Bitcoin Forum

Recent bitcoin price volatility has sparked growing interest in creating a "coin" designed to remain price stable over an extended period of time.

For speculators, it can be best thought of as a complementary currency to Bitcoin. When Bitcoin's value is rising, speculators want to hold Bitcoins. When Bitcoin's value is falling, hold StableCoins. Why not just let a "trusted" exchange hold on to your fiat currency while Bitcoin values are falling?... Really?... No sense enumerating all the posts on exchange fraud, hacking, closures, account seizures, etc.

IF a theoretical StableCoin existed, it would be possible to trade between BitCoin and StableCoin at will. All while remaining completely anonymous, even to the exchange that facilitates your trades. In addition, you wouldn't need to "trust" an exchange to secure your fiat, your coins or protect your personal information. Both sides of every trade could be done while keeping your coins securely in your wallets, in their respective chains.

At least that is the vision...

Currently, no stable bitcoin-like currencies exist. Over the past four years many individuals have kicked around promising ideas, but no social moment has every formed in support of a stable coin.

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The point of this thread is to create a gathering place for people who SUPPORT the concept of a stable-value COMPLEMENT to bitcoin. This thread is NOT the place to bash the StableCoin concept or criticize its supporters. Nor is it the place to bash any particular BitCoin attribute or its supporters.

SUPPORTERS, Please post a message introducing yourself and please LINK any papers you've written or insightful posts you've made on the subject. Many people have hidden many insightful things somewhere on this forum. I'd like this thread to serve as a quick reference for any new supporters that might arrive.

To aid discussion, I'd like to propose the following definitions.

StableCoin - An abstract class of COINS which have the shared property that their monetary policy (coin creation/destruction bounding algorithms) will never allow the coin's future value to "tend toward infinity" or "tend toward zero" given the case of unbounded adoption and unbounded increase in external value traded.

GrailCoin - sub-class of StableCoin whose value attempts to always tend toward the value it had on the day the coin was first launched. It should retain long term value stability even if every reference its value can be measured against varies independently.

InertiaCoin - a subclass of StableCoin whose value is intended to deliberately resist change. InertiaCoin may be pushed off its initial price by extreme external conditions. But it will always re-stabilize to some appropriate value. (non zero, non infinite) Any coin with infinite inertia IS A GrailCoin. But not all GrailCoins need be InertiaCoins. Grail coins always move back to their initial value when pushed off. InfiniteInertia means the value can never be pushed off.

PeggedCoin - a subclass of StableCoin whose target value is dependent on some outside value.

GoldCoin - a specific PeggedCoin whose value is pegged to 1 troy oz of gold.
CPICoin - a specific PeggedCoin whose value tends toward a particular measurable consumer price index.
FiatCoin - a specific PeggedCoin whose exchange rate value tends toward a particular fiat currency.
DollarCoin, EuroCoin, YenCoin, etc. - A FiatCoin intended to always trade 1 to 1 with USD, Euro, Yen, etc.

MordorCoin - a sub-class of StableCoin requiring a fixed expenditure of electricity to mine.

I'm going to link active [StableCoin] threads here. That makes them easier for new arrivals to find. PM me any active threads you think should be added.

StableCoin (https://bitcointalk.org/index.php?topic=178140.0)
New alt idea, way more stable and widely used. Ideas welcome. (https://bitcointalk.org/index.php?topic=172549)
Has anyone proposed a coin that adjusts its supply to stabilize prices? (https://bitcointalk.org/index.php?topic=178027.0)
I will create a forked bitcoin chain (https://bitcointalk.org/index.php?topic=181488.0)
TrueCoin <-- coin with moderate inflation (https://bitcointalk.org/index.php?topic=183269.0)
StableCoin: please criticize (https://bitcointalk.org/index.php?topic=176748.0)
Looking for inflationary cryptocurrency dev (https://bitcointalk.org/index.php?topic=190030.0)
GRouPCoin a currently running LinearCoin (https://bitcointalk.org/index.php?topic=67991.0)

Historical
Goldcoin and Stablecoin proposals (https://bitcointalk.org/index.php?topic=29135.0)

Link in the signature :D

Hi I'm Red!

I came here first on July 19, 2010. I'm a fan of P2P distributed system and anonymity. Back in 2010 it occurred to me that privacy was disappearing as everything we did became tracked transaction by transaction. I'm a big fan of physical cash. It always gets you the best prices. Has the least overhead. And nobody asks for your name, drivers license, phone number, zip code, or other personal information when you spend it. That is superfluous and generally considered impolite.

However, physical cash doesn't travel well over the internet. And as more and more transaction took place over the internet. Less and less would be anonymous cash transactions. That seemed HIGH RISK to me from a social perspective. I'd been thinking about ways to create internet digital cash when I ran across a slashdot article on BitCoin. It got me really excited. I'm a software developer by trade, so I dug in to see technically how BitCoin worked.

Like most people I was blow away by Satoshi's genius. Sure I was disappointed by some details, things weren't really as anonymous as I would have liked. But I could live with everything except the monetary policy. That seemed (to me) to doom BitCoin niche status over the long term. Maybe a big niche, but not a replacement for physical cash.

I started these threads to hopefully begin discussion about possible StableCoin alternatives.
BitBucks - a discussion starter (https://bitcointalk.org/index.php?topic=917.msg11029#msg11029)
Bitcoin as a GET System (https://bitcointalk.org/index.php?topic=872.0)
The StableCoin concept wasn't very popular. I gave up and left the site for while.

----

In September of 2011, I got a PM from Etlase2 calling me back to this site to look at his EnCoin (https://bitcointalk.org/index.php?topic=44682.0) proposal. He claimed you could get stability by requiring the generation of 1 EnCoin to ]REQUIRE expending 1 KWH of electricity. I thought I was misunderstanding him because that concept seemed stupid. There's clearly not enough information... At least I thought at the time. And nobody would waste so many posts on so stupid an idea.

I decided he must be trying to say, "1 EnCoin is equal to the COST of 1 KWH of electricity." That still seemed impractical and stupid but at least the units of the equation matched. Both were measures of value at least. That had to be what Etlase2 meant. At least, that's what I thought.

So even though I thought it was impratical and stupid I decided to explore the concept. Surely Etlase2 wouldn't allow so many people to call him an idiot, over and over, if he wasn't on to something? It didn't take long before I had some plausible ideas so I posted them in the EnCoin thread. Etlase2 kept calling me an idiot who couldn't understand his most basic concepts. So I'd look at what I wrote, find a flaw and fix it...

After about a week, I found a solution that created a StableCoin. (https://bitcointalk.org/index.php?topic=44682.msg546418#msg546418) It used the cost of electricity to discourage over production of coins. But it didn't actually need to peg the price to the cost of electricity. Instead it used non-linear equations.

I thought it was genius. I'd proved that a StableCoin could theoretically be created. Etlase2, however, still thought I was an idiot. My presumption wasn't what he was saying at all. I had failed to understand his most basic premise. He was proposing that it always on average required 1 KWH to generate 1 Coin.

