Why Gold Sinks are BAD for the Gaia Community
I am going to delve into a relatively controversially opinion, but please bare with me and hear me out. I personally believe that gold sinks are ultimately bad for the Gaia community, however, this IN NO WAY implies that I agree with the gold generators or inflation. Please read through both points below (especially #2) with an open mind.
So why are gold sinks so bad for the Gaia community? Well there are two main reasons that I will outline now:
1. Gold sinks promote the sales of gold generators.
The value of gold depends on the amount of gold in circulation. The more gold in circulation means that gold is worth less. The less gold in circulation means that gold is worth more. When a large amount of gold is sunk through a gold sink - this means that the value of gold increases. When Gaia subsequently releases a gold generator, that gold generator is worth more than it would have prior to the gold sink and gold generator buyers are more inclined to buy it because they get more value out of it. Larger gold sinks imply an increase in gold value which consequently results in more gold generator users purchasing gold generators. When Gaia releases gold generators after a gold sink they establish an equilibrium that cannot be broken unless Gaia stops releasing gold generators… which Gaia has admitted to having no plans to stop releasing them.
2. Those who participate in gold sinks are pawns.
To explain this, let's use an analogy. Suppose that gold has a value of $1 = 1m and suppose that you have 1m. Now suppose that Gaia releases a gold sink and that gold has value of $1 = 0.5m. For this to happen, we must have that ON AVERAGE, half of the gold in circulation was sunk. Therefore, ON AVERAGE, each gold sink participant must have sunk AT LEAST 50% of their gold. Suppose that you are the "average" user. Then if you had 1m you must have sunk 0.5m and hence you have 0.5m left over. Notice how you went from having 1m when 1m = $1 to having 0.5m when 0.5m = $1. Essentially you have gained no value. However, since not everyone participates in gold sinks we (once again) must have that on average, each gold sink participant sink AT LEAST 50% of their gold and so on average, people who have participated in gold sinks have actually LOST gold value.
Another way to visualize this analogy is to imagine Gaia's current marketplace. Consider your current buying power. Now suppose that the value of gold doubles. This means that there's half as much gold in circulation once again which means that on average, every gold sink user has at most half as much gold as they did prior. Prices on the marketplace also adjust accordingly to be half as much as they were prior. So… with having half as much gold and the marketplace prices being half as expensive… are you really benefitting?
Conversely, those who do NOT participate in gold sinks actually benefit If you have 1m when 1m = 1$ and do not participate in a gold sink, then when 0.5 = 1$ you essentially have doubled your buying value.
Furthermore, gold generator buyers also receive a nice perk from gold sinks. Right after a major gold sink occurs, many gold sink participants will sell their items to try to regain value and buy items at cheaper prices… but the users who get "first dibs" on this fresh slew of more reasonably priced items are those who did not participate AND gold generator buyers who can buy gold that has more value. See the problem? Another inclination for gold generator buyers to buy gold generators.
When you donate to a gold sink, you're paying Gaia's cheque and you're giving away your VALUE to gold generator buyers. This is NOT how to establish deflation.
Potential F.A.Q.
A. If gold sinks aren't the answer to solving the gold inflation problem, then what is?
Gold sinks CAN be a solution to solving the inflation problem under two conditions:
1. Gaia ceases the release of gold generators INDEFINITELY.
2. Gaia provides a quality product to encourage all types of users to participate in gold sinks.
B. Since Gaia won't stop releasing gold generators, what is the solution the gold inflation problem?
There isn't really any solution to solving the gold inflation problem if gold generators remain on Gaia. The only thing we as users can do is to pressure/petition Gaia to stop releasing gold generators or… well, adapt.
C. You say that gold sinks are bad but haven't we seen some deflation in the last few months?
We have indeed seen deflation in the last few months. At Gaia's worst, we saw gold decrease in value by 820000% (8200x) compared to early 2013. Now gold value seems to have decreased by 200000% (2000x) compared to early 2013. Thus, in the span of a few months, we've seen gold value increase by approximately 4x from it's worst.
Now remember when I talked about Gaia establishing an equilibrium with the amount of gold in circulation? The thing is that the gold sunk from the system has plateaued DESPITE all of the gold sinks that have been put in place since then. We have seen gold sit at this rate for a few months now and it's a sweet spot for Gaia to continue to earn revenue from gold generators released after gold sinks.
Ultimately, gold sinks thus far have ONLY been effective in curving the inflation which made gold value extremely unstable. We will need to initiate more extensive measures to see further deflation and this current gold-sink-gold-generator cycle is not enough.
D. Well if we didn't participate in gold sinks then the inflation would get worse and worse, right?
That's possible but there's a limit of how bad the inflation can get on Gaia Online. If you take a tub of water out of your bath tub, you'll probably notice a difference... but if you take a tub of water out of the ocean, you probably won't. Now suppose that users stopped participating in gold sinks. Then for Gaia to get gold generators to sell, they will need to increase the average gold payouts in the gold generators... but the distinction between the increase in average payouts become more and more negligible to gold generator buyers as described in the water analogy above. As a result, Gaia will have to go to extreme measures to sell gold generators or preferably - find a new method of earning income from users.
Please post any comments if you'd like to start a discussion or leave feedback regarding this topic ^^.
