Okay, cunicula. So the idea here is that you have an interblock floating interest rate based on the market value of these coins? Is that correct? And this is used to make gradual corrections to line up market value with some existing fiat currency, such as the USD?

One potential problem is that the market value of coins can move a ton based on external interest, market manipulation, etc. For example, someone wants to buy 10m USD of these coins. If these coins are not available at the target value of 1 USD or close to that, it will spike the price. Furthermore, making lots of incremental interest rate changes is a slow process and will not be able to cope with value swings like a factor of 2 increase over a few days.

Another, more explicit, example of why there could be problems with small adjustments: 30k blocks in 7 months means a block every 10 minutes. If the market price doubles over 3 days, it will take a long time to adjust. Could this be a problem with maintaining a good medium for exchange? That there's lots of ways people can game it?

The USDcoin are not instantaneously convertible.

If "the expected backing ratio in 7 months is equal to 1," then the system cannot be gamed.

Moreover, if this is the case, the current backing ratio is almost irrelevant to the current price.

i.e. the market price of 50% backed USDcoin and 200% backed USDcoin should be almost the same.

Both 50% backed USDcoin and 200% backed USDcoin revert to being 100% backed USDcoin after about 40 days.

Here is a graph simulating how the USD backing would change in response to price in this system.

The interest rate changes are based on a simple algorithm rather than manual intervention.

(algorithm essentially targets 30 day convergence with 1 to 1 backing and slows down when backing is within 20% of parity to prevent overshooting)

Presumably real people would adjust interest rates using similar principles.

http://imgur.com/dJ2ekUuThe x axis is in days. You can see that the backing level bounces around 1, but gets knocked off by large price changes. The largest deviation is on day 1, where the backing level is set to be 0.05 USD per USDcoin and the initial interest rate is set to 0.

You can see that recovery to 1 USD per USDcoin takes about 3 months. The fact that the backing level was initially just 0.05 USD per USD coin does not help you predict waht the backing level will be on day 210. On day 210, this turns out to be 2.39 USD per USD coin. And on day 420, 0.57 USD per USD coin. And on day 630, 1.02 USD per USD coin. And on day 840, 0.96 USD per USD coin. And on Day 1050, 1.08 USD per USDcoin.

The point is that the current backing ratio != the

**expected** backing level you are able to exchange at.

At all times, the

**expected** backing ratio you are able to exchange at ~= 1.

Based on the current and past backing levels / prices, what is your forecast of the USD backing level 210 days in the future? Without being able to guess future price movements, could you make a guess of the future backing ratio that is better than 1?

If not, then you don't need to worry about gaming.

Finally, is this supposed to mimic the debt/bond system of the USD in some way?

Not sure exactly what you mean.