Bitcoin Forum

Haven't seen anything about it lately, but i was thinking and throwing some ideas around

If there were to be a $1/coin altcoin, where all coins are premined and sold at $1, and bought back at any time for $1...

a) How would we remove trust from the equation? how could the money be stored in a transparent way with no way of 'running off' with it? How could we prevent chargeback fraud?

b) Is there a way we could always pay $1/coin?, if there are any fee's, taxes or frauds the money from selling will be less than would be owing if everyone cashed out at once, If there are zero fee's charged (pay $1/coin get paid $1/coin), could it qualify as a not-for-profit and skip some of those fee's and taxes?

c) Unlike realcoin i would want it to be decentralised from the start, what would be a good way to do transaction fees?

i was thinking 1% of the total amount sent by default but the miners can set the minimum they want to accept and the clients can send what they want to send, with a warning about not getting confirmations with <1% fees... or The base fee is the minimum for 51% of miners to accept and then the rewards will find a place between the maximum people are willing to pay in fee's and the minimum miners are willing to mine for

There's no way for a currency to be both pegged AND decentralized.  It just doesn't work.

Seconded.  A guarantee to peg has to come from a specific entity; that entity is effectively the central bank of the currency.

If you figure it out Bitcoin will be obsolete, but it won't be easy.  I'm not going to say it's completely impossible, but it's a hard enough problem that no one has proposed a realistic way to do it, despite plenty of people wanting a currency with those properties.

Maybe with lots of pegs, and don't put any of them in the center....

Ya, I got nothin.  :P

Maybe peg it at first, then let it float once all the coins are in circulation if demand then drives up the price?

-MarkM-

You cannot enforce a peg of $1 without a centralized warchest of US dollars.

It might be possible to target $1 with decentralized proof-of-stake and voting on currency generation rules by stakeholders.

The assumption here is that the total value of the currency is maximized by keeping price near $1. If this is true, then stakeholders have an incentive to vote on currency generation rules that support a $1 price.

Stakeholders would report in the blockchain whether price is above or below $1. If they indicate it is above $1, then you increase the currency generation rate. If they indicate it is below $1, then you would decrease the generation rate. You charge a mandatory txn fee which is partially destroyed if stakeholders vote that price is below $1. This allows for negative generation rates, so that you don't get stuck with too much currency issued. If you issue too much currency without any mechanism to take it out of circulation, then the price could 'get stuck' below $1 with no way to recover.

It is not a very robust system because the incentives for truthful reporting are weak, but it could work. The incentives are much, much better than they would be with proof-of-work voting on currency generation rules. Proof-of-work miners would always have an incentive to inflate the currency by falsely reporting that price is high.

No one cares about this stuff though. Some idiot programmer will come out with their own crappy rules which they like because they created them.

Actually I was thinking central bank style, but the "warchest" would simply or mostly be what coins were sold for. If no-one buys any, no warchest is needed. If someone buys five for $5, right there is sufficient warchest to back those five coins. If all 21,000,000 get sold for $ each, right there is the $21,000,000 to back them with.

The main problem seems to be having enough transactions happening to make merged mining seem worthwhile, which presumably means enough fees to pay the bandwidth the disk storage and some actual profit for devoting bandwidth and diskspace.

-MarkM-

Yes, sorry that is what I mean by a warchest. It has to be centralized as you can see. The party controlling it will be a target for legal action. End of Story.

Yes, that is probably much more of a problem than any "technical" issues.

Kind of weird that the west painted the Soviet protection of their citizens from alien currencies yet oops looks like the west plans to do much the same itself. The fourth wall becomes an Iron Curtain?

-MarkM-

This was the basis for the very first proposal for encoin. Create a community trust where a certain amount of early mined coins were controlled by a large number of early participants to keep the price stable. It's kind of ugly in reality though, but it can probably work. The trust could buy and sell coins to the market in an effort to keep the "trust coins" stable with the marketplace, but only allow the trust coins to be transferred within the trust, unless the buyer wants to trade for regular coins for market price. I went into some detail with this, but I really don't think it's an option worth exploring because of the centralization issues. The trust would effectively act like paypal and probably be required to follow all kinds of regulations and so on.

The trust sounds quite centralized. Legal target. End of Story.

If you can decentralize the entity, and have its buying and selling activity decided by votes of stakeholders then it could be workable. If the decentralized entity does buying and selling to stabilize price, then it needs to control a secondary electronic asset. Accumulations and dispersals of the secondary asset would stabilize price of the primary asset. For example, suppose the entity used bitcoin as the secondary asset. It would need the ability to initiate sends of bitcoin in response to receipt of the primary currency automatically. The exchange rate between the primary and secondary asset would be specified by a democratic vote of primary asset stakeholders. You would need a mechanism to elicit responsible voting, for example only allow people who commit to holding the primary asset for one year to vote. The entity would manage the stabilized currency - bitcoin exchange rate to maintain USD parity for the primary asset. It would need to gradually tax users to accumulate a warchest of bitcoin in order to make this sustainable. Otherwise, any negative shock to the bitcoin exchange rate would create an uninsured fractional reserve. A run on the primary asset would ensue.

The programming for this would seem complicated and almost certianly infeasible given that it would need to be interwoven with bitcoin. It is just a set of contracts, however, so it is possible in theory.

A feasible way of setting this up might be as follows:

1) Create an m-of-n multisig bitcoin account to serve as the trust. Find n trusted forum members to serve as signatories on txns. Any txn with m>n/2 signatures is approved.

