Bitcoin Forum

Despite the announced 21 M limit, Bitcoin is limitless. All it can is hold 21 M per block chain, but we can create how many block chains we want.

What this leads to?

Well, for starters to its primarily goal BTC is useless, growing in value so fast it renders a totally useless currency for trading (other than trading BTC themselves). So my believe is that we need more block chains to operate, so we could have:

Universal Bitcoin (the one we already have)
but also:
EuroBitcoin
AmeroBitcoin
AfroBitcoin
AustraloBitcoin
AsianBitcoin

Leaving us with 6 block chains in total. To the very end when this 5 matures we will have 6x21M worthing the same, but as Universal Bitcoin has started first it must hold some value above the remaining 5 at least while there's more UBTC and is harder to generate than any other.

Why must a block chain be geographically limited?

Because without creating more block chains, WHO WILL STOP THE DEFLATION!

The idea would be to give it some sense, some "human readable" sense, instead of having Block Chain 1, Block Chain 2(...), as well as some "limitation" on the accepted or recognized chains.

There already is a limitation on chains I accept: the longest one. period.

That's OK... taken 99,9999999999(...)% of the planet still accepts none at all, not even that "longest one". The idea of split block chains must be on the table, it allows BTC to be more resistant and more usable, specially this last feature, as BTC has no use whatsoever.
I'd that one 1btc host that after tomorrow I'll not renewal. The reason? The host is ok for 1UD/mo, but suddenly became way too expensive as it tripled its value due to BTC.

So, how do intend to conduct business with such volatility on the currency?

Yes, the currency is volatile.  But how does making 6 more out of them (making them smaller and even more volatile) solve the problem?

There are already several distinct blockchains based on the Bitcoin software, I have test/demo IRCbots running that interface to several of them.

The CDN (Canadian Digital Notes) one is looking particularly interesting to me lately not just because I am in Canada but also because of the relative price-stability.

Mainline Bitcoin is looking a bit like a zero-reserve-banking system in some ways, to whatever extent it might be true that a run on the bank (everyone trying to sell all their bitcoins) might degrade the price.

I don't actually expect all the miners to just want to sell, with none of them being willing to actually "back" the coins they "mint" by offering to "buy them back" with goods services or other currencies, but the CDN plan of only "issuing" CDN coins the "issuers" (miners, minters) have CAD in the bank to "back" them with certainly has some appeal, as does the idea that their coins might thus keep a more stable price than mainline Bitcoins have. (The thinking behind that idea is that at least until uptake outstrips speed of minting, that is, until demand outstrips supply, there seems little reason for them to jump in value much higher than the CAD the people "minting" them are "backing" them with.)

I can set CDN prices based on CAD costs of doing business and expect that CDN will probably not fluctuate much in value compared to CAD thus that my prices should not require constant drastic revision.

The way Bitcoin has been fluctuating it seems to me it is probably much simpler to use a separate type of coin for commerce, buying mainline Bitcoins mostly for savings or investment or speculation rather than for use as spending-money.

Since basically the same software - thus the same interfaces/commands - are used for all the variants, it is easy to switch an application between the various versions/blockchains/currencies and to do exchanges between them. In fact my bots only work with currencies based on bitcoin code, not bothering at all with other protocols/interfaces such as paypal or liberty reserve etc etc.


-MarkM-

Running in parallel they manage to stabilize their inter-op prices. So there would be if not BTC, EurBTC, AmerBTC or other to fill the market need for currency, allowing then currencies to stabilize or not so open to speculation floating as a single block chain is.
BTC alone looks like a 3rd world currency, to do business with it you need to be carrying a price tag to change the prices every 5 minutes or so.

Some may think about go to the 4th decimal, to the 8th, however and even if those numbers doesn't affect machine calculation, this is just "the money", "the business" are intended to be operated by humans, not machines, to practical terms it shouldn't go over the second decimal (currency+cents), a currency with lots of units isn't practical.

its only volatile now b/c its so new. and the definition of volatility is somewhat suspect b/c its been only going in one direction: up.   this is what we would expect.  as time goes on and the currency production flattens, so will the volatility.  it will eventually find a stable equilibrium.  i think proposals like this are generated mainly from fear of not having gotten in at the ground floor.   i would NOT favor introduction of other block chains.  we have enough to deal with and protect with just one.

Maybe everyone will flock to CDN because it's so stable, hmmm...

It's news to though, how do I get CDN quotes?

There is an estimate of about 6,915,543,000 Person in this world of which it is estimated at least 10K already use Bitcoin.
That means you overdid your nines, by a lot.

How does that stabalize anything?  Because you say so?

Have you ever seen any other market that is extremely thinly traded?  Volatility like that is common.  Once it grows big enough, then it becomes harder for individual players to move the market. That's how you get stability.  Splitting it up would give the exact opposite problem, needing it to grow 6x as much to get that same level of stability.  You'd have to price things between the different coins (some might be worth more than others).  Frankly, you have no idea what you are talking about.

OK... let's wait and see... However mind one important issue: Trading money for money is a burning spiral of losses, as nothing is being generated to back it up nothing is fueling the economy. If BTC doesn't stabilize anytime soon, to allow other sort of business to be conducted with it, it will become a slow-burning ponzi scheme to the end.

CDN sounds a nice concept btw.

Just look up CAD. :)

Resist attempts to drive the price higher. Sure there will be some kind of transaction fee, for example I plan to have my bots use NKL (BitNickels) for such fees, but basically if people try to buy CDN for much more than 1 CAD per CDN it will presumably be because people buying it aren't then spending it. As long as they go ahead and spend it hopefully it will be able to go back out into circulation, allowing the supply to keep up with the demand.

Sure some day, probably in a few years yet, when a large percent of the eventual 21 million or so coins are actually in circulation, it might become time to open the thing up for every tom dick and harry to try to drive down the price by minting them at home, but at that point they will also thereby be driving up the difficulty, making it more expensive to actually mint the things.

-MarkM-

Where can i learn about the parallel blockchains avaiable out there?

Join IRC channel #bitcoin-otc on Freenode.

There you should find a bot named NickelBot. It has info obtainable by the IRC command

/msg NickelBot help

Unfortunately I think it currently thinks a BitCoin is worth less than a CDN... ;)

If you learn of others besides those NickelBot already knows about, do tell. :)

-MarkM-

Stabilizing is not the problem.  We live in the internet age.  We can price things every second.  For the large scale user, fees are negligible, especially compared to PayPal and credit cards.  Trading can be automated to make sure you aren't vulnerable to swings.

The only way we stabilize is if the exchange market grows tremendously.  Right now there is <20k BTC for sale on the exchange.  Anyone with medium pockets can buy them all up at any time, doubling the price.  Anyone with a decent amount of bitcoins could sell them and would lower the price tremendously.  We just need a bigger market.  It will happen with time (or it won't).

So, tom, with 6 parallel block chains you would end up with 5 times more BTC available, with different values between them is true, as they hadn't start at the same time, but will be more able to be up to BTC demand and therefore stabilization. A bit like what you've on the real world with different currencies.
As things develop, people will tend to stick with the most stable block chain for real life trade and use the more trended up as bullion or investment. Eventually some block chains will fall into darkness as happens to some currencies around, such as Indonesian Rupiah.

Why would they build up more demand?  Having more world currencies makes more volatility, not more stability.  It's good we have lots of currencies, since that volatility is not a bad thing since people can get out of bad currency and get into good ones.

Having more World currencies gives us diversity and choice. Have just one renders a monopoly, as now Mt. Gox have for an instance on BTC.
If BTC becomes as bad deal you've no alternative, equivalent to BTC, at the moment, do you?
Stability will be in the interest of those holding or investing in the coins if more BTC-like currencies are available.

Like anything else, currencies also work by the rules of the market and concurrence.

