Bitcoin Forum

Can somebody just promise to back the price up?
Say, somebody with a real name (or a real company)
could issue a legally binding obligation to buy BTC
for at least 0.1$, no matter what. This only takes 2 100 000 USD to guarantee that forever  and less than a million for the next couple of years.

Most likely you will never need to actually buy BTC at that price; just proving that you are able
to do that is good enough.

I guess there are enough people with much BTC and much USD
to be able to do that and to have interest in that. The benefits are obvious: more trust in the currency,
hence wider acceptance.



--
long-time lurker, scarce poster

I will set it as one Satoshi :)

faith, that's enough.

Cryptocurrency like bitcoin is a fundamentally new technology. These take time to be adopted by the clueless masses. You are right though, it probably will be some big player that creates a killer app using bitcoin.

Exactly, it depends all on consumer sentiments.

faith is easier to incite with legally-binding obligation rather than just words.

It will be extremely complicated for any company to issue a legally binding obligation on a decentralized p2p "currency".  What are the considerations to be given to that company in return for such an obligation?  There should also be an agreement for such an obligation, an agreement between the company and who?

The minimum consideration for bitcoin is the payment for electricity to an electricity provider. Other that, there is nothing standing between bitcoin and any private or public firm. Their obligation would simply be their product or service. An example might be paying in bitcoins for advertising clicks and allow the bitcoin to be used for micropayments or cash value after a fee for exchange.

He is talking about getting a "underwriter" to make the market. They don't need any control over it, they are at risk themselves.
The only thing is, do we want a world class professional with a company behind him manipulating our small market this early?
But just to be clear it is the same thing as someone coming with a bunch of money and putting in conflicting orders.

Buy 1M BTC at $4
Sell 1M BTC at $5

Since no one will break those walls, you make the profits from the variations in between.

Someone sells 10 at $4, then someone buys 10 at $5, you make 10 bucks :)

Once you get a obligation of a market maker, it basically adds stability and liquidity.

Only thing is, who are they entering into a contract with??? it would have to be MtGox or same.

HAHAHAHA never change bitcoiners!

OK, I understand that explanation. I just don't understand the need. I think people have become accustomed to economies that are manipulated by inflation and somehow think that volatility is a bad thing. Volatility will naturally decrease as the bitcoin economy swells. The bitcoin economy right now is limited to currency traders and is not yet a real economy. I don't think anyone will complain about high volatility while the purchasing value of real goods and services grows as bitcoin skyrockets.

I would like to see some company like FB pin their credits to BTC. Would it really be that much of a risk?

That would be a start

the idea is not to control the volatility, but just to guarantee that BTC will never become worthless.
This guarantee may become useless if the price soars, but is important in the beginning (now)

Think of it as face value of the bullion coins. Like, 1 South African Rand on a "krugerrand."

Putting a huge "buy" wall on MtGox is not the same, since everybody knows the wall can disappear any time.

I'm not sure how a "legal-binding obligation" can be formalized, but if a company with considerable reputation and market value simply publishes such a statement, it's already a big deal. I'm sure there are better and more "binding" ways to do it though.

No, a statement would not be nearly enough IMO.

I should have taken an extra couple seconds to simplify.

http://www.otcmarkets.com/otc-pink/home
Here ^^^ You can learn about market makers in small commodities or stocks.
It really breaks down how and what the market makers do somewhere in the info or faq or w/e.

If we start a company (bitcoin) and want it to have shares (bitcoins) you have to get a company to make the market, or agree to buy and sell no matter what happens. So you have this game of avg investor versus MM (MarketMaker) where the MM wins a hell of a lot of the time.

Just by researching why this is used in pinksheets and otc markets (or on a much much larger scale NYSE Nasdaq etc.) you will be able to see the pro's and con's :)

Pink Sheets would be interesting.  If some bitcoin investors start such a company and maybe sell bonds to that effect, it will have to effect of making bitcoins far more mainstream than just a currency known to computer geeks.

Now your thinkin'!!!
How very wise of you...

Let's bundle them with some other investments like IXcoins, Solid Coins, etc. to add value. Hell, I'll even throw in some IOUs I have on paper napkins to really make these bonds soar.

what if 1 btc would equal 1 share of stock in this new company

if its so easy and only requires 2,1 mil, why dont you just do it yourself?