2) Introduce a new blockchain currency with a fixed number of premined coins which is secured only by txn fees (perhaps via merged mining with bitcoin)

3) Set up the same m-of-n system for an account with the new currency. Initially, this account controls 100% of coins.

4) Set the bitcoin-new coin exchange rate such that at any time the new coins are priced at US$1.

5) Have n trusted forum members manually issue exchange txns based on the data coming from the Mt. Gox API and data on when sends occurred in the two blockchains.

6) Charge a 0.5% tax on exchanges in order to accumulate a warchest in the trust's bitcoin account. Nice people could also donate to the warchest. The warchest is absolutely necessary because bitcoin could decline in value and this would cause a bank run on the new currency.

It is not decentralized completely because you are relying on n trusted people, but it would serve as a proof-of-concept.

Interesting, but why isn't the secondary asset a fiat currency? Purely the logistics of zooming such stuff around the net?

Now how about if there were 'n' blockchains, each of a fixed number of pre-mined coins, each agreeing to trade 1:1 with the others and some target fiat currency?

By 1:1 I mean close to 1:1, such as "we will buy 1000 of x for 999 of y and/or sell 1000 of x for 1001 of y" and so on... 10000 of one for 10001 of another; 100000 of one for 100001 of another...

-MarkM-

I second this motion of a pegged currency to prevent speculation and price crashes.

I would also use it even if cleverly semi-centralized offshore setup to avoid problems, something like HD-money/LR but as above posts indicate looks almost impossible to survive long term

Yes, it is because of logistics and legal concerns. It is not clear how you would arrange an m-of-n style txn with fiat currency. You would need a money transmitting service to participate (like Dwolla). You would also need a centralized exchange. The m-of-n system could be run by a committee of trusted people located all over the world without a centralized exchange. It could still be shutdown by going after at least m/2 of the trustees, but I think this would be considerably more difficult.

The same concerns also apply to the completely decentralized (but technically infeasible) system without any trustees.

As far as exchange rates go, it doesn't matter that the secondary asset is bitcoin. The primary asset would still be pegged to the USD because of arbitrage.

Okay, so suppose we have a number of blockchain-based currencies, each of which would like to achieve some stable value.

Suppose we also have some secondary asset that might possibly be able to be Bitcoin but if Bitcoin gets too hot/dangerous to use, then some other similar asset that, like Bitcoin's current status, does have some way of turning it into fiat.

The currencies trying to achieve stability would issue all their coins in the genesis block or first block to their issuer.

Each of these currencies thus has one entity we have to trust to back their coins, but the larger the number of such currencies maybe the less we need to rely upon any particular one of them's backing entity.

Also the larger the number of them the less of a loss it would be to the others to pick up the slack if one of them's backer stops backing their currency for some/any reason.

Do World of Warcraft have to provide Know Your Customer and Suspicious Activity reports when characters amass or transfer large amounts of WoW Gold? How about EVE Online? Or Linden Dollars? If I wanted to cash in a few lindens would I have to go through the whole notarised ID thing that Mt Gox apparently now demands?

Lindens might be particularly relevant since they explicitly are exchange-able out to fiat.

There is still interest among some Galactic Milieu nations in selling their coins at relatively stable prices and at least exploring the concept of also buying them back at close to what they sold them for instead of telling players "oh well too bad, tough luck, you have to use them in the game, we cannot buy them back"...

-MarkM-

okay, so we use the money to buy a bank, and if everyone tries to cashout at once we get a bailout?

Good idea! Make sure to base the bank in a corporate-welfare state of course...

-MarkM-

how bout we call it The "Digital Enumeration Authority" wait, is DEA already taken?

Cryptocurrency Investment Accounts? ... Financial Bank of the Internet? ... bah

Martian Investment Bank.  8)

-MarkM-

EDIT some of the assets offered are in digitalis-assets.tgz file found at https://sourceforge.net/projects/galacticmilieu/files/

SEE ALSO https://bitcointalk.org/index.php?topic=53329.0

I think it is better to focus on a single fixed exchange rate cryptocurrency with a large warchest. There are several reasons:

1) Currency is most useful if it is accepted by a large community. Thus, it makes sense to focus on one single fixed exchange rate cryptocurrency to encourage broad usage.

2) The credibility of the exchange rate depends on the size of the warchest. You really want an exceptionally large warchest to prevent a speculative attack on the fixed exchange rate. If you establish several currencies then the warchest of each currency will be small. The exchange rates of each currency will not be credible. Better to have a single credible currency than a multitude of untrustworthy currencies.

3) I do not think it is a good idea to keep the warchest in a form that could be easily frozen by a corporate controller or a government regulator. Thus bitcoin is the best option as a secondary asset.

4) Competition is often harmful in finance. The problem is that competition encourages risk taking and fraud. Monopolists have a strong interest in preserving the status quo. The trustees could earn some income from fees for example. This is a good thing because it makes it unlikely that the trustees will rip-off their users for a one-off gain (looting the warchest or gambling with the warchest).

I'm confused... how is a warchest any different from a centralized company?  How does this differ from the existing proposed RealPay solution?

Refer to the post which starts out earlier which starts out as...

"A feasible way of setting this up might be as follows:

1) Create an m-of-n multisig bitcoin account to serve as the trust. Find n trusted forum members to serve as signatories on txns. Any txn with m>n/2 signatures is approved. "

Hopefully, you will understand why the proposed solution is:

1) more transparent and thus more trustworthy than realcoin  (the size of the warchest relative to outstanding currency commitments is public knowledge via data in the two blockchains)

2) more robust to government interference than realcoin. (either bitcoin or n/2 trustees must be compromised for the system to fail.)