Not exactly.  You also only consider block chains whose first block is the one that is hard coded in the code.

I wonder if we could not rewrite bitcoin without this hard coded genesis block.

Instead, the software would listen to any blocks, and would create the largest block chain it can, whatever the first block is.

You could make alternatives to BTC.  It would have to actually be improved in some way, rather than being a clone.  But the more cryptocurrencies that exist, the more instability you will see in each of their prices as people have to gamble about which ones take off.

I also had this concern for some time.  I'm not sure however it is a serious problem.  Currencies don't devaluate one another.  Printing sterlings doesn't hurt dollars.   Gold is not threatened by silver.  Etc.

The fact that there are many cryptocurrencies on the market might confuse some people.  But once they make their mind and chose one, everything goes fine.  Just let the market adjust prices between them and, if the economy wants it, one particular currency will emerge.

I actually think that the fact that people can create a new block chain at will is a good thing.  If they do so, it will mean that bitcoin has reached a point where too few people have hoarded bitcoins, so that it makes bitcoins less usefull for the economy.  People then need more money to do their business, and there is nothing wrong for them to create some.

It might be the free market solution for the "bitcoin will create a deflationnary spiral" mantra.

Of course they devalue each other.  If you NEED dollars to buy something, and it is not for sale in any other currency, that will make dollars more valuable.  And I'm talking exclusively about having prices be unstable.  As demand for each currency changes in relation to each other, the value relationship between each also changes.  Some will eventually become unused and worthless.  Some will have flaws and become worthless.  Some might take off.



Choosing one works, until you find somewhere you'd like to spend it that doesn't accept it and only accepts a different one.

Deflationary spiral is also a myth.  Oh noes, the prices be falling when the economy grows!  How horrible is it that you can now buy more free stuff!  Better give money to the politically connected so that we don't have that happen!

Doesn't matter as long as you can exchange cryptocurrencies quickly on a global market.

But I admit this would deserve a more thourough thinking.


Yeah I know but we keep hearing about it all the time as an argument against bitcoin.

"People gambling on which takes off"... people is already gambling on it with Bitcoin alone.
Also you "need" USD (if you're on US that is, here it would help you much, as everything goes on Euros) for buy and sell stuff, whatever currency doesn't make you able to buy and sell stuff is an useless currency.
And up to this point, I've to give credit to that guy with carrots, taken you can't buy anything on BTC and you would actually be a foul to attempt to run a business in this currency as you can't know how much it worths - up to last week 1,xx USD, in the week before 0,6x/0,7x USD, now 3.xx USD, some months ago 1.xx, tomorrow ???? USD. It's not quite "trending up", it's bumping wildly without consistency. Fiat currencies goes a few pips up, a few pips down, this one bumps from gold to rubbish.
And see here an issue? Everything goes around USD, most (rather say ALL) of us think on USD or EUR or a fiat and stable currency, nobody thinks on BTC.

Deflation ain't never a good thing, unless the currency causing deflation isn't in use at all. Hey! Now you can buy more stuff with less currency. Right... but so you will earn less of that currency. Again, it just doesn't quite "hurt" in BTC because nobody is trading nothing on BTC, everybody is "thinking" on USD.
And I'm speaking somewhat against myself, as I'm one of the BTC "pioneers", I generated several thousands of coins in the beginning.

But back to the beginning, instead of Euro/Amero/Asian... it could be silver BTC/bronze BTC/iron BTC...

BCEmporium,

If you want to get rid of this awful deflationary BTC, I can exchange them for testnet coins for you. You will have a part of an alternative blockchain right now. Exchange rate: 500 testcoins for 1 BTC. 10000 testcoins available. You can call it BTC/silver (or bronze).

Indeed I think the metal analogy is better than the geographic one.

Your implied premise is faulty.

Any brand new block chain will be just as volatile as bitcoin, if not more so, once people take an active interest in it...  and it will not have the chain strength of the bitcoin main chain.

Welcome to the real world, where a tiny market can rocket 1000% once a big player or two enters the market.

And rather than entertain that notion, we should just continue on, if they are scared to use it, let them stick with their inflationary money.

Exactly, which is why it is so damn volatile to begin with.  There is no way to accurately value it, so that's why it's so much speculation.  And because of this "flaw", you want to *increase* it?  This is like saying a one-legged man runs slow, therefore we should cut off his other leg.

Yes, but making it more volatile won't make it more stable.  It's a small market.  Making it smaller won't help.


You don't earn less.  Deflation only occurs when the economy is growing.  If you are producing the same amount as before, your purchasing power stays the same.  If you are producing less, your purchasing power drops.  If you are producing more, you get more purchasing power.  What's the problem?

Did you expect it to replace the USD this fast?  If so, that's flawed thinking.  This is not going to happen quickly (if at all!).

xf2_org,

So you imply the whole BTC concept is faulty, as the maximum amount will force people into tiny decimals of an overwhelming expensive currency...

Raulo,

I think those "secondary" bitcoins should be within BTC and not separated, to not spread within several block chains, nor to surpass the actual bitcoin (let's call it Gold Bitcoin for this essay purposes). To "split" we already have namecoin, for an instance.

So the client would look something like this:

http://www.bityacht.com/mbc.jpg

Another surplus of this is to get people into bitcoin, as newcomers will be able to generate a few silver coins, much lower in value than gold but enough to get them interested.
From an outside point of view I understand some of my friends when they look at me as sort of a "freeloader" for my early generated coins and their current value...

tom;

Deflation is a "money trick" not quite connected to production. It's a nightmare due specially to its social consequences, obviously BTC is somewhat safe of this due to not be "currency" anywhere. How could you explain to someone you'll pay him less? Will he understand? And if don't, you will bankrupt to pay him the same he's already getting... to the end it causes massive bankruptcy and spikes unemployment. A normal reaction of a government would be to change currency, or its name.
Again... it may not apply to BTC, at least just yet.

Nothing of the sort was ever expressed or implied.

This has been discussed many times here on the forums, search around.  Once "a bitcoin" becomes expensive, and people are using 0.00001 bitcoins to purchase a coffee, some user friendly moniker such as "mBTC" or "nanocoins" will be used to save people from having to type all those zeroes after the decimal point.  Your coffee will cost 10 nanocoins.

And I wouldn't be here, if I didn't think bitcoin had a good chance of being successful, or at least, making a useful, positive impact on the world.

Regular money is more like bread

Bitcoin is more like wine

I couldn't have said it any better, Bitcoins won't fail because of some simple flaw found in most centralized systems unless you've read the detailed description, checked the source code and possibly went to MIT for cryptology I highly doubt you'll find a flaw in this system after "taking a look at the details". Like someone else said they wouldn't be here if they didn't think it would work and I highly doubt thousands of people are investing in computers dedicated to mining bit coins if they thought all that Time, energy and centralized money backed money went to nothing.

You insist to forget one thing, the currency doesn't conduct trade, people does, so prior to "nerd thinking" you've to think on "the people" side.
Nowhere in Earth general population will stick with a currency where you need to go on nanoX or picoY or microZ, so if that's the idea, rather bury bitcoin for business now, as it only business will be to trade btc for fiat currency and back to btc again and to fiat currency...

That doesn't really prove a valid point all your really doing is calling it a different name. Currency is currency. I would pay for goods & services in microPennies in real life if i got payed in nanoPennies or vice verse or  so whats your point? What is the people side? are nerds not people and if they're not please explain because I'm pretty sure we nerds arn't aliens coming to destroy every world currency with cryptocurrency.

Xenland,

When comes to economics, a very large slice of it is psychological. A bit like deflation, it's a nightmare due basically to psychological behaviors not by itself; say you earn 500, your coffee costs 1, at some point your coffee costs 0.5, your boss wants to cut your income to 250, this will alter your state of mind as you, "in your mind", are getting less (regardless you do the same with it or not).

