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Author Topic: New miner-centric site with hopes to stabilize the BTC economy  (Read 8338 times)
enmaku
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June 13, 2011, 06:05:57 PM
 #61

OK I think I have some good data sources and sound math to work with now, give me a few days to figure out a proper volume/price ratio with standard deviations and make sure the calculated curves fit within some reasonable distance of reality and I'll bash out some code to produce new improved numbers which should update with every block instead of every difficulty change - much better resolution Smiley

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enmaku
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June 13, 2011, 06:07:20 PM
 #62

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.

I will give you that. The numbers by themselves do nothing. But it does require the ability to make sense of them to arrive at a meaningful valuation.

Be productive and all that... But know the true value of what you produce.


Exactly right, that's what my current work is all about, knowing what the work is worth. You can't "refuse to trade coins below what the work is worth" if you are legitimately missing that data. Give me a bit to find some math that matches the data and we'll all know what the work is worth.  Grin

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June 13, 2011, 06:25:56 PM
 #63

Exactly right, that's what my current work is all about, knowing what the work is worth. You can't "refuse to trade coins below what the work is worth" if you are legitimately missing that data. Give me a bit to find some math that matches the data and we'll all know what the work is worth.  Grin

You're just going to get buried in the rabbit hole.

What you want to do is to define your parameters:
How many hours can you put up with being distracted from family and community?
How long do you think the money you make should last?
How much loss of purchasing power and earning power are you willing to sacrifice for exchanging into fiat?
How much personal energy will you have left to be active in what you care about?

Work is worth what amount of time you have to put into it aside from other things you need to do.
Time is worth what you could be doing with it and how much more time that will take if you are distracted.
Money is worth whatever amount allows you to live at those parameters above.

Labor is a commodity. Work is not. Let's start acting like it.

Rather than suggested price, it should be reference price, window of variation that will not interfere with the above, the change in value of the fiat as well, and whether the price is moving in the wrong direction.

All this tweaking needs to include the tweaking by central banks.

And what we really need are trade recycling patterns. Using the same BTC 5x to buy a car by cycling them through the community. That's how you get stability.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
enmaku
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June 13, 2011, 06:37:46 PM
 #64

Rather than suggested price, it should be reference price, window of variation

Then I guess bitcoinreference.com is an appropriate domain  Grin

But in all seriousness, yes I intend to work out something volume-based from what I can mine out of block explorer's API. Speaking of which, anyone else having trouble getting to block explorer right now?

enmaku
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June 13, 2011, 07:27:49 PM
 #65

Exactly right, that's what my current work is all about, knowing what the work is worth. You can't "refuse to trade coins below what the work is worth" if you are legitimately missing that data. Give me a bit to find some math that matches the data and we'll all know what the work is worth.  Grin

You're just going to get buried in the rabbit hole.

What you want to do is to define your parameters:
How many hours can you put up with being distracted from family and community?
How long do you think the money you make should last?
How much loss of purchasing power and earning power are you willing to sacrifice for exchanging into fiat?
How much personal energy will you have left to be active in what you care about?

Work is worth what amount of time you have to put into it aside from other things you need to do.
Time is worth what you could be doing with it and how much more time that will take if you are distracted.
Money is worth whatever amount allows you to live at those parameters above.

Labor is a commodity. Work is not. Let's start acting like it.

Rather than suggested price, it should be reference price, window of variation that will not interfere with the above, the change in value of the fiat as well, and whether the price is moving in the wrong direction.

All this tweaking needs to include the tweaking by central banks.

And what we really need are trade recycling patterns. Using the same BTC 5x to buy a car by cycling them through the community. That's how you get stability.

Exactly:
"How many hours can you put up with being distracted from family and community?
How long do you think the money you make should last?
How much loss of purchasing power and earning power are you willing to sacrifice for exchanging into fiat?
How much personal energy will you have left to be active in what you care about?"
[emphasis added]

That valuation is going to vary widely.