I thought the concept was silly, but just as an exercise I decided to see if I could make his concept work. I could! He was correct a stable coin could be created using his principles. So for the sake of having another concrete example of a potential StableCoin, I wrote it up for discussion as GEM. (https://bitcointalk.org/index.php?topic=47628.0)

Now when I wrote it up, I still thought burning so much energy was stupid. It SHOULD NOT require so much energy to create a stable currency. WTF! the Federal Reserve and Bureau of Engraving and Printing combined don't use that much energy! But at least three people were discussing the concept so I decided not to derail the discussion. I figured that if I could convince 10 people that a StableCoin was plausible, then I'd work on convincing them we could make the whole system more electrically efficient.

Unfortunately, we never got more that 4 people to believe that StableCoins could be created. Everyone presumed a central exchange was needed to directly make monetary policy decisions. We'd PROVED the opposite at least 3 separate ways, but it was a hard sell to a hostile audience. I got bored and left this site, again.

----

I came back a few days ago on a whim. I figured that after a huge spike and a crash, more people might see the value of a stable valued electronic currency. Surprisingly, a thread called StableCoin (https://bitcointalk.org/index.php?topic=178140.0) started to gain a little traction. As did another thread (https://bitcointalk.org/index.php?topic=175676.msg1828789) I tried to be interesting in (http://Re: Bitcoin trades the inequity of dynastic power for the inequity of early adoption).

In one of the threads I suggested (https://bitcointalk.org/index.php?topic=178140.msg1865323#msg1865323) we create an index thread so we could all find each other now. No one objected, so here we are...

Actually, increasing or decreasing the supply of coins attempting to be exchanged is all that is required. You don't have to "haircut" the total number of coins in existence.

In any StableCoin, as soon as the value falls below target, its no longer "rational" to continue non-essential coin exchanges. Better to wait until the value inevitably returns to target. Hoarding, in this situation, is the behavior you want to encourage. No sense punishing that. My proposals only tax/destroy the coins of the "irrational" actors. Those who knowingly sell their coins below target. They already know they are taking an irrational loss. Making their potential loss bigger discourages some from doing so.



This is an insightful concept I've never seen discussed in the context of creating a StableCoin. Would you consider expanding on your thoughts in the StableCoin discussion thread? (https://bitcointalk.org/index.php?topic=178140.msg1855870)

Red I'm glad you have a new thread and your encouraging a good productive conversation here.  I am convinced that solving this stability problem will be for Crypto-Currency what solving the double-spend problem was, a Paradigm shifter.  I'm very interested in seeing a solution implemented in Freicoin and if a solution that I find satisfying is produced I will advocate for it to be implemented there.  Alternatively a new coin could be established.

A few general features that I think any solution will have.

- Separation of transaction processing from money creation:  The BTC solution (brilliant in its own way) of combining the coin creation process with the transaction validation process is inherently unstable because the whole system is dependent on a continual coin creation process which in turn depends on valuation.  If these processes can be decoupled it opens up considerable flexibility.  Proof of Stake or some other novel method not yet created may be the solution, or a new compensation structure for the miner.

- Feedback Mechanism that creates And possibly destroys coins:  I think everyone basically in agreement on this what ever solution your advocating, the code works a bit like the difficulty adjustment code or even cruder.  Once a 'push' is established the protocol creates or destroys coins until the 'push' stops.  Thus a target quantity never needs to be identified directly, just a direction of change.  Creation is much easier then destruction so the implementation of the destruction process is a challenge.  A solution that only creates might be viable but I'd be much more confident in a bi-directional solution

- Fully distributed without central point of failure:  One of the core principles of peer-2-peer systems and one I'm committed too very strongly.  This more then any economic reason is why I'm opposed to taking external inputs because of the 'injection' problem, who passes the data into the chain, if its one person its a point of failure, if its a multitude then the input is just hearsay and opens up the next issue.

- Resistant to manipulation by actors with perverse incentives:  Controlling the supply of money is THE single greatest power in a currency.  It matters not what money is if you control the quantity you control all, you can enrich or ruin borrowers or lenders at your pleasure.  Any system remotely worth of the name Stable will need to be resistant to manipulation and SOPHISTICATED manipulation at that.  This is why something trivially easy to spoof like transaction volume is useless (even if it DID reflect value which is doesn't).

Further thoughts that pertain more to my specific Market based solution and which are mostly for Red's consumption.  Let me start off with some back ground of how my thinking evolved and see if this is at all helpfull or stimulates some idea on your part.

My initial goal was actually the regulation of the Demurrage rate in Freicoin.  Under Gesells theory this rate should equal the 'Liquidity Premium' of money at all times.  Liquidity Premium is simply the value that money has above its face value because it is 'liquid', all financial assets have varying degrees of liquidity but currency by definition has the highest.  Ultimately a fixed rate was chosen as their was a good historically researched 5% figure recommended in the literature, but this is not really an issue for a none demurrage coin.

My though was to create 'Bonds' out of the block-chain (this would be money creation) and then have buyers compete to bid up the price of these bonds.  The Bond are just illiquid coins, like immature coins but with some specific and long period they are illiquid.  So by buying illiquid coins with liquid ones your basically selling your liquidity back to the block-chain.  If the current demurrage rate is too low then the bids should fall for bonds as people find it more desirable to keep coins liquid, thus demurrage rises.  The opposite happens as the bids rise.

While this was a good first stab I realized quickly that it completely ignored inflation and that it would probably be necessary to take that into account.  Also the number of bonds created was arbitrary and with only one side of the market being human it would be easy to manipulate by falsely up biding which would lower demurrage, a fairly obvious group-wide collusion might set in.

I thought that perhaps all coins could be created as these 'Bonds' and sold on the market, miners receive the sale price but otherwise don't control the process so they can not withhold supply.  Bonds could be of a slow-payout type too rather then a fixed period frozen coin, this would make them in essence a second kind of coin in the system with different rules governing their movement.  The goal would be to make them an illiquid instrument so they might be non transferable.

It then looked like I needed a second market to solve the 'untangling' problem, one market could predict inflation and the result of that would be subtracted from another market per the Fisher equation Interest = Inflation + Liquidity Premium (or any combination of two markets that allow the two values to be found).  I began to think the market had to be composed of two opposing groups of bid and offer so they could both be driven by profit motive and would determine the volume of trade too.

I spend a little while reading up on Friecoin, Demurrage currencies and Gesell. It gave me a bit of an epiphany. Sorry, I'm not a true believer... But it did give me added clarity. A while back a guy was advocating for a new COIN with a concept he called the Universal Dividend (https://bitcointalk.org/index.php?topic=796.msg8925#msg8925). I thought the concept was so naive and stupid that I'm pretty sure I ran him off the site.
EDIT: Found this Universal Dividend Currency link. http://wiki.openudc.org

Now, however, UD, Demurrage, & BitCoin all make me realize that there are orthogonal dimensions to coin design.



I've noticed two other related dichotomies.

