I used AI word so more people can understand the idea...
I would love to see the reasons cause it would be an "inevitable disaster"
I'm not saying it would be an "inevitable disaster". But you are using AI to mean "some magic algorithm" does the math. I'm just discussing what that magic algorithm might be. |
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Red, stop shilling your shit and contribute to the debate. If you think you've got the right answer go ahead and implement it.
I think I'm 80% to the right answer. I don't think measuring coin value against electrical usage is (in general) a good idea. It was however the first proposed way to create stable currency. I did not create that concept. Another guy did with EnCoin. I just attempted to research and document what simple mechanisms could make the concept work. Currently I like the idea of "shadow-fiat" coins pegged to the value of their base fiat currencies. These would be anonymous trading currencies with medium term predictable values. They could be used in contracts (like rental leases or installment plans) where you wouldn't currently use a volatile currency like bitcoin. They aren't intended to serve as a replacement for bitcoin, but as a complement to bitcoin. Think of it as a place to keep your anonymous speculation gains. If bitcoin is rising, hold bitcoins. If bitcoin is falling, hold shadow-fiat until it starts to recover again. If you need to pay rent in 5 days, hold shadow-fiat just-in-case. However, I haven't worked out the math of pegging to a fiat currency without using a trusted oracle (like Mt Gox) that sees both sides of the transaction. My current chain of thought is to "introduce risk" through a para-mutual gambling incentive. The mining equivalent would be to put your existing coins at risk against receiving a share of the new coins created. However, it needs to be done in a way that doesn't tend toward price oscillation. I don't expect that pegging a coin to fiat will be popular. But I keep watching these threads to see if anyone has a better idea. Really, I watch to see if anyone is discussing math that will work. |
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It's amazing how many false relationships people see. Hash rate has nothing to do with exchange rate. Neither does the social dynamics of a popular vote.
Stable currency can be created but all the incentives need to be pointed in the correct direction. In the GEM proposal we solved the problem by introducing monetary risk. A person only attempts to create new coins when it is profitable to do so. He risks the cost of creating a coin against the current exchange value of the created coin.
In GEMs case the "risk" was actual electricity cost. If the exchange price of a GEM coin is above the cost of electricity needed to produce it, then there was profit to be had in minting new coins and IMMEDIATELY exchanging those coins for fiat currency. This immediateness is important. Coins minted and then hoarded do ZERO to change the exchange rate. Only coins attempting to be exchanged can do that.
And yes, there does need to be some downward pressure on the coin supply in certain circumstances. Demurrage doesn't really work. Destroying coins that aren't in the process of circulating has no effect on exchange rate. The only way to raise the trading price of coins when their value has fallen is to discourage people from spending them (at that moment). In GEM we introduced a "panic" tax. When the price of GEM coins falls below the target, an extra tax is imposed on spending the coins. The farther the price falls, the higher the tax (non linear). The tax is destroyed.
There is more to it but the above should give you a rough idea of the minimum concepts necessary to create a stable currency. The hard part is doing it without a trusted oracle which can supply external trade information.
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Both ideas want miners to request MtGox for the current market value or something. That's an outside dependency and probably a Point of Failure. That's not what I meant.
I've been kicking around ideas for this sort of solution. I used to be repulsed by the idea of a "center-of-the-coin-universe." But as I've explained in other threads, bitcoin already has a center-of-the-bitcoin-universe and it seems to function adequately enough. |
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Another complement to the hard currency (blockchain bitcoin) economy, would be to reinstall real bills. This is a fascinating read. (As you said) I'm through about half of it so far. I'm sure the clearinghouse model is used in big business to this day. One of those magic techniques that make real business men smarter than me! :-) However, I'm struck by how close it is the the Local Exchange Trading System model referenced above. Had no idea its foundations went so far back! Thanks for the link! So if you feel velocity is somehow a desirable characteristic for a backbone of a monetary system, at least with bitcoin you get much more of it compared to the current one.
Velocity is awesome. It mitigates the need for large amounts of actual coinage. But that's really the inverse of my question. The gold in Fort Knox hasn't circulated in my lifetime. However, it has appreciated in value along with the high velocity coins and gold directives in circulation. I'm asking how many bitcoins are in cold storage? (metaphorical Fort Knox) There was a scandal in the 70's were people started to believe Fort Knox gold had been secretly sold and was circulating. I'm wondering the opposite. What if fewer bitcoins are circulating than we presume are. We don't notice because the velocity of the circulating coins is so high. |
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There's a Bitcoin Days Destroyed graph, but I don't know where to find a Bitcoin Days graph.
That's a nice derivative. Especially the filtered versions. Obviously people are already trying to figure out when the coins in "cold storage" start to move. |
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1 million coins traded over the weekend. How many do you think is enough?