So you are anti bitcoin I assume...
Anyways, it would have to be a company that offered a sort of mutual fund that invested in crypto-currency and related businesses, I don't see anyone only pegging it to just bitcoin price, might as well buy bitcoins :)
If a company say held 25% of funds in BTC, spent some funds on or investing in an exchange, and r&d for new ways to implement cryptocurrencys. Hold some funds in various formats to facilitate transfers - such as gold, euros, usd, yuan, etc.
You would have a nice little power house i guess. To be honest though I wouldn't want to do this, so must company's wouldn't.

Solidcoin will be the one to do these types of things because it is more designed to integrate with the existing system, and there is someone in charge to speak with unlike bitcoin. Companies simply wont deal with nobody, they need a person to hold accountable.
I dont want to get into a solidcoin issue or anything, but bitcoin really isnt intended to be mainstream, and actually has some features that make it less likely to ever become mainstream.

Im thinking while I type which is never good so Im done.


This is kinda dumb, it isn't ridiculous to fully believe that it is "easy" for a significant amount of companies or people to "easily" spend 2.1 mill on an investment.

So it is EASY actually, they do it all the time... refer to my pink sheets link above a few posts ^^^

˙sdlǝɥ sıɥʇ ǝdoɥ ı ˙ʎɐʍ ɟo puıʞ plɹoʍ oɹɹɐzıq ɐ uı uıoɔʇıq dsɐɹƃ oʇ ɯǝǝs ǝɹns noʎ `ʍoʍ

Nice trick, maybe I didn't get what you were saying? I really thought you were saying it is relative to ixcoins and napkin iou's.

I forgot to include the obligatory sarcasm emoticon. TBH, I am not anti-bitcoin, I am anti-money. Period. I want to see bitcoin as the next evolutionary step before we get away from money altogether. I see bonds as just another way of selling silk purses.

This is a cool idea which I'd pondered on.  If I were a wealthy person, I would absolutely do this as a form of political activism and to help change the world for the better.

Step 1: Form an endowment or foundation outside the US (maybe some Carribbean nation)
Step 2: Fund this endowment with $21m
Step 3: Create the bylaws for the endowment to dictate that it's sole purpose is to buy all Bitcoins at $1, and sell all Bitcoins at $1.50
Step 4: Make public record of these things, and announce the endowment to the world in a grand John Galt type speech. Make big PR event out of it.

Bitcoins would then never be worth less than $1 each. For the plan to be credible, the wealthy person needs to accept the fact that $21m may be lost in the purchase of a worthless good. If he can commit to that cost, then the plan works.

Come on Peter Thiel, stand up for your principles! No other form of charity I can ponder would be so useful as this to the state of the world. $21m to help guarantee a revolution in the world's monetary system. Pennies.

That's silly. Money is as natural to mankind, and as necessary, as language. If people trade, they will barter for things. If they barter for things, a natural money-commodity will emerge in the marketplace. The world should abandon national fiat monies, not money as a concept.

I would have to disagree with this,  someone could purchase all bitcoins for 1dollar, and they still could go to 0.

That's a bold statement that man needs money. If so, then why don't other intelligent animals use money? There are many animals with known language ability. In fact, most animals share resources. They care for their young and even extended family. How much do you charge your children for their breakfast? Have you never done anything for anyone without asking for something in return?

The Khmer Rouge already were successful in ridding their country of money. Cambodia doesn't have a real currency even now.

Ummm no. If the foundation managed to purchase every single coin, then there would be no market price, except the $1.50 that the foundation offers to sell them at.

In practice, the price would never get to $.99, because a seller would never sell at .99 when he could sell to the foundation at $1

Please elaborate, this is interesting.

The price could reach a point of no return if it falls below $1. People have lost faith in things before that died, like electric cars, outdoor movies, and free tv. The cool thing is that bitcoin is global, so it's unlikely that every country in the world will be dumb enough to let it happen.

I didn't say man "needs" money, I said man always develops money through exchange. It is natural because the only way to prevent something from being used as money is to use violence/force to prevent it. A government could perhaps "mandate" that no money be used, but even in practice you'd have people prefer one good over another for common trade, be it cigs or seashells or buttons... something always emerges as a common medium of exchange, a money. The fact that deer and alligators don't use money doesn't disprove my theory =)

Also, just because societies always develop a form of money doesn't mean every transaction requires money. People always trade/barter with other goods... but this is always a minority of transactions in an economy. And of course people always "donate" to each other also - providing goods or services with no compensation. But again, the vast majority of value exchanges in a society will tend to use a form of money. It's unavoidable, and certainly nothing to be afraid of.

