Bitcoin has a SEVERE problem with "exchanges" that want to try to behave as "stock markets".

What they are doing with their BTC "Future Securitized Derivative Contracts" now is:

• Punishing small buyers and all new "casual" users adopting the currency with the highest fees
  
  
• Punishing small sellers and all new "casual" and small retailers adopting (redeeming) the currency with the highest fees
  
  
• Rewarding speculative traders, leeching off of the daily spreads or ramps of the currency value with lower fees for greater churning "volumes over days" rewards
  
  
• Rewarding big, huge-trader Pharaohs for staking out far riskier out of bounds idle-preying positions, not actually expected to "exchange", that would facilitate steep uncontrollable risks to the currency value by extending sudden random ramps or slides to ludicrous and/or disastrous extremes.
  
  
• They are actually encouraging and rewarding speculation and volatility with their risky, counter-productive and suicidal, totally ignorant volume-discount fee nonsense.

This BTC future-securitized derivative-contract was intended as OUR transnational MEDIUM OF LABOUR-EXCHANGE CURRENCY not as somebody else's silly common commodity-resource share! (or wasn't it?  )

Well regulating the Bitcoin  future-securitized derivative-contract's currency value "automatically" is a simple trick that can easily be done through the trading (vs exchanging) fee structures. You simply punish people progressively and exponentially more through sliding fees for staking-out asks and bids further out of bounds, to negate the benefits of pump and dump, while still allowing a bit of churning reward for day-value trading and/or price reward for patient bargain-seeking bid-ask haggling.

Everything is a "scam" unless you do your homework, and find out it's perfectly legal and legitimate.

Read this:  Bubbles with bitcoins
https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923

We are not doing anything nearly as lawless nor clearly as fraudulent as pawning off Mortgage Backed Security Future Derivative Contracts! Our contracts have real utility as a physical security.

We now have no choice but to parry against any and all future attacks now. We have seen the beast and it most surely and likely is even still roaming among us.

Being the Mother of all exchanges and main "wholesalers" of the future securitized derivative contracts Mt Gox have no choice but to be the main "reserve pool", nor way to avoid practising a degree of "bankstering". This means that they have the largest and prime systemic risk of being ruined by poorly regulated speculative volatility.

The problem with the fiat nature of BTC-derivative trading is that "democracy" (even so-called "free" market laissez-faire) is no way to run a well regulated Supra-National Global Labour Exchange Currency system! The hallmark of a Adam Smith sort of Freed Market is that it is always well-regulated.

The challenge the Bitcoin Nation now has is to develop a self-regulating set of automatic trading (fiat value voting) rules that advantage, reward and encourage staid and conservative trade-exchange, over reasonable and tiny fractional ranges about current values, yet HARSHLY and PROGRESSIVELY, EXPONENTIALLY PUNISH out of range (more volatile) bidding and asking with exorbitantly prohibitive fees, thereby automatically attenuating, limiting and shutting down volatile ramp-ups and slides in the preciously guarded DURABLE VALUE of our new currency...


See this proposal/explanation
 Re: stable bitcoin pricing...The "Bubbles with Bitcoins" nightmare
https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923

Hi Portnoy, many thanks. Please add me too. 

1H4Dyk2qP2WD4bnGtDeZuqaCn2zH5R1jWA

the good news is that the soon-ness and the suddenness of the BTC value's radically self-destructive volatile rise an fall (2 day event) is probably what saved most exchanges from outright bankruptcy, as thy had only refilled their pools with devastatingly costlier newly deflated BTC perhaps once or perhaps only by half.

It seems the Fed Gold Pharaohs, flush with their Quantitative Counterfeit, may now be planning to become BTC Pharaohs and wanted to do a little "Stress Testing".

Mt Gox is the main Bitcoin "Future Securitized Derivative Contract" wholesaler for most major currencies. You will generally only find wholesale (lowest buy cost) large volume prices for Bitcoin Future Derivative Contracts on that Reserve Bankstering Exchange.