I do not understand this fixation on size of warchest.

2.1 million currencies each of which only ever sold ten coins at $1 each thus resulting in $10 warchest is still 100% backing, how does it matter how large your warchest is other than in proportion to your outstanding (not bought back yet) coins???

If you only ever sell zero coins, then a warchest of zero dollars should suffice. If you only ever sell 100 coins, a warchest of $100 should suffice AND need not exist until the coins are sold.

-MarkM-

indeed, what i was looking for was a way to make the 'warchest' at least emulate decentralisation, and be the backing to a completely decentralised coin

Also to avoid taxes and fee's that would limit the ability to pay back at the same price.
Maybe have fee's for coins sold when they are less than a year old.

In the end i want to eliminate trust, there should be no need for anyone to trust:
that the coin they paid $1 will always be worth (at least) $1.
that no one will run off or gamble with the warchest.
that the law, government, bank or anyone else won't do anything.
That the money won't be stolen through fraud or other means

You are overlooking the central problems. If the currency is backed by US dollars, then how do we know that the public trustees haven't run off with the warchest. If we can't verify this, then why should we trust the trustees.

If the currency is backed by bitcoin, we can verify the size of the warchest in the blockchain. However, bitcoin could decline in value. If this occurs, then the face value of the backed currency would be greater than the value of the warchest. A factional reserve. This could cause a bank-run. To avoid this scenario, the warchest needs to have a $US value much larger than the value of the underlying currency it is backing. Otherwise, the moment bitcoin falls in value you will have a bankrun.

I think we might already have a lot of those bullet-points with Bitcoin.

What we don't have though with bitcoin is the price not going way up above $1 *then coming back down*.

It almost seems as if with Bitcoin our main method of ensuring it never goes below a dollar is to keep it far far above a dollar so that even when it makes huge shifts in value those shifts happen way up in the $2 to $30 range, or like more recently, in the $3 to $8 range.

I think if we are merely wanting to trust they will be worth at least a dollar we have already had that for quite some time now. (Past performance, future performance gotchas of course might well apply...)

The plans my "national and multigalactic currencies" folk have been thinking of never planned to keep their currencies from going higher in value than the value they initially back them at at startup. Their idea had been that once all coins are sold the value could or should or would continue on up by market forces, eventually making their puny initial backing of only one fiat dollar - a value that grows smaller all the time - per coin become more and more irrelevant... Or they could then start to be thought of more like non-voting shares maybe, and be backed by 1/21000000 of the actual assets, including the cash reserve warchest of hopefully umpteen other currencies by then.

We have not yet tested how many blockchains one can "reasonably" merged-mine at once, so it is not yet clear when they would hit a limit of number of coin types if every time they ran out of one type, resulting in its value going over $1 per coin, they simply start a new chain they will back at $1 while continuiing to let the older ones grow in value, strengthening their reserves if they start using the older types as reserves.

In such a scheme your suggestion of using bitcoin as reserves is simply an example of using a/the older type as reserves for the new cheaper type.

-MarkM-

Are you responding to me? I don't understand what you are saying. Perhaps this is the source of confusion:

The trust can keep the price at a $1 just by committing to buy and sell for that price as denominated in bitcoin. Just because the trust's assets exceed $1 per coin does not mean it needs to let price rise.

Edit: I see you mean that something always worth at least $1 is not an improvement over bitcoin. It needs to be worth exactly $1. I agree completely.

Edit 2: I would like to re-emphasize my position that the pursuit of multiple pegged currencies is exceedingly foolish.
Network effects and trust are at the center of a currency's function. Trying to make many currencies simultaneously is just pissing network effects and trust away. It is doomed to failure.

I meant Drakahn's not actually visually bulleted in the markup "bullet points".

But once the issuers have sold all 21,000,000 coins and their price keeps going up, they might not be able to afford enough of a stockpile of the actual coins they propose to back to be able to throw enough on the market to keep their price from going "too high".

Thus the introduction of a new, "only a puny fiat dollar per coin" chain at such a time, relegating the old "only a puny fiat dollar per coin" chain to "oops, valuable blockchain coins, hoard them along with your bitcoins to back these new ones with".

(Using identical APIs for them all should keep it pretty trivial for commerce software to use the new coins, possibly just needing to know port number change and coin-name / symbol change.)

Re Edit Two, I have never seen any nation issue anything other than multiple pegged currencies. For example, pennies, nickels, dimes, quarters, dollars, fives, tens, twenties, etcetera, all pegged if only to each other...

RPG players seem to expect currencies to be pegged, like ten silver to the gold, five gold to the platinum etcetera. They actually find it kind of weird to think the number of one coin type you get for another coin type might change from shop to shop or time to time.

They actually seem to find the idea that a groupcoin is worth a thousand devcoins quite reasonable for example, being as how both produce the same number of coins per block forever but one produces a thousand times as many per block as the other.

-MarkM-

Seems like forum members could just as easily collude to run off with the backing funds as a company.  And I'd trust a legitimate company that complies with regulations with millions of dollars a heck of a lot more than a handful of forum members.

Just my opinion though.  I know the folks here love decentralization and complete transparency.  :)

They can start of with 21,000,000,000,000,000 of the new coins if this is really a concern. The starting number is completely arbitrary. The important thing is that the number of new coins and bitcoins on reserve and the number of new coins in circulation are publicly observable. As far as them purchasing up all the bitcoin, this does not seem likely. Eventually, there would be very few of the 21,000,000 bitcoin left and the price for these remaining coins would be astronomic.