I guarantee you that's not true. If there are people trading, some form of money will emerge. Maybe not an "official national currency" but who cares about that.

some form of 'trade' will occur....  we could always go back to cows and chickens?

How will you pay to get your wagon wheel fixed if you cant do it?

Here is Cambodian money. KHR
http://www.holiday-in-angkor-wat.com/images/cambodian-money-50b.jpg (http://www.holiday-in-angkor-wat.com/images/cambodian-money-50b.jpg)
http://www.holiday-in-angkor-wat.com/images/cambodian-money-50b.jpg

http://en.wikipedia.org/wiki/Cambodian_riel#The_Khmer_Rouge.2C_1975-1980

It should go without saying that the Khmer Rouge went as far as no other to bring about the Communist utopia. Correspondingly their death toll was the highest in proportion to the population:
http://en.wikipedia.org/wiki/Khmer_Rouge_rule_of_Cambodia

More interesting is that real money in Cambodia is all foreign. You can pay in USD or THB. In fact this is a country that should adopt Bitcoin large scale, maybe making a Bitcoin backed dead-tree-money. It's quite predictable if they do this will spill over the borders to Thailand, Vietnam and Laos pretty quickly and from there to the rest of the world.

Surely you can present one from the time of 1975-1980.

OK, I thought you were trying to make a point that there is a successful govt w/o a fiat currency. Now I am unclear what your point was.

Right, trading is fundamental in human nature. So money is, too.


Thought this was obvious. If you do social experiments that go fundamentally against human nature, you must be prepared to kill. In the Millions. Are you sure you want to abolish money?

21 million coins at .01 = 210,000 not 2.1M

I think Jacque Fresco's idea of a resource based economy could work really well as a way of doing things without money, but it would require just that, a big rethink. Simply phasing out money would never work, unless though progress of technoligy we effectivly get to something like the resource based economy without having to redesign anything.

I suggest to read Hayek's "The Road to Serfdom". You'll understand that a planned economy will inevitably slide down a slippery slope into totalitarianism. Do you think Pol Pot and Mao started out with the intention to become the most terrible mass murders in human history? Not at all.

It's shocking to see how the economic insecurity of recent times makes people demanding planners. Even on this forum. Bitcoin is all about freedom, is it not?

Start a new block chain and say it's backed by gold. C-Gold and Pecunix started out with tiny investments and grew from there. Somewhat more stable pricing, at least no pump and dumps straight to $1

An individual exchange or e-wallet could back its holdings with gold but you couldn't back an entire blockchain with gold without creating a central authority to issue the digital currency and purchase and hold the gold reserves.  Because new coins are created on a set schedule, they'd need to buy gold equivalent to the value of those new coins each day.  That requires some serious capital reserves.

More importantly WHY THE FRAK would anyone do it?  To be nice?  Because they believe in rainbows and unicorns which shit skittles?

Most millionaires didn't become millionaires by waking up and saying "Hey I know what I am going to do today.  Take on $2.1M in risk with not only no gain no gain but no potential gain".

Why would ANYONE want to do this?
What have they got to gain from buying coins from people that could be essentially worthless? Apart from that they have to buy them because they promised everyone they would?

In an ideal world, this would be nice. But in the real world, this will never happen. But hey, if you want to sell me all your bitcoins right now for $0.10 each i'll gladly accept =D


So, what's to stop your USD or GBP or any other currency from turning completely worthless with the current rampant inflation? People still massively trust those, even though their *actual worth* is falling every day.

No gain? Not even potential gain? I was actually wondering not if, but when something along these lines would happen. As a Billionaire, you do a small investment:

1. Slowly buy up substantial parts of the bitcoins ( a million or so).
2. Announce big Bitcoin plans to the world.
3. Watch the rally
4. Profit

I think someone big will get into the marker, somehow they have to lift the cap of 21mil coins, even if it can't be done. 21mil is not enough, 100mil is though.

Why is 100 mil enough?

21million is only not enough if you treat coins with the same divisibility as conventional money (0.01 being the lowest value).

There's 8 decimal places with bitcoins. 0.00000001 is the lowest value. This is why we don't need any more coins. If you think about it this way, there are 21,000,000,000,000 "coins", if you use their full divisibility and treat them in the same fashion as most conventional currencies (e.g. 0.01 x 100 = 1 "coin")

You're right. The OP has .1$ which is a sort of weird format, which when I glanced at registered as somebody guaranteeing Bitcoins for 1 penny.

