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Oct 20 2019 06:34pm
I have been trying to find a way of understanding crypto that makes since to me. Decentralized cryptos are not meant to be controlled by top down policy. So instead a protocol and set of rules is created to manage the economic policy of the crypto. If people don’t like the rules, a fork is often the result. But is there underlying fundamentals to money that are inescapable in the long run?

Aristotle's definition of money is still cited today. Money has to be divisible, portable, durable and have “intrinsic value”. Today the “intrinsic value” has been replaced with “store of value”. Most people take this at face value as meaning that the money maintains its purchasing power. The “store of value” aspect is to me the interesting and the most overlooked. Nobody seems to ask why does something maintain its purchasing power?

While trying to figure this out I remembered how the Diablo 2 economy was left to its own devices for creating money since Blizzard turned its back on D2 and left the chips to fall where they may. For a long time Stones of Jordon became the currency while 40/15 jewels became the store of value. Stones of Jordon had no use in and of itself, but still became the default currency. I still don’t fully understand why. Was there no other candidates? Every SOJ was exactly the same. But surely there must have been another item that was also exactly the same, was mildly scarce and only took up one slot in inventory? If there was another candidate, then SOJ’s won out because of its network effect. If there wasn’t another candidate then SOJs won out of merit.

40/15 jewels would have won out but they were just too scarce to facilitate trade for average players. The richest players did trade 40/15 jewels for extremely valuable items. Therefore for the D2 elite, 40/15’s were the superior money. For high level trades, SOJ’s were not portable enough since a godly item might have cost more SOJ’s than could have fit into a trade screen or even in one characters total inventory.

My hypothesis is 40/15’s maintained their scarcity was because they were simultaneously a commodity. Unlike SOJ’s, 40/15’s could be used to enhance player items. And once they were used, they could not be retrieved, creating a supply sink that ensured its long term store of value. SOJ’s had no supply sink so they were probably inflationary over the long run. I remember people hoarding SOJ’s so they must have not been so inflationary as to disincentivize hoarding.

When runes came out, they became the economies default currency. I believe this is because people actually wanted runes to use and not just to trade, making SOJ’s obsolete. When runes were used, they could not be recovered, once again creating a supply sink that helped them maintain their store of value. What is also interesting is that the different runes had an exchange rate between each other. “Ist” runes were a common rune used for everyday trading but several Ist runes could be traded up for Jah, Ber and Zod runes which were the rarest and most coveted for their use to create and enhance items. Eventually D2jsp derailed this fascinating economic microcosm. But that’s a story for another day.
I have been casually studying economics for several years. But I have never heard of any economist talk about how a supply sink affects the purchasing power of a commodity based money. Gold has long term inflation rate of 1.5% but when gold is used to make something, it takes energy to recycle that gold and bring it back into the circulating supply of gold. The English Pound Sterling used to be on an oil standard. And of course once oil is used it can never be brought back to its original state again.

Now take an individual D2 player holding a Jah rune. He has to make a cost benefit analysis of whether to hold on to it to trade later or to use it to make an Enigma. If he notices that the value of Jah runes are going up. He might decide to buy a good enigma instead of risking making a bad one. If other people start seeing this too, less Jahs will be used, giving the supply of Jahs a chance to increase in the economy, lowering their value back down. When the player notices the falling value, he realizes that a Jah can only buy him a low or medium quality Enigma. He then decides to risk his Jah in making a new Enigma. If a lot of other players notice falling Jah values and do the same thing, Jah runes will be removed from supply and their value will go back up, providing an equalizing effect.

If my hypothesis is correct and this is an important function of the economy then that would make me a Bitcoin bear. Bitcoin has no commodity use and therefore no mechanism to tamper price volatility. Therefore the price will always be excruciatingly volatile like collectibles such as fine art or out of production cars.

There are other cryptocurrencies that do have a commodity use case. These are the utility protocols such as Hashgraph, Ethereum and Eos. In the future, the coins can be used to initiate smart contracts or purchase any other service built on their network. But I still struggle with these also because there is no supply sink. When the coins are spent they just changes hands in the networks economy and there is nothing to slow down the velocity. Ethereum and Eos have a staking option but there requires practically no effort to take the coins out of stake. This is in contrast to gold where recovering gold from electronics for example can be energy intensive and a cost/benefit analysis has to be done to see if it is worth it.

And that is pretty much where I am at right now in this thought experiment. Looking for any and all input, especially about the idea of supply of a commodity being equalized based on use. Also if my history of D2 money is wrong please say something.