The point isn't the $1, the point is, the people who initially bought the theoreticalcoins will get at least what they paid for them back, if they are used for a good/service it would be the same value in usd, if they hold on to them until all of the theocoins have been sold and the price goes free market, they might make a profit, they will not make a loss, so it would be good for a business to adopt and sell things for the same value usd/theocoin - IF we can remove trust from the equation

By the way I was still editting my previous post, a bad habit I know.

Would it do any good to use force of law in lieu of trust, such as by making an IOU coin, which like a cheque the giving of it into another's custody constitutes a commitment/debt to them?

This would bring us back to the often mentioned ripple concept, but as legally binding tokens of indebtedness...

(Mining would itself be contractual, IF you choose to have the coinbase of a block you mine include coins, THEN you are by the act of mining them commiting to redeem them...)

-MarkM-

I agree with you about trusting a large company vs. the crooks who populate the forum.

However, there is no way that a company could operate legally. With anonymization, the currency would be a vehicle for money laundering and drug sales. This would bring gov't intervention quickly. Realcoin will never work for this reason. On the other hand, if the company complies with regulation they will need to link every single txn to physical identities like in credit cards. The company would likely be liable for fraud committed by users to some extent. They would probably need to spend just as much as paypal to support their operation and would thus charge similar fees. What is the point of a company and currency like this? Why not just stick with paypal?

You need a solution that allows for decentralized or semi-decentralized and anonymous operation. Otherwise, all the other advantages of the currency will be lost. In order to get this, you will need to put the crooks in charge. These are the guys who are willing to operate a system which is a vehicle for money laundering and drug sales.
If you set up a system where the most profitable option is too comply with the rules, then even crooks will comply. You would do this by allowing the trustees to earn an income stream from the currency operation.

I don't see any proof that all transactions would need to be tracked.  When you hand out cash, you don't have to keep track of who that cash goes to afterword.  If a company hands out gift certificates or cards, they don't have to track who that gift card might be given to.  All that needs to be tracked is who bought it and who used it - same as with RealPay.  They won't be tracking anyone except the people who buy the RealPay coins from the central entity, and those who sell to the central entity.

There is no legal precedent to back up your theory that all transactions will need to be tracked.

It will bug the heck out of "them" that all transactions *are* tracked but conspicuously fail to tie identities to the tracking.

Bills have serial numbers, main reason cash registers don't track them individually yet is probably because they don't, economically/feasibly, *yet*.

The way the U.S. has been "lately" it gets harder and harder to believe they won't force tracking at cash registers pretty much as soon as they can.

Probably the only reason they let citizens own gold again lately is so they can sell it to them, having completed the process of first confiscating it from them. Once they sell it all they'll likely make it illegal to own again so they can confiscate it all back.

Can credit card operators and banks get away with only reporting deposits and withdrawals not account to account transfers?

-MarkM-

*shrug*

All I am saying is that I have not seen a law that would require person-to-person transactions to be tracked.  You can be suspicious of the government and speculate what they might want to do all you want, but until something happens, I don't think it's fair to make predictions as fact.

Also, and tell me if I am misunderstanding, but you want to back your version with Bitcoin?  What's the point of that?

Cunicula is the one who keeps wanting to back the hypothetical stable cryptocurrency with bitcoins, and even he sees that bitcoin's instability of price causes problems with that idea.

I have problems with the idea of backing them with anything other than what you sell them for, since anything else might well fluctuate in value compared to what you actually sold them for.

Thus my bots were designed to stash anything anyone bought one type of currency from them with in that specific currency's reserves, not to be used to back (aka buy) any other currency with.

Even that could have problems, since any "run on the bank-aka-reserves" might pick any of the things in your reserves as what everyone suddenly wants. For example if I sell ten CDN for some UKB and another ten CDN for some BTC and another ten CDN for some UNS, what happens if all those customers all turn up wanting to turn the CDN I sold them into UKB? Sorry, I only sold ten for UKB, I can only buy back at most ten with UKB, the rest you'll have to accept BTC or UNS for as that is all I have to back them with once my UKB reserves are expended...

Tracking customers suddenly starts to seem tempting, as I can look you up in my records and find out what exactly you paid me, and if you never bought the things yourself I could then even say sorry, I did not sell you those, here is my list of people I sold to, go find which of them bought these ones you want to sell and have *them* buy them back from you, its not my problem as you were not my customer...

(Bye bye fungibility...)

-MarkM-

To peg the value to one dollar in a way that is verifiable to third parties. Otherwise it will just look like a scam coin as in "Realcoin".

Ah, ok, so I was misunderstanding.

Well, best of luck with your endeavor.  Maybe you can find a way to work it out.  ;)

This is why I liked the "Freeciv Nations' National Currencies" concept.

We could back DigILire with real Lire, Canadian Digital Notes with CAD, United Kingdom Britcoin with GBP and so on for every national fiat currency.

No more need to worry about selling some of your only one type of coin for CAD, some for USD, some for GBP and so on then have a "run on the bank" in which everyone demans CAD or everyone demands GBP or whatever. Having one type of coin for each type of fiat means you can always have exactly the right kind of fiat in reserve to exactly back each coin regardless of what kind of fiat someone chooses to buy cryptocurrency with. You give each customer cryptocurrency that explicitly specifies which type of fiat they bought it with aka provided the reserves to back it with.

-MarkM-

How does anyone know if there is "fiat" in reserve? Why would the operators not just run away with the money?

Suppose there are honest operators who won't do that. What stops dishonest operators from setting up shop next door?