People will never accept any currency they can't aim for the "unit". That's why gold ended up replaced for trade, even before banknotes regular trade was done with mostly bronze coins.
And here we go again, the existence of silver, bronze and other less precious metals didn't hurt gold's value.

You won't make less if you keep your production increases equal to the rest of the economies growth.  If you are inefficient, your salary will get cut.  Otherwise, it will remain constant or even grow.

People will adjust.


But maybe they won't, since people get low raises now and think they are making more money even when inflation eats it away.  But they will have to live with the consequences whether they understand it or not.  But it certainly is superior to any inflationary system.

Like I said, Tom, it's a matter of "psychological" maneuvers.
People will get happier with inflation as they get more, even if they make less out of it, than with deflation. And even if deflation would be ok if all prices come down at the same time, the fact is they don't, some will, some won't. Let's say from my previous example you have to pay a rent of 250/mo, will your landlord accept 125? Or he will be asking you the same 250 even if now it worth 500?
Deflation is a cause of social unrest, massive bankruptcy and unemployment and, due to the psychological impact, way worse than inflation.

When thinking about economy, it's a mistake to think just in numbers, as who does business is people, nothing has intrinsic value, people give (or take) value of things, therefore you always need to add people to the equation.

I would oppose the creation of a separate bitcoin if it was out of the bitcoin project, as such will render "two golden cryptocurrencies", but my idea goes around create a lesser-valued bitcoin attached to the already existing one. One more suitable for investment, other more suitable for trading. And here works again the "mind trick", name one gold the other silver would keep "big sharks" away from silver... even thus mathematically they're the very same thing.

In order to cure the deflation problem, we need to keep in mind the basic equation for the quantity theory of money:

PQ = MV   (price x quantity = money supply x velocity)

Everyone is focusing questions on the money supply (total number of BTC that exist), but are not focusing on the "V" velocity.  Increasing the velocity will help reduce deflation and stabilize prices, even if we stick to the 21M limit on quantity.  In order to increase the velocity we need more active merchant trade in BTC.

Rather than getting super technical on monetary theory, I will try to explain my thinking in plain language terms.  Right now the likely cause of BTC deflation is that there is strong demand for BTC as an investment.  People are mining and buying BTC to hold them for various reasons.  Of course deflation only encourages this behavior, attracting more investment demand for BTC, causing further deflation.  I am using the term investment loosely here - someone buying BTC for investment wants to "hold" them for a period of time rather than "use" them as soon as possible.

The main practical difference between BTC "investors" versus BTC "users" is that a BTC user would typically buy/mine a small number of BTC and then spend them.  For example, if I want BTC to buy cofffe, I would buy maybe 10BTC.  After I have successfully drunk a few cups of coffee and exhausted my BTC, I would buy another 10.  This behavior is familiar to anyone with a store card for a coffee shop.

If Investors mine or buy they accumulate the BTC, not offering them for sale.  The problem is those "investor mined" BTC do not add much to the supply of BTC available for sale, and the BTC bought may actually reduce the amount available for sale.  Both drive up BTC value causing deflation.

If more merchants such as coffee shop owners accepted BTC this would help the problem.  They would receive BTC, deliver a nice cup of coffee, and in turn sell the BTC for local currency (CAD,USD,EUR etc) so they could pay suppliers and employees not part of the BTC economy.  This creates more sell side pressure on BTC and increases the average BTC velocity.  Both of those results are beneficial to increasing BTC economic activity and stabilizing prices.

The only way deflation happens is if the economy is expanding (people are becoming more productive).  There's no reason to think that your salary will be cut just because the cost of coffee goes down.  If everyone else is improving productivity and you aren't, your salary might go down in that case.  But it's probably better to get that signal that you are slacking than just assume a low/no raise means you are doing great.

Landlords will be forced to make rents competitive based on supply and demand.  If they don't lower their rents, people move out.  I've lived in deflationary rent environments, and people have the expectation that their rent lowers.  It's not a big deal.  He can ask all he wants.  But you are not his slave.  If the guy down the street lowers his rent to 125, you are going to move if he doesn't do the same.

Please explain how it causes bankruptcy.

In deflationary times there has been bankruptcy.  But this is do to the boom-bust cycle which is caused by ma-investment.  People invest in unprofitable areas due, that seemed like a good idea, but easy money drives inflation and the cost of business, which makes the business no longer profitable.  This results in bankruptcy, the easy money clamps down, deflation occurs, and then you have bankruptcy and unemployment.  But this is like saying that umbrellas cause rain since it is always raining when people carry umbrellas.

Yes, there is some psychological adjustment.  But people will adjust, just as they have adjusted to inflation.  People expect raises now.  People will expect rents to drop, food prices to drop, etc..., as we get more prosperous.  Salaries would stay constant or possibly drop a little with an increase in population, but they would be used to it.

Wrong concept, Tom, isn't "by produce more" that you cause deflation, could be but rarely (as the planet is already being exhaust of its resources), is by "retraction of consumption" (market has TWO sides, not ONE).
If less money is available, people will consume less, things either get cheaper or in stock, if stocking is possible, you can't stock fresh food for an instance.
This circle generates high losses to all sort of business.

I think you have the resources backward.  Every year, we are able to harvest resources better, more efficiently, and in greater numbers.  Technology allows this.  The amount of energy put on the earth and the amount of resources here are vast.

But, sometimes certain resources become more scarce or expensive to find.  This is an except to the general pattern, but certainly happens.  In this case, if the amount of money is constant, then prices of that good will rise.  We become less wealth in those area, which leads to price inflation.  This makes people poorer and is generally a bad thing.

Yes, this can hurt many businesses.  It also gives incentives to people to find alternatives.

You can have deflation even if production, resources and technology remain constant.  Deflation, like inflation, is a monetary phenomena.  Assuming the velocity of money remains fairly constant (which it typically does year to year) then an increase in economic activity (typically measured as GDP growth) and a constant money supply will lead to deflation.  Normally we think stable or slightly rising prices are the norm (at least for the last few decades) but we are not noticing that the money supply is growing at nearly the rate of inflation.  Take a look at http://research.stlouisfed.org/fred2/ you can graph all these things easily and see it visually as an illustration.  You can plot velocity, money supply (typically given as M2), GDP and other metrics over 50 years and see the changes.

Since the BTC supply depends on GPU cycles it is tied only very indirectly to any type of economic activity (investment, trade or otherwise).  This is the root cause of the BTC price instability.

Yeah, if money stops being spent, then those who are spending money generally would have increased purchasing power.  Velocity is just a different way to measure how much money is being used.  If someone hoards money and doesn't spend it (that money has V=0), then it's essentially removing it from the equation.  If people are spending it rapidly, then it's going to be the purest case where it's never taken out of the money supply.  Reality is money is taken out of the money supply and then put back in all the time, so it's just a way to abstract it.  But yes, assume it is constant and deal with the other variables to understand the problem.

I'm not sure that it is tied to GPU has anything to do with the price instability.  If it was just a dick measuring contest through GPU cycles, then there would be no price instability since BTC would be worthless.  But it *is* used for something, and it *can* be used for more stuff theoretically in the future.  The problem is it's a small market ($20M market cap now?), and a ton of that is being hoarded and isn't being traded, and a few decent sized speculators can drive the price up a ton very easily, and a few people trying to unload a decent amount can drive the price right back down.

This is the reason Marx was right about the major issue of Capitalism, somehow, or by convenience, some people tend or look to think as "growing to the infinite" as some kind of possibility. Technology doesn't allow it, as it needs resources to be created and after a few cycles you get it heavily inflated.
Therefore we've the cyclic crisis, a "readjustment" on that "growing to the infinite" attempt.

