I still haven't heard from hashcoin, so I've decided to just pay the other 0.9 BTC I owe.

I sent the following transactions:

0.4 BTC to the faucet (15VjRaDX9zpbA8LVnbrCAFzrVzN7ixHNsC)
0.3 BTC to jtimon (1N9u8az3nkztXP3xUcYFhoFsNAvARxBowq)
0.1 BTC to olomana (19QMwDKtRZVsiTposEk2RDPXVLfbABbadM)
0.1 BTC to vector76 (1N6kvsgWHSHfnScG31rBozNznrZnUBG1td)

I'll hold onto the other 0.1 BTC for awhile, then donate it to a worthy cause if I don't hear from hashcoin.

Thanks everybody!

Morpheus,

As you probably know, I've described something very similar to goldcoin/stablecoin targeting mechanism in my own thread. I give you some credit here: https://bitcointalk.org/index.php?topic=36453.msg451254#msg451254

I'd be very interested in your opinion if you have a moment to post in that thread.

The only thing "centralized" about this is the ticker which imports price data into the block chain.

The mechanism for maintaining the price at the ticker target is alluded to but not explicitly spelled out in the OP.

The price cannot go much over face value since the new currency can be created by anyone by destroying some bitcoins at (or slightly above) the current ticker value.

If the price of the new currency goes below face value, a portion of the currency gets destroyed each time it is transferred. That portion increases the lower the price gets, discouraging people from selling it. I stole this idea from morpheus as described in his stablecoin/goldcoin proposal: https://bitcointalk.org/index.php?topic=29135.0

Nice work. I salute you sir!

I note that slush's pool has been lucky lately, which I was just noticing yesterday in my own spreadsheets. It's nice to have that independently confirmed. I also note that slush's pool always has a nice bell-curve look to it. It's not clear to me why everyone else has their peak on the unlucky side with a bump way up on the lucky side. I wonder if it has to do with slush's algorithm to make pool hopping unprofitable on his server . . .

Anyone who finds these graphs useful should also check out:
http://bitcoin.sipa.be/
http://bitcoinx.com/charts/

Beautiful! Thanks for putting these charts together. I note that mining profitability is misleading early on when nobody knew how to do GPU mining. Also, it should probably be called "mining revenue"

I wonder if it would be possible to graph mining costs, pre and post GPU revolution. If you subtract mining costs from mining revenue, you get the actual mining profitability.

It would also be interesting to see some scatterplots, like:

mining profitability vs % network growth over the next X days

Anyone who finds these graphs useful should also check out:
http://bitcoin.sipa.be/
http://www.l0ss.net/hist.php

I've reworked post #1 to reflect that:
 - bitcoins are destroyed when the new currency is created
 - MetaData about the ticker is mostly stored in the text of the fake address that destroys bitcoins
 - USDCoins (or any other similar coins) get partially destroyed anytime they are transferred or sold when USDCoin prices are too low (this is what causes prices to come back up as people hold onto them rather than spend them or sell them).
 - Better way to handle ticker registration

You have demonstrated a strong understanding of what I am proposing. I salute you!

You bring up an important use-case, which I forgot to mention. What if I have some usdcoins, and I just want to transfer them (without selling them)? That could be done in two standard bitcoin transactions:

0.00000003 BTC to the hole (meaning "I'm going to transfer some USD coins to someone else"), then send 0.00000050 BTC to the address of the new owner, meaning "I transfer 50 USD to this address".

Note that almost no bitcoins change hands to transfer ownership of the USDCoins, but considerable value might actually be transferred by the transaction.

I'll add this example to post #1.

Heh - thanks. I found the avatar picture when I was experimenting on a monkey in order to predict the stock market: http://forecastmonkey.blogspot.com/

Actually, the predictions came from a computer program, but I have a sick sense of humor.

How would you propose I notify the network that my 50 USDCoins are for sale?


ANY set of rules you can imagine will work. For instance, you've been chomping at the bit to give demurrage a try with your friecoin project. You could implement it much easier in a client that supported these extended rules.

Bitcoins denominated in USD can't be seized. Also you can be a currency speculator anonymously!

Also, we're not just talking about USD here. You could speculate on Google stock, oil futures, and anything else that someone creates a ticker for. There's nobody collecting your financial information or tracking your trading profits to tax you.