Facilitating Trade vs. Saving
Speculative vs. Value Preserving

As Impaler pointed out, all these seem directly related to time.
"Likelyhood of a coin owner's wanting/needing to spend coins during a given period of time." Is an external force that acts on human behavior. Human behavior affects exchange value.

There is another human dichotomy that drives different peoples behavior in different ways. It seems to involve the emotional want to be rewarded for...

Work Performed           vs.    External Value Created
"I did what I was told"         "I created a new *good* that can be traded"

As services become increasingly important in our economy, this dimension becomes increasingly emotional. This emotionality also seems to be related to the perception of time as an actual *good* that can be saved and traded.

"I performed a service so someone else wouldn't have to, so they could..."

Work Performed           vs.    External Value Created
"Rest on their laurels"         "Create additional new *goods* that can be traded."

I think all of these dichotomies will end dictating what kind of "StableCoins" each of us thinks should be created.

Hi,

While I'm relatively new to thinking about Bitcoin, I do have a ph.d. in economics - that is, an agonizingly long training period of thinking carefully about one narrow question. The economics of money is far away from my field, though. My most relevant background before two weeks ago was spending a few months tweaking the rules of Settlers of Catan with friends trying to introduce different types of money (to take the place of barter exchange).

What I did take away from studying economics, however, is that when you are trying to understand something complicated, it is essential to first consider the simplest possible example. Only then can you see clearly that you don't understand the problem. ;)

The situation with Bitcoin is that most enthusiasts do not believe that stable prices are possible without centralization (if they even agree that stable prices are desirable). To me, then, it's clear that priority #1 is to explain a variant of Bitcoin that exhibits self-stabilizing prices in the simplest possible setting. So that's what I've been working on.

Sure enough, I've found over the past couple days that even after making all kinds of simplifying assumptions, I was confused about how my idea would really work. So I'm delayed in writing my answer up. My new target release date for my brief paper is at the end of next week.

What makes Bitcoin attractive is:
The value of Bitcoin as a medium of exchange is inherent in the protocol.  
The ledger is maintained in a P2P system and not centrally controlled.
There are a finite number of coins.

Volatility is a result of demand because of what Bitcoin is, keeping the benefits Bitcoin offers, while reducing volatility is in effect manipulating demand.

This volatility in price is the market distribution mechanism (http://en.wikipedia.org/wiki/Market_mechanism) at work and consistent with the laws of diffusion of innovation (https://en.wikipedia.org/wiki/Diffusion_of_innovations), once about 2/3ds of total adoption is complete you will have relative adoption and as a result relative stability. If Bitcoin reaches maximum adoption early say tomorrow, the economy will stop growing and the $/BTC will deflate to the size of the current economy and stabilise, base on the existing economy it is estimated to be around $2-$10.

However if the human preference factor is to cause it to grow, Bitcoins value is not a reflection of the economy size but a reflection of the benefits of storing fungible and transferable wealth in a finite medium that is secured and distributed on a P2P network, that demand will naturally be subject to human preference and is reflected as volatility.

One improvement I could think to achieve your goal would be to not adjust but build in the rate of supply to reflect (a Logistic Function (https://en.wikipedia.org/wiki/Logistic_function)) and not the current step function to a normal distribution model (https://en.wikipedia.org/wiki/Normal_distribution), and have new coins mined on a Gaussian Curve (GaussCoin) to better correlate supply with growth, for added stability and greater and faster user adoption all the while not manipulating demand

Adrian-x, it's understandable if you missed this request by Red.  But please do respect it.  I guess you're free to post whatever you want, but I would ask you to use one of the other thousand threads to debate whether StableCoin is a good idea. I would really enjoy it if we could set that debate aside here and stay on-topic.

Sure I understand, wasn't bashing the idea, I was making what I thought was a realistic way to achieve the goal
"One improvement I could think to achieve your goal would be to not adjust but build in the rate of supply to reflect (a Logistic Function) and not the current step function to a normal distribution model, and have new coins mined on a Gaussian Curve (GaussCoin) to better correlate supply with growth, for added stability and greater and faster user adoption all the while not manipulating demand"

Hi Adrian-x. Welcome to the discussion.

I do appreciate your wanting to preserve bitcoin's "hard money" philosophy. And I agree a better initial distribution function is a key to increased "stability and greater and faster user adoption."

However, personally, I don't know how to predict the initial adoption curve of a new coin. I'm pretty convinced that the rate of actual user adoptions is, very likely, directly related to the proposed initial distribution function. For me that means solving simultaneous non-linear equations and I suck at that.

However, way smarter people than me have written volumes I'll never read unless given a starting reference. And that is the whole point of this thread. I'm actually reading your references in between typing. Thank you very much for the links.

A concept that intrigues me is, say for discussion, a Gaussian based initial distribution DOES IMPLY a Logistic Function based adoption curve. Let's also postulate that the "natural" public adoption logistic curve tends toward a 15 year period. BUT, in coding, we guessed the wrong timescale. Say we chose 30, or maybe 10 years instead.

Have you written or posted about how the "actual" adoption curve would be affected?

Hi, I'm Etlase2. I used to be called etlase, but that account was squelched and posts deleted for vehemently speaking out against bitcoin just prior to the 2011 bubble and collapse.

Being of a programmer's mind, I immediately went to create something better. The first four designs were called Encoin, which attempted to associate coin value to the electricity cost required to produce them. During this time, I read hundreds of papers on cryptography, several books on economics, researched various different economic and monetary theories, and argued with many people.

The latest design is Decrits, which has dropped the idea of a coin having any direct relationship with electricity. The link for the proposal is in my signature, but the design has had many overhauls and fleshings-out since then.

I made a post describing how the minting system would work recently, so I will copy and paste it here. I spent tons of hours designing a system different from bitcoin and that would require several pages to explain, so please assume that the things I take for granted have been proposed, in my notes, how to work.

https://bitcointalk.org/index.php?topic=178140.msg1890016#msg1890016


First of all, the energy usage is only one facet. The cost of hardware *does matter*. The human resource cost *does matter*. It doesn't matter what the mhash cost is in real terms is--as long as you can foster competition, people will find ways to do better, and this in turn must raise the difficulty to where the mhash cost is in line with whatever inertiacoin's (potentially original) mhash cost is.

The original way I came up with to foster this competition was to algorithmically change the coin award at certain intervals. During these intervals, miners would be encouraged to lower their output, because if they don't, the difficulty is going to increase. However, more efficient machines would not really be bothered by this and would be able to profit handsomely during this interval. However, for whatever various reasons that could thunk up for this, more efficient machines may not want to or can not oblige, and this could cause a longer-term inflation of the crypto CPI.

I will walk you through what I am currently thinking Decrits will do:

1) It will algorithmically determine the number of coins to be created in the next Mint Block, as I call them.
1a) This number of coins is determined by a percentage of transaction volume over time. (note: for this to matter, transactions must be charged a percentage fee, which in Decrits is 0.01%)
1b) This figure will be difficult and costly to manipulate because it will require significantly increasing the transaction volume of the entire network over a period of a year or more while paying those fees.