But this leads to other sort of economics, as CoinOperated states rightly, BTC has no economy at all, it's value emanates directly from speculation.
Which lead us to a secondary problem here, we NEED (isn't just a matter of "want") to have or start a BTC based economy, if the current isn't suitable for the purpose, create another chain, have another rules like index it to CAD or USD, force "miners" to backup their coins with some solid currency and leave this one to the only purpose it seams to have so far; trading fiat for bit and vice-versa.
Otherwise, keeping this economy-less currency by trading BTC people is loosing, as it always happens when you trade money for money, and to the end this would end up like any other sort of scheme where you trade money for money.

Infinite growth is not required.  Marx assuming that was a requirement was incorrect.

If growth doesn't happen, or is less than population growth, people generally get poorer.  This sucks, but is not really any kind of problem for capitalism.  Capitalism would be the best suited for prolonging resources over several generations since there would be incentives to try to make things last as long as possible (although current consumption > future consumption all things being equal).

Technology has been the main reason our economy has grown over the last 10,000 years at a tremendous rate.  Everyone keeps saying the end is nigh, yet it never happens.  Maybe someday they'll be right.  But I wouldn't bet against the last 10,000 years.

This has nothing to do with the cyclic crises that is most commonly caused by money supply and the banks.  Banks put easy money into the economy, people cannot accurately make guesses on what is profitable, and then mal-investment happens. 

Sure, the economy comes from speculation mostly.  There are uses right now where it's superior, but it's much less than the size of the money supply.

What would be the point of creating a block chain and indexing it to a currency?  Just use that currency if you like it better.

Just an idea... yet it needs something usable.
You don't go buy a coffee with gold nor a car with tin; yet there're more coffees being sold out than cars and within this BTC we only get gold.
I know this moves with the greed of old miners, believing that a secondary line would drop the value of their bitcoins... still, is just a matter of put it in the right perspective to prevent such thing.
And, again, a secondary block chain would give a boost of another "gold rush" for it... maybe shorter than the actual block chain as now there're a lot of miners equipped with top edge GPU, something I don't recall to see last year.

Right on - I couldn't (didn't?) say it better.  The hoarding (what I called "investing") is reducing the average velocity, most likely drastically.  A "hoarded" BTC has V=0 over the the time period during which you measured it.  Has any economist written some econometric perl scrips to look at veocity in the BTC supply over time? The cool thing about bitcoin is we have complete transparency on all the transactions since the beginning while still preserving anonymity.  FRED has to figure it out by dividing GDP by M2, and both of those values are estimates and there are piles of books and PhD theses arguing for or against those metrics.

However, I do not want to go so far as branding everyone buying BTC at the moment as "speculators".  Let us just say there is strong demand with a narrow supply.  A likely source of the demand is investment, but until we have some real metrics we may not be able to judge how much is intended for trade.  A greater supply of trade goods and services would test that theory to see if we could shake loose some of the low velocity BTC, per my original point.

As we speak, BTC is under fire again as Mt. Gox is under DDoS... and in this times the lack of a BTC economy turns more evident. As nobody seams able to deal directly with bitcoins, the exchange being down simply "halts" the entire system.

I see your delimia that a paycheck will increase and decrease and that can do alot to people's plans with what they were going to do with it. but whos to say that my paycheck will decrease during a payweek? If we agree on me being payed 500 bitcoins it should already be in escrow regardless and if bitcoins prices go up or down(do you get payed less or more during a pay period if the price of the dollar went up or down?)then I'll have twice the money to purchase coffee until the next payperoid. But who knows what will happen in the future

Are there any ideas for how exchange would happen between the two block chains? Is there some way to facilitated chain1-to-chain2 exchange such that it will not become a completely independent currency?  I think two indpendent bitcoin currencies would be damaging to the chances of expanding this into merchant trade.  Merchants would have to decide which to support.

PQ = MV problem can be addressed by increasing V or M, or some combination.  The 2nd chain idea addresses M, but the problem is then we will have PQ = (M1.V1) + (M2.V2) and it will get complicated. Increasing V will help imo but I do not yet have a vision on how to get coffee for my bitcoins. What about just increasing the number of BTC awarded to miners? That may not seem fair to last year's miners, but we have to consider whether the recent large BTC price rises (deflation) is a long term threat to BitCoin overall.   Any currency, whether it be fiat, gold, Medici bills of exchange or immovable rocks will not succeed if there is not a reasonable amount of price stability (neither too much inflation or deflation).  It just becomes too impractical for merchants to manage long term, they spend more time adjusting prices than conducting business.  The miners might conclude some price stability is equally in their interest.

Makes more sense, you missed the gold rush and want easy money.

Fork the code and start your own version.  Get 21 million worthless "SilverCoins".  No one will care.

I do think that the original distribution of the 21 million coins might have been too fast.  Perhaps it would have been better to spread it out over 100 or 400 years, with fewer coins given per block initially or something.  But what's done is done.  Some people were lucky enough to get involved early (not me :().  They had no guarantee it would be worth anything and it was just cool.  Some people spent 10,000 BTC on a pizza.  Such is life.

I'm thinking of it as a technically separated, the both block chains are independent, with inter-op by human side. So it will be up to the market to say how many silver you need to get a gold. The most important point is to get them together at the user's eyes, means that the client that handles "goldBTC" must also be able to handle "silverBTC".
Having this secondary currency you get some point of stabilization, maybe however not just yet with silver due to the high demand of gold (so some gold investors may move to silver or diverse their investment wallets by put some silver too), but let's say in 1 or 2 years time it's started the bronze block chain and up to this moment you'll have a tertiary and basically stable currency, as the demand for the "bullion" doesn't quite engage this last chain, at least there's no reason for that to happen.
You can always inter-op them by the market, but those two lesser chains being less interesting to the speculators would become expendable exchange, increasing its velocity, whereas BTC (gold) remains as investment and savings.
Not as simple as the currencies as 100 cents = 1 usd I don't believe it would be possible to determinate 100 silver = 1 gold with the same linearity.

Basically is to move part of the real World to BTC reality, you tend to save an 100USD bill, to expend more easily 1 buck and not even to think much about expending 1 quarter.

As for the "gold rush", I didn't missed it and I wouldn't be investing in hard GPU's - nor do I've them, I'm not a miner -, don't bother. Generated some thousands by CPU back on the beginning, up to late July.

I still don't understand the point.  What problem are you trying to solve?  That someone doesn't want to "break" $100?  What need does this actually fill?  Stabilization?  It does the opposite.  Name something and describe how it actually helps rather than just rambling.

He is trying to increase the money supply because we are experiencing severe deflation.   I completely agree the problem (severe deflation) needs to be addressed or it will threaten bitcoin's long term future.  The idea of a bi-metallic currency is worth exploring.  Traditionally it was set at a ratio of 12:1 or 15:1 silver:gold.  Few people are aware this power was one of the few explicitly enumerated in the US constitution (Article I Sections 8 and 10).  To stick to round numbers, we could start a second chain and fix the ratio at 10:0 silverBTC:goldBTC.  The users console would just see "BTC" unless they asked for a breakdown.  Initially all the miners would rush into silver since the rate of silverBTC would be more than 10x goldBTC.  As all the CPU resources switch over to silverBTC, one day it would drop to just under 10x easier to mine silverBTC, and they would start mining goldBTC again.  That is exactly how it works with bimetallic currencies, and they did it for the same reason: increase the money supply in an orderly way.

Back on the time when people buy pizza for 10K, I bough cards for nearby values, I don't bother with it, and BTC flowed without much interruption.
Now... as this one gets to this price, BTC is stuck. Nobody can do business with BTC, it's simply impossible. So I feel the need, as a supporter of an economy of goods, not an economy where "money" is the "good", for a more worthless kind of BTC, one that is usable, and this one ain't.
Hard to understand?

