Bitcoin Forum

Here is an interesting and meaty post for everyone to chew on and provide some food for thought no doubt :)

Over the past couple of weeks I have been putting the final touches to the eMunie economic model (amongst other things). Despite some stiff arguments presented against it on a number of occasions, I was always confident that it would operate effectively in all but the most extreme of "black swan" events.

A few days ago I got to the point where it was feasible to test it out, the majority of the core economic algorithms and execution models had been implemented culminating in the completion of 3 years of heavy thought, notes, tweaks and sleepless nights :)

However, I obviously found myself lacking in test data, or the ability to generate it. To generate such data would require completion of the decentralized exchange and other systems, plus a lengthy process to generate such a data set which would allow confidence in the results.

Eager to test out our economics model, I decided to investigate if it would be possible to create a simulator that uses the eMunie economic model as is, using existing Bitcoin trade data to see if it was possible to "stabilize" the price of Bitcoin and review the performance of the economic model as a whole.

If such a volatile (and perhaps even manipulated) currency such as Bitcoin could be stabilized, then it is safe to assume that EMU (and any currency for that matter) could use our economic model to achieve the same goal.

Overview

The white paper which will explain our economic model in detail is not yet finalized and needs to include the most recent changes, which of course will take a little time to do. A basic overview of its operation is presented here which should allow sufficient understanding despite the lack of mathematical representation at this point.

In the following text EMU may be substituted for BTC, LTC or indeed any other digital currency.

The purpose of our economic model is to stabilize the price of EMU over the short term, providing protection against legitimate large movements which may disrupt the price and inadvertently snowball into a panic buy or sell, as well as "pump and dumps", manipulation and similar for-profit activities, whilst allowing long term price trends to proceed unhindered.

The primary components to achieving the above goal are a system buffer and "token" functionality. An additional preferred component is an exchange integrated into the economy which can be "trusted" to provide legitimate trade data.

The economic model is decentralized and bound by a set of rules and consensus and is autonomous.  No party has any control of the economic model, nor the funds available in the various buffers.

In the eMunie platform this exchange is decentralized and built into the platform natively, and all user actions and trades are validated by the network as well as the regular transactions, providing a trustworthy entity by which the economics can operate.

Stability Target

The stability target dictates the maximum desirable price movement of EMU over the duration of a year as a percentage. The economic model will attempt to keep within bounds of this target to the best of its ability.

This target is used at a much granular level most of the time, and it is easy to calculate the corresponding desired maximum movement over any period of time.

For example if the annual target was 10% and one wanted to calculate the daily allowed movement, it is simply 10% / 365 (or 366 for a leap year).

Delta targets are also used extensively, and provide a means to determine what the maximum allowed movement during two points in time may be.

Pressure

Trades on the exchange are converted to buy/sell pressure metrics which the economics model uses to determine both the estimated supply figures for that moment in time, and whether it needs to take action to ensure the price stays within target bounds.

A pressure metric in its simplest form is a percentile delta between the current and last trade for EMU in a particular currency pair (EMU/USD).

For example, if the last trade price was $1 and the next is $1.1 then there is a pressure of +10%. If the prices $1 and $0.90 then there would be a pressure of -10%.

Supply

The economics model can function in both fixed (such as Bitcoin) and elastic supply economies.

eMunie employs an elastic model that responds to "pressure" signals from the decentralized exchange, which are in turn used to calculate the supply/demand estimates at any point in time.  In the case of a supply deficit, a quantity of new supply being created and distributed to the various actors in the system as per a set of defined rules, an excess of supply results in EMU currency being burned by the system.

Tokens

Whether an exchange is decentralized or not, tokens that represent real world currencies are required so that users can "cash out" of EMU. This may be for a period of time as a strategy to maximize their position, or to exit the economy completely by later exchanging those tokens for their real world counterparts.

As eMunie is intended to operate almost completely isolated from existing centralized infrastructure, these tokens that represent fiat currencies are used extensively. Users that wish to cash out entirely would exchange these tokens for the real world counterparts via our TRAID system.

In the case of Bitcoin, these tokens are currently exchanged for fiat by the exchange at which they are held. Should Bitcoin ever advance to using decentralized exchanges and fiat currency on/off ramps, "colored coins" would suffice for use as these tokens.

Buffer

The buffer should receive a portion of all new EMU supply, allowing it sufficient funding to perform its task, and this portion should be significantly higher than any feasible holding by another entity in the system. In the case of the simulated tests, this buffer was set to 10%.

The buffer should receive real time trade information from the exchange, including the buy/sell pressure of that trade and the currencies being traded.

If the pressure percentile of that trade would exceed the allowed delta target, then the buffer is used by the economic model to fill that trade.

As the buffer will be both buying and selling EMU, it not only needs to have a quantity of EMU itself but also be able to hold various "tokens" that represent currencies such as USD which are being traded for EMU.

A critical feature of the buffer is that it is the only party who is allowed to convert digital currency to fiat currency tokens and vice versa, and do so in a frictionless manner without cost. All other parties in the system must trade their USD tokens on the exchange for other currency tokens, assets or EMU.

To maintain balance, should the buffer require some USD tokens, it will convert a quantity of EMU it holds into USD tokens at the current EMU->USD price and record it in a FIFO (first in first out) queue for future use. If later it is required that some USD tokens it holds should be converted back to EMU, it polls the EMU->USD FIFO queue and converts back to EMU using the values stored in those records.

This ensures that the buffer does not profit (or incur loss) from conversions and upset the balance of the system as would be the case if USD was converted back to EMU at the current rate, rather than the rate at which it was made.

Buffer Trades

The buffer only intervenes and fills trades if the pressure of that trade exceeds the target delta since the last trade. In the case that the pressure is beyond bounds the buffer fills the trade at the current maximum allowed ask as per the delta, which then becomes the current price for EMU.

For example assume the current EMU price is $1, the last trade was 1 day ago, and the max daily target delta is 1%. ($0.01) If a trade were now presented to buy at $1.10 per EMU, the buy pressure would be 10%, 9% more than the allowed delta.

The buffer would then sell EMU at $1.01, filling the trade and setting the current price to $1.01, which is the maximum allowed by the delta.

Likewise, if a sell was presented at $0.90 per EMU the sell pressure would be 10% (or the buy pressure -10%) and exceeds the allowed delta of 1%. The buffer would fill that trade by buying the EMU at $0.99 (converting EMU to USD tokens if needed at the current rate of $1.00)

Bitcoin Data

I sourced the Bitcoin trade data from http://api.bitcoincharts.com/v1/csv/ which has data from a number of exchanges and currencies from as far back as 2010. This data is simply formatted as the trade time, the amount of BTC being traded and how much for in a particular currency.