How do consumers tell the difference between honest and dishonest operators if they can't check how much money is on reserve in the operator's bank account?

What happens when the gov't freezes the operator's bank account? What is there to prevent this from happening?

What is the mechanism governing how the operator makes decisions? Is there just one dude controlling everything?

There are just too many problems with this. My idea is clearly much better. You probably know that.

I did work it out, but I can't program it up because I don't code. Just looking for some interest from people with the proper skills.

@Cunicula:

Your idea has its problems too, as I am sure you know.

Thanks for posting so I can post again though, because I wanted to add that blockchains can be used to do voting just like shares, anyone can verify with the block explorer how many coins each address has on balance thus how much voting weight each address could have if it signed a voting ballot.

Thus first I shall address your post, then add on this voting concept as a possible way to handle some distributed decision-making (even if not necessarily actual distributed execution of the decision).

This combines your idea of bitcoin having a central importance, if we use bitcoin for the voting.

Using bitcoins for the voting means it is not unreasonable to propose that IF you legitimately have a stake in actually knowing whether I have a certain amount of a certain type of fiat, THEN you can simply buy that amount of fiat from me with bitcoin.

If you do not have enough bitcoin to buy my entire stock of that type of fiat, I simply snub you as being of too little account for me to worry about whether you believe I have the fiat.

If you *are* of sufficient account though, you CAN buy my entire stock of fifty five Canadian Pennies three Canadian nickels and a tooney that my reserves listing sheet claims I have.

You and everyone else will be able to see on the blockchain that I THEN have enough bitcoin to buy that much CAD.

We could even, you being such a massive shareholder and all, have an agreement whereby I will buy those CAD coins back. We between us will have testified (they have to trust that you really did receive the CAD coins and aren't merely colluding with me) that I did have the CAD I claimed to have and now presumably have it again.

Now you maybe express doubt that I have a one kilogram brick of platinum?

Send me the bitcoins and maybe I can buy one and pretend I had it all along. Or I can maybe point at a pile of bitcoins I prove I control and say to you hey that there IS a brick of platinum any time today at today's spot price, lets do a shareholder vote to see if the holders would like me to have such a brick in my reserves.

So I agree that the transparency of blockchains is very useful, but at the same time it might be useful for the stakeholders, as you seem to like to call them, to be able to decide that actually the way such and such a fiat is fluctuating as compared to bitcoins might make it worthwhile to hold fiat instead of bitcoins at some points in time, or to hold a certain percent of each. Since lately, if you look at which fiats fluctuate a LOT compared to bitcoin you might almost be tempted to claim it is not the fiats that are fluctuating it is bitcoin that is fluctuating.

We could build code that can measure signed vote ballots that are signed by bitcoin addresses to allow bitcoins to act as voting shares...

Then vote on how much of our theoretical 21,000,000 units of currency we should hold as bitcoins, how many as dollars, how many as yen, how many as CAD and so on.

We could maybe start with pennies, try to acquire 21,000,000 pennies, in order to be able to say we at least can back each unit with a whole actual mostly-zinc early 21st or late 20th century penny...

Or try for NicKeLs, like bitNicKeLs aimed at, they aimed to be worth an actual made of nickel old style nickel from back before the nickels got debased...

-MarkM-

Your questions are the questions i started this thread to try and answer

Maybe we could do a pawnshop using a blockchain for its pawn tickets, so people can come visit the shop to see that we have all the goods that "back" the tickets plus after some period of time possibly restricted by law we would be free to turn those assets into cash or whatever else in order to have more room in the shop for more bars of gold or whatever, putting the cash into a trust account etc.

Is it illegal to trade pawn tickets in barter transactions?

Or we could have DryCleanedGarmentsCoin, backed by drycleaned garments, and have blockchain based laundry-tickets redeemable for the garments, and people could barter those?

-MarkM-

Let's go for a more universal and purer form of labor: hugs

You could have a chain where anyone can issue its own currency. Mtgox publishes its private key, tradehill its own, intersango, etc.
People decide which usdCoins, eurCoins, etc they trust and accept.
You make the trades with contracts (https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains) (need nLockTime).

By doing this, you also enable decentralized chain based Ripple, because you could make a tx like this one (all transfers in the same tx and A, B and C must sign it):
10 mtgoxUSDcoins from A to B
10 tradehillUSDcoins from B to C
10 intersangoUSDcoins from C to D

Everyone being capable of issuing their own currencies and transitive transactions is all you need for Ripple. Maybe this side effect/byproduct feature doesn't interest you much but I think it's important.

The main potential problems I see could come from spaming/DoS, but miner's fees should take care of that.
You would also need a server or a system like darkExchange to move the offers and such. These are called markets in my proposal (https://bitcointalk.org/index.php?topic=60591).
The messages on the proposal are wrong, I'm still thinking about the design, but you can read the specification. Basically is allowing this (iouChain or whatever) and also cryptoAssets that are not only issued centrally but also accounted centrally (instead of through a proof of work chain). About decentralized issuing...I don't think it is possible neither. At most issued by different parties that vote. But if you're backing a currency their users must trust you, there's no other way around it.

About legal issues, I'm not a lawyer, but...aren't paypalUSD, dwollaUSD, mtgoxUSD, etc backed by fiat legally? Is it about "know your customer" stuff? Intersango doesn't require you to identify yourself and it's legal. What am I missing?

Are you sure Intersango doesn't have to know its U.S.-resident and/or U.S.-citizen customers?

Don't even Swiss financial institutions have to do that nowadays?

