I think the tax is highly desirable. As with bitcoin why would anyone want to accept payment in a currency that has a substantial risk of inflating. Most people are not speculators by nature. The protection from inflation offered by a tax is worthwhile. Without a tax, pegging generation to velocity would reduce volatility, but it could not stop inflation due to a fall in demand.
A few points:
1 ) voluntary transaction fees make no sense to me. Transactions add information to the blockchain permanently. They impose costs on everyone using the sytem (storage costs, bandwidth costs). This should not be free.
2) a big problem is measurement of velocity. A side benefit of transaction fees is that they will make velocity measures more reliable.
3) Currently miners are paid through seignorage (issuing coins), this is equivalent to a tax on the rest of the user base. Replacing a part of the seignorag tax with a transaction fee tax would not make users worse off in general. (the incidence of the two taxes is different but they are both taxes. more on this later.)
3) Miners will always need to be rewarded. Therefore any velocity based system could never drop the coin generation rate to zero.
4)the ability of the transaction tax to prop up value depends on being able to destroy more coins than you create each period. If you can consistently destroy more coins than you create, you would be able to support the price of a currency unit even if demand for the currency falls. Of course if demand falls to zero then you are shit out of luck.
5 ) pegging generation to velocity would enable such a system. The tax revenue per period is the product of velocity and the tax rate. As long as currency generation is less than tax revenue the system can destroy more coins than it creates each period.
6) the tax rate would have to be very low to keep the currency useful and prevent evasion (e.g. Sending wallet files as email attatchments). I would suggest a 0.1% levy on all sends. There should be a very small fee per kb as well which would only apply to microtransactions.
7) currency generation would be smaller than potential destruction (currency generation < velocity *tax rate).
Miners would earn most of their income from the tax. In the case of inflation, mining income would fall by more than half because the tax would be devoted to coin destruction. In the case of deflation, the tax would be used to pay miners.
9) coin creation and destruction would continue indefinately.
10) the tax incidence of a transaction tax and seignorage are different. Seignorage is born by people who hoard their coins. Transaction taxes are born by people who spend coins.
11) rolling out a coin generation mechanism based on velocity is tricky. One option is to set a minimum coin generation rate. This would be set extremely low, so that hopefully it would only be binding in the currencies initial month or so.
A few points:
1 ) voluntary transaction fees make no sense to me. Transactions add information to the blockchain permanently. They impose costs on everyone using the sytem (storage costs, bandwidth costs). This should not be free.
2) a big problem is measurement of velocity. A side benefit of transaction fees is that they will make velocity measures more reliable.
3) Currently miners are paid through seignorage (issuing coins), this is equivalent to a tax on the rest of the user base. Replacing a part of the seignorag tax with a transaction fee tax would not make users worse off in general. (the incidence of the two taxes is different but they are both taxes. more on this later.)
3) Miners will always need to be rewarded. Therefore any velocity based system could never drop the coin generation rate to zero.
4)the ability of the transaction tax to prop up value depends on being able to destroy more coins than you create each period. If you can consistently destroy more coins than you create, you would be able to support the price of a currency unit even if demand for the currency falls. Of course if demand falls to zero then you are shit out of luck.
5 ) pegging generation to velocity would enable such a system. The tax revenue per period is the product of velocity and the tax rate. As long as currency generation is less than tax revenue the system can destroy more coins than it creates each period.
6) the tax rate would have to be very low to keep the currency useful and prevent evasion (e.g. Sending wallet files as email attatchments). I would suggest a 0.1% levy on all sends. There should be a very small fee per kb as well which would only apply to microtransactions.
7) currency generation would be smaller than potential destruction (currency generation < velocity *tax rate).
Miners would earn most of their income from the tax. In the case of inflation, mining income would fall by more than half because the tax would be devoted to coin destruction. In the case of deflation, the tax would be used to pay miners.9) coin creation and destruction would continue indefinately.
10) the tax incidence of a transaction tax and seignorage are different. Seignorage is born by people who hoard their coins. Transaction taxes are born by people who spend coins.
11) rolling out a coin generation mechanism based on velocity is tricky. One option is to set a minimum coin generation rate. This would be set extremely low, so that hopefully it would only be binding in the currencies initial month or so.