Local dishonest, and risky "Reserve Bankstering Exchanges" (in your own country) trade out of commingled reserve pools of Bitcoins that they buy in bulk and mark up before sale to their local clients. This means they will easily go bankrupt in a crash since they keep everything in "their" BTC pool, unless/until extra large withdrawals occur. Otherwise they pay-out small withdrawals out of new deposits before risking the surplus of them on more backroom Bitcoin for them to play with behind clients backs. If you can figure out a way to buy BTC on Mt Gox and sell it on local Reserve Bankstering Exchanges, you got a steady spread of income, regardless of the price

An honest local "Live Trading Exchange" will keep both your funds and BTC totally segregated from their own at all times and at all stages and is much lower risk but they may still use a marked-up reserve pool of BTC of their own to conduct client trading upon, again making buying more expensive but selling better than Mt Gox prices. Technically even a totally honest and above-board exchange is at catastrophic risk of (asset) ruin from a crash, but at least they could return client cash-funds and BTC (not in Escrow) that are not theirs, afterward.

Mt Gox appears to have had problems of it's own this last week and I do not know into which group to class them as far as commingled client funds risk goes, but it's also a lot harder and more costly to arrange to get cash into them (hence, the mark-ups?). Also being the Mother of all exchanges they have no choice but to be the main "reserve", nor way to avoid "bankstering".

More about "commingling" here:
https://bitcointalk.org/index.php?topic=177252.msg1845510#msg1845510 (Mt Gox and other withdrawal Issues)

More about "stability, fiat, derivatives, labour-exchange currency, pyramids and speculation" here:
https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923 (price stability vs bubbles)

I honestly beleive that we are just at the tip of an MF Global type (gold derivatives exchange that failed last year stealing millions in 'segregated' client assets) epidemic among Bitcoin exchanges that got caught with their pants down during the BTC crash last Thursday.

You see a Bitcoin is simply a derivative that only represents the LOOT that the guy that you got it off, got out of you for it, and made off with. It is a fiat "futures derivative contract" that arguably has some but really has no certain value/worth.

Like a "gold contract' or "mortgage backed security' (love that last word) derivative it is a "BTC Futures Contract" that merely allows you to keep, transfer it in, transfer it around or transfer it somewhere else to resell it there for whatever it may seem to be worth to the next guy, a minimum of an hour from now.

Now if the exchange you have an account with was dealing honestly on the up and up it should religiously keep all client funds in segregated client accounts THAT IT DOES NOT TOUCH nor ever figure into it's own net earned assets nor gross daily "take". It should immediately convert all transactions in real time and transfer all cash funds from buyers accounts to sellers accounts, removing it's fees only. It will have ZERO problems conducting business as usual any more than it ever did taking in, trading and paying out your money on the way up. Your account is your property, not theirs.

But if the "Exchange" has been "reserve bankstering" they may think it advantageous to delay redemption trades or simply "reserve" cash floats (minimize their bank balances, reported gross) by keeping client asked-converted-cash tied up along with client bid-spent funds in the "lay around" medium that profits them most, meaning they keep most all of their day to day "floats" in (rising) appreciating/deflating Bitcoin Futures instead of letting much lie around in real (stable) cash. This way they get to play the game with "money" that's not theirs (steal) and pocket the gains, not waiting for client bid trades, while clients wait for them to debit deposits to accounts or to pay them cash withdrawals out of fresh cash  or BTC arriving daily from new depositors.

To simplify, imagine they just take (and keep on taking) all the (spare) loot they get their hands on and buy themselves one huge commingled "reserve" pool of BTC with it. Then, always later, clients must just buy and sell from them within their own "reserve" pool. You loan them your loot for free, later, they then lend you an account for fees. They get to trade and make/take the profits off their commingled "reserve" of Bitcoins ASAP all the time. You get to Convert "your" (still theirs) Bitcoins in and out of their pool for fees, and you (on your comfy recliner on their pool deck) also get to lend them your converted loot for free until they are good and ready to pay you back so you can go home to shower.