Thank you!!!!
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Oct 20 2019 06:41pm
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Oct 20 2019 06:53pm
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Oct 20 2019 09:10pm
Quote (Thor123422 @ Oct 20 2019 05:41pm)



Haha, this place never changes, that's why I love it.
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Nov 1 2019 12:28am
That would legendary if someone other than a jsp’er read this.
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Nov 1 2019 11:26am
if you want to make a comparison the best is Sojs.

yes sojs to have intrinsic use, both as an actual equipped item and as use in spawning Dclone. but overall they're a storage of value, same with HRs but to a lesser extent as HRs have much more intrinsic use in runewords and socketables.

sojs are worth what the market demands, but it changes over time. and pre-JSP sojs were the only reliable in game currency. dupes would change the value, and soj price on items fluctuated greatly.

if you want cryptos to be simplified the best way is this. there are 2 cycles in crypto, short and long term.

in the short term you see fluctuations of 10-20% on a weekly basis. so 10k BTC can be 9K BTC on a weekly basis with relative ease. if BTC is in a long term down trend.

the the long term basis you can see as much as 200-300% fluctuation over a year long period or so.

which leaves you basically only a few options.

you can invest in the short term, as crypto doesnt have day trading restrictions. and try to buy at 10-20% down, hold until it raises 10-20% then sell off. wait for the next fall, and try it again.

OR you can buy and hold for a long period of time, up to a year even, to get a LOW buy to pay off big.

the issue comes in how the coin overall is trending. if it's trending down you can really only buy at the bottom of a curve then sell once it raises. if it's trending up you have options to hold longer.

it's a good reason to make multiple buys in what you think is a curve, so you have multiple offload points. overall i try to target a 1-2% daily increase in my portfolio. i was hitting that target very well until we got into the heavy down trend, many days hitting 5-10%. i made the mistake of buying on the down trend so most of my money is now locked up, which is ok. the day trading of like 8 coins simultaneously with multiple rebuys and selloff points was getting tiring.

i mainly got into it out of boredom because robinhood was on my phone. turned 100$ into 300$ rather quickly and now it's all stuck until the market comes back up and i have like 150$. o well.
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Nov 1 2019 06:27pm
:thumbsup:
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Nov 2 2019 02:01am
Quote (Grippster @ Oct 20 2019 08:34pm)
Looking for any and all input, especially about the idea of supply of a commodity being equalized based on use.


dollars= "store of value" only (no intrinsic)

insertable d2 items (rune or 40/15) could be used as a store. But, as you mentioned before, once socketed they stop being stored value.

One of the most relevant currencies in the history of human civilization is IRL gold. That is an interesting case to consider against the 2 mentioned above.

Gold could be stored (coins) but it could also be consumed .. sort of. When a pharaoh built a huge gold statue, its intrinsic value was put to use. But it also became irretrievable .. sort of. It's not like the pharaoh could just grab a chunk out of the statue and trade it for some silk. But the "stored value" could eventually be retrieved, such as if a conqueror took the city and starting melting down all the shit the last guy built.

I think it's important to consider IRL gold when we talk about currency. That is the commodity that had the most impact on framing humanity's understanding of what a currency is. If cryptos are going to do away with the notion of a currency having intrinsic value (which seems to be the direction we are headed) then it will represent a big shift in how humans define currency as a concept.
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Nov 3 2019 02:32pm
Quote (Kayeto @ Nov 2 2019 02:01am)
dollars= "store of value" only (no intrinsic)

insertable d2 items (rune or 40/15) could be used as a store. But, as you mentioned before, once socketed they stop being stored value.

One of the most relevant currencies in the history of human civilization is IRL gold. That is an interesting case to consider against the 2 mentioned above.

Gold could be stored (coins) but it could also be consumed .. sort of. When a pharaoh built a huge gold statue, its intrinsic value was put to use. But it also became irretrievable .. sort of. It's not like the pharaoh could just grab a chunk out of the statue and trade it for some silk. But the "stored value" could eventually be retrieved, such as if a conqueror took the city and starting melting down all the shit the last guy built.

I think it's important to consider IRL gold when we talk about currency. That is the commodity that had the most impact on framing humanity's understanding of what a currency is. If cryptos are going to do away with the notion of a currency having intrinsic value (which seems to be the direction we are headed) then it will represent a big shift in how humans define currency as a concept.


The most used form of currency ever was the cowry shell. It was durable, impossible to counterfeit, and took significant effort to retrieve from the ocean.
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Nov 14 2019 01:56am
bum,p[
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