Please clarify - you are saying you want stable BTC prices?  IE a pizza should cost maybe roughly 10 BTC, and in 6 months time it should still be fairly close.  Maybe 9 BTC, maybe 11, but not 0.0001 or 10,000? 

That was my point earlier, if prices change too much too quicly (either up or down) the currency becomes unusable.  Do you like the bimetallic idea? goldBTC and silverBTC?

But the bi-metallic standards failed.  This is because there always is a natural price between things, and there is a legal price.  If you fix the trade ratio rather than just let it float, then you end up with no one accepting the overvalued metal and everyone wanting the undervalued one.

What's the difference between adding a 10:1 currency and just moving the decimal place over a digit?

Why is it impossible?  It's certainly possible.  You change your prices.  I wrote code to do this in 15 minutes.  It's super easy.  Once the economy grows large enough, things will stabilize quite a bit.  But it needs to grow to support this.

That's what happens when something moves from being valueless (BTC at the beginning) to somewhat valueable (now).

Yes CoinOperated, I do think that it has to be a way to contain either deflation or inflation. A secondary block chain if connected with the main chain would be less appealing to the current speculators and therefore potentially more stable.
Also the ability for some newcomers to mine would encourage more people to enter into bitcoin, expanding its market.

The whole current trend starts to look after the fate of e-Gold, Pecunix or other "most people didn't even heard about" e-currencies.

I just don't see how to set the x:1 proportion with this one, at least at the beginning.

You can change your prices... is it? How? By setting them up in a fiat currency and a CRON to check BTC last on Mt. Gox every 5 minutes?
Question is: There's no money flow in BTC, without flow all "growth" it represents is illusory. Again: Trading money for money is a process of erosion and self-consuming. Which means in the end BTC will "break" when no more "fresh blood" gets in as in any Ponzi scheme where "the money" and "the good" are one and the same.

There are two ratios to set:
(1) Exchange rate of silverBTC:goldBTC = x:1
(2) number of silverBTC generated per CPU cycle : goldBTC = y:1. 

y will decrease over time naturally, and y:x will fluctuate up and down.  We can choose to make x a fixed value in the user console, and by everybody agreeing to use this version of the user console it would get enforced.  Or we can let x float as tomcollins proposed.

I  am leaning towards BCEmporium's view that letting x float has some technical challenges.  I also think it has many psychological challenges as the ratio can be volatile throughout the day. Who wants to stop making coffee and go and execute trades to lock in a favorible rate after each cup?  The coffee merchant would prefer to do it once at night and trade all their BTC take for the day, or even better once a week.  They could lose a significant amount before they sell it to volatility.

We could rather just fix the rate in such a way as to stronlgy encourage silver mining.  That is the behavior we are after, motivating more people to get into mining to increase the BTC supply and stabilize prices.

 

"Request Price in BTC" -> go see what it costs.

It's trivial to implement.  I've already done this.  You could CRON if you wanted to as well so you wouldn't have to do it on request.

You are correct there is not much flow.  But it's because it just started and not many people use it.  Why?  Because there's not a good reason to (except in niche markets).  It has zero to do with stability.  We need growth.  That will bring stability and make a bigger reason to use it.

Stability is still an issue.  The merchant will want to convert back to fiat as soon as they can because they do not want to lose money.  They are coffee makers not currency traders.  As soon as the BTC receive verification is "mature enough" it will need a feature to automatically execute on Mt Gox as well. Now the merchant also needs an account on Mt Gox and trust the trades will clear and get paid.  It is adding a lot of hurdles.

I still like the tomcollins "request price" feature, even if the community goes with fixed rate for x:1 you still want to be able to see fiat conversions right in your console.

Growth is definitely needed.  Need to consider what feature will promote it best.

Tom,

Even if you implement such "convert to bitcoins" (and two of my sketches already do it) you still have an issue, with it being so bumpy either you go sell your coins right after the sale or take the risk of holding them, as it bumped on Dec/10 to 1USD, Fev/11 to 0.7, Mar/11 0.6, Apr/11 1... to boom the last week up to 4, now on 1st week of May down to 3 and probably will end the week at 2. Those 200K moved was probably the gathering for a high payment which made BTC to climb this much.
Rather complicated to settle prices within this system.

I wasn't going to disclosure this project so soon, but this project of mine @ http://www.bcommerce.biz/ already does it. And to prevent "go check" on every 5 minutes it does the conversion by the following formula, once a day it collects fiat currencies value at Google and USD-> BTC at Mt. Gox, it then sets BTC value by the following formula:

Mt.Gox high + Mt.Gox low / 2

It is designed to operate with fiat currencies plus bitcoin. As bitcoin alone (my first sketch) would be hard to penetrate on its own.

I've thought of the idea of handling all of this for merchants, then paying the merchant through ACH transfer or some other means.  I'm not sure it's worth my while right now to pursue, especially since it would be a regulatory nightmare.  Yes, there are hurdles right now.  Accepting bitcoins is either a novelty or a necessity right now.

Your site looks interesting.  So on your bcommerce site, if a merchant lists an antique for $100 USD approx 320 BTC, how do they get paid when it is sold?  Only BTC?

I will give the choice to the seller to set it to be in bitcoins, paypal, wire or cash.
The site just provides the trading "platform". If a fiat is selected it will display the BTC equivalent for either conduct the trade in BTC, if is one of the ways of payment accepted by the seller or buyer, or BTC promotion purposes.

So if the seller wants Paypal USD and the buyer wants BTC, you will perform the clearing trade on their behalf.  Sounds pretty cool.

No, if the seller doesn't want BTC, simply won't select it when creating the deal.
And this platform is meant to allow both end business; selling or buying. If you want to buy something, let's say a pair of pants, you start it by saying your maximum budget for it is 10 USD. A offers to sell it at 9, B at 8... reason why I said "the seller OR the buyer", depends on what end the deal was started.
As it goes maybe I'll give your idea some thought, but that would depend on a stable BTC... otherwise I would be playing Russian roulette by intermediate such trade.

Even if you let gold BTC float vs. silver BTC, you'd still likely see silver BTC be worthless in gold BTC terms as time goes on.

There are implicit interest rates in silver and in gold.  Any interest rate, remember, can be expressed as a discount rate: the price of the future good in terms of the present good.  Ten minutes from now, there will be about 50 more [gold] bitcoins (ignoring bitcoins lost due to death of people and/or computers) out there with an increase approaching epsilon in their aggregate value so the value of each bitcoin will decrease.  A bitcoin ten minutes from now is worth about AuBTC 0.99999177 in current gold bitcoins.  Likewise there's a discount rate in AgBTC.  Let's say for argument that ten-minute AgBTC is worth 0.98 in current AgBTC (i.e. that AgBTC's supply is growing faster than AuBTC's).

There's also an exchange rate between AgBTC and AuBTC.  Since we can calculate the price of future AuBTC in present AuBTC, the price of future AgBTC in present AgBTC, and the price of present AgBTC in present AuBTC, we can calculate the price of future AuBTC in AgBTC.  The interest/discount rate in both currencies and their current exchange rate is a prediction market for the future exchange rate.  The future AgBTC/AuBTC rate predicted by the three rates will converge on the actual AgBTC/AuBTC rate as the future approaches (as time under consideration approaches zero, future and present approach parity).  This prediction is thus arbitrageable: if you know that your prediction of the discount rates is accurate, there's profit to be made.

We'll have the current AgBTC/AuBTC rate be 10.  Then 10 futureAgBTC is worth 9.80 presentAgBTC which is worth 0.98 presentAuBTC which is worth 0.980008 future AgBTC implying a future (mind you: future means 10 minutes from now) exchange rate of 10.2.  Silver has depreciated against gold but the interest rates in silver are markedly higher than they are in gold (the interest rate for lending 1 AuBTC for 10 minutes is .00082298% while the interest rate for lending 1 AgBTC for 10 minutes is 2.0408%).