As far as I can determine, this data is every trade that ever happened on the exchange in question. I have been able to find all my past BTC trades that I have made on exchanges within this data set.

To ensure that the economics model can sufficiently handle multiple trade currency types, trade data for USD and CNY was used.

The USD trade data consists of 58M trades made between Sat, 09 Oct 2010 and Tue, 19 Jan 2016 for the major exchanges during that time, namely Bitstamp, Bitfinex, BTCe, Coinbase, Lake, and MtGox.

The CNY trade data consists of 274M trades made between Mon, 13 Jun 2011 and Tue, 19 Jan 2016 for the two major exchanges of OKCoin and BTCChina.

Data Usage

The trade data is fed to our economics model in series, effectively replaying the trades in the order they happened at many multiples of real time.

To counter the phenomenon of varying price across exchanges, and the arbitrage opportunities that come with it, the data was presented in batches from the same exchange for the same timestamp.

Say that Bitstamp had 3 trades at UNIX time 1307942004, and Coinbase has 6. The 3 Bitstamp trades would be applied together, with the 6 Coinbase trades applied after, and so on until all trades for all exchanges and currencies at UNIX time 1307942004 had executed.

Without this batching, the stabilized price of BTC has an small amount of constant "jitter" which was undesirable, with it this "jitter" is eliminated.

A secondary effect due to this phenomenon also needs to be considered when calculating the pressure percentiles. All pressure percentiles should be calculated only from historic data pertaining to the exchange which that trade originated.

In the case of a trade from Bitstamp, if the most previous trade executed occurred on Coinbase, a historic search should be made for the last trade that occurred on Bitstamp and the pressure percentile calculated accordingly.

Emulating Bitcoin

To ensure as close a simulation to Bitcoin as possible, we also simulated Bitcoins supply emission and the rate at which they were generated including halving. 10% of the supply emission was directed to the buffer as already stated, with the remainder going into circulation.

Initial Parameters

The simulation was executed with the first trade occurring on Sat, 09 Oct 2010 02:07:18 GMT which was made at MtGox and was the first purchase of BTC for $0.10.

The quantity of BTC in existence at this moment in time was approximately 4,205,200, 10% of this (420,500) was allocated to the buffer.

A stability target of maximum 10% was specified.

Results

The first test was the processing of USD trades only, and the results were extremely encouraging and interesting to say the least.

After the processing of the 58M trades over the course of almost 6 years, the ending BTC price on the last trade was $0.10085, almost exactly the same as the starting price of $0.10.

Over the course of all the trades, the low and high BTC price was $0.0983 and $0.10321 respectively. Which is obviously extremely stable when considering how volatile BTC has been due to its varying trends and amid large pump and dumps and manipulations.

Also of interest is the fact that at no point was the buffer in danger of expiring its resources, with the minimum and maximum available BTC quantities held by it being 420,500 and 999,126 respectively.  Due to 10% of the BTC issued from block rewards being directed to the buffer, its cumulative purchasing power never actually dropped below the initial value.

The CNY + USD simulation is currently executing, and due to the number of trades (over 320M) it is expected to be completed sometime in the next 12-18 hours. I'll report back with the results of that simulation when it has completed, but as of right now, the results look to be very similar to the USD only simulation.

Some other simulations I would like to run include reducing the buffer allocation and stability targets as low as possible while ensuring stability.

The data sets for these simulations will also be made available for download in MySQL dump format soon, and we will be constructing a basic presentation website where this data can be navigated and queried in a more human form via candle graphs and other charting methods.

Final Thoughts

Application of our stabilizing economic model to Bitcoin unfortunately has some fundamental consequences and I am not suggesting that Bitcoin should do it. The use of its trade data was purely to test our model with intense real world data giving us confidence in the model and the algorithms that power it, and also as a curiosity experiment with regard to Bitcoin.

Perhaps the most critical issue that would prevent any implementation of such a stabilizing model into Bitcoin, is the almost total destruction of the mining economy, which is fuelled by the speculative trading brought about by Bitcoin's fixed rate of supply emission.

In order to supply miners with an incentive should a stabilizing economic model ever be applied, Bitcoin would have to adopt an elastic supply model that, like eMunie, reacts to supply and demand instead of its current fixed emission policy.

Miners then would be rewarded not by an increase in the value of the BTC they hold, but by an increase in the amount of BTC that they hold instead.

Thoughts?

Ok, So I took the USD txns that Dan did from his simulation of BTC using the eMunie economics and aggregated the trades to a monthly open/high/low/close stock chart view.

Here's the BTC chart for reference (like we need reminding of what volatility looks like):  

Bitcoin (weekly view since Aug 2011) http://imgur.com/YYGsEjO (http://imgur.com/YYGsEjO)
Low $2.22 / High $1163

Here's the view if BTC was using the eMunie economics method (Baseline start cost $0.10): http://imgur.com/cMIHT2P (http://imgur.com/cMIHT2P)

min/max btc (from the chart above): $2.22/$1163 (delta: 1160.78 or 1160780.00%)

min/max emu (from the chart above): $0.09832/$0.10322 (delta: 0.0049 or 4.9%)

your model may have many fancy rules to control supply and demand, but you cannot control peoples desires.

even if you had rules to stop people selling if the price dropped. that is called ignoring orders..

also to note. by you controlling what is acceptable price movements, and you controlling the supply and demand, breaks many freemarket rules, and wont be a benefit to the community.
people would not use your exchange if you were ignoring or delaying peoples desires, even if the point would be to avoid price dumps.. and so your supply would drop out because people cant trade or react to price movements. which would affect the results because you wouldnt have the supply that was there in the historic data.

so the supply that might be used to hold up a resistance point to prevent prices from dropping would get weaker. because less users are trusting you with their funds.

people who dont withdraw, would instead change their values of their order to try getting into the 10% target rule just to get their order processed, even if it means losing out.

the end result would that once you do the first tweak. and ignore the first order. you can no longer rely on historic data.. people will move funds out or change their orders and so anything after 2011 is irrelelevant as the human element which you ave not factored in. would have changed orders.

so although your economics may look good on paper, i feel you are lacking in the social impacts of economies, which i do not think that you have added as a variable that can totally change any results you have created using logic alone.

EG

say i had 6 orders in historic data (b)=buy
(b) 0.105cent
(b) 0.102cent
(b) 0.098cent
(b) 0.096cent
(b) 0.094cent
(b) 0.092cent

lets say that was a historic trend where on a tuesday. you had a rule that no trades would be processed below 0.095. those last 2 trades wont just sit there as a unprocessed order creating a resistance point.. those trades would either get canceled and withdrawn so they can buy coin elsewhere at their desired price. or they would at worse change the price to be 0.096 just to force the order through.

by wednesday.. historic data is irrelevant as its no longer valid, different people are trading at different prices that history.
(its like the butterfly effect of time travel.. change one thing can change history)

i dont think you have thought about the butterfly effect of changing history

Just to clarify in case of misunderstanding, there are no rules that stop people from selling.  Orders will always be filled either by matching orders from other users, OR the buffer.

