In this post I will highlight main economic reasons why SAFEnet (MaidSafe's network) cannot succeed in the long term. I may expand and update this post as time permits.
- Safecoin is a highly inflationary currency
- Safecoin isn't backed by anything
- SAFEnet is inefficient
- The rewards system is unworkable
Highly Inflationary Currency
Safecoin will be a highly inflationary currency. At the moment, there's over 430 million Maidcoins in existence. Once the network goes live (which may or may not happen) owners of MAID will be able to convert their holdings to Safecoin.
From that point on, the price of Safecoin will supposedly automatically adjust based on supply of coins and demand for storage space (more on that later).
The growth of Safecoin monetary supply is described in one of the MaidSafe official documents which I don't want to waste time on because it's based on simplistic guessing. It is 99.999% certain that real life won't be anything like they expect in that document. Hell even the currency itself may not work like they expected.
But in the highly unlikely case that Safecoin and its network work as expected, the supply will grow to many billions (42,949,672,900). Why anyone expects that MAID will appreciate from the current overbloated level is one of greatest crypto investment mysteries of all time!
You may ask "but where are your arguments?" to which I say I don't have any and I don't need to have any. The burden of proof is on MaidSafe (or you, if you agree with their economics). The coin is not backed by anything!
You can read their unsound money fantasies in this document, but let me give you a hint: 10% of MAID (one day Safecoin) already exist. Where's the network disk space that's backing those coins?
The coin is already inflationary! Which brings me to the second point: an unbacked currency.
But to round up this point:
- From the very beginning farmers will not be paid the lowest market price for storage capacity
- Farmers make money only when data is downloaded, so farmers need to make a significant investment in bandwidth and capacity before they can start reaping small rewards
- The rate of issuance (inflation) is significant
A revenue-seeking farmer would never run SAFE as long as there's a way to sell their space for bitcoin. It's that simple. Even if they could get paid the same (and below we will see they won't) the cost of crypto-exchange would make Safecoin slightly less attractive.
Safecoin is Unbacked Currency
The founders are probably not aware of it (because they don't understand Austrian economics), but Safecoin is not backed by anything.
This statement would get you moderated away at their forum, so you won't find much on this there.
The MaidSafe project claims Safecoin is (will be) backed by Proof of Resource: initially storage (capacity) resources and later other (maybe compute or network). But is that really so?
As I mentioned above, 10% of the maximum monetary mass is already in circulation, and yet 0 bytes of network space has been paid for with the (equivalent) of millions of US$ spent.
If that's not enough of a hint, you're hopeless.
But just for fun, let's also consider there's a concept of recycling of Safecoins, but there's no recycling of disk space. That is, a Safecoin spent to upload data to the network is "recycled" (passed on to farmers, app creator, etc.), but the space on the farmers' disks never gets released. Think about that: spent money is recycled, but space is not returned. In the long run, one and the same coin can buy an unlimited amount of space. If that doesn't sound weird to you, you must be a fan of Bernie Sanders.
Those who understand the economics and math may also want to take a look at another can of SAFE worms which is related to the way the network autonomously adjusts its "reward rate". That whole area is a complete economic joke hidden behind a think veil of mathematics, so it's impenetrable to most readers. But it's very easy to understand - without having to know the math or anything else - once you think of it this way: at any given moment, the supply of unused disk space is smaller than the amount of space all outstanding Safecoins can buy at the current advertised price.
It's a Ponzi. The network may have 10 TB of unused space and despite that all Safecoins out there may be worth $10,000,000. So how much does one need to pay for 1 TB (or even less - see further below)? One million bucks. Clearly, this doesn't make any sense.
The Safe Socialists claim this kind of situation would motivate farmers to buy more disk space, but even if they did (say, they put an extra 10TB on line), there would be no demand ($500K/TB doesn't sound much better, does it?). If we continue like this, we will realize in order for the coin to be worth something, it has to be fully or nearly completely backed by disk space, and Safecoin isn't (won't be).
But this - Economics 101 - is too complex and repelling for the socialists on the MaidSafe forum so my attempt to explain how Safe Ponzi works probably won't end up in the MaidSafe Community Wiki.
SAFEnet is Inefficient
Multiple copies of all large files are made. I think currently the replication factor is 4x which means if you upload 1MB of data you'll occupy 4MB of storage capacity on the production (mainnet) SAFEnet.
That means a "farmer" (the person who provides storage space) can charge for 25% of the capacity. Or put differently, you need to pay 400% more to store your data on the SAFE network.
Overhead on other networks and professional hosting companies is far smaller (usually 50-200%), so clearly either SAFEnet space will be very expensive, or no farmer will be able to make money (or the both).
I suspect the second is more likely to be true: no professional farming will be possible. Hobbyists will salvage/dump some unused disk space and that will be it. But even that is unlikely when they can't actually get paid (meaning, in BTC or some local currency) unless they get rid of Safecoins first.
The rewards system is unworkable
It should suffice to say that the rewards system is completely unworkable. You don't need to believe me on this. Just go to forum.safenetwork.io and search for "rewards".
As it stands now, the system should reward "farmers" (storage providers), "content producers", and application providers. But since there's no way to know the identity of people on the network, it's entirely possible to upload random garbage and hire 1,000 bots that download it all day long. But that's not all.
There is no agreement on this, and neither there is agreement of how the system should work in the first place. Floated ideas range from pure socialist nonsense (that everything should be free and Safecoin given away) to that only farmers (storage providers) should be rewarded (which of course is exploitable using the same bot army mentioned above; the only inconvenience is whereas with the content you upload you can target your content with a 100% success rate, while farmers can't choose what they store so one would have to find cheaper bots and hit all network content to get a small share of rewards, but exploitable it is - it's just a matter of how cheaply one can acquire the bots).
Bonus Material on MaidSafe Over-Issuance
I just spotted this in the MaidSafe "IPO white paper":
A quantity of 429,496,729 coins will be available for purchase, this equates to 10% of all safecoins
Well, now that it's likely (see my previous posts) that a quantity of 450 million coins will be made available for purchase, we know they lied. Of course, they can claim they proposed a change and "the community" (meaning 20 socialist fanboys on the community forum who may not own a single Safecoin) agreed. Problem solved!
Second, since 450 mil MAIDs will be made available, would the total supply be 45 or 42 billion? You see, the socialist fanboys on the MaidSafe community forum aren't asking this question because it doesn't really matter. Fourty two, 52, whatever. To them these are just numbers that mean nothing. Which is exactly my point.