Will HoloFuel price be stabile from its first day?

HF supply will be 0 in fact. But there will be positive and negative balances. They will change over time by considering the demand and hosting power. Ok for this point.

We also know that the team’s target is a stabile (not static) currency. The algorithm will accomodate the amount of active supply.

My question is: Will this algorithm start to operate in the first day of the mainnet? When will be the first day that can be produced new HFs other than the current 177 billion. In other words, will stabilizing the price by expanding or shrinking active supply be the first aim or it will be happened in months/years? Now, HOT is volatile due to it is limited to 177 billion. Producing new positive balances could stabilize its price when the price are rising. Will we see a stabile HF in early days of it? Thanks in advance for the answers.

I don’t believe so, no. Last I heard, stabilization algorithms won’t come into play until well after the HOT-HF swap period is finished, and I don’t even know how long that swap period will be. They used to say at least 6 months, but I’ve been hearing here and there that this period may be much longer. Maybe someone else knows more.

No, it won’t be stable from the start. If I understand correctly, there are no stabilization algorithms. Rather, what stabilizes the price are the supply and demand dynamics for hosting.

At first, activity will be very low in comparison to the available hosting, so hosts will have an incentive to set prices very low to obtain that activity. Once demand increases, hosting will become more scarce in comparison, causing hosts to raise their prices. The higher volume and prices could cause more hosts to join due to profitability. With an increase in supply, this cycle repeats until an equilibrium is reached, and may reenact as the conditions apply. Since this is about web hosting, hosts are incentivized to be consistently available, helping to dampen wild fluctuations in supply.

Additionally, the daily supply of disbursed HOT is correlated with a few factors, such as HoloPort sales, total network capacity, and community/app activity. I believe that these algorithms are currently proprietary to Holo. This is in contrast to many fixed-supply or time-release currencies on blockchains, which bear little correlation to fundamental market dynamics. Emaline Friedman wrote about this: https://link.medium.com/xXFr1j8B0eb

Both HOT and HF can be thought of as IOUs for hosting.

Non-hosts without a credit limit will be able to:

  • trade HOT unilaterally with other tokens
  • swap HOT → HF only
  • send/receive HF

Hosts with a credit limit will be able to:

  • trade HOT unilaterally with other tokens
  • swap HOT → HF
  • swap HF → HOT as much as their credit limit will allow
  • send/receive HF

When HOT is swapped for HF, the HOT leaves circulation and sits in a reserve, while HF leaves its reserve and enters circulation. When HF is swapped for HOT, the opposite happens: HF leaves circulation and sits in a reserve, while HOT leaves its reserve and enters circulation.

Right now, Holo and HoloFuel are not yet live, so HOT is trading like other speculative tokens. Also, HOT shouldn’t reach a ridiculously high price, because who wants to pay such a high cost to post a tweet (especially when Holochain can do so much more for so much cheaper)?

Hope this is helpful, and hopefully this is all correct :slightly_smiling_face:

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First of all, thank you for your useful answer and allocating your valuable time to write. I’ve learned a lot.

I wonder what are you thinking about two things:

  1. Let’s talk about a scenario of the first week. There are 177 billion HOT in that day. Since the network is active, let’s say 10000 node (I know it’s huge but it’s an imaginary world) started to operate in the first week. In addition to that, let’s say the network gave them 100000 HF credit limit for each node everyday. It means that 1 billion HF can be produced daily (even if they are/willbe backed by hosting power). Doesn’t it mean that HOT (and therefore HF) gets more open to the inflation since the active supply increases 1 billion every day. I know the factors that affect price are not just these factors. There are several other factors as well. But I want to know that what will be the approximately increase rate of the active supply from the beginning.

  2. You said that “HOT shouldn’t reach a ridiculously high price, because who wants to pay such a high cost to post a tweet.” Is the price of HOT (or HF) important? The networks costs can be adjusted according to the market price of HOT? Or you are saying so since costs will be adjusted according to only in terms of HOT (or HF) no matter what it’s price.

From my understanding:

  1. The credit limit doesn’t appear out of nowhere. It’s a statement generated from the receipts of a host’s prior 3 months of hosting. It’s basically saying “since you’ve demonstrated an ability to provide x amount of hosting over the last 3 months, we’re trusting that you’ll be able to provide roughly the same amount over the next 3 months.” So from the beginning, no hosts will have a credit limit, and will need to earn it.

  2. Ultimately, I can’t predict what hosts will charge, or the market dynamics. Hosts will be able to adjust their prices how they please, but in the future, additional reserves will be set up to swap HF with national fiat currencies. Crypto exchanges may also set up their own nodes for trading HF. So in the future, hosts won’t only be setting their prices according to a single reserve.

Also consider that theoretically, there is a limit to how divisible HOT and HF are. Although it’s unlikely, we wouldn’t want them reaching a price such that it’s too expensive to perform a transaction at even the smallest increment. This is also the motivation behind the huge HOT supply. Consider the sheer amount of tiny hosting transactions that would occur over many apps operating globally. The large supply helps make for a better experience in using HOT/HF. It’s more intuitive for a Holo-based Uber alternative to charge 30 HF for a ride instead of 0.0003 HF.

@pauldaoust wrote a great piece on mutual credit that you should check out as well: https://blog.holochain.org/mutual-credit-part-1-a-new-type-of-cryptocurrency-as-old-as-civilisation/


I think both of us need more information to know how will be the increasing HF amount strategy of the team at the first days of HF. What will be the inflation rate (what will be the amount of active supply production) at the first days. I appreciate if someone who knows, maybe @artbrock, answer it. Thank you for your efforts, I’m grateful to you Alex.