Thus, after a huge crash a negligently managed Exchange just lost itself and all it's clients a boatload of value, needs to hire a new "emergency trading team" and suddenly can't even pay withdrawals, claiming that "they are urgently hiring and training more people due to volume" or that they were "overloaded" or that they have "too many emails" and "annoyingly dumb customers" to "get back" to.

If you withdrew funds on Wednesday night and your exchange used to normally take their good old 2 days time to put money back into your bank and they don't answer the phone or any emails and you now suddenly see 4 days gone by and your withdrawal order hasn't even been sent by them yet (today at 4) and they posted a last Friday lunch break News statement like:


In spite of the fact that their Terms of service indicate:


...and you've also clearly noticed in the past that they never ever seemed to have had any problems with withdrawals before  when all the same "volatility" was going up  I'll give you three guesses what is going on with your withdrawn money, and those Bitcoins that are now mysteriously "getting lost" on their way into their accounts....

 

The first question that comes to my mind is how much is $20 million (USD) worth of gold worth?

Because America is booming an extra 8%-10% the last few days, by virtue of it's huge recent humanitarian ammunition exports to alCIA-duh terrorists in Syria, the powerful Federal Reserve Gold Pharaoh's We-Owe-Them Note(USD) deflated new price of gold just dropped it by $150, or nearly 10%.

will this $20 million (USD) worth of gold be valued in pre or post "Syrian Jihad" USD?

I think the answer is on their "How it Works" page


in other words BitInstant gets cash through their various merchant accounts which it then transfers to exchanges "in the most efficient way known", thus undoubtedly using it's own reserves of Bitcoins which it sells on the exchanges buying your Exchange-Account a "cash deposit".

So, when the insanely too volatile, unregulated, grossly unstable, unreliably priced Bitcoin Derivative market crashes in 10 minutes time, they loose a boatload of money being forced to execute quick exchanges to transfer converted sums, the same way merchants foolish enough to use Bitcoins or Exchanges foolish enough to keep their segregated customer cash accounts in Bitcoins would have been in the massive devaluation crash.

Price stability is the critical issue that will kill Bitcoin if exchanges can't be properly disciplined into the well regulation of BTC value.

https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923 Re: stable bitcoin pricing...The "Bubbles with Bitcoins" nightmare

The growth of the fruits of all labours is infinite, it cannot ever be properly represented by anything else that is finite. (without infinitely further subdividing that) for all practical purposes the BTC subdivided at $10 and again at $100 and maybe will again at $1000

The world may seem finite, but we and our knowledge of it, our productivities, ingenuity and capabilities are not. We have all already clearly seen that our hatefully evil, repulsive, soullessly bestial powers to desolate and destroy surpass any naturally disastrous power ever encountered during the recorded existence of our world. Our loving, creatively attractive powers shall surely far exceed those sadly most valueless, pointless and foolishly passed war-communist milestones. Neither is their any law nor impenetrable barrier that restricts us from exploiting other celestial bodies with greater "finiteness" beyond that of our own.

This is 18th century Malthusian physiocratic claptrap. Back then the farmers would have also scoffed at the "silly notion" that an arsenal of "petards" could destroy the world. They dwelt in a monopolized-gold debt-enslaved prison of ever-diminishing returns.

In the old book of Genesis' economics lesson of Joseph, the 7yr famine and a foolish gold-commodity Labour Exchange "currency" results in the people selling themselves into slavery to Pharaoh as soon as their gold (for grain) runs out. The same thing happened all over again to moron Wilson's enviously, greedily and lustfully expanding USA in 1913. They sold themselves through their (treasury) ownership of their National Medium of Labour-Exchanging Currency to the Rothschild/Morgan tory-Trotskyite boardroom-socialist Gold Pharaoh's "Fed, central bankstering syndicate", effectively reversing the outcome of the Civil War (all debt-slaves now).

