value = price * quantity
This assumption is wrong, the correct representation is:
price = value() / quantity
where the
value() is a function. The value is created only when any goods or services are produced.
I agree that,
price = value() / quantity
, is a better way to think in terms of what happens in the 'real' economy, I was thinking more from an accounting point of view almost. I probably should have used:
market cap = price * quantity
A currency has the ability to 'map' to something real, like the GDP of a country. If the currency supply is fixed, and 'real' GDP increases, prices MUST increase to compensate. Obviously price increases can be very disruptive (everyone spends effort trying to avoid getting 'caught out' by rising prices, and stop trying to do productive things).
IMO the crypto movement is dominated by trading culture that likes to see price increasing as the 'reward', but I think that hurts adoption in the future. Better for everyone if 'reward' is in more coins, not higher prices.
- Stable prices are good
- Increasing 'market cap' is good
In order to achieve both of those quantity increasing through controlled inflation is the optimum.
How money supply effects the actual creation of 'real' value is an economy/society is something crypto community will start to address more in the future. When that happens fixed supply cryptos will be seen more as commodities than currencies.