To my understanding, there won’t be any inflation mechanisms or increasing amount of HF over time. Holo will have a special reserve account, carrying a debt equivalent to what they’ve raised initially. People will exchange in their HOT, and HF will be disbursed. I think a key thing to understand with mutual credit currencies is that it is never created from nothing. Holo’s negative reserve balance comes from what they raised in their ICO, and this is being paid back to hosts (hence it being called Initial Community Offering). HF isn’t a token that exists on its own, but it’s better thought of as a unit of account, keeping track of the work being done across multiple peoples’ ledgers. The above article on mutual credit that I mentioned illustrates this wonderfully.

Edit: correcting statements on Holo’s reserve balance.

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This post may answer your questions: https://medium.com/h-o-l-o/holo-fuel-economics-101-c9631d63014a

Holo’s AMA #41 @ 20:21 also addresses this: https://youtu.be/Z7qhif2_USQ?t=20m21s

I’ve read the 101 article before. I understand the concept of HF and mutual credit system. But, in the reality, active supply (positive balance) means total supply. So, it’s among the factors that affect HF price. I know it’s backed by hosting power but when a HF credit given to a host, it means positive balance increased. Until the host pay back the credit by providing hosting service, it means the active supply increased. This creates a short-time inflation.

These are scenarios from my personal viewpoint but my questions could originated from my lack of information. Maybe I need paradigm shift. We will se if my concerns get true. So, all in all, thank you for your efforts.

Hi, the part that you’re missing is that in a mutual credit economy, any positive balance incurs a negative balance of equal magnitude somewhere else. This means that the net supply is always zero. Credit limits mean that hosts will be allowed to have negative balances. There is no increase in supply. HoloFuel has no inflationary mechanisms. This also means that the circulating supply and net supply represent two different values. The circulating supply is the number of outstanding promises, which can be found by adding all of the positive balances (OR all of the negative balances). The net supply is found by adding both of these together, which will always be zero.

Only those who want to be the host neef to make the swap #hot to #holofuel? Or those who just want to invest for a long term in #holofuel too?

I understand that if I want to swap, I will have to transfer Hot to the Holochain network to turn it into Holofuel.
But …If I don’t want to be the host, can I transfer after swap my Holofuel back, from Holochain network to the exchanges (Binance for example)?

The swap from HOT to HF is voluntary. Hosts don’t need to have any HOT or HF in order to host. Hosts will be getting paid in HF. HOT is a way to pre-purchase hosting before Holo goes live. Once it does go live, HOT will also act as a bridge allowing people to convert to and from HF.

Here are some different scenarios:

  • If you’re an app developer who doesn’t want to host: you’ll have to pay for your users to be hosted. This must be paid in HF, which can’t be bought directly with fiat. You can buy HOT and swap it to obtain HF.

  • If you’re an app developer and a host: you don’t need to buy HOT or HF. You can host your app’s users on your own machine for free. And since you can earn HF from others for hosting their apps, you can use it to pay for additional hosting if your machine runs out of capacity.

  • Maybe there’s an app where the developer can’t or doesn’t want to pay for the users: if you want to use the app, you can do a few things:

  1. Buy your own HF so someone can host you. This can be done by buying HOT and swapping it to HF.
  2. Install the app natively and become your own host for free.
  3. There might be hosts who choose to host that app’s users for free.
  • An app might use HF for payments. For example, a Holo-based Uber-alternative may use HF to pay for rides. For this, you can buy HOT and swap it to HF. Or, you might already have HF from hosting or getting paid for a service you’ve offered.

No exchanges support HF right now because it hasn’t been released yet. This might change in the future. Reserves are different from exchanges. With the HOT reserve, only hosts with credit limits can swap HF to HOT. Exchanges might not require this to be the case. As mentioned above, Holo does plan to create additional reserves to convert HF to/from national fiat currencies.

Since the swap is voluntary, I’m wondering if it’s necessary for you to do? HoloFuel is designed to be spent and used for services, not to be accumulated in one place over a long period of time. Early adopters will be rewarded by the rise in price of HOT and HF, but it’s designed to eventually stabilize as the market develops.


Thank you for information.

What advice would you give to those who want to be neither hosts nor developers, but who have a #hot now?

There will probably be other people in this “situation”. I personally will wait to be able to install Holochain on my computer. I wish I could buy a Holoport but it is no longer manufactured now.

Thank you!

I think Bogdan is asking the question from an investor’s perspective. The crypto coin traded on the market right now is called “HOT”. Will the new HF be transacted on the market as well as a crypto coin? Will the investor be obligated to switch HOT to new HF coin? How will the investors benefit from this and what should motivate them to invest further in this project? (They definitely want the price per share/crypto coin to gain some value.)
Looking forward to your reply or someone who can shed some light on this topic.
Thank you in advance.
Bogdan, Rai I think you should check this. The Holo Group price predictions are ridiculously low for HOT vs the market experts predictions.

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@RaiTurk there’s a draft of HoloFuel’s design. I think it’s a bit old, but it does explore some inflation/deflation preventing feedback mechanisms that might be helpful. Not sure how many of them will make it into HoloFuel’s final design.

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Thanks Paul. It was my own confusion. Now it’s clear for me, and I think that my questions are out of the scope of Holo tokenomics. I realized recently.