This is not a troll. Just really curious. The premise of this thread is dependent on the inverse of the statistic you give above. We know exactly how many bitcoins currently exist. Does anyone regularly calculate how many bitcoins DIDN'T trade over any given period of time. I'm sure may of your $1 million coins traded hands multiple times. Someone crawled the transaction graph a while back and found that a huge number of coins had never traded EVER. They still sat in exactly the same outpoint they were "mined" into. I guess the question is, does anyone graph the total coin age of the system? They might. I've been gone a while. It's not fool proof. People often move their coins from one personal address/outpoint to another. But it would show what percentage of the coin base is in cold storage. |
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Meh, here's the thing about having a lot of bitcoins. If you don't spend them, there's no difference. If you do spend them, you get cool stuff but you also have less bitcoins (and somebody else has more).
It's not like the current situation where the rich can position themselves at the output hopper of the printing presses and fill their pockets at will with the proceeds of your savings account.
This argument has gotten repeated on this site since its founding. That doesn't make it logical or correct. Suppose Satoshi had decreed that their shall forever be only 10,500,000 bitcoins instead of 21,000,000. And instead of deciding to spread the generation over multiple 4 year periods he decreed that all coins would be distributed in the first 4 years. Or in other words, what if the initial distribution of bitcoins was already finished. Everyone in the world had to work with the bitcoins that already exist today. Now what mathematical law will forever dictate the value of each bitcoin? It's pretty simple and not at all rhetorical. Each bitcoin's value becomes proportional to the total value of external goods/services that humans wish to exchange among themselves using bitcoins to facilitate that exchange. Current bitcoin owners want to exchange a certain amount of external goods/services among themselves right now. These same people likely have the potential to exchange more external goods/services among themselves. (They could sell each other their cars and houses.) But that group has a finite upper bound. Taking the group of bitcoin owners as a whole, they only own so much stuff. All the upside comes from people who DON'T currently trade their external goods/services using bitcoin. So say I have 1,000,000 BTC today. That's $100 million today. Say I want to spend $1 million a year. That doesn't mean my BTC will be exhausted after 100 years. The more noobs I convince to use bitcoins the more value my coins have. If the value of BTC goes up exponentially then the number of BTC I have to part with is reduced from linear to logarithmic. In other words, I couldn't spend them all if I wanted too. That is why with Gold as a currency and land a property Royal families could say Royal for generations. |
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Don't forget that many of the early adopters worked bloody hard on Bitcoin. Some spent thousands of hours writing and testing software; some set up Bitcoin businesses (which was much harder then than it is now). And some spent their own money on promoting it.
For example, Gavin Andresen bought 10,000 bitcoins and gave them away to newcomers at his Bitcoin Faucet site. How many of the whiners are buying bitcoins to give away?
Just to be clear, I consider anyone on this forum today an "Early Adopter". Even if you don't own a single bitcoin yet you have an opportunity that 6 Billion people don't. This logic only makes sense, right? We are slightly more that 4 years down a timeline that goes to infinity. Because if you consider this "the middle" then bitcoins only has a practical lifespan of 4 more years. If that is the case, why should 6 billion people care? In fact if you consider the timeline anything shorter that infinite, then the only possibilities are zero or more "next coins". If zero, BTC was a failure. If there is a "next coin" and you grant its "early adopters" the same blessed status..., then isn't it in the best interest of 6 billion people to wait for the next coin? |
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Xiaoma, I agree completely with everything you've written. But allow me to concentrate on these parts. I don't think it is important if currency A or currency B is the primary one, or if people enjoy speculating on it. What I find important is the fact that in this "double currency system" only one of the 2 can be used as an actual currency and money transfer, and the other one as investment/speculation/protection/whatever. I don't think Bitcoin was ever designed to be just that, but there is no reason why it could not become one. This is topic for another thread.
That is exactly the conclusion I came to. And philosophically it doesn't seem important which currency is considered primary. But you are correct is only makes sense for a stable value coin to be used as actual currency. If I owe my rent on the 1st of each month, I can't really agree to a 1 year lease priced in volatile coins. Imagine if I agreed to a one year lease priced in bitcoins this past January. WTF! So if the people who want to use coins to exchange for goods/services have to price and pay in stable coins, what are the volatile coins actually for? They can only be for pure speculation. But speculating on what? It can only be for speculating on how many people want to speculate on volatile coins. But if the only use of volatile coins becomes exchanging for stable coins isn't it fair to call it a (Ponzi, Pyramid, Matrix, Queueing, etc) Scheme? |
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whoops sorry... of course we have a super stable currency that is nearly impossible to manipulate.
Anyway looks like I don't have much more to say about the topic of this thread. Who got hundreds of coins have that, who got a million will be lucky anyway. Not my problem unless it stops bitcoin from going mainstream. Do we still want that?