The question now is, which would you rather hold?  Are you saying "look at that rate in AgBTC!  I should be in silver!"?  If that's what you say, you're not holding, you're investing/lending.  If you have the choice of investing/lending in AgBTC or AuBTC the choice is neutral if you accept the discount rates and exchange rate as accurate: the change in the exchange rate will cancel out the difference in the discount rates.

Investing/lending doesn't decrease the set of currency holders.  If you lend money to someone it's either because he wants to hold money, he wants to lend it to someone else who wants to hold it, or he wants to trade it for something else and the person he trades it with will then either hold it, or lend it, or trade it for something else...  at some point someone is making the decision to hold or "hoard" AgBTC or AuBTC.  Given that the value of 1 AgBTC in AuBTC is falling, it's fairly clear that these individuals should have a rational preference to hold AuBTC over AgBTC.

This results in exit pressure from AgBTC to AuBTC as the hoarders obey the incentive which puts more upward pressure on the AgBTC/AuBTC rate which increases the incentive for hoarders to hold AuBTC.  We have a positive feedback loop that continues until AgBTC is worthless, unless there is some external factor at play.

One of those possible external factors is that the lenders don't understand what's happening and thus make suboptimal decisions.  If AuBTC is predictably appreciating by 2% over AgBTC but the loan markets in both currencies predict only 1% appreciation (basically that AgBTC rates are 1 point higher than AuBTC rates) then you see lucrative investments in businesses whose only act is to hold gold and hedge it with the prediction of lower appreciation.  Eventually these investments crowd out all other AgBTC investments and the AgBTC rate is driven to 2 points over the AuBTC rate.

Another is that some party who creates present AgBTC to buy future AgBTC, thus disrupting the interest rate inputs.  The danger for this party, of course, is that they're not just creating present AgBTC to buy the future AgBTC generated by the appreciation in AuBTC.

In any case, speculators on these things can and will speculate, and the speculations boil down to long AuBTC and short AgBTC.  Again, the predictable appreciation of AuBTC over AgBTC generates predictable appreciation of AuBTC over AgBTC.  Monetary competition is fundamentally unstable: there's no negative feedback, only positive feedback.

Thus why fixing the exchange rate between AuBTC and AgBTC is doomed to failure: at some point there will be a jolt that is sufficient to start one currency appreciating and once that happens the appreciating currency will appreciate until the depreciating currency is worthless.  But even with floating rates, this phenomenon happens: the rational saver will rebalance into the rising currency and de-diversify out of the falling one (or at least, the sooner he figures this out, the better off he is).

This happens with non-fiat currencies all the time: thus far basically every commodity (barring a few exceptions like Pacific islands that use rocks) besides gold and silver has been demonetized and silver is almost totally demonetized (despite the word for money in a ton of languages being the word for silver...) relative to gold.

In the world of national fiat currencies, holders and users are not homogeneously distributed.  Most of the people for whom USD has intrinsic value (viz. the ability to keep the US government from kidnapping them, killing them, and/or taking their stuff) are in one area of the world.  Even if they keep most of their savings in something else (gold, bitcoin, swiss francs, shares of facebook, etc.) and use something else (possibly not the same thing) as a medium of exchange for buying food etc., they still need to buy and hold USD from time to time.  Is there a group of people that need AgBTC in order to survive or keep their stuff?

I'm not sure we're on the same page regarding what it means to fix "x" where AgBTC:AuBTC = x:1 exchange rate.

The direction that people chose to exchange should be a function of which is easier to mine.  I am not sure that a fixed rate is practical, but let me restate the idea so that it can be examined.

The price of AuBTC and AgBTC in fiat currencies, say USD, would fluctuate independently according to the market.  This is necessary since they are separate chains and can be transacted independently.  Initially the quantity of AgBTC would be small helping to support a high price, plus it would be easy to mine. This would attract miners away from spending their CPU cycles on Au and into Ag mining since it is more profitable in USD.  Clearly there is an arbitrage opportunity if AgBTC/USD:AuBTC/USD < x people would sell AgBTC for USD and then buy AuBTC and then use the fixed rate x:1 to convert back to AgBTC.  This would force prices back to a ratio of x:1.  However even afer the arbitrage closes the gap, miners would still be attracted to AgBTC because it is less than 1/x times as costly at first. Eventually the cost of mining AgBTC would increase just above 1/x times AuBTC as more miners come in, and miners would switch back to AuBTC.

It seems that it would be intuitive to set the mining rate of Ag and the limit at x times Au. But I cannot think of why it has to be so.  Can you?

Another interesting question is this: Undoubtedly some Au enthusiasts will not want to deal in Ag.  That is their choice. Can an Ag-Au system co-exist nicely with a smaller Au-only system?

The quantity being small doesn't make a high price.  There is a small quantity of my turds that are framed, yet the price is strangely not high.  No one wants them.

If you had a fixed exchange rate, this means someone has to be forced to accept one kind of currency in place of the other.  Would the client force this to happen?  In that case, you really just have one currency and you created more Bitcoins.  If this were to happen, it would render Bitcoins valueless.  If you can arbitrarily add more and more Bitcoins at any point, it completely defeats the point, and the price would go to $0.  There would be no point in using it.

But if you let things float, sure, it could happen.  The market is so small, some people would go off looking at AgCoins and try to get in early on it.  But they wouldn't be worth much.  The Bitcoin price would also drop some due to uncertainty and having competition.  This is the biggest natural threat to BitCoin (you can make arbitrarily as many identical clones of it as possible, no longer making it scarce).

But again, what is the point of this?  Do you just want to artificially lower the price?  Get in on a second mining boom?  What problem with Bitcoin is actually being solved by forking/forcing the main client to deal with a fork?

No, Tom, ever wonder why we've so many forms of currency around? A: Diversity.
At this moment bitcoin is a failure on its main purpose, it's impossible to conduct micropayments with it, as 1 cent worth already 0.03 USD+ and this will probably go up.
The secondary bitcoin, which can be done within a dual-bitcoin holder (this and the other) - create a "fork" or a fork alone to deal with that secondary BTC would render just a concurrent currency. If some or a lot sticks to this BTC and refuse the other, fair enough, I don't see how to enforce people to accept this one, so I wouldn't see a reason or how to enforce people to accept the other.

I see an issue into force a conversion rate, as it would need some sort of "Central Banking" to enforce and control the supply of AgBTC... not quite possible within the BTC decentralization. But if a group decides to put that idea forward... as long as they've both sorts of BTC enough to hold it as so. But I believe for practical terms it will need to float in the market.

As for the "new mining rush", you must see it as a way to get more people to join BTC, not as "oh sh**! I'm f**ng greedy with the BTC I generated in 2010 and I'll not allow anybody else to touch it". Your AuBTC is safe, don't bother with it... you let some new folks mint their 50 AgBTC and get more supporters - thus some old miners may interest in mint Ag at the beginning making it less time-spawning as AuBTC in the beginning.

Wrong answer.  Until very recently, there was only one currency.  Gold.  This happened because it was the best currency, and it destroyed all competitors.  Governments finally changed this when they realized they couldn't print gold and realized the power of devaluing their own currency. 

Actually incorrect.  You can certainly do less.  And there is the power to do MUCH less (but having nano-transactions overhwelms the network and serves no purpose).


You have two options and only two.  An independent concurrent currency (that may be integrated into the client or not, doesn't matter), or some additional fixed rate currency (which means you just expand the number of Bitcoins, and give the new ones funny names).  Doing the first is possible.  Go for it!  The second one will crash Bitcoin to $0 (or would just be rejected by anyone who knows anything).


So fork teh code and create AgBTC.  Everyone will ignore your useless currency and you will see for yourself.  Or some people will flock to it, half people will use regular BTC, half will use AgBTC, and the value of each will be cut in half, until someone makes Bronze, Iron, Zinc, etc...