-MarkM-

I live in Europe and didn't had to. Not even for depositing euros. Maybe is illegal to have an account on intersango if you're a US citizen and you don't identify yourself. But it doesn't ask.
I don't know. Just remember exchanges aren't banks. Are you sure you need to identify yourself for depositing USDs in a foreign business that's not a bank?
Anyway, as always, when it's technically possible, we can try to rely on pseudonym reputation and the martians...

Hmm maybe exchanges in Europe aren't as heavily burdened with regulations, maybe you can simply buy currencies over the counter at airports and such without having to show ID or passport, maybe even walk into any bank and buy it over the counter without ID, without creating an account, stuff like that?

How did the far across continent money-transfer networks of the Middle Ages work? Haven't they only recently been "purportedly" shut down, yet operated for centuries even before telegraph, telephone, radio, back in the days of the early computer known as the abacus?

Maybe there was something to be said for trust once upon a time? A simpler, more idyllic age when the darkness of superstitious faith kept people honest by threat of jealous gods? ...

-MarkM-

I think assuming a dishonest operator is silly.  I mean, Paypal could be dishonest and run, but they haven't.  MtGox could, but they haven't.  Dwolla could, but they haven't.  Countless other companies could, but they haven't.

Not everyone wants to be a criminal on the run.

I don't know what you mean by "stopping dishonest operators from setting up next door".  If the honest company controls all of the funds from the get go, what could a dishonest company set up next door do?

The government could freeze the company's account just the same as they could freeze a "warchest" account.  I don't think there's anything to prevent that from happening - it's one of the potential dangers of dealing with fiat.

As with any other company, there should be a hierarchy of decision makers with checks and balances throughout the organization.  Regular audits from an outside company should also be performed, and if they are AML compliant, I imagine the government would likely perform their own audit procedures as well, to ensure that the company isn't out to scam anyone and actually has the reserves to back up the outstanding liabilities.

There is no mention of any interaction with fiat anywhere in the system I propose. Avoiding interaction with fiat is the whole purpose of the system.


Why is the world like this? Why even bother to respond to people like this? Arrghh! Diogenes is looking for a human being in the bitcoin forum.
 

There are similar reading comprehension fails in the rest of SgtSpike's inane ramblings. Sgt. We always knew you were slow. Kindly meander over to a thread targeted at your reading level. Wait... I'm probably the one who should be leaving... Goodbye.

Sorry - keep getting you and markm mixed up.

The problem with your idea is that it cannot be stabilized, making it no better or different than Bitcoin.

sure it can be stabilized. it is just a fixed exchange rate. you stabilize it with a warchest just like any country with a fixed exchange rate does. read up on fixed exchange rates

yes but you are backing it with bitcoins, say you did it 1:1
1 bitcoin for 1 coincula - Why would i buy a coincula when bitcoin does everything it does? and its value will always be bitcoins value in fiat
if you mean buy 1 coincula for $1 worth of bitcoins, well you need to have the bitcoins in reserves to do this and there are too many ways to not have enough bitcoins to pay everyone back.

whereas a $1coin tied to USD will always be worth the same USD and make a much easier way to transfer 'fiat cash' around the internet, since each coin would be an iou from '$1coin corp'  and the reserves would be what was paid for them in the first place

So, let me see if I get this straight.

You plan to have a warchest filled with BTC and whatever the coin is.
You plan to use said warchest to buy and sell the coin, as needed, to keep the exchange rate basically stable compared to some fiat currency.
You plan to fund said warchest with transaction fees.

Am I correct?

EDIT:  DeathAndTaxes explained it well.  I understand the concept now.  I think it's a good idea, and would make a good alternative to RealPay.  I like the idea of a company-handled coin better myself, but there are certainly people on both sides of the fence in that regard, and I think there's definitely room for both services to co-exist.

EDIT2:  It also helps that DAT explained it without resorting to petty namecalling.   ::)

Yes i see that the reserve could work but you would always need more than was deposited and could end up paying out more than was deposited (not in usd value, but in bitcoins)

we sell 1 million coins for $1 in bitcoins when bitcoins are at $5 - we have 200000BTC
bitcoins drop to $2 and everyone wants their bitcoins back at the same time to 'get out' as it we're - we have 200000BTC and owe out 500000BTC - where is the 300000BTC coming from?

I sold some SA currency a couple of weeks ago at an over the counter exchange, ie. I walked in and they paid spot price for it. Walked away again 2 mins later the only thing I signed was an acceptance of the amount.

marked

How did trying to figure out how to tie an altcoin with fiat value without loss turn into losing a lot of BTC?

Okay, so the proposal is multiple reserve rather than fractional reserve, fine.

However part of what I liked about the Freeciv Nations and Multigalactics currencies concept was one could hopefully end up not only stabilising your several hundred (one per galactic nation plus one per multigalactic corp that chooses to issue its own currency like GMC and GRF) currencies BUT ALSO MAYBE BITCOIN TOO.

The concept was our warchest would end up not only having piles of different kinds of fiat and piles of bitcoins and piles of devcoins and piles of groupcoins and piles of i0coins and piles of ixcoins and piles of litecoins but also piles of each of potentially hundreds or thousands of other currencies, each wielded by some despot or royal family or republic or communist-party or democratic process, each using its own "warchest" to stabilise its own currency AND MAYBE BITCOIN TOO.

The whole idea of each and every game-nation being able to issue its own currency or currencies is not intended to detract from bitcoin whatsoever, it is intended to show how useful the whole bitcoin concept and algorithms are and provide endless numbers of possible baskets one could form from one's choice of which of these currencies one thinks the entity behind it is worth your while to ally with or go to war with or ignore or whatever.