I'm not sure why the choice of 10 cents then. As long as Bitcoins can't go to zero that concern is alleviated.

+1

There is no reason that at some point we can't add a few more decimal places, if needed. The client would need to be modified and people would have to agree with the change. I think most would as it won't reduce the value of their holdings as trebling the available coins would. QED

-1
Austrian Economic theory is pop pseudoscience. Fresco doesn't even propose an economic theory. Folks take this stuff too seriously. Money is imaginary, that's what I love about bitcoin. It's so imaginary, that even economists can't imagine it! Technology is what makes progress, not money. If economics was science, then you wouldn't get so many opposing theories. Its not like anyone can reject the theory of gravity and float away.

Oh Sir Popper, please enlighten him.

+1

I will buy all bitcoins at 0.000047619. Also I have big plans with them  :P

With bitcoin, it is possible for a central bank or cartel of central banks to control the bitcoin money supply. The important thing to understand is that stored bitcoins are indistinguishable from lost bitcoins. Bitcoins only really have value when they are spent. This means that the Central Banks can buy bitcoin when they want to raise the price, and sell bitcoin when they want to lower the price. Through this process, they are able to control the rate of deflation up until they run out of coins to sell (run-away deflation).

Decentralized Central Banking Proposal

The OP was interested in a floor price. It is possible for a group of people to cooperate and share the risk of setting a "soft" floor price. Buy strategy shamelessly stolen from a post I saw months ago. Let's say each participant agrees to invest $10 USD for each "soft" floor. Using your favorite exchange, the buy orders would look something like this:

• Buy 100 BTC at $0.1 USD/BTC
• Buy 200 BTC at $0.05 USD/BTC
• Buy 400 BTC at $0.025 USD/BTC
• Buy 800 BTC at $0.0125 USD/BTC
• Buy 1600 BTC at $0.0625 USD/BTC
• Buy 3200 BTC at $0.03125 USD/BTC

The above buy walls each cost $10 USD for a total of $60 USD. Two people cooperating in this manner don't even need to agree on a specific floor price to share the risk. For example, somebody can invest $10 in a Buy for 142.86 BTC at $0.07 USD/BTC. The above buy walls would absorb a sell of up to 242.86 BTC while keeping the price above $0.05.

Where it gets interesting is when you start trying to use these unwanted bitcoins to try to control the rate of deflation. Anybody with a significant amount of bitcoins can use the same strategy to set a sell wall going in the opposite direction. For the purposes of discussion, let's say we want to limit the rate of deflation to 1000%/year (during the initial growth period). Without checking, I am going to pretend I found the weighted average price from a year ago was $0.30 USD/BTC. 11 times that corresponds to $3.3 USD/BTC (which until recently was below the average price). If you wanted to sell up to 127BTC, you could set up the following sell walls:

• Sell 1 BTC at $3.3 USD/BTC
• Sell 2 BTC at $6.6 USD/BTC
• Sell 4 BTC at $13.2 USD/BTC
• Sell 8 BTC at $26.4 USD/BTC
• Sell 16 BTC at $56.8 USD/BTC
• Sell 32 BTC at $105.6 USD/BTC
• Sell 64 BTC at $211.2 USD/BTC

The sell walls should probably be re-evaluated/replenished daily. As before, several individuals can share the risk of setting a ceiling, even if they disagree what exactly the ceiling should be. For example, somebody who thinks deflation should be 10,000%/year may set their ceiling to $30.3 USD/BTC.

Edit: Central banks actually use Interest rates control economic growth.

it's easier to just make your own chain then you can keep all of it.

I just don't see how someone can profit from backing them....  if you can find out a valid way to do it... then I can imagine it working.. but until then it's a pipe dream.

so I see the question "why" and "how"

Why would anybody do it? I think it's pretty clear. If you have  100 000 BTC on hands (and yes, some people do), you are  interested in their price to grow. If you have zero BTC and consider starting using them for you business, you are worried that their price may drop to $0.0001 next week.   The 100000 BTC guy can attract 0 BTC guys by guaranteeing that the price will never go below (say) $1 (or $0.1). This will help expand the economy and consequently bring the price up.

How? I don't think it's difficult, really. Some ways have already been mentioned in this thread, but on a high level having some reputation and backing your "guarantee" by some legal statement is the way to go.

