MC2: A cryptocurrency based on a hybrid PoW/PoS system

[frga13]

There is a rumor that they will meet somewhere in the hills of South Dakota. Very soon. Indeed.

[tacotime]

Update:

- Whitepaper 0.04 is pretty much done and has sought to trim down the technical details for readability.  It hyperlinks extensively to the wiki, so that if you need more information, you can find it.
- Cunicula may be joining the team for the enhancement of coloured coins with derivatives/dividends, etc.
- Shift is focusing from technical development to actual development.  I am meeting people locally who have degrees in both computer science and finance in the hunt for a lead dev.
- Going to contact exchanges soon to see if any are interested in being the go between for crowd funding, and also the premiere exchange for Netcoin.

I will double check the paper tomorrow and release it, then I will be moving full steam ahead with passing this to a lead dev and beginning the crowdfund.  In the future, I will be only interacting with the project as a consultant.

As for the other Netcoin, no one cares

[RobinHood27]

IS THERE ANY POOL FOR THIS COIN?

[cryptrol]

IS THERE ANY POOL FOR THIS COIN?

NO BUT POST YOUR ADDRESS HERE AND WE WILL DONATE YOU 10000 NTC

[cunicula]

Here is a diagram explaining my system for derivatives tracking the USD in value.

https://anonfiles.com/file/69d36074de50b14ec7afa334d9a31da8

Feel free to ask questions. I am also working on a text based explanation.
The amount of text is huge, so I figured a diagram is better.

Will also post in project development.

[GarrusV]

That diagram is very extensive. I'm not even sure where to start given my lack of economic schooling. Could you maybe include an introduction to it and some simple conclusions? Why do you need derivatives to track to USD. Sorry if I'm coming across as naive.

[cunicula]

If you have a tradeable cryptoasset with a fixed value of 1 USD and a hypervolatile paired derivative that absorbs price changes
1) Businesses can accept cryptocurrency directly without facing risk from price changes and without a middleman such as BitPay
2) People can day trade between the cryptocurrency and USD without using an exchange, such as MtGox
3) Speculators can make leveraged bets that the cryptocurrency will appreciate without a bucket shop, such as bitcoinica.
4) Regular investors can earn a positive (low) rate of return on their cryptocurrency holdings with minimal risk (e.g they make a guarenteed profit in terms of the cryptocurrency as long as its USD price never drops below 10% of its current level)
5) the blockchain can be used as a short term store of usd value (you lose rather than earn interest so this isn't something you would want to do for more than a few months)
6) Dependence on banking system goes from high -> low

Results:
Profits of MtGox, BitPay, and Bitcoinica -> return for Low risk Investors and high risk Speculators
Fees for using, exchanging, accepting cryptocurrency go from monopoly/oligopoly level -> perfectly competitive level (near 0)
Risk of losing assets if MtGox, BitPay, Bitcoinica go bankrupt, go dishonest, get shutdown go from substantial -> nonexistent
Biggest criticism of bitcoin (huge price risks faced by users) mandatory -> optional

Does that answer your question why?

[cunicula]

BTW please check out the stuff I posted in the project development thread.

[_ingsoc]

BTW please check out the stuff I posted in the project development thread.

Could you post the link for that thread. Thanks.

I believe he's referring to this. There's also supplementary material available on the Netcoin Wiki here.

[dragin33]

If you have a tradeable cryptoasset with a fixed value of 1 USD and a hypervolatile paired derivative that absorbs price changes
1) Businesses can accept cryptocurrency directly without facing risk from price changes and without a middleman such as BitPay
2) People can day trade between the cryptocurrency and USD without using an exchange, such as MtGox
3) Speculators can make leveraged bets that the cryptocurrency will appreciate without a bucket shop, such as bitcoinica.
4) Regular investors can earn a positive (low) rate of return on their cryptocurrency holdings with minimal risk (e.g they make a guarenteed profit in terms of the cryptocurrency as long as its USD price never drops below 10% of its current level)
5) the blockchain can be used as a short term store of usd value (you lose rather than earn interest so this isn't something you would want to do for more than a few months)
6) Dependence on banking system goes from high -> low

Results:
Profits of MtGox, BitPay, and Bitcoinica -> return for Low risk Investors and high risk Speculators
Fees for using, exchanging, accepting cryptocurrency go from monopoly/oligopoly level -> perfectly competitive level (near 0)
Risk of losing assets if MtGox, BitPay, Bitcoinica go bankrupt, go dishonest, get shutdown go from substantial -> nonexistent
Biggest criticism of bitcoin (huge price risks faced by users) mandatory -> optional

Does that answer your question why?

