New miner-centric site with hopes to stabilize the BTC economy

[dayfall]

I sounds wonderful if it would fix the problem.  BUT, if you would actually sell coins to me for $22 then all I have to do is sell them at MtGox for $24.  Return and buy more coins...  Rinse.  Repeat.

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[enmaku]

I sounds wonderful if it would fix the problem.  BUT, if you would actually sell coins to me for $22 then all I have to do is sell them at MtGox for $24.  Return and buy more coins...  Rinse.  Repeat.

If enough people are selling coins at or around the average market-sustainable rate there wouldn't be anyone to buy them from you at MtGox for $24.

At the very least publishing the VALUE of 1 BTC versus the PRICE of 1 BTC should give an idea of the current status of the market. Try as I might there was no way I could justify $31 per BTC last week. Such a price was unsustainable and as we saw, it caused quite a little weekend crash. Things rebounded this time, but how many crashes can we really have like that without killing the project?

[jhansen858]

I would be elated if the price just went from $30 to $10 every single day..

[dayfall]

I am confused as what we as miners are supposed to do.  I agree it is critical to stabilize the price, but what can I do?  Do we simply sell above 22.6 and buy below?  Hmm, actually, that sounds like a great idea.  (I think the price is should be closer to $25-$30, but anyway.)  

Why don't we just use the 7day average?

[Findeton]

I am confused as what we as miners are supposed to do.  I agree it is critical to stabilize the price, but what can I do?  Do we simply sell above 22.6 and buy below?  Hmm, actually, that sounds like a great idea.  (I think the price is should be closer to $25-$30, but anyway.)  

Why don't we just use the 7day average?

We could calculate price with a 7 day average, taking into account the 7day average of mining power (THs). We could use a price/difficulty constant to calculate price.

And we could create a website and a bot to trade all bitcoins automatically at that price. It looks like a great idea indeed and it would stabilize price indeed. But in order to make things more stable we not only have to sell if price rises above the price limit, we should buy bitcoins if price goes down too.

[enmaku]

I am confused as what we as miners are supposed to do.  I agree it is critical to stabilize the price, but what can I do?  Do we simply sell above 22.6 and buy below?  Hmm, actually, that sounds like a great idea.  (I think the price is should be closer to $25-$30, but anyway.)  

Why don't we just use the 7day average?

We could calculate price with a 7 day average, taking into account the 7day average of mining power (THs). We could use a price/difficulty constant to calculate price.

And we could create a website and a bot to trade all bitcoins automatically at that price. It looks like a great idea indeed and it would stabilize price indeed. But in order to make things more stable we not only have to sell if price rises above the price limit, we should buy bitcoins if price goes down too.

Absolutely brilliant, I love it! Any idea where I could find an API feed with, say, daily average prices for the last 7 days as well as daily average mining power for the same period? Such a value would be likely to increase steadily during each difficulty period which would show much closer to the real trend of slowly increasing value rather than big spikes every time the difficulty goes up. Yes I understand that difficulty lags price (because it's calculated after the fact) but if you smooth the lines of that jagged stairstep they tend to match price quite nicely.

The 7 day average bit is precisely what I was talking about when I was asking for ideas to improve the formula... Now let's try to make it happen lol.

I can't agree more that we need to both buy and sell around the limit, it's just much harder to get people to agree to buy at any given point than to convince them to sell 

[Findeton]

I am confused as what we as miners are supposed to do.  I agree it is critical to stabilize the price, but what can I do?  Do we simply sell above 22.6 and buy below?  Hmm, actually, that sounds like a great idea.  (I think the price is should be closer to $25-$30, but anyway.)  

Why don't we just use the 7day average?

We could calculate price with a 7 day average, taking into account the 7day average of mining power (THs). We could use a price/difficulty constant to calculate price.

And we could create a website and a bot to trade all bitcoins automatically at that price. It looks like a great idea indeed and it would stabilize price indeed. But in order to make things more stable we not only have to sell if price rises above the price limit, we should buy bitcoins if price goes down too.

Absolutely brilliant, I love it! Any idea where I could find an API feed with, say, daily average prices for the last 7 days as well as daily average mining power for the same period? Such a value would be likely to increase steadily during each difficulty period which would show much closer to the real trend of slowly increasing value rather than big spikes every time the difficulty goes up. Yes I understand that difficulty lags price (because it's calculated after the fact) but if you smooth the lines of that jagged stairstep they tend to match price quite nicely.

The 7 day average bit is precisely what I was talking about when I was asking for ideas to improve the formula... Now let's try to make it happen lol.

I can't agree more that we need to both buy and sell around the limit, it's just much harder to get people to agree to buy at any given point than to convince them to sell  

I don't know, but I'll be interested in helping with the programming part in 2-3 weeks (I have exams now).

This Trading Bot should be used mostly for savings, Meaning that because we not only sell but also sell, in average you won't be able to retrieve the money exactly at the moment you want, only when price is above the calculated price.

Or we could make two bots, one that only sells and another that sells and buys. But, the problem for the bot that only saves is how to send the money in $/€ to the people... I'd rather we only use a bot that both sells and buys and when people want to retrieve the money they retrieve it in bitcoins...

