wrap my head around Factom and determine if I want to invest or not:

1. Why will 73,000 FCT be created each month? Why not 75,000 or 50,000? It seems to me that initially, there will be substantial inflation once the Federated servers go live and at some point, potentially substantial deflation. Why not just create as many FCT each month as are used to purchase Entry Credits to keep the number of FCT static?

2. As I understand it, Entry Credit holders will be able to vote for the Federated Servers. What is to stop me from purchasing a ton of Entry Credits not to use for Entries, but to use to vote my servers and the servers of my friends to Federated status. What's to stop me from, "Selling" my votes? Why not have a Darkcoin masternode system where anyone can run a Federated Server who puts up the necessary collateral and they are paid in turn. More decentralized and less prone to vote stuffing.

3. As I understand it, X Factoid were sold at the public offering, and Y Factoid are held by Factom Inc or its employees. Is this correct, and if so, does Factom Inc. hold those tokens or employees? And what rules are in place for those tokens? For example, is there a lockup period where they can't be sold and if so, what is the expiration date? Or are they actively being sold by employees for profit or the company to raise additional funds?

Thank you for your insight as I conduct my due diligence.

1. As described in the initial token sale documentation, to pay for the server+engineering time, new factoids would be created at a rate of 20%/year of the token sale amount. 4379795.611338 factoids were sold, which corresponds to 875959.1222676 per year or 72996.5935223 per month.

The federated servers goal is to make each unit they are granted become more valuable. The best way they have of doing this is to increase the amount of value people are sacrificing to place data into the blockchain. The more people are using the system, the more demand there is for the tokens, and the higher the market price. If we were trying to make factoids be money, only paying transaction fees would keep the supply stable.

In contrast to many other projects, Factoids are not trying to be money. We already have internet money, and that is bitcoin. Factoids are a tool to pay the servers in a scalable decentralized way, coupled with a way to provably show that value was destroyed.

The closed loop feedback nature of the system means in the long term (absent speculation), the dollar amount of the factoid inflation will match the dollar amount of entry credits being purchased. Speculation thrown into this will drive the dollar price up or down from this equilibrium. Now when we have this mismatch between the source (inflation) and the sink (entry credit purchases) then the increased or decreased supply will tend to correct the price towards equilibrium.

Contrast this with your transaction fee model, where speculation would be the whole point of the token. At that point factoids would be competing to be money, which goes against what we are trying to do.

2. most systems can be attacked by throwing money at them. The best we can do is to make it so that an attacker needs to expend more value than the rest of the network combined.

Optimally we would use thermodynamic proof of work, but as history has shown, unless you are Bitcoin, using proof of work is more of a liability than a benefit.

The darkcoin masternodes seem like proof-of-stake. Daniel Larimer has some interesting recent thoughts on proof of stake.

Quote

I have long been of the opinion that proof-of-stake is superior to proof-of-work. Today I would like to challenge my own beliefs against the lessons I have learned from over a year of experience with proof-of-stake.

http://bytemaster.github.io/article/2016/01/04/The-Benefits-of-Proof-of-Work/

We think that the people who have the most interest in the success of the system are the ones who are actively using the system. The ones purchasing entry credits are the ones using the system.

On that note, we are setting up a delegation system, so you can direct your Entry Credit support to your favorite blogger, who presumably actually pays attention to what is going on. They would then vote on your behalf.

3. 40% of the token sale amount was granted to early purchasers. 60% of the token sale amount was granted to early contributors.

http://allcoinsnews.com/2015/05/16/factom-raises-2278-btc-in-software-token-crowdsale/