2) A Mint Block cannot begin until enough money has been transacted to warrant it.
2a) This will be based on either a (large) percentage, equal to, or a (small) multiplier of the number of coins transacted since the last Mint Block.

3) Once enough money has been transacted, those who wish to create money will have to join a queue to begin the Mint Block.
3a) For the first 25% of the queue, 10% of the individual coin award (the amount each queuer will receive) must be supplied in the currently accepted difficulty with a 10% winning hash and an account number. (note: this can *always* be accomplished in 40-50 bytes because of the account ledger)
3b) For the rest, 5% of the award must be supplied. The most efficient are the most likely to start the next block, but we do not want to unnecessarily raise the difficulty if the majority of people are less efficient, so they get a slight bonus. (This will eventually lead to deflation if we do not account for it, and perhaps because of money supply manipulation.)
3c) Once 75% of the the block's worth has been queued, a minimum amount of time must pass before the queue will close. This figure will be based on some percentage of the the average time it has historically taken to create a Mint Block. (This means that magnitudes more powerful ASICs can not shut others out)
3d) If more than 100% have queued before the minimum amount of time has passed, a random selection of the queued minters will be made to complete the block.

4) Once the block begins, all minters are encouraged to mint at once because:
4a) The coin award is higher the faster you finish. Likely +10% for the top 25%, +5% for the next 25%, -5%, and -10%.
4b) Taking longer than an algorithmically determined amount of time (based on prior blocks) will result in penalties of at least 10% and perhaps more. (e.g. if everybody finished past this time, even the top 25% would still only receive -10% of the promised coin award.)
4c) At some point the block will close, and unminted coins are lost.

5) (Tentative) After the block is over, minters will be randomly assigned to groups (probably of 40) to determine the 10/5/-5/-10 payouts.
5a) This means that there will be groups where ASICs fight ASICs and GPUs fight GPUs (NB: obviously not all of them). This reduces the overall profitability potential of ASICs.


To avoid the p2pool-like data spam, the number of coins mined per queuer must be relatively high. I think the target length for each block will be around 5-10 days. This requires commitment from those minting. It will be annoying. And the fee to join the queue could be completely lost. 50% of those queued will make less than the award.

In addition to all of this, we must eschew mordorcoin and give money away for free. Now we know for damn sure that new money is needed with the difficulties associated with minting. The written decrits proposal proposes giving away 5x of this block of coins to transactions and 5x to existing accounts, both randomly (blocks of accounts will be stored together, and this will be the starting point for awarding free money to them because awarding every account is infeasible in a network of any reasonable size). This area can be nitpicked, but I have come up with some very solid solutions.

In addition to that, because network expansion could easily outpace the time constraints set on Mint Blocks, each successive Mint Block within a defined period will increase the tx/account award further. The second block in a row will award 6x to each. The third will award 7x. This may max out at 10 each, or maybe it could go on continuously (perhaps after 20x the difficulty could start increasing say 3% per block; with so much new money in circulation [especially to transactors], if this causes mild deflation it would likely not have any problems being counteracted). So even in the worst case scenario of everyone instantly switching to ASICs and intentionally not raising the difficulty, designing and producing those ASICs will never be profitable. Plus the inflation has to catch up and raise the average amount of transactions over an extended period, or the ASICs will simply run into a wall where they can not mint for extended periods.

I haven't got a solution but my initial though was to look at Bitcoin and try and fit the current adoption rate to the new coin adoption rate.  

History shows us when a superpower like the British Empire gains a relative monopoly in gold, and uses its military might to control other countries gold, what happened in the "free" New World of America is the market just used silver instead, the "Tea Party" was an uprising agenised the British Empire because all triad taxes had to be paid in gold, which had to be obtained from the British Empire and the Empire control the gold monopoly as a predictable result exchange was unfavourable.  What we learn is money that is free of manipulation, control and somewhat limited is a good foundation to build an economy that will out produce all others.

I see Bitcoin becoming the equivalent of the British Empire's gold, and a possibility for a better distributed cryptocurrency becoming the New World's Silver. (Litecoin and other alternates at this stage share the same distribution model as Bitcoin and for that reason don't make a viable alternate.)

Someone in another thread pointed to a video I won't reference it, as it is misinformation regarding peek oil being a myth, the video does make the valid point that rising prises, encourage, innovation and alternate market solutions. It is in this mechanism that supply and demand should influence or increase the new coins to meet demand.

So working with the preface that rising demand causes prises to rise, the introduction of new coins could be distributed to users for; 1) Mining; and 2) maintaining the Blockchain, if an effective way could be found to measure demand that isn't linked directly to price, you could solve the problem.  

A small tid-bit of an idea with regards to that 'futures-market' idea.  What if a token existed that conferred the privilege of mining future coins? Without this token a person can not mine, a Proof-of-stake algorithm would be utilized on these 'futures' and they would very much resemble the classical use of futures to buy the fall harvest before the exact value of that harvest was known.

Now this token provides someone with a deflation prediction with something they would value as in the future they can realize the value of deflated coins by mining the coins themselves.  Because mining is no longer PoW it is a simple matter for a client node to mine from this token, naturally these cryptographic tokens will be called ORE.

In order to predict longer trends ore comes in different types that are for different amounts of time into the future.  Shortest duration ore can be used in say 3 months, while the longest duration would be something like 30 years and the intermediates would follow a simple power of 2 relationship (and we could even give them metal names too just to be cute).  The mining process simply uses a modulus on the block count to determine what kind of ore is valid for each block so theirs an endless rotation that provides opportunity to mine all the ores in every hour.

Each grade has its own market and this provides us with a more nuanced picture of future inflation and deflation are likely to be and helps stabilize the system.

Now that I've read yours and Etlase2's ideas again, I think you are both on to the same principle.

As I read him, his ideas is more like investing in a temporary mining company that may or may not end up being profitable for you in the near future. Before any mining can start, sufficient people must put at risk sufficient (A) stake. If enough people (B) don't buy in, the venture collapses before it can start, and the organizers loose what they've staked. Once the venture launches, an varying amount (C) of gold is mined each month investors get paid by they're share.

I read yours more like free-range berry picking. (X) number of berries grow in a field every month. But if nobody pays a picker to go gather them then they're eaten by birds. Investors contract with pickers by the month. But there are only (Y) number of pickers available and each can only pick (Z) berries/month. If you have contracted with a picker but no longer want the berries, you can sell the contract to someone else.

Hi, I am wingding.
I appreciate very much the initiative taken here.

I have scientific background in technology and have been reading articles from time to time about digital money since the 90s. (I also read Simon Singh's book about the history of cryptography, which I higly enjoyed and recommend)  However, when I stumbled across bitcoins in mid 2012 i realized immediately that Satoshis brilliant work was it! This was the digital money that would work!

It took some time before I actually bought some coins, but I was lucky to to do it before the real hype started. When it crashed down from 260 to 55 in a few days, I felt a really deep dissapointment and gloom. I did not loose any money, but I realized that this bubble thing is likely to happen over and over again. And that will prevent bitcoin from becoming used for online merchandise.