These are the kind of questions one might ask when deciding whether to accept a job offer. The data I'm trying to come up with is a reasonable estimate of what that job might pay with a shelf life of more than 20 minutes. I also believe that if people are aware of a reasonable, expected average then they are more likely to trade around it. If you recognize what the current valuation of a commodity should be and see that it is actually trading significantly higher, you might recognize a bubble more rapidly and responsibly sell. Enough responsible selling will suppress the bubble without causing drastic market corrections. The same works in reverse - if you recognize that a commodity is under-valued at the moment, you would certainly be best served to buy some and then re-sell when it becomes correctly or overly valued again.

The big problem that I think we've come to an agreement on is that factors like MtGox's dark pools, unmonitored black/gray market exchanges and transactions etc. make it very difficult to determine proper valuation of bitcoin as an asset. Thankfully we all have the ability to peek directly into the block chain and attempt to extract data from the transaction database itself. This is what I'm currently attempting to do (or what I will be attempting to do once blockexplorer comes back up).

enmaku
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June 13, 2011, 08:05:26 PM
 #66

True, but they have a really handy API and I don't feel like re-inventing the wheel at this exact moment. Eventually yes I'd like to start parsing the blockchain myself and not be reliant on BE, but until I've at least proven my math I don't want to re-write that amount of code.

Of course if anyone has a code snippet or knows of an application that will let me peruse my local copy of the chain and perhaps run some basic analysis that'd be more than welcome too  Grin

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June 13, 2011, 08:20:41 PM
 #67

These are the kind of questions one might ask when deciding whether to accept a job offer.

The value of a bitcoin from a job is the same as that bitcoin spent on a product. You're looking for a distinction where there is none.

Quote
The data I'm trying to come up with is a reasonable estimate of what that job might pay with a shelf life of more than 20 minutes. I also believe that if people are aware of a reasonable, expected average then they are more likely to trade around it. If you recognize what the current valuation of a commodity should be and see that it is actually trading significantly higher, you might recognize a bubble more rapidly and responsibly sell. Enough responsible selling will suppress the bubble without causing drastic market corrections. The same works in reverse - if you recognize that a commodity is under-valued at the moment, you would certainly be best served to buy some and then re-sell when it becomes correctly or overly valued again.

The big problem that I think we've come to an agreement on is that factors like MtGox's dark pools, unmonitored black/gray market exchanges and transactions etc. make it very difficult to determine proper valuation of bitcoin as an asset. Thankfully we all have the ability to peek directly into the block chain and attempt to extract data from the transaction database itself. This is what I'm currently attempting to do (or what I will be attempting to do once blockexplorer comes back up).

FUUUUUUUUUUUUUUUUUU. Dammit.

All righty. Lemme try a different approach.

I spent zero minutes looking at prices when I created my lending structure. I price in BTC and expect fees in BTC. Nothing else matters. Dollars don't figure in one bit. Exchange rates are not a problem until I get to bitmunchies.com and diapers go up in BTC because somebody tripped up a bunch of bots.

And the irony of it all is that you can actually build bots with their own circuit breakers. No change to the exchange is needed.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
enmaku
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June 13, 2011, 08:29:17 PM
 #68

When the day comes that I can pay my electric bill in BTC then I'll be able to do all of my accounting in BTC and no exchanges will be necessary. Until then, I need a reliable way of finding out whether my mining operations will be profitable today and it might be nice to know roughly how profitable, too.

enmaku
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June 13, 2011, 08:58:25 PM
 #69

When the day comes that I can pay my electric bill in BTC then I'll be able to do all of my accounting in BTC and no exchanges will be necessary. Until then, I need a reliable way of finding out whether my mining operations will be profitable today and it might be nice to know roughly how profitable, too.

The one twist I would put on that is to figure profitability in BTC instead of your government issued currency... You will be much better off in the long run. True, you do have to account for exchange rate for those inputs payed for in local currency, but instead of converting your Bitcoin to Dollars for that calculation try converting all your other costs to the the Bitcoin exchange equivalent. You might be shocked to find out that your costs are actually going down!