That sounds like a cool idea.  I worry that the netcoin the development has taken too long and will not get off the ground.  Perhaps an idea such as this will help it take off ??

[_ingsoc]

That sounds like a cool idea.  I worry that the netcoin the development has taken too long and will not get off the ground.  Perhaps an idea such as this will help it take off ??

It's not so much that it has taken a long time (bear in mind it's only been a few months), but more so the fact that there are only a handful of people who have a fundamental understanding of the Bitcoin codebase. tacotime has some great ideas, which he has very meticulously detailed in the open, so it's about aligning those ideas with someone who's open-minded and interested in experimentation. I don't want to get on a high horse or anything, but I'd rather support a project that tries and fails than one that takes your money with big promises and without any development commitment. And develop we will - it's for science!

[tacotime]

Whitepaper version 0.04 is now complete

_ingsoc, will be in touch, I'll try to get an e-mail off before I have to give a presentation tomorrow morning

forums will be back up soon.

night guys.

[wizzardTim]

have you guys seen this?    I disagree! 


https://cryptocointalk.com/forum/391-netcoin-net/

Is there any issue by using the same name? I don't think so. Correct me if I am wrong.

Mastercoin has done the same, there are now 2 mastercoins (you'll find the one under the "Alternate cryptocurrencies" subforum, while the other under "project Development").

 

[Xaltotun]

I gotta admit, I love it when developers put out white papers. It adds so much to their credibility.

[cunicula]

I think it might be a good idea to test out a very stripped down version of my derivative system as an independent altcoin.
I think a working proof of concept could spark interest in a more sophisticated implementation.

Here is the simplest possible system I can think of to generate USD units of value:
1) two coins exist call them basecoin and USDcoin
2) 1 USD coin is backed by b_t basecoins at blockheight t; the value at genesis is arbitrary say b_0=1
3) r_t is the interest rate per block on USD coins at block height t. It can take on any value between -1% and 1% per block say moving in increments of 0.00001%
4) the number of basecoins backing a USDcoin changes between blocks based on r_t, as shown below
b_(t+1)=(1+r_t)*b_t
5) miners announce whether USDcoin trades for more or less than 1 USD in each block
There are three possible options: more than 1 USD, equal to 1 USD, and less than 1 USD.
6)if more, the interest rate is incremented down by 0.00001% r_(t+1)=r_t-0.00001%
If equal, the interest rate is unchanged r_(t+1)=r_t
if less, the interest rate is increased r_(t+1)=r_t+0.00001%
7) [allowable on the blockchain conversion txns in block t]
1 basecoin -> 1/b_(t+30000) USDcoins
1 USDcoin -> b_(t+30000) basecoins
Basically you can convert between the currencies, but with a ~7 month delay. The conversion rate depends on the backing level 7 months from now. The txn inputs and outputs remain unspendable until 7 months from  now when the coversion rate is revealed.
Note: regardless of the backing USD value at block height h, the expected backing USD value at block h+30000 will be about 1 USD. This is enforced by the adjustable  interest rate which forces the backing level torwards whatever is needed for a 1 USD valuation.
regular txns (that don't require conversions) work just as in bitcoin there is no delay. Outpits ade spendable as soon as a txn enters a block

That is pretty much it. The rest is just parameter tweaking and perhaps taxes on exceasive leveraging (I.e. overissuance of USDcoins).

 There is a close real world analogy here: basecoins are equity invesyments in the system, USDcoin are USDdenomiated bonds. Equity holders own whatever value remains in the system after paying off the bondholders. Both groups take on risk and likely earn positive return. However, the equity holders face minor risks of price fluctuations thatdon't affect bondholders. Bondholders only worry about catostrophic failures that wipe out everyone.
The bonds serve as convenient stores of USD value just like paypalUSD. If paypal goes bankrupt, its customers get expropriated too.

I think it makes sense to launch this first before thinking about a more flexible syatem for netcoin. If this fails then a more complex system would fail too.  