If the buffer does not have enough reserves, then that trade is able to move the price freely (assuming it is filled).  The buffer is not an infallible mechanism, nor does it attempt to halt trading on the event that it can't operate.

Example, if the buffer is out of reserves, the current price was $1 and a sell was posted @ $0.50...that sell would execute providing someone other than the buffer wanted to buy at that price.  The price of the asset would then be $0.50, even though it is well below the preferred minimum.

If then at that point the buffer was to get an amount of resource, it would not attempt to bring the price back to near $1, it would apply its preferences from the $0.50 price point that just occurred.

Does that improve your understanding?

Also, I chose the BTC test data as a source as it contains almost an entire spectrum of human trading behavior at the extreme.

A more stable currency will have a more predictable trading behavior, which in turn amplifies the stability of the currency further as a matter of course.  The live BTC data used was probably the most chaotic and difficult to stabilize, and as no order sentiments were modified (only the relative price/pressure), or dropped, it got a real work out.

Who exactly is funding the "buffer" (and why)?

(this is starting to look more and more like BitShares to me)

The system funds itself by directing a percentage of new supply created into the buffer.  In the case of an oversupply due to dropping demand, the system burns currency from the buffer.  Should the trend reverse and there be a supply deficit once more, it will receive its percentage of new supply once again.  Rinse...repeat.  (this was omitted from the Bitcoin simulation to ensure it was more in line with Bitcoins behaviour)

The token assets are then created by converting the base currency (BTC in our test, EMU in the real thing) back and forth between these token assets that represent real world currencies on demand.  

Only the system can do this direct conversion, no one else, not me, not you, your mother, or your dog.

That seems to imply that these new funds actually "have a value" but why do they?

(if no-one wants to buy them then their value would be nothing)

New supply is created because there is a shortage of supply due to increasing demand.

So actually they do have value.

So if there is no demand then no new supply is created?

Correct?

(this kind of circular logic is exactly what BitShares uses)

Yes correct.

Heh, I don't think its unique to Bitshares, this is standard supply/demand market mechanics which can and is applied to anything and everything daily and has been around for centuries!

So - the point that I am making is that you are assuming that there will be demand.

But - there may not be at all (in which case your modelling isn't really very relevant IMO).

I'm not sure how the level of demand has any bearing on the functioning of the stability mechanics as explained.

If demand is dropping then the price is allowed to drop with it, if its dropping too fast, then the buffer resources are used to prop it up a little in an attempt to ride it out.  If demand continues to drop and the price with it, the buffer will cease intervening and allow the market to set the price unhindered.

If there is little or no demand, that price may well be zero, and it would not be prevented.

Its designed to iron out the short term bumps, if the long term trend is down, then down the price will go!

My point is that governments such as China have tried and are failing to stop their stocks from falling (despite injecting billions of RMB per day).

No amount of manipulation will work - if it did we would never have had the GFC nor what is coming (which I think is going to be worse).

If you really have something that works better than all the other professionals in the world that do this stuff can come up with you truly deserve a Nobel prize.

And as I've stated, it's not the intention to stop the price from falling indefinitely if that is really what the market wants, that would rightly be a ridiculous objective.

But smoothing out the short term, in a controlled (not manipulated) manner is most certainly desirable IMO.  Or does everyone want speculative, manipulated crypto-currencies behaving more like commodities, that will never see mass market use because of the resulting massive volatility?

Another issue that faces traditional monetary systems is that the feedback loop is full of delays.  By the time the controlling authority has all the information about what the economy is doing and makes a decision on what the best course of action is, the economy is already doing something totally different.

In a system such as this, there isn't that large delay, its to the minute (or even second) information on economic behavior, thus the reaction to it will be more relevant and be more efficient.

It's hard to say - the way China has been trying to handle their share market melt down is to shut it down nearly every other day (and that isn't working if you hadn't noticed).

I would agree that there is little point in "delaying things" as you just end up with a "train-wreck in slow motion" (which is exactly what we are seeing in regards to the Chinese stock market).

But overall if the sentiment is overwhelmingly negative there is really nothing you can do to stop the downward trend.

But you don't know immediately if its a train wreck, or some whale trying to dump the price for his own gain.

If its a whale, and you can out play him, then isn't that better for the currency and everyone as a whole?

After a period of time, it'll become apparent if its a colluded play, or the real deal and at that point the best action can be taken.

When it is the government that is shutting down the trading day after day (and trying to buy enough to stop the drops) then you know it isn't just a whale (they would have executed such a whale here most likely).

We are facing "the real deal" in terms of another economic crisis about to hit us.

Well thats China's problem not mine :)

My problem is discovering a method that limits manipulative opportunities while still allowing the market to speak as a whole...and I believe the above does so.

creating supply.. hmm
so this is not bitcoin at all and nothing to do with making bitcoin stable, and more so to control volatility of an altcoin you create.
ok got it.

so when there is demand, you create new supply.. ok well your altcoin is now not deflationary but just another fiat emulator. and has lost its purpose as a competitor to bitcoin.

though maybe using some technologies of blockchain i presume, it wont be a replacement of bitcoin, but more so aimed at updating the fiat system

im sure a government may adopt your EMU coins as a national currency(maybe). where supply is no longer created via credit agreements, but instead the demand the population.

We'll see - there are very many talented minds in China that have failed to be able to stop this "slow train-wreck" which you seem to think your system will solve.

Why not offer your services to them (am sure they'd pay you a few billion RMB if you could solve their financial woes with it)?

Well if you re-read the original post, you'll see that I did not run the simulation with the elastic supply enabled, but with the emission algorithm as defined by Satoshi

So in fact this test was a very close simulation of attempting Bitcoin stability as the supply is not modified in any way other than diverting some of it to fund the buffer, and the overall emission follows Bitcoin exactly.

You don't need many, you need just one of them to discover the solution.

As for China's RMB, they really didn't start allowing it to quasi-float vs. the $ till around 2011.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Currency&symb=usdcny&x=37&y=9&time=20&startdate=1%2F4%2F1999&enddate=2%2F9%2F2016&freq=3&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=9&uf=0&lf=268435456&lf2=2&lf3=4&type=4&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11 (http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Currency&symb=usdcny&x=37&y=9&time=20&startdate=1%2F4%2F1999&enddate=2%2F9%2F2016&freq=3&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=5&maval=9&uf=0&lf=268435456&lf2=2&lf3=4&type=4&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11)

The issue with them attempting (and failing) to control a soft landing in the stock market is a different matter than their capital controls they use in an attempt to protect their stock exchanges.  