As for getting new people to join it, if there is free money, the people who are in best position to get to it will get to it.  New people aren't going to mine some random valueless currency at a greater rate than the people already involved in Bitcoin.  If it's easy to mine, it's because it's valueless.  If it becomes valueable, then people will just switch.

It seems your main complaint is "it's too hard to mine".  Well no shit, it's supposed to be hard to mine.  No one is supposed to get rich mining except maybe the early adopters who were just gambling anyway.  People should focus on getting Bitcoins by either buying them from people or by offering goods and services for them.  Mining is not adding much value to the Bitcoin economy.  If all we did was mine, it would be as pointless as http://progressquest.com (http://progressquest.com) (mining has value as a transaction logger, but if there were no transactions, it becomes pointless).

You claim you want stability and predictability in the value.  Why suggest things that would do the exact opposite.  Although adding new currencies that people are forced to redeem at a fixed rate would give stability and preditability- it would make the value 0.

Wrong! Prior to printed money you'd Silver, Bronze, Tin, Copper... even Iron in Sparta. Gold was an asset, used mostly for savings nobody was carrying gold along, unless was completely insane.

Again I'm NOT a miner... nor have equipment to compete with those miners.
Yes the AgBTC will start to be worthless... so was AuBTC... and yes, people will make Bronze, tin, copper... until they find one suitable for goods and services, one that is what BTC isn't: expendable. As this one ain't and probably Silver will have too much value, thus less than Au (not 50-50 market), within some time.

Up to this point, and even if at the beginning we'd some btc business enthusiasm with those pizzas, hosting, domains, etc , now all it resumes to Mt Gox, trading money for money. If you don't realize how hazardous is to keep trading money for money and that will render no more than yet another Ponzi (maybe the reason why the creator of BTC jumped of), than there's nothing I can do, enjoy it.
I keep saying that while BTC resumes to this, it's a threat and you'll find it out somewhat soon, nothing is being generated the only "business" is "mining", what you call "trading" is selling "mining". Maybe some drug dealers or people dealing with CP are adding value to this, I don't know, it may give it high value or justify its present value, but for the rest no added value is being given to BTC economy.

Well, yeah, back before people interacted with each other.  Eventually all of those metals lost.

Of course trading money for money and that's it would not be a successful economy.  I haven't denied that once.  The bitcoin economy needs to grow to become useful.

However, going in and out of money might be sufficient for some economies (mainly black markets).  Most of the value now is speculation, that it will be useful for something down the road.  If it does, it's severely undervalued now.  If it's not, it's severely overvalued now.  That's why it is moving so much.  People are placing their bets.

A lot to chew on here, so I am not going to even try to quote anyone!

First, I am not a miner and don't intend to be. But even if I was, if I can mine Ag so can you (probably better than me). That is not the reason for proposing a second chain.

The problem I am trying to solve is how to get bitcoin to grow a real economy behind it. Remember that tulips were a great investment vehicle, right up until they weren't.   Right now bitcoin is primarily an investment vehicle because there is demand for something like it. That demand could be channeled into driving the growth of real economy, rather than waiting for the inevitable bursting.

In order to get a real economy growing, merchants and consumers need to increase their confidence in BTC as a trade currency.  I believe that the price instability, especially the very high volatility of the last four weeks, is a detriment to that goal.  I would be equally worried about severe inflation, in fact even more so than deflation.  For this reason I do not want to get too wrapped around discussion on the merits of deflation.  A moderate amount of steady deflation might be fine, but that is not what we are seeing.

A lot has been said about 8 decimal points and it is hard to deny that the micropayments could be solved.  But I am trying to address human psychology for casual users.  I went on some web sites yesterday and noticed they had not updated their BTC prices so it was much cheaper in USD. Casual consumers would just use dollars. We know the right thing is to go to MtGox sell your BTC and use the USD to pay, this closing the arbitrage gap.  But average people couldn't be bothered most of the time.  I have a friend that runs a major ecommerce site and she goes on for hours about how you get a higher take rate if you place the radio button on the left compared to the middle depending on country.  That is the reality.

Similarly merchants will not know the arbitrage has taken place and after a while just take down the BTC becau,se nobody is using it.  Also human nature. Yes their are cool solutions to automatically get quote feeds from MtGox but those are just more hurdles for people.

In sumary I strongly believe that stable prices are necessary. One solution would be to convince everybody to increase the 21M limit and increase the mining rate, but knowing human psychology that pig is not going to fly.  Hence I propose a second chain. 

I can see both sides of fixed vs floating Ag:Au rate.  You should not need a central bank but I admit I do not have all the details worked out. The idea is to use market arbitrage forces to perform that function, similar to the way ETFs use arbitrage to keep their trading price close to the NAV.  SOMETHING will have to be set arbitrarily in the system, such as the eventual Ag cap and mining rates.  The people that willingly download the AgAu console will all mutually accept those arbitrary settings.

I am very interested to hear opinions on how the floating rate would work, and what the arbitrage is.

I keep hearing this argument, but it's just assertions.

"We need stability".  Ok, I understand.  Economy needs to grow for that to happen.
"So we fork the code and make more bitcoins and make the economy smaller".  WAT?  It makes no sense.

Please for the love of God try to explain how having either more Bitcoins or similar Bitcoins makes things MORE stable.  If anything, it would make prices fluctuate more and make things unstable.

If you think otherwise, at least try to put forth your thought process so I can show you why you are wrong.

Prices are not stable because there is huge speculation and it is a super thin market (meaning there aren't that many coins traded close to market price, so any significant order moves the market big time).  Propose something that actually solves that issue.

I also disagree that merchants are not taking things because prices are unstable.  They aren't getting involved because the amount of work needed does not justify the increase in business they might get.  There are only a few users, most have access to USD or GBP or EUR or wahtever, and using cash or credit cards is less costly for them than going in and out of relatively small number of bitcoins.

If you want to fix things, make them useful for something!  Start your own store.  Have people pay in them.  Start trading them to people in person.  Expose more people to them so the economy grows.  Do not splinter an already tiny community any further.  Unless you can somehow show me how splitting up into two currencies somehow is helpful.  But I hear a lot of rambling and not any actual arguments.

Ever wonder why people stop using gold for trade? Well one point BTC doesn't have, is that it's heavy, but mostly due to its high value. It's the so called "too good currency = bad currency". This is what is happening to BTC, it is becoming "gold", a currency "so good" that nobody will expend it once it triples the value in a week. - Eventually, as no economy develops out of it and it gets stuck in a money exchange without anything else it will suddenly drop to... zero.
But back on the why "not gold", people started to use other "currencies", "worse currencies", and when they did it, gold hasn't lost its value, nor gold was put out of business, simply was moved to "big deals".

Turns funny to see the fear of another "mining pool", this resembles so much the old pre-Fed/Central Banks fractional and distributed reserves. Normally a banker or even an economist would be doing the math and tell everyone to run away, but these "miners", "exchangers" and "speculators" aren't either of them, so they will fall to the very same mistakes they did on the past believing to come out "unscratched".

So, that's it, you already get a currency for speculation, this BTC; in order to do two things, very important things, create an economy and actually stabilize and strengthen bitcoin, you need a "worse" bitcoin, and can't be this one already, as this one is already "bullion". Also can't be "forked out" btc, because that wouldn't be creating an "alternative lesser-valued bitcoin" but another concurrent bitcoin as whole. "The sharks" that are pushing btc up already have their pool, this one, the other can fly under the radar for a while... until a yet lesser may be need, in total 3 or 4 block chains can keep up the supply and the different kinds of business.
It could be even created over 3 separate GUI's, 1 dealing with "Au" only, other with both and yet another for Ag only.