You simply cannot use another finite, limited (and likely monopolized already) commodity-resource (gold, silver or DaVinci paintings) to represent an infinite and limitless and ever growing commodity (the value of all human efforts and labors). What this foolishly-pegged to another commodity-value dual-use conundrum in a nation's people's Labor Exchange Currency inevitably causes is assured monetary slavery! Sooner or later by means foul or fair one economic "winner (or boardroom-socialist group of them) will inevitably come close to owning all of the available gold or silver or DaVincis etc and all of the means to produce any much more of it! Thereafter everyone in the economy must go to the "winners cap in hand to borrow either some token of "their gold" or a fiat token that they mint which is backed by some fraction of their wealths just to use a pay toilet!

Well regulated "inflation' is just a symptom of "growth". As productive national economic populations grow so must (and should) the quantities of their national economic labour exchanging currencies.

Finite Rarities are Mediums of Savings

Renewable, Produceable and Less-Finite commodities are Mediums of Investment

A nation's people's Labor Exchange Currency is it's unique-economic Medium of Labor Exchange.

Since the "globe" does not produce nor exchange with any other planet, there is no such thing as a "global economy". The "world" is just a marketplace. A transnational-corporate cult of boardroom socialist Pharaohs in the Cayman Islands is not "another globe". But, the trans-nation of Bitcoin may well be the first globally "All-Human Currency" ever devised.


The economic value of a nation's people's Labor Exchange Currency can only be what it alone is, a fractional representation token-derivative of the values of their EXPORTS into the global marketplace.

The moral to the Genesis and the Wealth of Nations economic lessons is simple. As citizens of a nation we are "enslaved" through the instrument of our nation's Labor Exchange Currency tokens to the well-regulated export trading policies of our governments who's solemn duty it is to accountably and responsibly manage the value of those tokens of it's citizens wealth. When a government abdicates it's responsibility and duty to defend its trade balances effectively through such corruptions as "free trade" it has abdicated the economic defence of it's citizenry and it's right to be their national government.

A finite resource-commodity foolishly adopted as a Medium of Labour Exchange "currency" by a national economy is a recipe for enslavement. The "finiteness" of Bitcoins has nothing to do with stopping "inflation", nor should it be confused with the Austrian Fascist (Tory Trotskyite) notion of gold enslaved economies. All the "shortage" of BTC does is fund a transaction recording network that happens to also mine new coins as a profitably commingled pastime. So far absolutely nothing "regulates" the inflation or deflation of the value of the money supply of the derivative market speculated BTC Derivative Tokens.


But, in honest fact, the "bitcoin derivative" itself is a so-called "pyramid scheme" as are all market traded stocks and commodity-derivatives. New fiat Federal Reserve Note "dollars" are also a once-gold-derivative, "derivatives" albeit that only an ennobled group of old boardroom socialist Gold-Pharaoh monopolists are still "trading" them to their political serfs for federal-socialist "bonds", that we all end up owing them tax-derivatives for.

That "fiat" Private Federal Reserve proprietary boardroom-socialist "dollar" in your pocket that we all use as our "Medium of Labor Exchange Currency" represents three things:

• TO THE GLOBAL MARKETPLACE; It is a national economic derivative token representing a fraction of the "currency" of the wealth of that nation's people's exports, both labours and products, as it, and they, are valued by global demands for it, and them. (a questionable It-Owes-Us note of theirs)
   
  
• TO YOU; It is a widely accepted derivative "It-Owes-You" token that represents the derived-value of what the previous holder of it got off of you for it. (a somewhat durable It-Owes-You note of yours)
   
  
• - AND EITHER:
  • TO IT'S PRIVATE OWNER/ISSUER; It is the fractionally derived-token for part of a larger common debt owed to them, that your Tory-Trotskyite enslaved socialist-government is bond-indentured to them or to their bond clients for. (a fiat "Our-Slaves-Owe-Us" note of theirs)
     
    
  • TO A CONSTITUTIONALLY RESPONSIBLE GOVERNMENT; It would (only theoretically, since almost none exist anymore) be a public treasury owned, issued and/or rented-out and profited from (greenback) derivative token representing a well-regulated fraction of the "current" wealth of that nation's people's exports, as it (and they) are valued by external demands for it (and them) from other economies in the Global Marketplace. (a well-regulated yet still fiat We-Owe-Us note of ours)
     
    

A Bitcoin is currently all of the first element, but only part of the second, and it is only hoped to be a part of the third..