These stock market operations are similar to those used by many US exchanges as well  http://www.nasdaqtrader.com/trader.aspx?id=CircuitBreaker (http://www.nasdaqtrader.com/trader.aspx?id=CircuitBreaker).  Not exactly relevant to the discussion of our economics model as there is no autonomous entity within these exchanges serving to smooth out the volatility.

Huh?

You don't think that it is software that decides to stop the trading?
(the software might get its orders from the government but I am pretty certain that the actual decision to stop the trading is done by software)

Well - again - if you have done that then please give that solution to every major government in the world and collect your Nobel award (otherwise I guess we should blame you for the next GFC).

Sensing some animosity here to be honest.

I'm here because I'd like comments on the idea as a whole, positive and negative, things that could maybe be improved, structured reasoning why it might not work (despite the test data results that suggests the contrary).

Not just a "It won't work" and "GTFO and collect your award if you're so smart"

No one knows if it will work or not, no one has tried it before, so perhaps it should be given a little more thought before putting it in the "not Bitcoin, not Blockchain" trashcan

Stopping trades for a short time does little to smooth out movements. It only prolongs them to when the exchange reopens. Our stability mech. allows continuous operation.  

The grandiose claims made by so many of these crypto projects have basically not happened (beyond Bitcoin itself) so I don't mind to be portrayed as "suspicious" (but I am not being angry nor rude so I don't know why you pick the word "animosity").

The very fact that you would label someone just questioning things as "animosity" itself is curious.

Also the fact that you haven't called out @CfB for "trinary logic" is rather surprising to myself (do really think that there is any point to it?).

Basically, think of the eMunie system as you would the IMF SDRs http://www.investopedia.com/terms/s/sdr.asp (http://www.investopedia.com/terms/s/sdr.asp)

However, instead of a highly-bureaucratic and political system that attempts to manage supply based on having access to imperfect information from the delayed signals in collecting, generating and distributing reports (much like the FED) and that is only accessible for use by government entities, you could have a system that autonomously identifies supply/demand in near real-time and is able to be used by all Joes/Janes alike.

And if inflation (ie. new supply) is distributed equitably and fairly across all users based on their existing holdings then the net effect on them is zero.  

There are, and have always been, 2 variables in the value equation:  Price and Qty.  While btc and nearly all solutions focus solely on a variable Price model, this isn't the only one available.  I'm guessing the reasons there has only been a focus on price variability and fixed(relative) quantity is that we have only known of one way to manage the quantity variable:  central government entities (e.g. Fed Reserve).  

However, it should be self evident above based on the initial post that there is another alternative that did not exist prior to when centrally managed govt entities were established.

Again - you are assuming that anyone actually "wants" the supply (if they don't it is just some worthless thing being created).

This is very much what BitShares says about their stuff (and it all strikes me as being rather circular logic).

Most of those claims are a post on some forum and nothing more comes of it.

I'm presenting a real test that I did, with result data that I can provide.  That's not so grandiose anymore as I've done what I said I would, and I'm simply looking for verification with an open mind.

I don't think I've ever got a structured, well formed, detailed critique to anything I've ever posted on this forum, and that's simply all I'm asking for.  Perhaps I should stop trying.

If I've missed something, then the aforementioned would allow me to pinpoint it...being told "it won't work because of China" doesn't help me to highlight where I may have gone wrong, or even to allow me to provide a critical argument in return.

You can easily create back-dated models for trading that work perfectly on history but will fail after they work live so it isn't a valid test.

(anyone who does automated trading knows this)

Should the price be rising because there isn't enough supply in circulation to meet demand, then it is safe to assume that it is wanted.

If you want to talk about assumptions, Satoshi assumed that someone somewhere would want 50 BTC every 10 minutes, regardless if they did or not.

I know, you'll state that the act of mining suggests that someone wanted them otherwise they wouldn't expend the resources to get them....sure ok, the act of posting trades with buy prices higher than the current suggests the exact same thing.

And what about back-dated models for trading that work perfectly in BOTH environments?  Because the model is actually sound.

well if you are not creating the supply when emulating the bitcoin historic data. then your results would fail because the historic data would be void once you start playing with orders (butterfly effect)

you cant change orders and think that the future demand/supply and orders would still exist. so im still wondering why you would think that bitcoin would be stable based on your use of irrelevant historic data.

anything after the first day of daytrading in 2011 becomes a new dimension and no longer part of historic data.

people who cant get their orders processed because your system cant find a counter order to match. would cause people to withdraw funds(affecting your buffer) or they would change their order price(affecting history and demand). which as i say makes history change. and no longer relevant to use any further data from the next days data, as it would be invalid and not the same.

or more concisely put

EG.
if you changed the winter 2013 spike of $1000 so that it stayed around the $100 level. lots of people would withdraw from your system(buffer supply dries up) to sell coins privately on other exchanges. which would mean that your exchange is then lacking supply and stuck at a false price of $100 with no resistance or no demand to sell.. what would then happen is lots of dollar holders throwing in more dollars to buy your limite supply of cheap coins that are left(by those stupid enough to not withdraw) thus they would lose out selling too cheap and the buyers would get cheap coins to then arbitrage until all supply buffer is gone.

leaving your system in a totally different dimension of value than other exchanges.

the only way your system would work is if you were the only exchange and no one had any other means of exchanging away from your system.

and so i think your system would be more suited to the fiat controlled and centralised economy. and not so much to manipulate bitcoin at the expense of people who want a true freemarket

Of course - but if they don't post any trades with buy prices higher than the current then the price isn't going to rise.

If panic happens then there is simply no magic that is going to stop a collapse.

I never said that there was, it its inevitable it will happen.

For a start - where is a "professor of economics" that backs your theory?
(presumably you would at least have one)

Keep at it Fuserleer! Always nice to see something new..  :)


So - accounts can have the total amount of EMU increased, to ensure that the overall price stays stable ?

I may have 10 EMU, and that is worth $1. But if the price of EMU halves, I will have 20 EMU, but still $1..  (I think ?)

Can you only increase EMU per user, and remove EMU from the Buffer ?

What happens if the Buffer is empty and you still need to remove more coins.. ? (global demurrage ?)

Oh, I don't know.  How about Milton Friedman (ie. The Quantity Theory of Money)
http://www.econlib.org/library/Enc/bios/Friedman.html (http://www.econlib.org/library/Enc/bios/Friedman.html)

On the Quantity Theory:
John Maynard Keynes accepted the theory in general and wrote:  "This Theory is fundamental. Its correspondence with fact is not open to question."