Bitcoin provides all of them with the ability to put aside the whole legal crap about fiat currency, and have fun with the whole actual empirical doing of stabilising currencies, coping with what happens when the Foo of the Manchu deliberately turns the Manchu currency into a scam (as if anyone didn't expect him to, like duh, the deviousness of the Foo of the Manchu is infamous) and so on...

-MarkM-

Thanks D&T. I appreciate your ability to get past my megalomania. Also, sorry for going apeshit on you SgtSpike. My teaching evaluations always say that I am a poor communicator and it must be true. I have some issues.  I'm afraid that my reputation and communication ability hamper my ability to spread ideas. No one is going to hire me to handle public relations. I say things like the CEO of Citibank on national TV regarding public anger against bank executives [something like] "It is sad that America has become a country where people hate anyone who is better than them"

D&T, if you want to start a new post with the proposal, it might be a good idea. We would need to eventually attract interest from a talented coder for the new currency to work. He could potentially be paid with seed capital or shares in the enterprise.

Like D&T, I was thinking that the trust would start with seed capital, and then charge say a 0.3% fee on any txn with the trust's exchange. 0.2% would go to increasing the size of the reserve and 0.1% would go to reward the investors. There would also be a 0.1% mandatory txn fee which could pay miners on all txns.

So the total fee on the exchange txn would be 0.4%. The use volume is potentially large because daytraders could use the exchange as a substitute for trading on Mt. Gox. Given the other hassles associated with Mt. Gox, the fees should be low enough to be competitive.

As for the seed capital, I was thinking that say 50 trustees could submit 50 BTC each which would be locked in the venture as equity. These 50 trustees would share an m-of-n multisig account on bitcoin and an m-of-n multisig account on the new currency which would be used for exchange. Any txn with either currency would need to be signed by at least 25 of the 50 trustees.

The identities of these trustees could be anonymous if desired. It could be that some people submit 50 BTC several times, that doesn't really matter. It is just like they are buying multiple shares.

No worries.  It didn't help that I thought you and markm were the same person most of the time while I was reading, so I can't blame you entirely.

In response to a few people claiming that whatever programmer creates a fork is going to imply his own rules, good or bad, I'd like to disagree. I want to program an experimental fork and I'd like to take many things into consideration, obviously. I like the idea of having a backed currency, and I think we should find a way to do this without it being centralized. I am probably going to start programming this this summer, because I'm in school now and I probably should focus on that, unlike all of my previous years.

If anyone would like to help sometime in the future, let me know!

-Garrett

The only way to combat the problem is to attach a system outside of fiat currencies. So what concept is universal to most humans....
Well if time is money then it must be the time that is worth something. Time and the Goods that were produced in said time.

Let us say we (the community that accepts the new coin) attached the value of one hour of time per one coin.
Of course to make that work the community would need to understand that everyone's hour is worth the same. If you are a Doctor then your Hour is worth the same as the hairdresser down the street. What matters is the time you put in to your line (or lines) of work. So long as your skill meets a need of the community then your effort is paid by trading the coins for others services.

It runs along the concept of barter system but levels the playing field for all ages.
The time dollar is old hat and has been working well for many communities it would seem. One particular site is already used to keep track of jobs needing done and who has what time creds. What I would like to see is a decentralized form of this system by attaching the value to a btc fork.

Naturally we would need to figure out the least amount of time$s needed to supply basic needs. The community may need to adjust its greed level to make things work for everyone (agreeing to sell necessary goods at affordable levels).

If for some reason it becomes necessary to convert a time$ to a local currency then perhaps we could give its value as the local minimum wage (unless of course that is only an American thing.)

https://bitcointalk.org/index.php?topic=41513.msg1145565#msg1145565

Completely terrible idea.  If you pay the same to a doctor as a hairdresser, then no one becomes a doctor.  Who is going to go through an extra dozen years of schooling, have a high-stress, long-hours job, have the threat of malpractice lawsuits constantly hanging over their heads with every move they make, only to make the same amount as the barber down the street who dropped out of high school?  Maybe a handful of people would feel it is their "duty" or "calling" to go through all that to help civilization, but certainly, the number of people who would become doctors would be far fewer than today, and certainly far fewer than necessary to server the general public.

And that could be extrapolated further.  Who is going to be a manager with a degree in manufacturing engineering when they could skip college and simply be an assembly line worker making the same dough?  Who is going to be an assembly line worker when they could do what they truly love and just write music all day?  So, we end up with a society full of a bunch of starving musicians and artists who can't buy food or clothing or shelter or transportation because no one is willing to make any of those things, because everyone wants to be a musician.

Excellent post DAT, as usual.

Of course it's clear to people with basic understanding of the machinery of free market that everyone's time should not be worth the same. Otherwise it's a system of charity rather than a currency.

On the other hand minting based on time is possible with centralized identification service (i.e. not applicable to the realm of crypto-currency). I think someone published a paper on this recently, this system includes built-in welfare because you get to mint coins by just living your life, but that probably would likely provide only bare mininum of subsistence.

Which gives rise to the fact that we as humans will never rise above doing things for personal gain.
But as stated, it would take a society that can provide basics of living to everyone, and above that would be your motivation to work for more.
So much for a Roddenberry future.
It must be mentioned that many people in this world actually volunteer their time as duty to fellow homo sapiens (and other animals too).

As for costs of things, our current market is way inflated due to government (and other lobbying corp) influence. So those currently gouging the system would not have the means to do so.