I already do. Smiley

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June 13, 2011, 09:07:11 PM
 #70

I skipped the thread, but hopefully someone has pointed out that what you're suggesting is a cartel. You're the millionth person to invent such a thing. They sound great in theory, but they don't (generally) work.

The reason is that it's profitable for people to cheat the cartel and therefore, inevitably, someone will. You're trying to resist the natural forces of the market.

Cartels can work when they're made up of a very small number of people (the handful of controlling interests in OPEC, the only two gas stations in a small town, etc) and/or when there are effective methods to punish cheaters who must be traceable. Bitcoin mining is almost the perfect example of a scenario in which cartels can't and won't succeed.

Don't go broke while you're out having fun. Check out Coin Watcher.

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enmaku
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June 13, 2011, 10:57:17 PM
 #71

I skipped the thread, but hopefully someone has pointed out that what you're suggesting is a cartel. You're the millionth person to invent such a thing. They sound great in theory, but they don't (generally) work.

The reason is that it's profitable for people to cheat the cartel and therefore, inevitably, someone will. You're trying to resist the natural forces of the market.

Cartels can work when they're made up of a very small number of people (the handful of controlling interests in OPEC, the only two gas stations in a small town, etc) and/or when there are effective methods to punish cheaters who must be traceable. Bitcoin mining is almost the perfect example of a scenario in which cartels can't and won't succeed.

Yeah you shouldn't have skipped the thread, lol. That may be how this all started off but I'll admit when I'm wrong. I did the math, I ran the numbers and I figured out not too long after the original post that it was highly unlikely I'd ever get enough of a power base to pull such a thing off. I've shifted focus on my site. I'm working on extracting data from the blockchain that, combined with data from the MtGox API, might be able to give a meaningful prediction of BTC/USD value expected for a given period of time - something like an exponential moving 24-hour average but smoothed or modified by factors not necessarily available directly from MtGox. For example, I should be able to correlate transaction volume from the block chain to transaction volume as reported by MtGox and sizable differences in volume may be noteworthy predictors of dark pool action.

I plan to spend the next week in deep analysis and hopefully can come up with not just a more accurate price index for this market than the standard analysis tools might provide but also EMAs for the standard deviations such that we can try to predict the likelihood of market movement in a given direction and make the most intelligent trades possible.

I feel pretty certain that people following their natural instincts can stabilize this market over time, but that time might be shortened by smart traders having good data and THAT is what my efforts have now been turned to.

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June 14, 2011, 05:20:21 AM
 #72

Regardless of the problems with my implementation, merchants will not enter this marketplace if they have to change their prices daily - and in the current market, daily wouldn't even be often enough! There is no reason that anyone anywhere should pay 1 BTC for a shirt and then twenty minutes later see a price tag of 0.8 BTC and then 1.4 BTC twenty minutes after that. The issue still remains that this market is too volatile for real commerce and if the only people in the market are the speculators, who thrive on volatility, there will likely never be a sufficient decrease in that volatility to make this a worthwhile mechanism for most businesses to transact in.

I see a lot of people reaffirming that I've spotted a problem and telling me that my solution is stupid, wrong or communist but not a lot of people stepping up to do anything themselves. So until someone has a better idea and wants to implement it, stop complaining about my imperfect solution.

I recently started to accept Bitcoin as a merchant, and it was the same day BTC went from 18 to 31 and then dropped off pretty low against the USD due to heavy sales. Wink

So what I did was making the order processing partially automatic; the customer select Bitcoin during checkout in the online shop and gets information how to proceed in the order confirmation email automatically. When we receive an order I browse through the recent currency trade stats/graphs for the past days and reply with an offer via email which is time limited depending on how big the BTC currency fluctuations are against US Dollar. This is also a good way to get experience with BTC, and maybe at a later stage implement fully automatic handling.