I didn't alter the sentiment of the trades though, the sentiment of every single one of those 58M trades is exactly as it was.

If that trade was posted because the trader wanted to cash out because the price was $1000, then that same sentiment is present in our test.

Therefore if the sentiment isn't changed, then there is no butterfly effect.

In fact I would argue that due to this, it is HARDER to stabilize the price, as we are applying rational sentiment against prices that now make it irrational, and irrational trades are MUCH harder to stabilize.

For example User A has a Bitcoin that was worth $1000, as of the pump at the start of 2014, a few days later it was at $800, a lot of people cashed out because the sentiment was panic.

In our stabilized model we have that same trade, but it is applied to a stabilized price with the same sentiment, panic.  Even though in our stabilized test, there was no reason to panic because the price hadn't dropped 20% in a few days, perhaps only 0.5%.  In the stabilized environment that user A probably wouldn't have sold, but in our test he still process the sell with the same sentiment, even though its now irrational.

WOW!

So I need to have a Professor that endorses my idea before I should present it?  ::) :o

but by changing the trades, (making the $1000 never happen) you are changing the sentiment, which then effects future sentiment. and that is the exact problem, by not considering that sentiment will change because of your actions. you have failed to take that into account..

as ciyam said.. it wont work with live data as that involves live human emotion and change of sentiment in reaction to your model, and thus using historic data after the first day of changing it. makes all further days of historic data irrelevant

your model would only work on a centralised control of currency where you are the only exchange and hoarding environment available

If you look at what is going on in this field then I would say the more respected academics that you have to endorse your ideas the better (you think it is acceptable to have zero?).

Otherwise should we say that you and @CfB are equals then?

Did you read what he wrote?  The $1000 trade DID happen.

What you're talking about is the market dynamics during a pump (FOMO) and dump (fear), which is correct.However, you're wrong. The test is done so that the sentiments are tested, which gives a worst case scenario for the price stability mechanism. In a live testing, these extremes will be much less pronounced and hence the stability will be easier to keep. It does not invalidate the algorithm, it backs it up since it will likely not see such pressures in live environment.

seems like over 5 years of your model it never reached $1000

anyway.. goodluck with your emu coin.. it wont work on the freemarket, but may be a good demonstration for the fiat centralised and controlled economy

So isn't taking the next logical step in rationally implementing the Quantity Theory of Money (first proposed in the 80s when technology would have been limited for a useful implementation) considered relatively the same thing as having it supported by a sizable population of academia?

Almost but from the wrong angle :)

The price of EMU has no bearing on how much you hold, if you hold 10EMU and the price drops from $1 to $0.50 you still have 10EMU.

The demand of EMU does have effect though, so if the price of EMU is going up due to demand, and there is not enough supply, new supply is created and distributed in a number of ways.

One of those ways is "dividend on balance" (or stake), so if there was 10% new supply created, you would receive a 10% dividend on your balance.  Now you have 11 EMU, not 10.

Its preferable when attempting to maintain a stable price, that absorbing new incoming value is done by an increase in quantity, and not the price of each unit.


Yes if the buffer has an excess, then it will not be allocated a portion of more supply, only users will (getting a bit out of the realms of the discussion here, but it was a good question!)


The buffer can always remove EMU from supply (fill sell trades) as it is able to do the conversion of EMU to another token at will and "in place"

Example, you are selling 1 EMU for 1 USD.  The buffer has no EMU and no USD tokens, it can take your 1 EMU, convert it to 1 USD token, and send it back to you.

You can then exchange that 1 USD token for a real USD dollar via the TRAID network (again a bit out of realm for this topic, but I want to be through)

Later the person that exchanged you 1 real USD for your USD token wants to by an EMU, he posts a trade and the process repeats, converting that USD token to EMU if possible, or your trade of that USD token sits on the exchange until someone other than the buffer comes and fills it (at this point, the buffer is not able to intervene so the prices run unhindered until it can).

I am just wondering why there don't seem to be any economists (Hungarian or otherwise) backing your model.

(if your idea is backed by the so-called Hungarian's then why are they not being supportive of it?)

Yes, the baseline (start) cost was set to $0.10.  The btc prices were then normalized to this value since that is the expected start value for eMunie (tentatively).

The sentiment doesn't change!

That trade even though it is now only at $1 is processed as if it was at $1000.

Actually the start cost of $0.1 was based on the first every trade of BTC at that price, from Mt.Gox.

Surely to get backing I need to present my idea first...which is what Im doing here and seemingly getting scolded for it.

I don't think that the Chinese economy can be compared to eMunie at all. The Chinese economy is an extremely manipulated house of cards build from an insane amount of (often hidden) credit.

Well, Friedman died 10 years ago, but that's irrelevant to the facts of his published theory.  I'm guessing since Einstein is dead light can now easily go faster than 'c.'

Okay - but I would not have thought that this forum would be the appropriate place to present your idea (as I doubt hardly any such people would be looking at this forum).

Also - it is starting to look like you have a bunch of shills here.

If you want to be taken seriously I think you should perhaps ask them to tone it down.

So answering questions is now considered bad form?  What a concept. 

If you were just answering questions (that I'd actually asked you) then that would be totally okay - but I actually haven't even asked you a single question (I was asking the guy in charge).

This forum is relevant to crypto (which is the field I work in) and Bitcoin (which is the subject of the test), why would it not be relevant?  ???

Why would I ask them to do that, they are free to post on whatever they like, as it happens they are avid eMunie supporters and are attempting to assist in explaining and answering the questions raised.

I'm certainly not going to start ordering people what they can and can't post, just in case others look upon me in a bad light for it when the topic of conversation is a legitimate one.

Well - if your project's topic starts to look much like @CfB's project in terms of the way that posts are being handled then I think you should seriously question whether you are doing the right thing.

So you endorse censorship?

Do you endorse @CfB's "trinary logic"?

(simple question - which others are awaiting your reply on)

easier to report this topic to be moved to the altcoin category, as its not bitcoin. and all fake bitcoin tests yielding fake results, purely done to try getting to talk about their altcoin on the main bitcoin category by subtly talking about bitcoin.

but i do hope they do have some utility in teir own economy. but definetly doesnt belong in the bitcoin category

Heh ok I'm not playing this game.

I'll come back with a professor.

No it wasn't, I spent time setting up the test to behave like Bitcoin, time I could of used on other things as I thought it would be interesting for all to see how Bitcoin would behave with this applied.

So - to all others - someone who won't even agree that "trinary logic" is "snake oil" should IMO be viewed as suspicious.

(you have been warned)

It was nothing to do with the topic of your question, its purely due to how this topic, a topic that I wanted to seriously discuss, has already descended into the same nonsensical, time wasting, childish, "tit for tat" games that happen in the Altcoin section.