EDIT: Or yeah, that could mean a miner strike when prices go down! Fuck Yeah!

[enmaku]

Best thing I could find is the MtGox "recent trades" JSON feed, which seems to go back about a week. I'm fairly sure I could hack something together to pull that data into a temp database, calculate a moving average and then dump the temp table. I'll have to play with the data a bit but I think an exponential moving average might fit the data better with less lag. I feel like I'm heading dangerously close to speculator territory with the bot idea, but I suppose there's a difference between speculation with my own interests in mind and speculation with the interests of the market in mind.

[AntiVigilante]

At the very least publishing the VALUE of 1 BTC versus the PRICE of 1 BTC should give an idea of the current status of the market. Try as I might there was no way I could justify $31 per BTC last week. Such a price was unsustainable and as we saw, it caused quite a little weekend crash. Things rebounded this time, but how many crashes can we really have like that without killing the project?

Solution: Build something that justifies that price. The network gave us a gift. I started coding. Stop trying to make the math work against the math. You'll only drive yourself bonkers.

[enmaku]

All right, fine, just pretend I'm not trying to accomplish anything by putting the information out there then. All I am is a guy who threw out a web site that shows, based on prior trends, what the average exchange rate for BTC should be for a given period as delineated by difficulty changes. Do with that information what you will - I still say it will keep bubbles from growing as large just for people to know exactly how inflated the currency probably is at a given moment.

'Inflated'

Does not mean what you think it does.

If you want to make a compelling case for managing the Bitcoin economy you must convince people you know what you are talking about.

in·flat·ed  (n-fltd)
adj.
1. Filled or expanded by or as if by gas or air.
2. Unduly enlarged or aggrandized; swollen: an inflated estimate; an inflated ego.
3. Full of empty or pretentious language; bombastic.
4. Raised or expanded to abnormal levels: an inflated economy; inflated wages.
5. Hollow and enlarged: an inflated calyx.

I'm going with definition 4 on that one. If we have a baseline measure of average value for a span of time, and the currency is currently trading well above that value, I'm pretty sure the Oxford English dictionary says we get to use the word "inflated." It does, in fact, mean what I think it does.

Exactly my point. The context is economic policy, which is what you propose. And you don't seem to get that.

Clueless...

My original reply was an angry ad hominem attack and I realize now that I foolishly allowed myself to be baited into irrational anger. I apologize and have decided to step away from such conversations. I'll still be here if you'd like to rationally discuss things without name-calling.

[enmaku]

This thread is getting cluttered with anger, pedantry and semantics. I'm simply not responding to it any more. You can go argue somewhere else if you have nothing constructive to add. Anything that looks sounds or smells like an ad hominem attack will be ignored and, if the attacks get bad enough, reported. I will update the first post as new developments occur on the site and I'll gladly respond to meaningful criticism but I'm tired of playing this game where we all just call each other names and get nothing accomplished. Be constructive, be productive or go home.

[enmaku]

At the very least publishing the VALUE of 1 BTC versus the PRICE of 1 BTC should give an idea of the current status of the market. Try as I might there was no way I could justify $31 per BTC last week. Such a price was unsustainable and as we saw, it caused quite a little weekend crash. Things rebounded this time, but how many crashes can we really have like that without killing the project?

Solution: Build something that justifies that price. The network gave us a gift. I started coding. Stop trying to make the math work against the math. You'll only drive yourself bonkers.

I'm not trying to make the math work against the math. I'm trying to make the math work for the people against instability and the formation of market bubbles.

[dayfall]

Here is my proposal.  We build something like MtGox with calculated rates and limited trades.

Here is how it works.  Pools can add an optional fee that will automatically transfer bitcoins to this new trading site.  (non-miners can just contribute in a non automated fashion.)  These coins are available for purchase at the 7day average of the other exchanges+10%.  When coins are sold, the miner that contributed them (selected round robin) gets 3% into their account.  The rest of the money goes to buying bitcoins.  Bit coins can be sold at the 7day average-10%.  Again, the bought coins go back to the miner who sold his coins that generated the cash that was used to buy the coins.

The non-contributors (i.e. speculators) have the option to buy and sell at these fixed rates.  However, their max volume is determined by a percentage of available funds left at the trading site.

What I think this will do is cause normal people to reconsider if they really want to buy at more than 7day+10% or sell less than 7day-10%.  "I can go to MtBitcoin and buy from the miners for less."

Also, I think we should try to get stores to use a stable rate of 7day (+/-5% which they choose).  If I had my store up and running I would seriously consider trying it.

[Basiley]

talked about miners union days before. anyone laugh. now - nobody laugh.
talked about distributed marketplace - anyone laugh. now [almost]anyone programming engines for it.
talked about telecom investments - sceptics eyebrow. now satcom sales high as never before.

