Distributed bank of bitcoin.

[stan.distortion]

...

[dissipate]

[crazy_rabbit]

This weekend we got to see the kind of manipulation that can be done with a big stack of BTC's and since this morning I think we've seen the stability a big stack of coins can give too, the chart should be all over the place yet since 8am it's stayed within 3% of 9.5.

If its possible for a big amount to make a small profit on keeping the price level then there's room for a bank that pays interest and there is no need for it to be centralised, it could be a different kind of wallet.

It's an interesting idea, and people should take note that scheme's like Pirate's can very easily lead to someone controlling a market stabilizing or destabilizing chunk of coins.

As for making some sort of institution? Like a bank? I think the real world has shown us that decades of benevolence can still lead to malevolence on a massive scale.

Perhaps a wallet that could be considered like a "trust" where everyones share is multi-sig? but then how does the mega-wallet earn interest or make a profit?

Or perhaps we should be worried about Cartels?

[DeathAndTaxes]

No.

Simple version.  Central banks can't fail.  They can generate infinite reserves and destroy infinite amounts of currency in order to manipulate the exchange rate.  While they may make a "profit" it isn't their intent to do so and just as often they lose money in these transactions.   Trying to keep prices level AND profit is going to fail on both accounts.

For example the Chinese central bank pegs the Yuan to the dollar at a certain exchange rate.  How do they keep it there?  Simple if it rises (relative to the dollar) they generate a much currency as necessary and buy dollars thus removing dollars from the market (relative to Yuan) and adding Yuan (relative to the dollar) which lowers the exchange.

There is nothing which prevents someone from buying Yuan above the exchange rate set by the state other than the "threat" that you are taking a bet where the opposite side of that bet is taken by the central bank.  A central bank with infinite fiat resources, who has no profit motive, and who can continue to take losses until they win.  The WILL win and you WILL lose.  People tend not to take bets they can't possible win and that "threat" keeps the exchange rate trading in a narrow band.

TL/DR version
Cental banks need two things, neither of which exist in the Bitcoin world:
a) infinite supply of currency they can generate from nothing
b) ability to operate infinitely without profit (their losses subsidized by taxpayers and/or currency holders)

While a "non-central" bank COULD try to limit the rise of Bitcoin (or limit its decline) eventually no matter how large it will find its reserves insufficient and then all that pent up demand will cause a massive spike/crash and the "bank" will suffer crippling losses.  

[dissipate]

@dissipate: Fsck your ugly

Oh sorry, I made that face when I read you wanted to start a centralized bank that wasn't centralized. 

[DeathAndTaxes]

You either have a bot who's intent is to make a profit and it doesn't care if the prices goes to $0.01 or $100 or you make a bot which strives to keep the price trading in a narrow range and doesn't care how much it costs to do that.

You can't have both not without infinite reserves.  Decentralization doesn't change that fundamental equation.  Now in the short run you can make a bot which does both .... until you deplete your reserves end up long on the wrong side and see a massive massive move against you.  Central banks can peg a currency simply because they can't run out of funds, a entity without the ability to create or destroy currency at will can.  The longer you kept the market from reaching a natural equilibrium the more of a momentum play you will create and when you lose control speculators pile in to "ride the rocket" (or the reverse).  

So yes you can hold prices steady & yes you can profit from market.  No you can't keep prices steady AND profit from the market.

[justusranvier]

Simple version.  Central banks can't fail.  They can generate infinite reserves and destroy infinite amounts of currency in order to manipulate the exchange rate.  While they may make a "profit" it isn't their intent to do so and just as often they lose money in these transactions.

I agree overall with your post except for the part about not profiting. The central bank, as the first spender of the newly-printed currency, is most assuredly profiting. They are gaining control of, in your example, dollars for free.

[DeathAndTaxes]

I agree overall with your post except for the part about not profiting. The central bank, as the first spender of the newly-printed currency, is most assuredly profiting. They are gaining control of, in your example, dollars for free.

Most central banks don't profit directly.  The Fed (US) for example turns over all trading profits to the treasury (beyond their allowance for rebuilding reserves and operating costs).  Now the Fed clients (major banks) most certainly benefit indirectly from the actions of the Fed.

The more important thing is the Fed's actions are intended to create a trading profit (as the OP outlined).  The fed isn't saying "ok how many T-bills do we need to buy in order to make a 5% return this year".  The Fed is saying "ok how much liquidity do we need to add buy buying T-bill and increasing the money supply to meet our target inflation rate".  IF the Fed shows a trading profit is immaterial.  Sometimes it does.  Sometimes it doesn't.  It isn't trying to profit from open market transactions.  That is the problem of the OP scenario.  A non-central bank WOULD have to make a profit.  You can't peg a currency AND profit.  You may profit while pegging a currency but you may also lose.  The fed doesn't really care.  A decentralized bitcoin bank which sometimes suffers massive losses for the "good of everyone" isn't going to have many investors.