Through the mechanisms of trading speculation on exchanges a Bitcoin is STILL a "fiat" currency since it can clearly still be inflated/devalued or deflated/overvalued and by the activity of trading exchanges, without any regard whatsoever to it's finite rarity. Trading it just like some common commodity/stock derivative and thus unhinging it's value irrationally just totally negates the rather silly "finiteness" anti-inflation argument.

see https://bitcointalk.org/index.php?topic=175708.msg1832923#msg1832923 Re: stable bitcoin pricing...The "Bubbles with Bitcoins" nightmare

The Economic Nation of Bitcoin's Labour-Exchange Currency has already suffered at least three major inflationary devaluations, over alarmingly short periods of time! I cannot think of a nation's economic-export Medium of Labour-Exchange "currency" that has ever been so radically scary, unstable and undependable in randomly "fiat" minute to minute valuations.

Were the value of Bitcoins to GROW ONLY in value, (deflate) generally always progressively in small increments and seldom or never to inflate in any more but negligible manner than their promise as a cooperatively owned global profit-sharing common, public Medium of Labor Exchange Currency be realized (item 4), and savers would earn "interest-dividends" on their wallet savings in their own wallets, but this is risky or nearly impossible to guarantee under current market manipulative valuation conditions.

 In the matter of Reserve Banking nobody really banks Bitcoins but Exchanges. Some might even possibly be able to mount a small reserve-lending scheme. I tried out my wallet but kept worrying about a hard drive failure and a backup/ Time Machine restore nightmare, and simply couldn't see a way to have access to the same wallet on both of my computers (desk/lap/droid etc) unless i left them online at an exchange "bank".

A Bitcoin (unlike a nation’s people’s Medium of Labor Exchange “Exports-Currency”, has no “central authority” nor physical valuation (backing) such as even the “world marketplace’s good faith in the exports of Doofistan” (nor gold) to back it. When a customer shows up at a (say Canadian) Bitcoin Exchange with Doofistan Bitcoins in his wallet all his wallet contains is a pile of the “stock-derivatives” of the value that somebody else received for the assets he paid for them (a pile of derivatives).

This flaw raises an “MF Global” sort of an issue. The Canadian “MF Global Exchange” can’t phone up the Global (nor Doofistan) Bitcoin Reserve and ask them to send over some Loonies to compensate them for buying this guys Bitcoins, with Canadian Loot, can they?

 So where does this Canadian Money come from? The exchange just has to wait until there are enough customers to buy them (at current valuation) to show the seller his money. The real problem comes from many traders trading-up into a balloon, and in what (or how well) the exchange chooses to segregate it's assets..

Say a trader trades dutifully and productively out-of and into a series of big run-ups and valleys in wildly fluctuating Wild-West Bitcoin speculation prices.

So say they came in last week with $1000, paid fees and consolidated gains in Bitcoin/Cash positions at various fluctuation points doubling their investment value to $2000. All of that value was paid for (locally) by somebody else. Now nearly half of that new value was probably eaten up in fees and maybe one lousy-timed trade ($400), so now they cash-out, after the crash, for $1600.

Where is that $600 going to come from? If the “exchange” kept most or all of their “floats” in cash, no problems, but if the exchange was also putting it (or putting it all) into Bitcoins (to lend them out)… different story!

 

any takers?