I have described the issue more deeply here (with some nice graphs): https://bitcointalk.org/index.php?topic=179961.0

and a shorter version here: https://bitcointalk.org/index.php?topic=181488.0

So my solution is not very fancy and advanced, but I think it will work, in the sense of keeping prices more stable and encouraging spending of coins and not only hoarding.

Hi All,

Not much to introduce about myself. Very little technical knowledge, but have an interest in economics and alternate ways of organization of society.

Here are my thoughts on the issue of a stable crypto coin. Caveat, They don't form a coherent whole.

[Thought 1  - Locking of coins] 

There are 2 sources of inflation in a crypto-currency. There are the new coins generated and there is the influx of already existing coins coming into the market on the sell side.

I asked a question earlier in the forum about "locking" of coins, rendering them unspendable for sometime. This would create a clearer picture of the money supply that is in actual usage now.

Right now, people say that a lot of their coins are in cold storage, but we have no way of verifying the same. They can appear anytime in the nearest exchange and drive down the price to whatever the market will bear at that time. So stablecoin needs to have a way of clearly placing coins in cold storage in plain sight, with clear indicators that during the next few hours, days or so, more than X number of coins or Y percentage of coins, simply cannot be traded. Thus, not only is the money supply (M1, is it?) in plain sight, but money placed in short term and long term locked coins (bonds?) is also in plain sight.

The issue really is that these bonds will also be traded and we may be back at the same place where we are now, but atleast merchants who deal only with the coin can be more assured, I think. How to incentivize people locking up their coins publicly, not really sure.

I read a few threads on this and realize that all of your thinking on this is much more advanced, but my above point was not made explicitly anywhere, so I thought it is better to put it out there.

[Thought 2 - Liquidity, Velocity, etc.]

The best suggestion that was made in this regard was coin days destroyed, but coin days destroyed could be manipulated by round tripping to one's own account. To counteract that, one can have a minimum transaction fee. A transaction fee however, is something that should be decided by benchmarking against competitors.

[Thought 3 - Demurrage]

The simplest forms of demurrage are flat percent off every account and a flat fee off every account. One is a flat tax, the other is a regressive tax. For a currency, the first one seems to be the better. An authority imposing a currency may have the second to persuade people to centralise their account (maybe with a bank).

A progressive demurrage may lead to people choosing to split the currency across many accounts, thus not yielding much more than a flat percentage.

[Thought 4 - Incentive]
List of people to incentivize
1. People holding the currency, but not too much
2. Verifiers/miners
3. Merchants providing new and needed products to the community
4. Publicly locked coins

So, there they are, my thoughts or a incoherent ramble, as some might portray it.

To what real end? Something I've learned over going through the process of doing the whole stable currency idea is that you can't brute force the price to some acceptable spot, you've got to let it run free a little. Your view here is colored by bitcoin's heavy one-sidedness that comes along with its currency distribution scheme, and I think your fears would have very little place in a currency where the supply of new money was not so heavily restricted.

If hoarders hold back in an attempt to increase the price, minters create new currency for a profit and bring the price back in line. Hoarders are no better or worse off, though the value in the economy has arguably increased (hoarders chose not to revert back to fiat). Any rash of selling below the cost to produce coins is a lot less likely, because everyone has an idea what currency can be created for. It's a braking mechanism. Bitcoin's cost to produce tends to move with the price of bitcoins; a stable currency's cost to produce should try remain as stable as possible. So while bitcoin can lose or gain hundreds of % in a day and market movers can take advantage of fear, anyone manipulating a stable base cannot take advantage of that fear.

PS - An interesting side effect of the Decrits proposal, where people purchase 1 year shares for a meaningful amount of currency and receive a portion of transaction fees as payment for helping to secure the network, during periods where there is mild inflation due to whatever reason, buying shares for a small but guaranteed return will temporarily lock money. Periods where price inflation is experienced are even more beneficial times to purchase shares because the tx fee is a percentage of each transaction. Thus, inflation = more fees. It encourages temporarily removing money from the economy, and this locked money is an easily verifiable thing and part of normal network activity.

Really interesting ideas blogospheroid! The group is really getting larger!

Just for your reference:
Impaler is working on Freicoin. It is demurrage based. He is also kicking around ideas on locking coins.
Glad he mentioned it. I'd forgotten Etlase2 was fleshing those ideas out as well
I'm glad you mentioned incentives. That's one of my favorite topics! Nobody ever wants to discuss "manipulating" the users.

I cannot deny that bitcoin's structure influenced me on this. And I know that the price will run free, even if only a certain percentage of the coins are transactable at any given moment. The question is, does it add a little more stability or not?


I'm sorry if you've answered this one before, but what prevents this from becoming a mordor coin, burning up resources indiscriminately?


Decrits sounds like a very interesting proposal. I need to read it in more detail.

Whether it does or not, you have not come up with a way to incentivize it, and thus no one (rational) will do it.


It's all good, I prefer discussing this stuff in threads rather than the numerous questions I get over PMs because then I don't have to repeat myself! :)

In the other StableCoin thread - https://bitcointalk.org/index.php?topic=178140.msg1890016#msg1890016 - Although I did paste it in this thread as well, there is more context there

Relevant part is at the end:

"In addition to all of this, we must eschew mordorcoin and give money away for free. Now we know for damn sure that new money is needed with the difficulties associated with minting. The written decrits proposal proposes giving away 5x of this block of coins to transactions and 5x to existing accounts, both randomly (blocks of accounts will be stored together, and this will be the starting point for awarding free money to them because awarding every account is infeasible in a network of any reasonable size). This area can be nitpicked, but I have come up with some very solid solutions.

In addition to that, because network expansion could easily outpace the time constraints set on Mint Blocks, each successive Mint Block within a defined period will increase the tx/account award further. The second block in a row will award 6x to each. The third will award 7x. This may max out at 10 each, or maybe it could go on continuously (perhaps after 20x the difficulty could start increasing say 3% per block; with so much new money in circulation [especially to transactors], if this causes mild deflation it would likely not have any problems being counteracted). So even in the worst case scenario of everyone instantly switching to ASICs and intentionally not raising the difficulty, designing and producing those ASICs will never be profitable. Plus the inflation has to catch up and raise the average amount of transactions over an extended period, or the ASICs will simply run into a wall where they can not mint for extended periods."


Now I will be repeating myself, but that proposal is over 9 months old and it isn't fair to go back and change it all to fit my current ideas because the discussion will look weird. But it covers the major points well enough. I have 40-50 written pages of tweaks and ways to make it work better as well as multiple ideas on how each facet could work. Things that I would like to eventually flesh out publicly to reduce the chance that I missed something. I think one more proposal will be in the works and then it's time to finally start writing code, and hope some more will join up.

I agree. The incentivizing aspects need to be discussed.

My first thought is that similar to what you suggest for distributing new coins to transactions and accounts, it can be modified to transactions and locked coins, maybe weighted by how long they keep it in freeze.