I don't think the problem is the guy holding 100,000 bitcoins,  the problem is the guy holding $21,000,000 USD (currently $7.5 million) to state that he will support the price at 1 dollar per BTC.

In order to support the price you need the dollars to support it with.   I personally don't have 21 million USD in my pocket to pay everyone 1 dollar per BTC.

indeed, a guy with 100 000 BTC is not a problem, but a (potential) solution:  he's interested in the success of BTC. I think there are enough people who have a lot of BTC and have already made enough USD with them to be able to support bitcoin in the described way.

How much is needed for that? It's not 21 mil$, it's less. To begin with, in the next couple of years there will not be more than 11 mil bitcoins, so to guarantee the price at $1 for a couple of years you need at most that much. And then, it doesn't have to be 1$ per coin. Already $0.1 and even $0.01 per coin means some considerable stability.

I didn't read the rest of your proposal because the last thing I want is for a central bank to frak up Bitcon but you are aware central banks currently do exactly what you outlined in the second paragraph (something you think is impossible) in fiat currencies.

For example the Federal Reserve can increase the money supply by printing money and then using that to buy treasury bills.  Since as you indicated something out of circulation is just as good as destroyed this in effect generates money from nothing and destroys a treasury bill (from the viewpoint of the economy outside the Fed's balance sheet).

To do the reverse the Fed sells Treasuries from its balance sheet and hold dollars.  Technically since it can create infinite amount of dollars at will on its balance sheet it doesn't hold them it simply removes them from the economy.  The supply of debt grows raising interest rates and the monetary supply shrinks raising the value of the dollar.

Alright here, I will personally guarantee that I will buy every last bitcoin for $21 for all ~21m. I am hereby guaranteeing the price will not drop below $0.0000001 per Bitcoin, or $1/MBTC.

Do not underestimate me as I have the economic power and desire necessary to guarantee a $7.48 market cap for the entire Bitcoin economy for the next month.

Feel better?

I removed the first line from my post because it was in error.

I was essentially advocating trading bots that allow wide, but tweakable price swings (with a year-long time-frame in mind) . If most bitcoin holders do the same thing, volatility should be reduced.

The point of trying to enforce a deflation target is that rapid climbs in price lead to bubbles, and make bitcoin look more like a ponzi scheme (even though it is not). If large bitcoin holders simply strategicly release coins when the price says there is demand, wild swings can be avoided. Conversely, crashes represent an opportunity to buy back in cheap, while at the same time supporting the price.

Didn't the bold "Decentralized Central Banking Proposal" hint my choice of words was deliberately provocative? My proposal combines the role of a central bank with the role of a free market.

100+ years of central banking has taught us the folly of trying to control markets.  Yet still we try. No thanks.

If federal reserve with infinite liquidity can't keep the dollar stable I doubt anything can keep bitcoin stable and trying brings in bankers, and manipulators, and people pushing agendas (some will want BTC higher, some lower).  Sorry.  No thanks.

I think part of my point is that the manipulators are there anyway. We (as in bitcoin holders, which I am not yet one) might as well set a soft floor and ceiling.

If the price really wants to keep climbing even after new old coins are put back in circulation, there is not much anybody can do to stop it. However, if the price spike is simply caused by a surge of interest after a news article or something similar, there is no need for the price to spike dramatically. Similarly, if Bitcoins really are worthless, any buy walls proping up the price will be pointless. However, filtering out flash crashes may be useful.

Are you inferring we use the R-word to stop swings? Isn't that bannable here?

If you mean regulation, no. Regulation is the end-result (not the cause).

I am advocating a cartel of bitcoin holders willing to risk token ammounts of fiat and bitcoin in order to absorb wild swings in the price of bitcoin. For the most part, the day-to-day swings should be left alone for day traders to play with.

The problem is that the day-traders don't plan for the long-term. I outlined a strategy that allows the people that really want to buy and hold to encourage more predictable growth. For the start-up phase, the target may be to keep anual growth between 0 and 10,000%. After the block-reward drops, it may be prudent to half the growth target as well, say between 0 and 5000% anually.

Anual growth of 1000% or more is stupidly high. I just don't think it would be sustainable. Since I don't expect the weighted average price to rise more than that much per year, I would set my buy and sell walls accordingly. As Death and Taxes pointed out, I have no way of enforcing that expectation. However, I think bitcoin adoption would be encouraged if wild price swings were avoided.