:-) It has been my contention since the beginning (almost 4 years) that this thread's topic will be what stops bitcoin from going mainstream. So let's talk about this... If there were a value stable COMPLEMENT to bitcoin (something like GEM, EnCoin, et. al.) which was created as stable "swap space" for speculators when the bitcoin market is falling, Would that stable currency eventually gain dominance because it alleviates the need for bitcoin in the first place? Specifically, would "stable coin" become the primary "currency" for setting prices, measuring value, making loans and paying off debts. While relegating bitcoin to "scarce commodity" status. Furthermore, would there be any point in speculating in a "commodity" with no particular use except as a currency? |
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From what I see, I suspect is more like a checking account and a stock playground at NYSE. A savings account is not that volatile.
Ssssssh! Don't tell anyone here that... :-) |
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The idea of 2 complementary currencies with a focused design is very interesting. One could be optimised as a pure transactional with a stable exchange, and the other as a deflationary store of value. And still have the benefits of a decentralised, near-anonymous and non seizable.
Let speculators speculate with bitcoins, and merchants deal with the other one. And let people choose a mix of both according to mood.
Exactly! Like having both a checking account and a savings accounts. |
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What mechanisms exactly would appeal to enough people, so that they would trade the guaranteed-less-than-100%-ever-more inflation of bitcoin, for something which cannot markedly appreciate in value over time, due to new creation tied to increase in userbase?
That's what I've been pondering for longer than I care to mention. But I think I have an answer now. Clearly there is no way to convince the crypto anarchist, libertarian, gold lover, "saver" of the fixed coin bitcoin model that a variable coin/fixed value coin is BETTER than bitcoin. However, clearly, there is a need for a COMPLEMENTARY fixed value currency in addition bitcoin. What for? The other half of speculation. When bitcoin is going up, speculators want to own bitcoins. When bitcoin is crashing they want to own anything but bitcoins. However, all the stable alternatives are currently fiat "accounts" within currency exchanges. These are subject to all the non-anonymity, seizure, hacking, fraud risks that regular (cyprus style) bank accounts are subject too. How might you make a value stable non-fiat currency? This is one potential way. https://bitcointalk.org/index.php?topic=47628.0All the cool bits you love about bitcoin. None of the price instability. |
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Why create something targeted at instant transactions (like a Paypal) or to be used as a currency (like the USD) but design it to have the economic behaviour of stock market? That makes no sense. What we see here is that the effort needed to get 10-15 coins today is pretty much the same level of effort and risk that 1 year ago would give you hundred of thousands.
The main problem here is not the fact that early adopters have more, this is fine. The main problem is the sheer scale of the disproportion. We talk about million times more for a comparable risk. People entering the Bitcoin world now risk as much than people entering 1 or 2 years ago.
Xiaoma hit on what I think is the fundamental reason bitcoin will never go mainstream. Some 6 Billion people in the world are much like him. They've never heard of bitcoin, or they've never heard of bitcoin until today. When they show up here they are all going to ask this question over and over again. "Why should I waste my time and money making you guys really rich? I've got that problem already." @Xiamo, I can answer your question directly if you'd like, but it would cause a flame war. Probably better to do it in a new thread. Hint: Bitcoin is not a currency. It is the first commodity ever created by mathematical fiat! |
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When I discovered bitcoin it was 5 BTC for $1. I thought it was overpriced because the previous week it was 200 BTC for $1. That was the difference one slashdot article made.
I ran the original client for about 20 minutes but it made my laptop hot enough to be uncomfortable on my lap. Never bothered to generate a block. Instead I got a bit nickel from the bitcoin fountain. A week before the fountain was giving out 5 BTC to anyone who asked. The slashdotting emptied the fountain so they reduced it to nickels.
Lost the nickel somewhere. Still think BTC is overpriced.
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I initially stated that a huge problem is the fact that far too much of the Bitcoin monetary base was mined for trivial effort by a small group of people.
See it is your fault not mine! :-) A smart man once wrote: "If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the culture of naive fools and conmen, the former convinced that BTC is a magic box that will turn them into millionaires, and the latter arriving by the busload to devour them." I never said that. I said the problem with the initial distribution of a fixed set of coins was: "Because to potential new adopters, after that point Bitcoin is going to look like a new a 21,000,000 coin currency with a 10,500,000 coin pre-generation that went to the creator and his "friends". Certainly people will stop caring about Bitcoin long before they show up on our doorsteps with signs saying, "We are the 99.9932%!"" https://bitcointalk.org/index.php?topic=48521.0LuckyBits, Please keep us straight! :-) |
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If there was an improvement in the technology that eliminated the need for exchanges, would it be enough to eliminate the dictator from the algorithm?
Now you get it! See, that's the problem I think I have a solution to! :-) Better yet, it reenforces anonymity! |
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