But if you are trying to lock coins during inflation, there probably shouldn't be free coins being given out. I suppose if you could determine, somehow, that there are too many coins and then later reward those who locked money. But this seems convoluted to me. Like I said, stop worrying about a little bit of inflation. If there is more than a little bit, there is something wrong and locking coins isn't going to fix it.

A coin with predetermined difficulty

Imagine a coin that is exchanged at $100, and mining it costs somewhat less. Different from bitcoin, the difficulty is not adjusted according to block production. Hence, if an increased market demand takes place, the price will go up, but so will also mining, which in turn increase the supply and work against the price increase. In the case of a price decline, so will the profit from mining, and fewer coins will enter the market.

The mining difficulty could be predetermined to double each 18 months, following Moores law. I believe such a coin would show more price stability, and a value strongly correlated to energy costs. It would certainly have a different price dynamics than bitcoins.

If only there were a link in my sig that goes into massive detail about such a system.

@wingding, we've "imagined" that coin a number of times. See my GEM proposal linked in my introduction post. Etlase2's proposals are based on that concept as well.

@Etlase2, been looking at Ripple's underlying mechanics. They've implemented a lot of the stuff we've wanted to do.
1. Keeping a balance sheet instead of separate inputs and outputs. (Encoin style)
2. Distributed consensus building. For this they used the personal trust rules I described somewhere.
3. Instant irreversible commits based on that consensus. (Encoin)
4. No mining rewards. Peers validate the ledger because they have a long term self-interest in doing so. (My assertion)
5. No cpu power wasted on POW at all. (My assertion)

Edit: WRONG! Ignore this presumption
6. (unconfirmed presumption) Every Ripple peer is a stakeholder with a vested interested in stable valued XRP. They will use a centralized LETS-like process to "fairly distribute" some initial  XRP among early adopters. With the goal being to drive the initial XRP exchange price into a pre-planned trading price relative to some Fiat benchmark. After that Ripple will release XRP from their huge reserve in order to meet demand. This will be OK with a consensus of users because stability is a quality of every user's social contract with Ripple.

Neither of us was a proponent of the number 6 implementation. However, we were both in favor of the stability social contract idea.

I've come up with an idea for the simplest (for me to create) InertiaCoin I can think of. I'm going to write about it in a separate thread. It is based on the "complementary currency" idea (a la NameCoin). It will use mixed-mining so there is zero extra PoW to be done.

It will use BitCoin's transaction fee to reward miners and discourage chain bloat. BUT, there is no preset mining reward. Over time mining rewards will vary with monetary policy to create price stability.

Monetary policy will be set in a completely distributed fashion. It will use a proof-of-stake "Vested Interest Voting" system. In other words, users who don't vote are presumed to be OK with the status quo. Those who want a change in the current coin creation/destruction policy, Vote. Voting can be done at any block change. Creating/destroying coins will be done similarly to my GEM proposal.

Any initial thoughts?

By the way, this is the Cheap and Sleazy version of my plan. I have a much more stable version. And a PeggedVersion. But before we get lost in details, I want to see if there is any interest at all. I think if I don't act on the idea immediately, Ripple will run the table on Coins.

I think that it is extremely difficult to have a new coin succeeding without strong power or support behind it. Even though it may provide more stability. When the fresh markets realize that that most bitcoins were premade before supply rate was halved, the hoarding/scarcity problem becomes evident, and new money will seek their way into alternatives like Litecoin and Ripple. I still think still the fork/twinchain/branch concept could achieve something, because it could be a healthy mutation of bitcoin, and not something entirely new.


 

Another thought.

From Decrits, I got the idea of using transaction fees as a proxy for GDP. In a corner of the blogosphere, targetting a level path for the nominal value of GDP is being talked about as the correct way to target the money supply of an economy. i.e if by a certain time, nominal gdp is not as high as the level calculated by the growth path, then print money. If it is more, then withdraw money from the market by selling assets.

I, personally am in favour of such a policy for statist monetary policy. NGDP does look better than inflation targeting or money supply targeting.

So, a policy appropriate to crypto currencies could be to target a steady growth in nominal transaction fees. Have an initial booting up period where anyone who can bring in a certain amount of hashing power, brings it in and gets coins. It is a pure mordor coin during this initial period. After that (2-3 years, maybe, anybody have any ideas on how to determine when a crypto currency has stabilised?), the targetting mechanism takes over.

If the transaction fees paid in a certain interval of time (maybe a week or fortnight) exceed the level target, then automatically lock up a percentage of the money in every account. Coins that can be used now, lets say block height 99, get locked so that they can't be used till block 149. Ownership is maintained, but usage is constrained
 
If the transaction fees paid are below a level target, then automatic unlocking of locked coins occurs, Coins locked till block height 140 get changed so that they can be used in block 90 and so on.

The level target for transaction fees could be a linearly increasing one, exponential or sigmoid.

The initial bootstrap is tough. I was thinking 3 years. However, instead of pure mordor coin, the "early adopters" would get multiples of the coin award. Perhaps 10x for the first 4 months, then 9x, and so on until the last 4 months at 2x. This would hopefully be enough time to see a reasonable transaction volume and distribution of money among many people (while yes, giving it a slight pyramid distribution to encourage adoption that quickly flattens out). Then flip the switch and people no longer need to mint to get free money. Might be a big deal like the first bitcoin halve, and merchants would be encouraged to start getting in the game.


I'm sorry but I think this is a terrible idea. You propose the exact opposite of what you should when the economy is expanding--you are strangling it instead of encouraging it. All to prevent price inflation temporarily if something other than expansion is happening (and cause deflation if it is expansion). Assuming the currency creation base is stable, the value of the money should continue to oscillate around that point. Hell, even without the idea of price stickiness, merchants in a system like Decrits would not need to constantly reprice because of DCR->fiat fluctuations if they could be fairly sure of the stable currency creation base. This will take time and market penetration though.

Messing with account balances or locking coins is going to leave a terrible taste in everyone's mouth, and I don't think it accomplishes anything worthwhile.

The thing that is being curbed is nominal transaction fees. Without a trusted Oracle, we have to rely on within-network indicators. Nominal transaction fees is a within-network indicator, that is relatively secure.

Any indicator that affects further results will be prone to abuse. And sorry, I believe the direction of the feedback you describe is not correct. If there are more fees being spent and the system encourages it with printing more money, then even more fees will be spent and even more money will be printed until the coin collapses due to hyperinflation. There needs to be a written down growth path for some indicator. For bitcoin, it is the monetary base itself. I'm discussing the possibility of using the nominal transaction fees as an indicator. One can try to model a good growth path that is high in the beginning and lower later, that is beside the idea of targeting a level of nominal transaction fees.

Hope I've made things a little more clear.

The way I look at it, there is a component of proof-of-work/mordor coin that has to be incorporated into every coin. The question seems to be how to minimise it and still maintain stability.

