Bitcoin Forum

Fellow Bitcoiners,

   All of us are in the prisoner's dilemma. What I mean is that we would all be better off if the price is stable and held our bitcoins (this rule does not apply to purchase of G&S) rather than selling them. Stability would result in more merchant acceptance, and the price would go up, while instability may result in failure of the bitcoin and adoption of another P2P decentralized system. Furthermore knowing that a sell off is not going to occur would result in added confidence and more people buying in to the BTC economy.
   
   However because we believe that most others will sell first, the value of our bitcoins will go down anyways, therefore we might as well sell and beat others in the race to the bottom, basically it is profitable to betray the bitcoin community. In the Prisoners dilemma, the reason the logical result is betrayal is because the prisoners were isolated and could not communicate, however with bitcoin not only can we trust each other, but we can verify what we are saying. If we were to form a union, a pseudonymous system, members could pledge not to sell off their bitcoin. A score of some sort, based on parameters that will be defined by the community, can credit a members contribution (amount of btc) and loyalty (odds he will follow through with his pledge) to the  union. The union could act as an escrow. For example the union could provide proof that 40% of the BTC that is in the "cash flow" has been locked away, release will occur in 1 year or if BTC goes below 100, whichever comes first (Timelock can be done in the protocol and the union would not have to be trusted with a potentially large sum of BTC).
   
   Simultaneously action must be taken to avoid price inflation due to a liquidity squeeze, and deflation due to a sudden abundance of liquidity when the funds are redistributed. A combination of a system mandated function, that distributes amounts of time and money available into different pools based on an algorithm, along with rational human intelligence and cooperation are necessary to minimize "price bumps" that such a scheme would produce.
   
   I feel like its in everyones best interest to see something like this happen. Most people hoarding would be willing to lock away their bitcoins to see them rise in value. Stabilizing and having an index is something necessary to reduce speculation and see bitcoin really take off.

If you believe in this project feel free to start developing, or adding more BTC on top of my bounty.

PS My bounty goes to the person I deem has created the system for the "successful union" after the time that it has seen reasonable adoption of 10,000 members or 1,000,000 BTC whichever comes first.

Your system will not work, to support the price you need someone with cash ready to buy.   Ultimately, the only thing you would accomplish by this is to create a thinner / more volatile market as there are 'fewer' players actively buying and selling.

I actually have a system that will work to stabilize the BTC price by allowing people to go short BTC and take out call/put options in an entirely decentralized manner.   The result is that merchants could 'lock-in' the price via options and end up with 0 risk of price changes.

I would suggest you look into http://the-iland.net/static/downloads/BitSharesWhitePaper.pdf  for more information on how to achieve your goals.