Now let me be clear I am not saying the Fed is "good".  Power corrupt.  The Fed has a lot of power and is beholden to the banking cartel.  Currency is a zero sum game so when the banks win someone else loses.  I am just saying it isn't the INTENT of the Fed to show a trading profit.  They trade to control the "market" (in this case the market is inflation & interest rates).

[markm]

Isn't this where multi currency systems come into play? Bimetalism, multimetalism?

Don't directly attack the interface between one type of fiat and one type of cryptocoin, instead dodge around, shifting the exchange rates between various cryptocurrencies, adding more cryptocurrencies or crashing a bunch of volatile cryptocurrencies to try to focus high value low volatility in, say, bitcoins while pushing low value high volatility into a swarm of junk coin varieties, or somesuch?

I suppose the entire fiat world could try to consolidate as one side and the entire crypto world as another and try to go head to head at each and every fiat/non-fiat pair, but isn't fiat kind of at a disadvantage when it comes right down to it?

-MarkM-

[justusranvier]

Now the Fed clients (major banks) most certainly benefit indirectly from the actions of the Fed.

By "clients" do you mean "shareholders"?

[smoothie]

ROFL!!!!!!!

[markm]

Isn't this where multi currency systems come into play? Bimetalism, multimetalism?

I'd guess multiple systems as an exchange for each of the worlds current currencies would be able to establish a true exchange rate based on how bitcoins are being bought and spent between currencies. The results of that could be very scary and I'm not sure there would be enough bitcoins (or bank reserves) to support it once the arbitrage starts.

Not sure? No problem... cue empiricism!

Consider for example a few nations such as the Canucks, the Brits, the Martians, each with their own blockchain (CDN, UKB, MBC). Add a couple of major multigalactic corporations such as General Mining Corp and General Retirement Funds, also with their own blockchains (GMC and GRF). Maybe a multinational metanation would be useful too, like the (galactic/multi-galactic) United Nations with its own blockchain scrip (UNS).

We know what assets each of these entities owns, so if we know how many coins to divide its assets among we know how much of its assets each coin represents.

Naturally the Canucks like to denominate loans they make to others in CDN, so when a miner who is paying 1%/day to GMC on startup loans comes to the Canucks looking for refinancing at a lower interest rate they would like repayment to be in CDN. But there are a lot of mining corps out there, so a bunch of entrepeneurial developers, who, of course, favour devcoin (DVC), forms a new multigalactic corp, General Financial Corp to do the legwork of finding cheaper interest rates for busy intergalactic miners who are busy enough running their vast mining operations that they really don't have time to go hobnob with politicians, clans, governments and so on trying to suck up to one enough to talk them into giving a better interest rate loan to refinance those usurious startup loans the GMC and GRF corps gave to mining startups.

The GFC denominates its loans in devcoins, and that turns out to get them into a nasty situation, because no one knows exactly what assets the sum total of all devcoins actually represents, so markets instead of actual inventories of assets end up getting in on the devcoin valuation estimates everyone is trying to use.

General Financial Corp borrows a million GRF from the Canucks, but of course how much they owe is denominated in CDN, not in GRF. The conversion rate of CDN to GRF was looked up when they took the loan, to record how much CDN they owe the Canucks.

The usual situation for a mining startup was to get half their financing from GMC and half from GRF, so General Financial Corp converts some of its borrowed GRF wealth into GMC currency so they can offer to miners to refinance both their loans at once, getting them off the 1%/day (Earth day, not game day; one earth day is several game days) hook, offering them half a percent a day. (They did their bulk borrow from the Canucks at a quarter of a percent a day.)

Take a look at a table of asset values expressed in CDN at http://galaxies.mygamesonline.org/digitalisassets.html

Take a look also at the share values tables, wherein sGFC is the shares of the General Financial Corp.

Devcoin's value is very volatile because one never knows what the sum total assets of all devcoins in the aggregate add up to so one ends up doing fudging estimations like "I wonder how much bitcoin it would buy today on such and such a planet in such and such a galaxy", or "I wonder how many tons of deuterium it would buy in such and such a galaxy" instead of being able to figure aha there are this many coins each being in essence a share of a mutual fund that owns this list of assets, many of which have well known relatively nonvolatile values...

An important thing to notice in all this is the total number of devcoins owed to GFC is vastly, by orders of magnitude, larger than the total number of devcoins that will be minted in the next gosh knows how many years. These folks do not go to market to buy and sell things, they look at their conversion rates table. If the total assets of the Martians are five times the total assets of the Canadians then one Martian coin is worth five Canadian coins, if both happen to be (as they are) chains of 21 million coins each (or, in general, of the same number of coins each).