In addition to this, in a way to even out the BTC currency losses when customer "gets too good rate", we keep some of the customer payment in BTC (eg. like 50%), and exchange the rest to USD. Since I believe the Bitcoin will increase in value against the USD eventually, even if it takes a month of swinging up and down, half of the customer payment will then increase enough to cover any losses we had at the time of purchase.

To survive as a merchant these days you have to improvise and adapt, this is nothing new for us. I think the people worried mostly about currency fluctuations are miners here in the forum, funny that they seem so concerned about merchants. My advice; when the the rate drops down, stick with your Bitcoins, don't panic. Hasty decisions are rarely good.

Need modchips? We accept BTC...
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June 14, 2011, 06:44:33 PM
 #73

Regardless of the problems with my implementation, merchants will not enter this marketplace if they have to change their prices daily - and in the current market, daily wouldn't even be often enough! There is no reason that anyone anywhere should pay 1 BTC for a shirt and then twenty minutes later see a price tag of 0.8 BTC and then 1.4 BTC twenty minutes after that. The issue still remains that this market is too volatile for real commerce and if the only people in the market are the speculators, who thrive on volatility, there will likely never be a sufficient decrease in that volatility to make this a worthwhile mechanism for most businesses to transact in.

I see a lot of people reaffirming that I've spotted a problem and telling me that my solution is stupid, wrong or communist but not a lot of people stepping up to do anything themselves. So until someone has a better idea and wants to implement it, stop complaining about my imperfect solution.

I recently started to accept Bitcoin as a merchant, and it was the same day BTC went from 18 to 31 and then dropped off pretty low against the USD due to heavy sales. Wink

So what I did was making the order processing partially automatic; the customer select Bitcoin during checkout in the online shop and gets information how to proceed in the order confirmation email automatically. When we receive an order I browse through the recent currency trade stats/graphs for the past days and reply with an offer via email which is time limited depending on how big the BTC currency fluctuations are against US Dollar. This is also a good way to get experience with BTC, and maybe at a later stage implement fully automatic handling.

In addition to this, in a way to even out the BTC currency losses when customer "gets too good rate", we keep some of the customer payment in BTC (eg. like 50%), and exchange the rest to USD. Since I believe the Bitcoin will increase in value against the USD eventually, even if it takes a month of swinging up and down, half of the customer payment will then increase enough to cover any losses we had at the time of purchase.

To survive as a merchant these days you have to improvise and adapt, this is nothing new for us. I think the people worried mostly about currency fluctuations are miners here in the forum, funny that they seem so concerned about merchants. My advice; when the the rate drops down, stick with your Bitcoins, don't panic. Hasty decisions are rarely good.

I've just updated the site (and API feed) with new code. It now displays the most recent price, a four-hour moving average price and the standard deviation for that same four-hour span. I'm suggesting that merchants list their items at the low end of either the 68% or 95% (1 or 2 standard deviation) brackets since that's the lowest value BTC is likely to swing to before you get a chance to cash out.

For investors, buy when the market is more than 1 SD under average and sell when the market is more than 1 SD above average (use other tools and knowledge obviously, but this is something worthwhile to put in your toolbox).

Similarly, miners should hold coins until value is above the 1 SD range (or above the 2 SD range if you're really patient) to sell.

Finally, the standard deviation itself can be used as a tool to measure market volatility - a high standard deviation indicates a high degree of volatility while a small standard deviation indicates a rather stable market. I'm doing my data-gathering now to determine what a "good" SD (as a percentage of variance from baseline) is for this particular market and I'll be developing an implied volatility algorithm from that in the near future.

Enjoy Smiley

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June 14, 2011, 08:47:56 PM
 #74

Gotcha, I suppose it would make sense to treat the market more like a resonant circuit than any kind of normally distributed system - it is a sort of feedback loop after all.