[enmaku]

How about this, then... I've agreed before that speculation within certain bounds is good and CAN have a stabilizing effect, but that much of the speculative trading that is occurring today is doing little more than creating unsustainable bubbles and profiting from both their rise and their crash. What if we find a way to create a reasonable valuation of 1 BTC, perhaps an exponential moving 7-day average or something. We publish this information in an easy to find easy to use manner and suggest that people buy when the market dips more than a small amount below and sell when it climbs more than a small amount above. This would still be a profitable trading scheme, though riding the bubbles and crashes is potentially moreso. The major benefit to this scheme is that if enough people trade around a reasonably estimated average price for a given day, their trades will help correct the trading price back toward the average. Given enough users and enough time this should lower the obscene variances at least enough to make it usable without being pegged to a fiat currency in a much shorter timeline.

I would have no problem with this kind of a system and it doesn't have any of the dramatic components people have complained about before - no controls or demands, merely information and education as well as a set of recommendations that can be profitable for those who follow and are good for the market as a whole. Given a bit of time I could whip something like this up from MtGox's API feed fairly easily. Questions/comments/complaints?

[AngelusWebDesign]

To the OP (original poster):

Regarding difficulty and the value of BTC: You are confusing "accidental" correlation with "essential" correlation.

Yes, up till now there has been an accidental correlation between increasing difficulty and more Bitcoin users. But it's not essential.

It's essential for a computer to have a CPU -- without one, it's not a computer.
Having lots of LEDs is "accidental" -- that is, it's just icing on the cake. It doesn't take away the fact it's a computer if it's lacking that feature.

A man having red or brown hair is accidental.

Anyhow, it's more likely that someone with 20 rigs added 3 rigs, than finding 3 new miners to add 3 rigs. As time goes on, this will be more and more likely. When someone has 20 rigs, they have lots of money coming in and adding a rig is nothing. It's harder to find 3 more people who are interested in mining.

Anyhow, just because 10 miners add a rig (with 3 cards) and raise the network hashrate by 0.3% doesn't mean that the Bitcoin base went up by 0.3% -- it's not essential. Even if it's gone that way up till now, it won't in the future.

Matthew

[enmaku]

@Angelus: There is also an upper limit to how many rigs the average miner can sustain. Not many people are mining out of data centers right now and believe me you start running out of available electricity after a point. Assuming ~400W for a decent rig and ~1300 BTU/h of heat that will need to be removed via additional air conditioning at average efficiency levels, we're talking ~550W per rig. If you're lucky and live in a house or a decently large apartment you might have a 100 amp main breaker, meaning ~11,500 watts are available to your entire house. Roughly enough to power 21 rigs if you had no other power consuming devices to run and no other heat producing devices to cool off. According to the US Dept of energy the average U.S. household consumes ~14,000 kWH per year, which works out to about 1600 watts at any given moment, averaged out. That leaves enough room for 18 rigs if you're average and I'm guess most miners were above-average power consumers long before bitcoin existed. There is an essential upper limit to any mining operation. Most are not willing to lease a separate space to expand operations so once they hit the power/heat ceiling they are unlikely to continue expanding. To this end, yes some portion of the difficulty increase will always reflect old miners buying new rigs but I'm willing to bet that the better portion of it is new miners. Also, old miners couldn't buy new rigs without demand for the currency which I still believe is coming from growth of the network more than speculative demand (especially now that the $31 bubble popped)

@chodpaba: I agree that darkpools are frustrating and bad for the market. The whole system was built on the concept of "open but anonymous" transactions. Since those dark pool transactions still require a transfer of BTC between accounts, perhaps we could combat this by using blockexplorer to compile the total BTC transaction volume for a given day and find some correlation to average price for that day which fits? That would almost certainly be a more accurate measurement than what MtGox chooses to give us via the API, though considerably more complicated to gather data on

Of course we could also vote with our feet and just start using TradeHill. I have the feeling there will be a fairly meaningful migration once TH's API becomes available...

[enmaku]

Oh, and that's if you're lucky enough to have a 100A main breaker. If you live in an apartment (like me) or an old house, you might get stuck with 50A (like me) or 60A main breakers, so cut that in half.

I pop breakers all the time

[enmaku]

@chodpaba: I agree that darkpools are frustrating and bad for the market. The whole system was built on the concept of "open but anonymous" transactions. Since those dark pool transactions still require a transfer of BTC between accounts, perhaps we could combat this by using blockexplorer to compile the total BTC transaction volume for a given day and find some correlation to average price for that day which fits? That would almost certainly be a more accurate measurement than what MtGox chooses to give us via the API, though considerably more complicated to gather data on

Of course we could also vote with our feet and just start using TradeHill. I have the feeling there will be a fairly meaningful migration once TH's API becomes available...

Now that would actually make your website useful. If you could compile and present raw market data in a way that is easily accessible, and so flatten the availability of market information to all players, it could go much farther toward achieving your stated aims.

All right, consider it done! Well... Give me some time to write the code and figure out how/where to keep it running without hammering my poor little shared hosting box and THEN consider it done!

[AntiVigilante]

Stability comes from anchoring to productive transactions.

The right way to do this is to take the gains, be productive, and refuse to trade coins below what the work is worth.

Stability does not come from numbers. It comes from valuation in terms of work.