As for fixed vs floating, I expect already huge resistance from the current miners (even if they're more part of the problem than the solution), and would expect more if it was somehow fixed or regulated. It doesn't quite matters if today you need 1000 silver to 1 gold, and tomorrow 10,000 Ag:1Au, as long as the prices of Ag doesn't spike and come back, let the Au handle speculation and "investors".
You're not, in this process, make the community bigger or smaller, just making it usable.

My theory is that the cause of the volatility and strong deflation seen recently is that many newcomers are buying into BTC attracted to the notion that it is "scarce".  I am not alone in this, many have posted similar sentiments on various threads. This phenomena is driven by recent press coverage and the fact the idea really clever.  Any move to increase the supply of such bitcoins will tend to dampen this source of investment demand and stabilize prices.

I agree we need more merchants and more real economy, and I believe that would also create sell side pressure and stabilize the market, and have posted such previously.

Now some facts would be interesting:  

You stated "few users".  How many users are there?  

You state  "huge speculation" and "super thin market".  Please point me to some market depth and trade data that supports this.

Gold is too heavy?  Are you kidding?  The currency is too good?  I can buy a house out of gold I could carry in a backpack with ease.  It's not that heavy.  If anything, it's too light, as it's hard to do small transactions with it because you start dealing with tiny specs of it.  That's the biggest drawback to gold IMO, is small transactions.  Which is why silver was useful.

People used other currencies when their governments mandated they had to.
Strange, I didn't know Gold's value dropped to 0 because it was so awesome at money.  You learn something every day, I guess.

I have no idea what you are saying.

Well no shit it's just speculation.  There is nothing to buy.  It takes time to get there.  It's a chicken and egg problem.  No one uses it, therefore no one sells anything with it, therefore no one uses it.  Until it has a market where it is forced to be used, or it is advantageous to use it (black markets), why use it?


Sure, if you say so buddy.

Of course having it scarce makes it valuable.  That's kind of the point.  Scarcity is pretty important for a currency to work.  It's not the only thing, though.

No idea how many users, but my guess is under 10,000.

mtgox.com.

Market cap ~$20M.  You can buy all the coins on the market for under $30k (at least last time I checked before they went down).  That jumps the price tremendously.  Try to sell 20k bitcoins, and the price drops tremendously.  Try selling $30K of any stock on a major index.  See what happens to the price.  Try buying $30k of stock, see what happens to the price.  It barely moves.  Because the market is well-traded.

How would this create "sell side pressure"?  It would make people try to spend them to get rid of whatever they could by making them worthless?  Perhaps.  Try to actually explain your arguments instead of state assertions.

Gold is one of the heavier metals around, 19,3 tons per cubic meter. Lead for an instance is just 11,34 tons.

What happens to gold is that it's high valuable per gram, unlike lead which is cheap - not by "intrinsic value" (since there's no such a thing and if we measure it by usability, copper or silver (as it is the best electrical conductor) would be the most expensive and even lead would be more worthy than gold, which only good property is to be immune to erosion).

Why gold never drop to 0? Because it was seconded by the other metals market, gold alone would be a huge problem, as due to its value you would need nano-chips of gold to buy a coffee, would become useless for daily life, up to speculation and would make the market hang without a reliable and usable currency. And this is a problem with btc, we've ONLY gold.

Yes.  And that's a good thing.  I can put the value of a house in a backpack and carry it easily.

Ok, so you are agreeing with me, that it is not the best suited for small transactions.  But you do realize BTC can be split up 6 more decimal places?  Right now it makes no sense (who buys something for 1/1000th of a cent?), but if the value goes up, we shift the decimal in the client, and boom goes the dynamite.  If we shift the decimal all the way over, and the smallest purchase that makes sense is still too large, then making a "silver" that is just an extra few decimal places makes great sense.  But by then, a trivial purchase (say $.01 in today's market) would need to be the smallest Bitcoin value (.00000001BTC).  So if Bitcoins ever are worth $1,000,000 each, I am all for Silver BTC!

I explained in depth how commercial trade usage would create sell side pressure in other posts that I thought you were monitoring. I can dig back and repost.

Do you have tape showing the price movement on 20k BTC trades you mentioned? Can you post some piece of it?  I have looked at mtgox before but assumed that is only a fraction of the market since the depth is rediculously small.  You can't tell the true depth anyway because obviously large liquidity is not going to be posted in the order book.  I also assumed that there are other markets and the largest volume is OTC.  Bitcoin encourages OTC by its very nature, more so than most other trade I can think of. So some ticker examples of lack of elasticity would support the point since it should draw liquidity away from OTC and other venues if only temporarily.

Does mtgox publish its complete historical tape?

I can think of all the usual methods for promoting liquidity but they are controversial in the real (old?) world as well. Such as steps to encourage more market makers, rules for minimum liquidity, facilities for margin and short selling, rules for pricer discovery, etc etc etc I'm sure you're familiar with the litany.  Need to think about how to do some of that p2p.

Just look at the market depth.


Yes.  You can see every trade that has happened.

Market makers have no incentive to be there due to the low volume and spread.  Perhaps adding options or other more advanced features will help.

I haven't been able to get on mtgox last night, it hangs.

Do you have some section of tape showing trade history where small trades are at huge spreads and wide volatility?  Do they tape their whole order book, or just time/price/quantity?

While margin and short selling should add liquidity, it is controversial whether it decreases or increases volatility.  It would have to be tried. Narrow spreads that you talk of seems counter to a thin market.  Options require active committed market makers, if we don't have a strong market in the underlying not sure that will help.  But mtgox had an "options coming soon" note on their site.

I'm not sure you can look at previous market depths.  You can look at the current depth, though.  They do only show 125 orders closest to the highest bid/lowest ask prices.

The spreads are sometimes small, but sometimes huge.  Even when the spread is small, there are often only a few bids or asks at those prices. 

If I wanted to sell 1000 BTC immediately, the last trade was 3.441.  The current highest bid is also 3.441.  If I sold, the price would drop to 3.301.  Fairly significant for not really that much to sell.  If I wanted to buy 1000 BTC, the lowest ask is 3.462.  So only a 2 cent spread, which is nothing.  But at 3.441 the bid is for 171 coins, and the ask is for 2.84.  To go up to that 171 coins, I'd have to move the price to 3.51, so it's closer to 7 cents.  Not that bad, but it's only for a super tiny order.  For 1000 BTC, I would need to drive the price all the way to 3.5699 to get enough asks to cover my order.

3.559 vs. 3.301 is a 26 cent spread for a fairly small order.  Pretty significant.  Now add in a single investor that wants $10,000 of action.  To buy, I'd drive the price to 3.65, I'd end up with 2784 coins at a price of $3.59 on average).

To sell $10,000 worth, I'd drive the price to 3.14, selling 3046.35 coins at an average price of $3.28.  So that's a $.31 spread in a fairly large order.

But your buy and upward price action might attract more ask depth.  It depends how fast the market reacts.  A better experiment is to execute part of your order at the ask qty 170 and put some or all of the rest of it on the book and see if that attracts execution.   I get your point that trading is thin but I'd like to see some of the tape.  I'm sure there are examples of both execution strategies in the tape somewhere.  http://www.mtgox.com/trade/history last 47 hours doesn't work for me today either.  If you have some sections of the tape that illustrate please copy-paste the in.

Exchanges typically solve this by requiring market makers to post bids and asks of a minimum size always, and they have a minimum number of market makers (at least 2 or more). Let's say it is minimum qty 100 and 2 makers, that means there is always qty 200 ask and 200 bid at any time.  So you can execute that and obviously they will raise and widen spread but they compete for the next execution (as you work through the remaining 800).   In order to comply they either have to have short facility or maintain enough inventory on both sides of the trade as a % of daily volume to allow enough time to replenish inventory if one side gets drained.  Which is exactly what you want. The other solution is to go to an auction market.