Of course I haven't used anything with the name "Lorentz" attached since college so I'll be out for a bit brushing up. Then I'll have to see if my mediocre PHP skills are sufficient to actually implement whatever my refresher course turns up  Grin

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June 14, 2011, 09:01:16 PM
 #75



 Shocked

Yeah I can't do that in PHP. I could maybe do that on paper if you gave me enough time, but I'm a database admin, my programming abilities have very real and finite limits Tongue

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June 15, 2011, 02:20:50 AM
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Gotcha, I suppose it would make sense to treat the market more like a resonant circuit than any kind of normally distributed system - it is a sort of feedback loop after all.

Of course I haven't used anything with the name "Lorentz" attached since college so I'll be out for a bit brushing up. Then I'll have to see if my mediocre PHP skills are sufficient to actually implement whatever my refresher course turns up  Grin

That's what I have been saying but people won't believe me... It looks like a P+I loop.

Anyhow, just try going with the log-normal, it will be a better fit and produce less outliers to the up side. All you have to do is find a factor that makes the distribution fit the data and that should be close enough for the kind of short-term lens you are using.

How about using this to "suggest" profitable pricing of items rather than trying to make the market "behave"? Fixers invariably have this fantasy target in mind after which every new target is just a new target. They never have to admit they needed to adjust.

Difficulty goes up in less than a day. Bottom prices will rise and consolidate. Top speculation will panic and fall. This is a consistent stabilizing pattern.

Another better way to do things is to sell low price items at high traffic against the BTC and high price items at low traffic against the dollar (in BTC). I don't care if pay $13 for .5 BTC pencil. I just do not care. But I do care if I pay $80 for 5 BTC in diapers.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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June 15, 2011, 03:28:46 AM
 #77

Quote
I've created a simple web site (changed: http://www.bitcoinreference.com) with a forum attached that displays what I believe to be a fair market value for BTC which is automatically calculated from the current difficulty setting and converted into several world currencies

I believe that the market should set the value for BTC, not some guy trying to setup a cartel of miners. We already have been dealing with the Federal Reserve and the banking cartels long enough, I think it's a horrible idea to start yet another freaking cartel.
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June 15, 2011, 04:01:05 AM
 #78

Quote
I've created a simple web site (changed: http://www.bitcoinreference.com) with a forum attached that displays what I believe to be a fair market value for BTC which is automatically calculated from the current difficulty setting and converted into several world currencies

I believe that the market should set the value for BTC, not some guy trying to setup a cartel of miners. We already have been dealing with the Federal Reserve and the banking cartels long enough, I think it's a horrible idea to start yet another freaking cartel.

That may be an unfortunate choice of words, but I don't think that is really what he is trying to do (anymore). I think, he's just trying to help miners with the Bitcoin trading side of their business by finding ways to provide good information and take emotion out of trading decisions.

If someone is willing to sell coins under what he believes is a 'fair market value', he is free to buy them and resell them for his 'fair market value'.

"fairness" is an arbitrary concept that is improbable to be agreed upon by a large population.
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June 15, 2011, 04:08:43 AM
 #79

awesome site =) awesome idea =) speculators are ruining bitcoins for a quick buck
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June 15, 2011, 04:18:37 AM
 #80

I completely agree. But I also recognize that because of the large percentage of inexperienced traders in the Bitcoin exchange markets there is a great potential for fear/greed swings that more experienced traders are taking advantage of. I don't like to see miners loose their coins simply because they don't understand how the markets work and fall into pricing traps.

They should be allowed to fail if they choose not to do their homework, like everything else in life. In a free market, no transaction is made unless both parties benefit, they aren't forced to sell their coins and they should not be forced to hoard their coins by some cartel either.

The inexperienced traders will eventually fail, lose their time and or money and move on. Let them go gracefully. Leave nature alone. Haven't we learned enough already from the past?

When you try to make things idiot proof, mother nature comes along with a better idiot, and you end up causing more damage than if you just left things alone.
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