I had hoped that at least here, where the so called "big boys" play, I'd have a chance of a serious, engaging discussion, regardless of if my model is correct or not.

As that is clearly not the case, then I just refuse to continue.

your test lacked open supply of the freemaket, arbitraging, reactions to your prices changes(sentiment) and so the results are not conclusive to what bitcoin would really be like if emunie exchange was around in 2010.

yo might have great success concentrating on a altcoin you have full control of and try selling your theory to the fiat economists. but it falls flat in the bitcoin freemarket as it doesnt take much of bitcoin economics into account.. mainly fiat economics of centralised demand and supply

I'm not sure how else to convey that the sentiment behind the trade didn't change, nor how to say again so that it is understood that the supply and demand in this test was disabled.

exactly.. you didnt consider that sentiment would change. that people would react differently after you change the order matching. you presumed that people would still hand over funds in the same manner no matter what.

if you did include the variable that sentiment would react to your order matching tweeks. then the results would be different.

again how can i convey that sentiment behind a trade WOULD change, and thus the supply and demand beyond the first day of trades would change.. if you just accounted for such deviations

ok I think I understand what you are saying.

The sentiment, if the price was stable, would likely change for the better (less panic dumps, and dragon chasing pumps), but we are still applying the trades with the worst case sentiment.

So, if we are stabilizing with the worst case sentiment, that sentiment is now irrational compared to the price, and it's harder to stabilize a price when the trades are being made irrationally.  That then should imply that the model is able to handle very extreme situations.

if there were more stability in bitcoin within your exchange.. then there would be less people playing with them in your exchange as a day trading platform

although a usable currency stability outside of exchanges is good. but on exchange stability/stagnancy of prices are not good. it would effect peoples decision to hoard large sums on exchanges because there is no need to daytrade.(altering your supply buffer)

thus even in a stable exchange. your supply buffer would not be the same. and because there is lack of supply. people can abuse that. by arbitraging. and only using your exchange as a temporary 'flip' rather than a permanent store

in short. the results you released would not be the same. you cannot predict the reactions of change. your theory will fall flat on an open market. because you can never code sentiment accurately.

you would need to be the only wallet service and only exchange available to be able to control 'sentiment'..

however ill say it again, your altcoin could be useful if you aimed your theories not at the bitcoin free market. but at the fiat/altcoin centralised markets. and tried engaging your discussions in that economy. as the results (which still wont be perfect) would however have less variables to attempt to simulate.

again you would have more success and possible fame. if you aimed your PR at a centralised solution for currency economics

Isn't that the wrong way around?

If the price being more stable means there are less people trading, then the buffer would have MORE resources and not less, because less trades are in the range where it needs to intervene, so it intervenes less.

The sentiment change would be:

A. the vast majority of traders would stop pumps & dumps, as they would not be profitable
B. few may try a coordinated pump & dump of an incredible amount in order to defeat the system buffer

it's not impossible to defeat the system (by exhausing the buffer), but because the buffer receives new currency during the pump, it's very difficult to accomplish.

With eMunie's economic model, BTC would be a digital currency, and not a speculative digital commodity.

It sounds like an amazing thing - yet I don't see the peer reviewed algorithm design do I?

Why is that?

(just like I don't see the stuff behind other alt crypto currency promises)

You don't "trial an algorithm" on a forum (you do, however, manipulate and trick people on a forum).

Well maybe if someone would assist me, which is what I'm asking for, instead of just stating I need a professor, I need a paper, I need this, I need that, maybe I'd be able to provide it.

I presented this here (and other places) in an attempt to maybe find someone that is knowledgeable about these aspects, and can help to determine if it really IS a thing or not.

A lot of people have criticized me for attempting all this on my own, but when I come to actually look for assistance in verification, I get zero.  

And in the case of you, it seems you're now trying to incite a character assassination :|

I am certainly not trying to incite a character assassination but I do wonder about the strategy that you are using here (as it is so far the same as what @CfB is using).

If there is simply no academic that has any interest in your project then you think that somehow that is their misunderstanding?

thats the utopian dream if you are the only wallet service and the only exchange available..
again failing to see the sentiment of a open and free market.

This got me thinking, so I'd like to clarify this "flipping".

I think you are stating that traders could use the buffer against itself to make a profit on trades.

That is they buy at the buffers lowest bid, and sell at its highest ask, but the buffer doesn't post trades that other traders can see, it only reacts to trades that others posted.  The rules that define how much it will buy/sell are strictly enforced but easy to calculate what the buffer will buy and sell at in any given moment.

Also bear in mind that the conversion of EMU->BTC/USD/GBP or anything else is frictionless and costless to the buffer, its a zero sum game.  If it didn't receive any new supply, and started with 1M units of the base asset, it could convert all of the USD, GBP, BTC token assets it made back to the base asset and it would end up back at 1M (this is due to the FIFO conversion queue).

So lets say that a trader A thinks he can profit, the buffer only buys if the ask is below current price-max delta, and only sells if the bid is above current price+max delta

With that in mind, how could he profit, I don't see any immediate means to do it?

No, but for them to have an opportunity to become interested in the first place, they have to know about me and my ideas, otherwise how else would you suggest we discover each other?  "Looking for distinguished Professor" adverts in the personals of newspapers?

If the idea really has zero merit, then fine, but what if that isn't the case?

It's more efficient for me to disclose the beginnings of an idea, and be informed by someone in the know that "I see the idea, but xyz" than for me to spend a lot of time writing papers, studies and everything else. Especially if there is an immediate problem in my critical thinking that I am not seeing, which someone else could point out to me saving a lot of wasted effort on my part, but maybe provides inception of a better idea themselves off the back of mine.

no!

they sell at a higher price elsewhere... and then deposit fiat into emunie to buy your cheap controlled coins.. then withdraw.

basically the users dont hoard coins long term in your "buffer" they just use your exchange as a quick 2 minute flip.
im guessing your economics doesnt extend to flips and arbitrage of the open market.

so maybe its best you stick to your strengths of the centralised single exchange economy. as your theories fall flat and dont work out on bitcoins open market. but i do hope you get some fame in centralised markets and (utopian dream hope) that you become the person to solve world fiats issues.

Why would people buy at a high price elsewhere when they too can buy on the main exchange at a lower price? - it will never happen.

IMHO in order to achieve mass adoption outside of the IT crowd a wallet service requires the following properties:

A. Fast payment. Customers are not willing to wait for more than 10-15 seconds for payment processing.
B. Value stability. After looking at the menu and ordering a steak dinner, customers cannot be expected to pay 10% more due to market instability when they are done eating.
C. Decentralization. The payment system should not be controlled and potentially manipulated by a bunch of people.
D. Scalability. Preferably scalable to Visa dimensions..
E. Easy of use. A grandma should be able to use it without a computer science course.