 

Another problem this simple "Counter-Speculative Fee Structure" market-wide policy would cure is the sparse-node Trigger-Limit Order "slide by" issue many exchanges have suffered.

when there are few and distantly priced orders on the order book a normal Trigger price and min/max price order likely will never (fully) execute in a steep rise or decline, since the next price after the insufficient supply to fill Trigger (order-volume) suddenly jumps below or above the guessed minimum or maximum "Limit" of the order


If one allows only, say, 30 (or some optimal number per conditions) specific predetermined price points, closely arrayed around the current price in both upper and lower directions (those "outer" higher and lower ones get progressively very fee expensive) there is a far better (almost assured) likelyhood that most Trigger-Limits will execute since all bids/asks must always likely populate it's price or range, and if not, trading slows/halts automatically, or until the "current" median price is reset up or down the next gradient in the appropriate direction..

Hopefully with the historical market pressure and trading data that has already been accumulated through the "Bitcoin Experience" thus far it should not be too difficult for some math wiz(s) to come up with appropriate fee and order-price range regulating algorithms to derive the well-stabilizing exponential trade-exchanging fee structures that would have most likely mitigated all the wild price departures and runaways, and have thus produced a more stable growth curve or vector reflective of the true expansion of the currency base-value relationships.


This (speculation) is one venomous beast that absolutely must be tamed, and NOT by having any more "Exchange Holidays" or putzing around with any sorts of disruptive Exchange/Trading "Halts" to sloppily attempt to do so.


When and if trading is down due to speculation we all have no money nor fair exchange access to it's intended use.

As an engineer, technologist, ace troubleshooter, economics theorist and crypto-philosopher please allow me to answer this question for you all and offer you the only possible solution to the all too frequent and destabilizing recent "Bubbles with Bitcoins" Nightmares.

Preamble and disclaimer:

I am an avid supporter of and user of Bitcoins who has nonetheless become extremely disturbed at the serious and near fatally suicidal shortcomings of it's very, very poorly designed exchange-trading systems.

Bitcoins are the new virtual, encrypted, invisible, untraceable and anonymous "gold" for mankind. Most importantly, they are OURS and we all independently "back" and profit from owning them as a derivative of their greater use and wider acceptance. They, unlike even national-socialist tokens (Revolutionary Greenbacks) are the first TRULY HUMAN "globally freed market" currency!

Why the last statement above is so involves a rather long National Economics 101 and Theory of Money discussion/explanation I'll post for you here later. My crucial point here is that we all have a stake in the success of this new, digitally secure and decentralized human "Medium of Labor Exchange" utility, so we better get this right! We all know what is "right" about Bitcoins but now it's time to admit and to urgently fix what's terribly WRONG about them. The first aspect of them that we must address is the small matter of their "derivative resource" nature.

Einstein's definition of insanity is doing the same thing over and over again and expecting a different result.

The Pyramid-Derivative Trading Monster, explained:

A “derivative-stock” exchange is generally understood only as latter-day a scam designed to “churn value into” valueless assets that can neither be written off  nor liquidated (sold for book-losses).

Say you have an Olympic pool full of sour, junk-mortgage-bond “watered down lemonade” but still want to keep yourself (or get back) all the nice properties the worthless stuff still holds titles to. So you stir them all up and “dilute them” with a half a shot of some good “Stella Artois” AAAA-rated mortgage bond joy-juice and then make a trillion worthless-nothing “shandy nano-shooter packs” out of them who's contents couldn’t make a newborn baby burp. The stuff in them once had some value which you now proclaim loudly as the "value of all of them". Now you name these trillion new worthless-derivative shooter-packs “Mortgage Backed Securities” and set up a “stock market” for them. The word “security” is always good in a name, even if it names a stupid, annoying battery eating thing that beeps like a UPS whenever your luggage moves.

All of a sudden your worthless non performing and illiquid liability-nothings are generating you an income and a cash flow! Buyers are buying them, trading things with each other for them, and outbidding each other and all sorts of real money is changing hands over them with your (small-fee) help, and suddenly they are “performing” (with “values” totally unrelated to their own) on paper again.