What if you think bitcoins are overpriced (some day in the distant future) and are going to crash, but you don't trust the exchanges? Just convert some bitcoins to USD, then sell the USD for bitcoins again after the crash. The USD coins will hold their value while bitcoin prices are dropping.

I haven't tried cocaine, but I've found sudden increases in net worth to be a bit addicting. I've got to get another hit of that stuff, even if I have to drag all of you with me!


No argument there.

Yes, this could be done with a website too, but as you say, then there's no decentralization, and no point.

The goal would be to clutter the bitcoin block-chain as little as possible. Once a ticker is in place, to offer coins to sell could happen in one transaction if desired (combining the number of coins for sale with the price desired). The purchaser can buy the coins in two transactions (lock + payment). A small price to pay for what is achieved (I assert).

The bitcoin blockchain doesn't need to enforce my rules - it just needs to process normal bitcoin transactions. Only people who want new currencies use new rules.

bji - I knew I could count on you to think through this!

99% of these currency transfers would be  purchases from one user to another. That takes two transactions: one to lock out other buyers, and another to make the purchase. That's double the time for a normal transaction, but a small price to pay to be able to store my bitcoin wealth denominated in gold, oil, or soy beans.

The person running the ticker/hole would have to keep the same address. Other users would not. Under this scheme, I can't send you a USD coin directly. The only way for you to get it is if I sell it to you for bitcoins.

I describe how to register a ticker address in post #1.

The ticker sending 20 transactions per day would be dwarfed by the transactions based on the data that ticker would provide. The ticker itself would be a tiny percentage of the load placed on the system by everyone using the ticker.

Old bitcoin clients will still work just fine. The don't care that people are creating extra transactions, micro-transactions, and destroying coins willy-nilly. Only people who care about a certain type of new coin need to track who bought them originally, and who they sold them to, the same way they track every bitcoin in existance now.

I keep trying to find a way to do this because I believe there are trillions of dollars out there that would like to use such a system. Existing systems are NOT sufficient because they require everyone to disclose who they are so they have to pay taxes, big fees, etc. There is nothing that does what I want, and if something like this idea works and catches on, the whole world will take notice.

There are a number of problems involved with creating different block chains and exchanging coins between chains. This solves all those problems, and doesn't require any extra fancy scripts. It doesn't require permission from existing bitcoin users. It allows me or anyone else to make my own currency WITHOUT getting my own block chain, using whatever rules I dream up.

Yeah, I should have posted a tl;dr summary. Here you go:

Anyone can create their own currency within the existing bitcoin block chain by nominating some extra rules. Anybody following those new rules can use the new currency. Anybody can pay bitcoins to a specific address to get that new currency. Anybody can sell the currency to someone else by following the rules. Some data is embedded into microtransactions to publish information like "I have 30 goldcoins for sale at such-and-such price".

There. Can anybody prove me wrong?

I've spent weeks contemplating alternative chains, and have read every thread and wiki I can find about it. I think I might have something big here.

This works even if most bitcoiners don't adopt the new code, since it doesn't require the protocol to change.

Update: I just realized that the issuer of a new currency cannot be allowed to collect the bitcoins paid in exchange for that currency when it is created. If the issuer got the bitcoins paid to generate the new coins, he could generate infinite coins by paying himself over and over again.

Instead, the bitcoins paid by a user buying new coins like USD need to be destroyed. Yes, I'm actually suggesting that those bitcoins be destroyed. For instance, to purchase coins described by the USD ticker in my original post, you could send your bitcoins to a fake address:

1USD7985US1Dollars0usd1foo0a700000

This fake address can contain some or all of the meta data describing the ticker. In this case:

1 USD (ticker name) 7985 (forum thread) US1Dollars (ticker description of "US Dollars") 0a7 (0.7% spread) usd1foo (URL "usd.foo") 000000 (filler)

I can't think of any way to avoid destroying bitcoins. I don't have time to update post #1 right now, but I will later.

I had an epiphany last night while lying in bed contemplating targeted currencies as described in other threads.

I have convinced myself that anybody can start their own distributed currency with a set price target (USD, ounces of gold, barrels of oil, Euros, etc), using only the existing bitcoin client and protocol. To easily track and use the new currencies will require some extra UI on the bitcoin client, but no changes to the underlying protocol.