Currently everything available on the market fails on at least three of these five properties.

Bitcoin fails at A, B, arguably at C (huge block chain size, Chinese miners behind a slow firewall controlling a large portion of it), D (7 TX / sec) and arguably at E.

There are two chief issues in play here, I think:

1. I believe CIYAM's point is that there is nothing backing the stabilisation of the currency, except for the currency itself, which is the same way bitshares works. If demand crashes, there could be a downward spiral of devaluation causing a black swan. This is largely a fair point, which can only be resolved by having the backing currency off chain, which is hard to say the least.

2. Having the blockchain as a market maker subjects the currency itself to the adverse selection problem due to 'informed traders', which all marker makers face. This scenario manifests itself as traders buying from you when you ask is too low and selling to you when you bid is too high. There are a proportion of informed traders present in any market, alongside 'noise traders' who buy/sell at any price. Your simulation won't have included the effect of informed traders because it only manifests itself in live forward testing. However, you can add it to your simulation - informed traders know with certainty the future direction of the price after time period X, so they profit from your pricing mistakes.

edit: I meant to write about the difference between point 2 and bitshares approach, which you might find helpful - bitshares doesn't have a blockchain market maker, instead it socialises the adverse selection risk, because individual users lock up collateral (equivalent of your buffers) in order to create their pegged assets, and other users are required to take the other side of the trade. This way, the currency itself doesn't inflate wildly out of control in the case of a black swan, instead individual users get margin called.

lol.. goodluck with that theory.
it will only work if there was 1 sole exchange in existance... learn the term arbitrage. and why arbitrage is a real thing.

i have to point out another fundemental flaw in your economics understanding.

bitcoin never is, was or would be a commodity.

a commodity is a raw material that can be deemed as an equal quality to others of the same type. but is then used to create something. where the value is not derived from its production, but comes from the utility of what it can create. (the demand)

EG
wheat creates bread
oil creates car fuel
gold creates electronics and jewellry.

.. now then
bitcoins cannot be created into anything else.. bitcoin, if you knew much about economics is an asset. its value is based on its own merits of what it is, not what it can be manufactured into.

i think that the misconception that bitcoin is a commodity must be the analogy comparison to golds rarity.. which makes some believe bitcoin must be gold in every characteristic that gold has.

this is where it goes wrong..
although gold can sit as an asset, it is also a commodity as described above. bitcoin is not a commodity and is only an asset... to be more precise an digital asset currency.

Ok now I understand!  If you had explicitly stated 5+ posts ago that these were external exchanges we could have saved some time, as with your mentioning of the buffers and such, I wrongly assumed you meant the internet exchange.  Basically then your argument is the same as monsterers below?


Indeed, and again, I never suggested that it could indefinitely prevent this from happening, but that it simply postpones the "crash" in case the cause is actually a whale/s colluding as per an agenda.  But the same can work in reverse surely, if the backing currency crashes, then the value of the asset it is backing is also in jeopardy.


Right so that brings me to the crux of the issue that needs to be addressed.  You are right, these informed traders were not accounted for in the test, I considered it and maybe wrongly determined that their effect would not be great enough to deplete the buffers.

However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it.  Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?

fiat
A. 3-5 business days. for wire transfers, cheques and even paypal withdraws
D. comparing Visa worldwide is a failure of understanding visa.. dd you know that Visa has not 1 ledger.. but multiple ledgers. and the statistics of world transactions is based on the combined sum of all their ledgers.. on that note. i wish to combine bitcoins ledger to represent visa USA, litecoin to represent VISA europe, feathercoin to represent Visa UK.  and a dozen other altcoins to represent the other dozen Visa ledgers.. and then lets combine the total transactions per second of cryptocurrency as a whole


now lets talk about this topics theory..
A. lets delay day trading instand trades because the emunie exchange has to find order matches to stay within the 10% preference. and delay some trades if they look like pumps/dumps
B. lets have a small value change per day, killing off day traders and ultimately alot of bitcoins free market spirit.
C.. lol so the solution to decentralization is to take away the dozen open markets and replace it with 1 market that has hard code to control trades...
D. if emunie is the only exchange, scalability wont be a problem. bitcoins free market utility and choice would die and so people would stick to fiat.
E. maybe emunie can make a easy use wallet. but desire to use bitcoin wont be there as its no longer better than fiat

It can, but there is no dependency between the two, which is critical. A dependency can cause the spiral of death as devaluation causes further devaluation and market panic.


You can actually get an estimate for the proportion of informed traders present in the market from your data - it can be approximated by orderflow, so take a sliding window of trades and calculate the buy volume and sell volume, then the VPIN = (buy-sell)/(buy+sell). This goes between -1 and +1, so just abs() it to give you your normalised proportion.

Right, you don't want dependency, but even without out any, the effect can still occur.


Ok great thanks for that.  I might call upon you as I'm implementing the modifications if thats OK with you , as you've looked into Informed Traders and other such phenomenon in more detail than I have.

I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price.  (Are there even any valid reasons why they would?)

As reported by Bloomberg, the Commodity Futures Trading Commission has now ruled that bitcoin, the peer-to-peer digital currency, is a commodity. This means the CFTC can regulate it and punish evildoers.

https://www.equities.com/news/is-bitcoin-a-commodity-or-a-currency

the same reasons that there are 12 prominent exchanges in existance. if you can explain why there should be only one. then you will have your answer.

i would explain the answer but there are too many reasons to list them all.
summerised
features(troll boxes, put and call options. shorts vs plain standard no fancy feature, basic trading)
barriers of entry (kYC or no kyc preference)
liquidity(how much volume(your buzz word buffer))
trust that its not going to fail
trust that the prices move enough to make profit on
limits or lack of financial limits to deposit/withdraw (AML or internal profit making vs zero fee trading)
arbitrage oppertunities..

i left that to last. because although your mindset might be a stable currency for consumer spending of goods and services.. exchange day traders love the opposite. they love price movements.

well we both know how american financial commissions work.. look at their blindness around the sub-prime loans that they classed as good investments..
so i dont hold much 'water in the faith of american financial commissions.

i prefer to use logic, and understanding or the reality of things. rather than what classification sits in purely based to make the commision most profit via licences, fines, taxes and fees

Ok thanks for the list, some I agree with, some I do not so much.