You have successfully made yourself (and a circle of your closest pals) a mountain of "something" out of an Olympic sized valley of near-nothings! No sane number of  “shandy nano-shooter packs” has anything to do with nor actual claim to any bond or mortgage. Everybody who has or will ever have one merely holds a derivative-token of what (the somethings) the guy who sold it to him made off with.

In fact, the first, “top” floor of the derivative-pyramid-market “shandy nano-shooter packs” derivative traders have already paid you all the money you thought you’d lost before, and saved you your properties, which you've now recovered for yourself from mortgage auction fire-sales. Still the derivative market continues to churn more money into the now totally-nothing half-shot of good beer “shandy nano-shooter packs” derivatives you called “securities”, each happily passing on to the next their “shandy nano-shooter pack” derivatives for real loot unless or until everybody finally realizes (or it becomes all too obvious) they've all ended up with nothings for their somethings…

A worthless-derivative market allows you to put in a lot of money and make a lot of money on paper, or put in a bit of money and make, lose and/or take out a bit of money, but you can never ever (all) take a lot of money out of it. The one exception is that, if/once it flies, the originator (the apex) usually always gets all or most of of his money, first… Then there is the hugely troublesome matter of the upper-level "bought cheap and held" Nano-shandy-pack Derivative Pharaohs who, like the Rothschild-Bilderberg Gold Pharaohs of 1913-1971 begin to feel like Nano-shandy-pack Derivative Billionaires who should still own and rule the world market with all their unclaimed Gold-Reserve-Note Derivative "valuation", who get really edgy when things seem to be about to tumble, and hit their Office Depot "Easy" big dump buttons. (before the last Bretton Woods conference)

Anyways, you still have all the rest of your very fine AAAA-rated beer to enjoy, as long as not too many Pharaohs attempt to take a lot of money out of the rolling asset-exchange bubble of your derivative market.

If that happens you're either a Bernie Madoff, a John Corzine or (at very worst) a Ben Bernanke. The wise developers of Bitcoins kindly ruled out the last option, by making Quantitative counterfeiting impossible. Oddly enough this isn't a tabloid attack aimed at Bitcoins, all "token derived" currency systems (and other miscellaneous misdemeanors) are designed this way. But usually only big, "central" (Tory Trotskyite) "governments" can get away with it.


The above discussion of unsavory realities aside, they are important to understand when addressing the topic of monetary stabilty.


Exchange vs Speculation.

Bitcoin thus far has been a rather profitable and resilient trading-exchange commodity, but during the rather riotous taxi-cab type birth of our new Bitcoin "crypto-currency" (their name for it, not one of my first choices) we have come face to face with a few ugly realities. The first is that both speculation and mischief in the Market mechanisms cause wild fluctuations in the stability of the thing we are trying to promote as a stable "currency".

The merchantability of any Medium of Labour Exchange rests upon it's absolutely assured stability of value. Merchants simply cannot afford to reprice products innumerable times a day, let alone bear the nuisance of doing so continually. Entrepreneurs of every single type including the largest group of professionals/labourers cannot contract their services at a price denominated in a token of wildly variable and unpredictable values! (unless the tokens are guaranteed to always rise-deflate or, at very worst, only fall-inflate in value over nominal holding time by a very small amount.)

The Economic Nation of Bitcoin's Labour-Exchange Currency has already suffered at least three major devaluations!

Labour is the PRIME COMMODITY in all economies. Without it nothing happens, and there is none! Even if it is writing something, down, passing a note, picking up a phone or tapping a key some entrepreneur must get paid for it. The fundamental purpose and utility of a National Economic Labour-Exchange Currency Token ("money") is it's inter-exchangeability for BOTH labours and for all other commodities. For a contractor to offer an assured contract to a property developer priced in a "money" the assured value of that "money" must be stable. He cannot offer to pay his tradesmen different wages for different minutes, hours, weekdays or months in tokens who's future values are always uncertain!