Wages, perhaps a good motivator for going into a more educated profession would be extra time allotted or the society credits you the time spent educating yourself.... Imagine that, being paid to educate yourself for the betterment of society.

Thanks for your views.

I think this would be an interesting experiment.  And not even at the "bare minimum of sustenance" level either - somewhere far below that.  But, an experimental currency that would give out an equal (per person) and continuous flow of digital coins to people based on some set of criteria that would most definitely set each person apart from the next.  DNA, maybe?  Certainly, the logistics of identifying a person and making sure they do not receive more than one payout would be by far the most difficult part of such a project.  Regardless, it would be incredibly interesting to see how people valued these coins given out for free.  They could actually provide a bare minimum of sustenance, depending on how much they are in demand.  Or they could be worth all of $0.10 for a month's worth.  Who knows?  The market would certainly set the price...

You are completely correct.  Humans will never rise above doing things for self interest or self preservation.  Humans will always take the easiest path to achieve what they want.  Some people volunteer (and don't get me wrong - I volunteer too on a regular basis) because it makes them feel good, and thus helps them achieve their goal of happiness.  And it only takes one bad apple (AKA, a freerider) to spoil an entire utopia based on everyone "contributing equally".

I do agree that government adds a lot of inefficiencies, but that doesn't mean it still wouldn't take a great deal more effort to become and work as a doctor than it would be to be an assembly line worker, or a barber.

It's a pipe dream, and a ridiculous one at that.  Only really possible in small tribal communities where everyone knows each other and can hold each other accountable, and jobs more or less require the same amount of training/qualifications to accomplish.  Certainly not in the anonymously-global world we live in today with an incredibly wide spread between skills, education, and work load levels.

"  Only really possible in small tribal communities where everyone knows each other and can hold each other accountable"


I agree Absolutely. I reference timebank : http://timebanks.org/ taking this concept and moving the record keeping to use btc instead of the 3rd party keeping track of who has what coins.
That would also keep eyes from everyone's business.

Again, thanks for your more then honest input.

I'm all for more user groups making use of Bitcoins!

Interesting.

I think you could, as long as there's an assumption that new money will be need to be created some time in the future. As long as you've got that you can set up incentives so that speculation creates stability instead of volatility:

1) When the currency is too weak, people can volunteer to destroy coins that they own. In exchange, they get a voucher entitling them to a share of the proceeds of:
2) When the currency is too strong, newly-created coins get distributed to people holding vouchers.

The vouchers would presumably be just be another kind of transaction on the blockchain.

What you do need is a reliable source of information about the exchange rate so your network knows when money needs to be created and when it needs to be destroyed. This is a bit fiddly and trust-requiring, but probably much easier to accomplish than requiring a bunch of people to hold real money and not run off with it.

Our team trying to make realcoin to be equal to legal currency like $, 1 REC=1$ maybe, we are not sure about the exchange rate. Because in real life, the purchasing power of 1$ varies at most time.

You are looking at something that MoneyGram or Western Union does but using a P2P Decentralized coin.

It is possible to peg a coin,  just create miners that can only collect fees.  no newly minted coins created by miners.   

The only way to acquire a coin is through an exchange.   In that exchange your sell coins only at a fixed price relative to some other currency.    It also means that you buy coins also at that fixed price.     In short, you absolutely need to have the funds in your store so that any run on the bank gives folks there money back.


In short, it is just like any bank... but using p2p to communicate transfers!!

Certainly possible with crypto-currencies.

If you are interested in this,   I can crank out the actual implementation for you.  PM me, or send email to info@frictionlesscoin.com

If you have a centralized issuer there's no point in starting a new blockchain.
Use colored coins or ripple to issue your usd IOUs, backed currencies cannot be p2p, period.

Right. The pegging goes with centralization. A place where people look to get "the price" or "the law stating the price".

I don't think that's right. The way we'd imagine it done with a crypto-currency the peg would get set as one of the core rules underlying the currency, like the Bitcoin block reward rate. That's sort-of centralized, but it's only adopted by consensus.

Markets tend to have a certain amount of centralization (or have to date) to the extent that there tend to be places - market squares, stock exchanges etc - where all the trading that sets the prices is done. But that doesn't necessarily have to be true, and even if it is the price discovery is still a decentralized process involving a lot of independent traders making their own decisions.

The war-chest model some people have suggested sounds centralized, but again doesn't have to be. I've suggested you can probably maintain the peg without having a war-chest at all, just through the money printing algorithm. On other threads, Croesus has been suggesting a rather complicated idea that I think involves a decentralized participatory war-chest, but I'm not going to pretend to understand it.

If you're pegged to a fiat currency then you're importing centralized control from the central bank of the currency you're pegged to, but even that wouldn't be true if you were pegged to a freely-traded commodity.

You cannot sustain the price of a currency by printing more.
Who has the usd to buy the coin back when market actors want to sell?
Whoever holds the backing of the currency is the single point of failure.

You can hold a peg just by controlling the printing process as long as you're likely to have to print in future. As long as that's true, you can incentivize people to destroy coins when the value is too low by giving them vouchers to allow them to print in future when it's too high. These could just be a special kind of transaction on the blockchain that anyone could make, so as long as you have a way for the network to know the exchange rate it's pegging to you don't need any central authority controlling printing or destroying coins.

This isn't a sure thing if you get a lot of demand coming in and you print a lot of money to meet it, then it all goes away and everyone decides your currency is rubbish. But if you're pegging to a regular fiat currency the hurdle you have to clear isn't very high; You don't even have to keep demand steady, because the coinage you're pegging to is gradually getting debased.