However your last point is interesting and it captures exactly why Bitcoin will never be a mass market currency....because its a commodity used by traders to increase wealth, and that is not what a currency should be.

you know day traders dont just trade commodities.. they trade ASSETS too..
bitcoin is a asset. so dont think about the oil market.. think about the stocks and shares market and your mindset will shift away from thinking about bitcoin as s commodity (based purely on the ill informed analogy of gold) and instead think of the asset trading.

lastly bitcoin is a great currency..
instead of centralized inflation that causes people to not save their income, and to spend it so much they even get loans to spend more, causing the country to have debt issues..

bitcoin is deflationry.
infact the coins i said in 2012-15 i am now spending happily without a care in the world. because the deflationary nature has helped me to turn a one hours wage into a weeks worth of spending. all because i saved.

inflationary currency is bad. deflationary currency is good.

Well, that's the difference between theory and reality. In theory BTC may be an asset and not a commodity, but in reality it is a commodity.

In theory a bottle of water is a harmless drink, but try to exlain that to the guys of airport security.

bitcoin is not a commodity.. which proves the commission have got the wrong theory, and it will eventually bite them in the ass.

its like the commission want to classify a duck is a crocodile.. so they can make money putting up signs in childrens parks next to lake that say, "dontfeed the crocodiles' they can class it all they like and get all the grants and budgets to make profit from all they like, but the reality is a duck is a duck and kids will still feed the ducks because they dont see crocodiles

Franky, the reality is that if the US goverment says that a duck is a crocodile, and sticks to it for a sufficiently long time, the duck becomes a crocodile.

and while america plays with crocodiles.. all 300mill amrican people see less utility in having "crocodiles" in their life.. yet
1.3BILLION people in china order duck
1.2BILLION people in india order duck
1.1billion people of the continent of africa order duck
742 million europeans order ducks

and now america loses its freedom to trade "crocodile" and the rest of the world wonder why duck is so cheap in america. and a great chance to arbitrage it on the crocodile exchange.. which chinese and indians find it weird to use a crocodile exchange that only supplies cheap duck.. but ultimately they dont care they are only going to use the crocodile exchange for a 2 minute flip to grab cheap duck

The Chinese adapt a lot of American things. I think Peking Crocodile would be on every street corner within 10 years.

That was my reasoning as well.

A. 3-5 buisiness days for the payment to come in, but you have a central authority that can promise you within seconds that the money WILL come through. This element of trust makes VISA effectively REAL TIME.
With bitcoin you can't truly use it to buy day-to-day items, buying over the internet sure, but a coffee at starbucks? or a burger?

D. VISA can have 50 ledgers or even 1 trillion. This isn't the same as saying bitcoin represents X and litecoin represents Y.
VISA as VISA is a single protocol that can process many TX's at once. The exact details on how they implemented their technology isn't relevant, what is relevant is the outcome.
If you are able to force EUROPE to use ONLY litecoin, and the USA to use only BITCOIN, and somehow this is able to withstand VISA scale TX's world wide - FINE. But the current status is - if I want to use Bitcoin or any other crypto that has any activity at all, I will need to wait - this is what eMunie comes to fix.


Tell that to the people who bought at $1K and are now holding worthless bits and bytes.
In order for a crypto to actually work as a currency, for people to truly use it, and not use it as a means of converting fiat back and forth, you need it to be stable.
I will never use bitcoin to pay for anything, for the simple reason that what if 5 minutes after I pay for my dinner (for example), the price rises by 50% due to some whale buying.
So now the meal I just payed for $60 has now actually cost me $90.

In eMunie, when more supply is made, it is spread between all "share holders". Meaning that holding will benefit you. When the system creates new currency due to increase demand, a certain percent goes to those who have done work (i.e validate tx's and other actions that help the system) and a certain percent goes to the share holders based on the amount of shares they hold.
You should expect over time, that even though a single coin is still worth the same - the total amount of coins you have will rise, making your 1 hours work multiply.

Have you considered a totally different approach?

Lose the fungibility of the stable currency, instead have a leveraged trading market, where users go long/short against a feed price by putting their base currency up as collateral. A long must be matched with an opposite short in order for a trade to begin, and either side can close the trade at any time (by settling their collateral requirement which maybe +ve or -ve, paying the other side of the trade), which causes the other party to match against the next eligible order on the book.

This gives users a way to gain exposure to a stable currency, but you lose the ability to transfer it.

I considered this approach but it wasn't acceptable to the goal, I don't want to lose the fungibility and I don't want to have any reliance on any human element (going long/short).  With an elastic supply my goals can be achieved without these more complicated additional mechanisms.

This test was to trial the buffer mechanics, and how it responds as a reaction to trade pressures in a fixed supply environment such as Bitcoin, and as far as I'm concerned the test was a success as I'm using historical data and using the same buy/sell pressures.

However, the argument up for debate here has now focused on trader mentality, and whether my test is valid when considering them.  There are two main user sentiments that need to be accounted for when modifying the trades using historic data.

The first is, a user wants to buy X BTC, and in this case the volume doesn't need to be modified.  The second is, a user wants to buy $XXXX worth of BTC and in these cases the test data volume DOES need to be modified.

In a live environment, the users trades wont be modified so the argument presented disappears.

The main issue is that if I scale the volume, then the test needs to move away from emulating Bitcoin, as with scaled supply there will not be enough BTC available to fill these scaled trades.  To do this test the elastic supply needs to be enabled, it will stabilize and output a price curve exactly to the one posted, except the volumes will be much larger.

I'd like to do this volume scaling and run the sim with the elastic supply enabled, for my own peace of mind, and to appease people here...I'll post back the results if there is interest, but it wont be applicable to BTC anymore, so this topic now is probably not relevant in this forum.

Fuserleer,

I respect you're one of the few in this space actually working towards innovating, it's good to see more out there.

My opinion on the volatility issue isn't one of crypto but of free markets and human nature. Every little trade prompts different trades in reaction, a sort of causality chain based on user decisions. To try to control this is to try to restrict this causality chain, which just forces it into a different set of parameters.

Let alone the many different factors that go into free markets such as "volatility increases on full moons", among many other external factors that influence a free market.
Here's a good read on how lunar cycle affects markets: http://nowandfutures.com/large/E2008-1-1629870.texte20lunarcycle.pdf

Constraining human psychological tendencies in trading and setting value of an asset in hopes to attract more users to "stability" that allow them to say buy a cup of coffee without having a market fluctuation, is going against the basis of free markets.

Market cap and agreed value consensus generally have a greater effect on price stability in my opinion, as we've seen in bitcoin as its market has strengthened over the years.
It's a trade off, to attract people wanting "stability" is to push out the day traders that like to make money on the "volatility", when a currency will naturally mature over time with more users agreeing it is a decent container for their wealth.

I don't think it's right to take the free out of free markets.
To have a market's growth constrained to a few constants in my opinion is something that will work against you more than for you.

Thank You,
Viz.