As it is, Bitcoin can never ever become a “currency” or be used in business and commerce as a stable Medium of Labor-Exchange of Reasonably-Assured (more or less constant) Value, because it's derivative market trading mechanism is mis-configured to do the exact opposite, or adversely over-do the desirable, rather than to assure incremental and gradually deflationary added-value to the stability, dependability and benefit of itself and equal benefit to all who use it.

To be a successful candidate in the global marketplace as a stable Medium of Labor-Exchange of some reasonably-assured “currency-value” range, that economic token’s “assured value” must, in the eyes of the Global Marketplace, vary only by a few minor 100ths of a percentile of daily, weekly or monthly “drift”. It cannot be subject to wild, daily, hourly, weekly or monthly swings, let alone 15 minute ones.

The entire notion of the speculative market-trading of the value of the Bitcoin derivative itself is almost nonsense, if you ever honestly intended it to be a “currency”.

If the BitCoin asset pool were merely valued by simple Debit-Balance and Credit-Balance Bookkeeping all varied-currency-converted values coming into it would always exceed all varied-currency-converted values flowing out of it. It’s mere “funding” would generate a constant surplus that would assure each token’s constant value. But that would require an accountable “Central Exchange Authority” to take in the value and dispense the tokens.

But, the BitCoin “asset pool” is a Derivative Market where the coins themselves are ALSO THE DERIVATIVE, and are only worth their FUTURE (not current), highly volatile gambling-derivative market value, an hour from now. This derivative market also suffers from the underlying "pyramid pressures" where a few Bitcoin-flush “somebodies” got (or feel they deserve) a lot of something for little and are unafraid to go in hard after that something whenever the grass starts looking a bit greener.

Meanwhile the Bitcoin buyers are merely holding a derivative of it’s former owner’s withdrawal from the asset-exchange system. The only thing that keeps it's value-growth expanding are the "buy and holders" who don’t (and can’t really) spend their derivatives anywhere save by cashing them in, or by patiently selling them (at some break even or gain) to newbies or other speculators, so as not to tip the applecart.

The corollary is that despite there being no central boardroom-socialist banksters, the more aggressive BitCoin Pharaohs can (must and do) still take every opportunity to devalue “our” currency, and they are not alone as other enemies can come in with worthless cash that costs them nothing to feed speculative bubbles and then dump too, to devalue the currency and discredit us..

Bitcoin will never work, regardless of it’s value-transfer utility, if they cannot stabilize the price of it. If nobody can guarantee what it will be worth in the next ten minutes nobody can afford to contract, price, nor comfortably and safely wait the hour it takes to transfer, be paid in or even to spend it.

To be a Medium of Exchange it must be quick and easy to obtain an exchange value that's always close to what one would expect it's value to be very cheaply (in fees)

To NOT be a Medium of Derivative Speculation (wild gambling) it must be made much harder and more expensive in fees to enter bids or asks beyond a stable, small, restricted fine gradient trading range centered about the current value.

The only way to fix it is to impose a tightly-tiered sale and redemption trading priority system, imposing limited Asking and Bidding points very close in value and to current value, and imposing exponentially higher (punishing) extra fees for both less- and more- extremely out of current range Trading Orders

They must fairly reduce the numeric ranges between all valid competing bids and asks by extending the temporal (more sequential) queues of buyers and sellers instead of promoting sparsely populated price level differences (with big jump-gaps) between them. This simple "counter-speculative fee market policy" would form a natural price stabilizing Exchange Market Regulation that would greatly increase the appeal of Bitcoin to savers, spenders and merchants, while making it far less attractive and conducive to hostile traders and speculators.

In addition trading (sheer speculation) fees must not encourage and promote "churning volatilities" by offering bargain fees for larger amounts of BTC/X exchanges, they must do the opposite and penalize farther out of reasonable-bounds bids and asks, that create an "irrationally exuberant" auctioning mechanism that will always increase volatility.

Is Bitcoin intended as a money or as a derivative?

Cheers!