By reducing the velocity of money--a drastic measure. Are you familiar with the MV=PQ equation? Either P (price level) or Q (goods and services available to the economy) could be increasing that results in an increased V (velocity of money) assuming that the M (money supply) is unchanged. You are worried only about P and do not see that Q has an identical effect from the standpoint of transaction fees. Designing a system with some linear idea of how the economy is likely to expand is destined to be wrong. It is not a predictable process by any measure. Adjusting V will not make P stable.


It may be secure, but for any argument you can make that it is useful I can come up with a counter-argument.


Then what do you think will happen when people are cut off from trying to spend their money?


See the thing is, more fees being paid do not necessarily encourage the system to print more money, at least if we're talking about Decrits. Fees, on their own, have absolutely nothing to do with it. Only the willingness for a large group of people to invest time, hardware, and energy into minting new currency. For that to happen, Decrits must be worth more than their cost to produce. Even if a massively irrational actor decides to inflate the currency, all he has done has turned his effort into coins for other people. He cannot continue this behavior forever.


If you want instability, sure.


Case-in-point.


Even spam protection throws this off. I would imagine you'd need a minimum transaction fee, Decrits proposes 0.01, so that microtransactions do not tax the network. If microtransactions are popular, this would throw off your indicator by several times as it would see much higher fees than actual activity. "Too many microtransactions this week--LOCK ALL THE COINS!" You could argue to use actual amounts instead, but then you run into the significant problem of off-chain transactions/clearinghouses being left out of your indicator (which is also the case with tx fees).


It sounds like you think that Decrits doesn't have a proof-of-work component. It does. Maybe you're generalizing. But the whole hyperinflation thing seemed to be directed at it.


I haven't seen you propose any way to minimize it, only how to hamfist a stable price based on incomplete information. What is your plan for this part of the equation? I've twice quoted how Decrits addresses this in this thread. I understand you're still developing your idea and I apologize for being harsh, but all of the concerns you state about what I've proposed are not really concerns and are things I have thought about and designed with in mind. You're using the same, weak arguments that everyone else does after getting an idea of what it is that is incorrect and not even bothering to quote the salient response points. I'd much prefer to argue my actual ideas rather than ones that look poor compared to yours; otherwise we go around in unproductive circles.

Hey, let's take the arguing out of the "Welcome..." thread!

Make another thread that starts with [StableCoin] so everyone can find it.

I'm still coming to terms with Ripple. I'm going to make a new thread about that too.

Hi Etlase2,

Do you already have another thread where this discussion can be taken, or should I start a new one?

You make an interesting point with regard to removing PoW for simple zero-sum transactions.  I've been thinking about this lately and really the only reason BitCoin uses PoW is to control MINING.  As soon as you separate transactions and mining the need for ANY proof just disappears.  The reason is that all transactions are sent into the network as a cryptographically signed piece of data, they can not be faked by some 3rd party.  The only thing a malicious minor can do in BTC is to BLOCK transactions either selectively or in totality.  This should be seen as a design flaw as the network should be perfectly capable of detecting and rejecting this behavior but the PoW president actually gives this potentially devastating power to the Miner.

The network propagates the transaction message to all nodes and block creation is only necessary to 'cement' the transactions as permanent and to give some kind of time-step to the network which is long enough to tell us that a double spend has not occurred.  Even if we felt this block process was necessary theirs no need for Proof-of-Work, just get the nodes to periodically make a block and propagate that around until all nodes agree that is the FULLEST block of transactions within a time span.  Now you might have an issue with clients trying to lie about their time-stamp or some kind of lag induced time-stamp disagreement.  To solve this just require each transaction to incorporate the hash of the prior block, this puts an indelible block-height into the transaction and guarantees that no one can make time-traveling transactions.  Once a block has passed outdated transactions are considered dead and can never be included.  But transactions that fail to get into a block should now be unheard of because the network actually prioritizes their full inclusion.

Now clearly a Stable coin unlike Ripple needs a mining process (well a money creation process), so separating mining and transacting is just a first step to getting at a solution because it gives us lots more flexibility.  You can now slow down or turn off mining without making the whole system collapse.

depends on what you want to discuss. if it is decrits or comparing your ideas to decrits, see sig

otherwise maybe this one: https://bitcointalk.org/index.php?topic=178140.0

Exactly! Etlase2 and I have been saying the same thing for years!


Yup, Ripple has an equally brilliant solution to synchronizing time. Set the default block creation time to ZERO!

Seriously, as soon as there are any new transactions. ANY node can declare a block/ledger created. Then they start the consensus cycle. Once consensus is reached if their are any new transactions someone declares a block and they start again! Brilliant! The also included a (per address) transaction sequence number DUH! That way its trivial to tell if a circulating transaction is old or a double spend attempt.


I discussed this very point with satoshi himself as it related to bitcoin. I thought keeping the old transactions at all was a curious decision for an "anonymous" p2p system. We kicked around several ideas, but none really played out. You can all agree to "forget" but you have to presume someone is lying and saving old transactions anyway.


Yup! Now you are totally in sync with Etlase2 and I.

@wingding, You might want to check out this post.
https://bitcointalk.org/index.php?topic=190030.msg1972784#msg1972784

Not exactly what you want, but a potential source base to start from.

Red:  I don't see how reducing block time to zero allows us to get a consistent block time over the long haul.  It seems you would get a block rate that is dependent on network latency and network size/interconnectedness.  While that may be consistent over short periods of time, it is certainly changing over the course of years.  It seems we would be forced to rely on time-stamp alone to get a long term hold on time as block rate has nothing that's regulating it.  For a conventional coin ware block rate is only meaningful for PoW mining rates this is fine as were presumably throwing out PoW mining all together (elegant ain't it).  But for demurrage (as implemented in FRC) we do need that block rate to be something predictable in the long term so we can apply the right rate, likewise lots of our stabilizing mechanism will want to know time to do their job.

In any case I'm now interested in seeing what Ripple tech we can incorporate into FRC and will bring this up with our developers.

It wouldn't and Ripple doesn't have consistent "ledger" time either. Simply the fastest transaction confirmation time possible. Block time tends to be bounded by time to reach consensus.

HOWEVER, what this does do is help synchronize peer clocks. With "peers" meaning those who validate and reach consensus on ledgers. In a perfect world, each ledger would have a time stamp after the previous and before the next. Ripple can enforce this much more tightly than a PoW block chain. Since every consensus build peer agrees what time the previous ledger was created. One of those peers can't put forward the proposition that they created the NEXT ledger at a clock time before they validated the PREVIOUS ledger. Think of ledger (block) creation times in Ripple as "notarization" times for the transactions they commit.

Note that BitCoin (and likely FreiCoin) relies on the block timestamps as well. It uses that information to adjust the difficulty rate. To do this reliably, BitCoin must presume that more than (X%) of the block creating nodes are not colluding to falsify block times. Ripple requires 80% to reach consensus.

Seems like having more consistent block time stamps would be a good thing for a demurrage currency. Right?

Did you see the gateway demurrage idea on the Ripple wiki?
https://ripple.com/wiki/Gateway_demurrage

Thanks Red. I actually came across Sweft before that, in another thread ( https://bitcointalk.org/index.php?topic=187800.40 )
At that point he did not like idea of the fork, so I am not sure exactly what he wants.