The concept is absurdly simple. You can create such a currency simply by saying that you have done so, and defining the rules for trading it on the bitcoin network.

tl;dr summary:


Let's look at how this could work.

You, Joe user, decide you want to create and issue a new distributed USD currency riding on top of the bitcoin protocol. In this case, your currency is targeted to USD. Anybody buying a unit of your currency expects to be able to sell it in the future for around 1 USD.

The first thing you do is create two bitcoin addresses: the ticker and the hole. The ticker broadcasts the current bitcoin price of 1 USD periodically (for instance, once per day, once per hour, or any time it changes). So if 1 bitcoin is worth $30, the ticker sends 1/30 = 0.03333333 BTC. These coins are sent to the hole.

Anybody anywhere who sends 0.03333333 BTC to a fake address specified by you is recognized to hold 1 unit of your new currency (1 USD). If they send 0.06666666 BTC to the fake address, they are recognized to hold 2 units (2 USD). They can buy as many USD as they want, destroying bitcoins each time they do so. (Sorry, destroying bitcoins is necessary - I don't see any way around it. If the person running the ticker and hole keeps the bitcoins, they can create infinite money by buying these coins from themself.)

Now, let's say I bought 50 USD by destroying bitcoins (sending them to the fake address), and later I want to sell them. To do this, I must mark them as "for sale". This requires that I first send 0.00000001 BTC to your hole, meaning "I'm putting up some of this currency for sale". Then I send 0.00000050 BTC to your hole, meaning "I'm selling 50 USD". Then I send 0.00000003 BTC to your hole, meaning "I'm offering 0.00000003 BTC off face value". The whole bitcoin network now knows that I have 50 USD for sale at 0.03333333 - 0.00000003 = 0.03333330 BTC each. Note that all these sends must come from the address which is currently recognized to hold the 50 USD I bought from you.

Enter yet another person. Satoshi wants to buy 25 of these USD coins. He sees that he can buy them by destroying bitcoins for 0.03333333 BTC each, or from me at 0.03333330 each. He of course chooses to buy from me. Of course, he can't just send me the bitcoins, because someone else might try to buy them at the same time. Instead, he sends me 0.00000001 BTC, which locks my USD coins for the next 2 blocks. For the next 2 blocks, nobody else can buy them, and I cannot take them off the market. Once he sees that he was the first to lock my coins, he sends me 25*0.03333330 = 0.83333250 BTC. Satoshi is now recognized to have 25 of the USD coins I bought from you. With the transaction completed, my other 25 coins are now unlocked, and they are still for sale until someone else buys the rest or I remove them from being for sale.

I change my mind and decide I want to keep the other 25 of these USD coins. I send 0.00000002 BTC to your hole, meaning "my coins are no longer for sale. Thanks!" I could have sent this transaction while they were still locked if I wanted to be sure any remaining coins were taken off the market once unlocked before any more could be bought.

Later I decide I want to transfer my remaining 25 USD to my friend Bob. First I send 0.00000003 BTC to the hole, meaning "I'm going to transfer some USD to someone else", then I send 0.00000025 BTC to Bob's bitcoin address, meaning "I hereby transfer 25 USD to this address". Note that almost no bitcoins changed hands, even though $25 of USDCoins are now under Bob's control.

After watching the wild success of your USDCoins for a few days, I think to myself "screw USDCoins, I'm making my own currency: doublecoins". I define doublecoins to start out at 1 USD, but they slowly grow in value such that their value doubles every year.

I create my own ticker and hole. Many sheeple agree that a coin which grows in value at a rate of 100% per year is MUCH better than owning USD coins. Bitcoins are destroyed in a frenzy as everyone buys doublecoins. For awhile things are going great, but then some people start to worry that they won't be able to find a bigger sucker to buy these doublecoins from them. Prices start to sag. When my doublecoins have a face value of 1.0 BTC, people are selling them at a 10% discount. The seller only gets 0.8 BTC because 10% of the USD coins are destroyed as a penalty for selling 10% below face value and the buyer only gets 0.9 of the 1.0 doublecoins put up for sale. 10% of doublecoins are also destroyed anytime they are transfered while doublecoin prices are 10% low. Eventually there is a panic, prices collapse, and all that are left are bag-holders. I buy a yacht and sail off into the horizon, having sold all my doublecoins at the peak, profiting from the ponzi scheme.