So when a miner wants to pay some of the devcoins he owes, he tells the folk he sells the stuff he mines to to please remit the payment to the General Financial Corp to be credited against the loan. Usually people buying mined stuff pay in GMC or GRF. The financial corp looks up the current conversion rate of GMC or GRF to devcoins, and credits against the loan accordingly.

Basically there is a difference between units of account and actual "specie" aka "coins". ("Cash"?) The quantities on the books of how much of what is owed to who is not limited to the number of "actually minted objects" to which the units of account refer.

I suspect it is not by sheer coincidence that the forex market is much larger than other markets; quite possibly it needs to be absolutely vast in order that mere material products being shipped around from owner to owner hardly makes a dent in the "ballast" of "units of account" that maybe somewhat help against volatility. (I keep wondering if financial "ballast" is in any way akin to the "ballast" of coils and/or capacitors used in some electrical applications...)

-MarkM-

[Elwar]

I have thought about this and can see it legitimately working. The key is having enough large BTC holders taking part or a few people with a large holding in BTC.

What would basically happen is that a price would be chosen. Say, $10/BTC. Then this group sets up a bid and sell wall at $9.50 and $10.50.

As one wall gets hit, the money is transferred to the other wall. As that gets hit it builds up the other. Being spread apart by $1,  profit is able to keep it going. At any time, the group can decide to bump up the price a small bit at a time. They decide on $10.50. They bring up the wall from $9.50 to $10 and raise the wall from $10.50 to $11.

The key is that the walls are large enough that they do not get stuck with all of their money on one side or another as a huge rally or crash occurs.

It would be like a Federal Reserve Board determining the price. But they would still have to react to market sentiment because their walls would be affected.

[unclemantis]

Sucks I missed the floor today. Usually the floor hits on Tuesday morning Central.

It is a good sign that the market recovered quickly!

[kjj]

I have thought about this and can see it legitimately working. The key is having enough large BTC holders taking part or a few people with a large holding in BTC.

What would basically happen is that a price would be chosen. Say, $10/BTC. Then this group sets up a bid and sell wall at $9.50 and $10.50.

As one wall gets hit, the money is transferred to the other wall. As that gets hit it builds up the other. Being spread apart by $1,  profit is able to keep it going. At any time, the group can decide to bump up the price a small bit at a time. They decide on $10.50. They bring up the wall from $9.50 to $10 and raise the wall from $10.50 to $11.

The key is that the walls are large enough that they do not get stuck with all of their money on one side or another as a huge rally or crash occurs.

It would be like a Federal Reserve Board determining the price. But they would still have to react to market sentiment because their walls would be affected.

This is the hard part.  In the fiat world, they can do this by sourcing and sinking infinite currency.  In the bitcoin world, or whatever, they don't have that ability any more, so they don't know that they can stay on the right side of the market.

[cbeast]

While I have been thinking of a unique model for a distributed "bank" it is a waste of time to worry about exchange fluctuations. The key to stability and growth is utility before liquidity. A bank could work as a network of multisig deposit transactions interwoven by inputs and outputs much like logic gates with keys held by webs of trust members. Risk would be shared by members like a credit union, but reserves would be held in escrows.

[unclemantis]

Question

When USD value becomes ZERO, then what is the value of BTC then?

[the_thing]

Fluctuations are natural. Even more so when the market is THIS tiny (when compared to ..mature markets). As the market grows in volume, it will also grow in stability and become less volatile. This is free market and that's why we use bitcoins in the first place. I know you're probably speculating on its price and now you're upset because of the recent crash, but hey you can't blame the system. We can only blame people on the market.

Furthermore, who would be the one to decide what the right price is? How would the banker determine, what bitcoin is truly worth and what price should be 'defended' by his intervention? 9 dollars? 20 eur? 13 dolars? Why 15 dollars? Why not 12 or 14? I tell you what. I trust the most volatile free market more than I trust the most intelligent banker.

Once again, the price didn't crash because the system is wrong. The price crashed because people who use bitcoins are idiots. Do you want to maintain healthy progress of bitcoin? Be resposible, use your brains, teach people, fight scammers, don't panick when the price falls... No institution can save your ass if you're too stupid (i don't mean you personally, i speak in general), the world can improve only if we improve. We must be better, then the world will be better. There is no other way.


Also:

When USD value becomes ZERO, then what is the value of BTC then?

BTC's value isn't directly dependant on USD's value. Your question doesn't make much sense.

[the_thing]

To sum it up,

1) you've been ''enjoying this whole boom and bust' yet you're deeply concerned about 'sharp swings caused by major trades and market manipulation'
2) in the beggining you wanted to solve this problem by a central bank that isn't central
3) and now you want the free market with regulations

Maybe you're not a man of greed but you're most certainly a man of contradictions.

...or maybe it's just my empty stomach that conceals my clear thinking. Now I'm going to get a late lunch.

[mobile4ever]

You changed the title?