Well their are two senses of using time, the block time stamps are used in a narrow sense to adjust difficulty in a PoW chain.  In Ripple you can dispense with this entirely cause you just want blocks ASAP.  Now FRC puts an additional requirement on they system that BTC doesn't, FRC wants to know that block generation rates really ARE on target over the long term (as in years), BTC doesn't need this and in fact the network for BTC has consistently run fast by noticeable amounts.  A little fast isn't too bad for FRC but my fear is a kind of quasi-velocity spiral in which slow block rates effectively lower demurrage which slows velocity and that feeds back into slower block rates etc etc.  We feel the system needs to have constant demurrage or be counter-cyclical in which demurrage goes down in a boom (canceling it) and up in a slump (again canceling it), the current demurrage setup we have is pro-cyclical if we assume hash rates speed up when the economy is heating up.

The simple alternative may be to just record the time interval of each block and have the system apply demurrage rates for that real time value rather then the block height, but this is a lot messier and we would be putting a lot of trust in the time stamp.

I don't see needing much trust in the time stamp. Just adjust the demurrage rate infrequently in the same vein as difficulty. You can't legitimately speed it up, because nodes won't accept blocks from the future. You can't legitimately slow it down, because honest miners will put an honest time. The attack vector is no worse than someone with a 51% hashrate stalling the network, and it will perform much more accurately when the network is honest.


[ad for decrits]
PS - Stable currency needs a stable network. Some new details (https://bitcointalk.org/index.php?topic=189239.msg1980595#msg1980595). :P
[/ad for decrits]

Thing is that our demurrage takes a very small fraction and raises it to a power of block since the coin last moved.  This needs a consistent rate of demurrage to compute correctly.

But the correct solution just struck me, we just separate the demurrage 'block height' from the underlying blocks.  Demurrage block height would just be a logical field on the block and after 10 minutes of block finding the next block increments that value.  Changes in the block finding rate can just be accommodated by changing how many real blocks it takes before the logical block field increments (and if blocks are taking longer then 10 minutes we can increment by 2 or more to maintain the real time rate).  And that number can be decided by the current time-stamp and difficulty code, but difficulty just represents a ratio between block finding rates and our arbitrary targeted 'logical' blocks.

This is very useful for any kind of futures market based layer put into a ripple type chain because it will allow rules and structure to be built that will be time accurate over the long term.

You are correct, I blew it on that one. I had a nagging suspicion I was forgetting something.


Sounds reasonable, I think it can still be subject to some manipulation, but it's fairly vague and requires a lot of investment to save money with a depreciating currency.

Variable rates of demurrage is something we discussed at FRC  for economic reasons, but no technical implementation has been presented yet.  My only though is that older periods of demurrage can be merged such that an aggregate rates can be found and tracked.  Say two periods with rates X and Y can be calculated to have had a cumulative rate of Z.  Then calculations can be done on these larger chunks of time if they are entirely within the holding period of the coin, a bit like how we drive across country by first doing down small streets and then along highways and once again down our neighborhood streets, its a tree traversal which should be fast and accurate enough for even a long span of time.


No more then current time-stamp falsification by nodes should have as it would fundamentally be using the same source data as current difficulty.  If Ripple is based on node consensus it seems you have to control more then half of all nodes to control the blocks, and as I've heard you have minimum balances this means it is a quasi proof of Stake system.

I'd appreciate to see a stablecoin developed that is as free from speculation as possible. There are many get-rich coins, but I'm not sure if they will ever settle to a stable or at least slowly changing value.

The most obvious way to achieve a stable coin would be to peg it to a fiat coin. This way users (people wanting to use it as a currency and buy real stuff or services) know what they get.
Even more stable could be a weighted pegging to a selection of different fiat coins.

Now to the 1million$ question. How to get fiat exchange rates in a decentralized way, free of manipulation?
The only convincing approach to me has been implemented by ripple.
Even if people are speculating with the value of XRP, the more interesting feature is the use of IOU. As I understand, XRP are not meant to be a currency or a commodity. They're just there as an intermediate means of transfer. Value doesn't need to be stored in XRP. I hope the server will go open source soon.

What makes me hesitate is the reliability of IOU's. As they are dept, not value, they're prone to default. A 1$ IOU is worth 1$ minus the risk of default. Probably we'll need to observe ripple for a little longer to see how things work out.

Apart from ripple, I'm following etlase's decrits proposal. And PPC seems to be an interesting alternative to bitcoin as a playground for speculation. Free of the latter's energy hunger.

Hi brenzi, welcome to the [StableCoin] topic. As you mentioned Ripple I wanted to link you to another thread where I was analyzing Ripple from a [StableCoin] perspective.
https://bitcointalk.org/index.php?topic=188266.msg2026191#msg2026191

Could the coin supply be adjusted in a decentralised manner according to an exchange rate sourced from an exchange like mt gox? Of course the exchange itself would be a point of centralisation but the average of a few exchanges could be used to source an exchange rate.

cant the miners just input an exchange rate as observed from somewhere? its in the interest of miners to report an accurate exchange rate.

like say the x rate is 1.50, cant the miners just put that in the blockchain? its not in their interest to report incorrect numbers as it will undermine the currency system in which they ar invested in

the observed market price is what miners place into the blockchain, its not replacing a market price its conveying it into the network

The coins can be exchanged at any rate anyone chooses, all I propose is that when the currency is too strong (as observed from a currency exchange for example) you expand the coin supply to target stability in the exchange rate. Avoid deflation and deflation by targeting stability.

is there a way of entering the data in a secure way? manually or in some other way?

why would it be an attack vector if entered manually?

but most peers wont support an incorrect input (multiple incorrect inputs at same time would be equivalent to a 51% attack), also one incorrect input doesnt undermine the system because the xrate for coin release could be the average of 90 days for example, plus there is a maximum velocity or inflation.

The problem with tracking difficulty is that if you release coins according to difficulty you create an imblanced system where your encouraging more and more miners to mine without sufficient overall adoption of currency. I think there needs to be a balance between mining and broader use of the currency by non miners.

Solve by inspection problem that you can't peg the value of a crypto coin to fiat using algorithms.  It simply does not work.

As a simple proof by contradiction, consider the case where NOBODY wants the coin.  How are you going to provide a liquid market where people can exchange their coins for that "stable" value?  Answer: YOU CAN'T.  Not unless you are willing to back that algorithm with a huge bank account that supports the fiat peg (i.e. the silly DGC bank idea where speculators for god knows what reason - perhaps they love losing money - would ensure that anyone holding DGC is guaranteed the price will never go down)

im not proposing a peg im proposing a targeting regime

but when the exchange rate goes too strong how do you bring it back down to a good level while maintaining difficulty up? you want max difficulty with a stable xrate too.

I understand that you have to take into account multiple factors to create stability. Thats why I wouldnt mess with the bitcoin model much and just add whats needed to implement xrate targeting if possible