Other tickers are created, some sustainable, and a few more crazy ponzi schemes. Eventually there are tickers for every major stock, currency, and commodity. Tickers are churning, holes are filling up, and needless to say, bitcoin prices are in the stratosphere.

Oh wait, now everybody wants to create a ticker. There could be 362 tickers claiming to be THE ticker for gold alone! To prevent this, ticker creation must have a limited supply and a cost, determined by supply and demand. The first ticker can be created once we reach block 142000 (because it has "42" in it. Current block is 140554, so this is about 10 days from now). The price of creating the first ticker starts at 100 BTC (way more than anyone will pay). The price goes down by 1% with each block, until someone purchases the first ticker.

Any time someone purchases a new ticker, the price doubles, then continues to come down at 1% per block, eventually reaching the price of the previous purchase after about 69 blocks (heh).

Payment for a new ticker would go to a fake address, again destroying bitcoins. Something like:
1NewTickerRegistrationForYourMommy

Once you have purchased your very own ticker, you need to specify the ticker address, the hole address, name the ticker, describe the ticker, etc.

This can be done with a series of special transactions combined with the characters you choose when creating the fake bitcoin address used for destroying bitcoins when the new currency is created.

First, send 0.00000002 BTC to the ticker address from the address which purchased the ticker. If they are the same address, you can skip this step
Then, send 0.00000001 BTC from the ticker address to the backup ticker address (this address would be in a second encrypted wallet. If somebody hacks your computer, and you lose access to the wallet with your ticker, you can unencrypt the wallet containing this backup ticker and keep going with uncompromised ticker updates)
Next, send 0.00000002 BTC from the ticker to a second backup ticker in another encrypted wallet
Then 0.00000003 BTC to a third backup ticker, and so on, until your paranoia is satisfied
Then send 0.00000001 BTC to the hole address
Finally, send 0.0000001 BTC to the fake address that will be used for destroying bitcoins exchanged for your new currency.

Now the whole network knows the address of your ticker, backup tickers, hole, and fake address. Next it is time to add some metadata for your ticker. We will put as much of it as we can in the characters of the fake address.

The metadata we want for this ticker is as follows:
"USD" (the ticker name)
"US Dollars" (the ticker description)
http://bitcointalk.org/?topic=7985.0 (the forum thread for discussing this ticker)
http://www.usd.foo (some website associated with the ticker)
0.7% (new coins will actually be sold at face value times 1.007, allowing our USDCoins to fluctuate above the correct price and therefore have an effect on real-life currency markets)

So the fake address we nominate is:
1USD7985US1Dollars0usd1foo0a700000

This fake address can contain some or all of the meta data describing the ticker. In this case:

1 USD (ticker name) 7985 (forum thread number) US1Dollars (ticker description of "US Dollars") 0a7 (0.7% spread) usd1foo (URL "usd.foo") 000000 (filler)

Any other similar metadata could be defined and included as above. If we need more characters than is allowed by a bitcoin address, we can send additional transactions to the fake address representing the rest of the data describing the new ticker.

Do you think I'm crazy? You're correct on that point, but what am I missing? Perhaps I'm missing an important detail which makes this not work at all, but if I am right, bitcoin price increases are just getting started.

Quite true. However, I think the whole point is to bypass and/or hide the complexity of futures/options from the user. A client that tells you that "your goldcoins = 4.31 ounces" is very appealing if you can provide enough confidence that they will STAY worth that much.

Yeah. It was just a crazy thought that crossed my mind. I doubt it would be as useful as having shares.

There's one guy in particular who is really hot on demurrage. I don't think anybody will ever hold coins with demurrage though if there is another option available. It's a non-starter from a marketing perspective.

I realize I'm all over the place here, but here is another way to decrease they coin supply temporarily: have the protocol sell bonds. In this way, the protocol can borrow coins from users (reducing the coin supply), then make interest payments, and return the money at maturity. This would be a good way to handle a temporary oversupply of coins, but not a good way to handle a coin supply that needs to keep shrinking (since more coins are ultimately introduced by these bonds through the interest payments).