[mercSuey]

I think it might be a good idea to test out a very stripped down version of my derivative system as an independent altcoin.
I think a working proof of concept could spark interest in a more sophisticated implementation.

Here is the simplest possible system I can think of to generate USD units of value:
1) two coins exist call them basecoin and USDcoin
2) 1 USD coin is backed by b_t basecoins at blockheight t; the value at genesis is arbitrary say b_0=1
3) r_t is the interest rate per block on USD coins at block height t. It can take on any value between -1% and 1% per block say moving in increments of 0.00001%
4) the number of basecoins backing a USDcoin changes between blocks based on r_t, as shown below
b_(t+1)=(1+r_t)*b_t
5) miners announce whether USDcoin trades for more or less than 1 USD in each block
There are three possible options: more than 1 USD, equal to 1 USD, and less than 1 USD.
6)if more, the interest rate is incremented down by 0.00001% r_(t+1)=r_t-0.00001%
If equal, the interest rate is unchanged r_(t+1)=r_t
if less, the interest rate is increased r_(t+1)=r_t+0.00001%
7) [allowable on the blockchain conversion txns in block t]
1 basecoin -> 1/b_(t+30000) USDcoins
1 USDcoin -> b_(t+30000) basecoins
Basically you can convert between the currencies, but with a ~7 month delay. The conversion rate depends on the backing level 7 months from now. The txn inputs and outputs remain unspendable until 7 months from  now when the coversion rate is revealed.
Note: regardless of the backing USD value at block height h, the expected backing USD value at block h+30000 will be about 1 USD. This is enforced by the adjustable  interest rate which forces the backing level torwards whatever is needed for a 1 USD valuation.
regular txns (that don't require conversions) work just as in bitcoin there is no delay. Outpits ade spendable as soon as a txn enters a block

That is pretty much it. The rest is just parameter tweaking and perhaps taxes on exceasive leveraging (I.e. overissuance of USDcoins).

 There is a close real world analogy here: basecoins are equity invesyments in the system, USDcoin are USDdenomiated bonds. Equity holders own whatever value remains in the system after paying off the bondholders. Both groups take on risk and likely earn positive return. However, the equity holders face minor risks of price fluctuations thatdon't affect bondholders. Bondholders only worry about catostrophic failures that wipe out everyone.
The bonds serve as convenient stores of USD value just like paypalUSD. If paypal goes bankrupt, its customers get expropriated too.

I think it makes sense to launch this first before thinking about a more flexible syatem for netcoin. If this fails then a more complex system would fail too.  

Correct me if I'm wrong, but the price of this BaseCoin is not determined by the supply/demand in itself but rather mimics the price of some other market which is based on classic supply/demand?  As someone who has worked in the hedge fund industry for over 10 years, trust me when I say that I'm sure there are many traders salivating over if and when this goes live, if indeed I am correct.

EDIT:  ...and I don't mean that in a good way.  This system is ripe for being gamed.  Even the article on coindesk about overlay networks on the BTC blockchain made to mimic USD based commodity prices was full of ignorance.

[cunicula]

First off, no, basecoin would be equity in the basecoin network just like bitcoin is equity in the bitcoin network. It has no intrinsic value or link to a real world value. The price of a USDcoin is based on real world supply and demand as well. An increase in interest rates increases demand for USDcoin. A decrease in interest rates decreases demand for USDcoin. It is very similar to a forex market for a currency that maintains an approximate peg to the USD via matching FED interest rate changes.

More importantly, you may have missed 7 month delay part as described below:

7) [allowable on the blockchain conversion txns in block t]
1 basecoin -> 1/b_(t+30000) USDcoins
1 USDcoin -> b_(t+30000) basecoins
Basically you can convert between the currencies, but with a ~7 month delay. The conversion rate depends on the backing level 7 months from now. The txn inputs and outputs remain unspendable until 7 months from  now when the coversion rate is revealed.

The only conversion txns allowed within the blockchain are described above.

There is an opportunity for arbitrage via conversion txns iff at time t

expected [market price of 1 basecoin at time t+30000 / backing of a USD coin at time t+30000 -  market price of a USDcoin at time t+30000| information available at time t] !=0

(note that t+30000 is approx 7 months after you lock in your bet at time t)

In January, you can commit x basecoin to the purchase of USDcoins at a future price equal to 1/backing of a USD coin in August. You cannot back out of this. The spot market price of a USDcoin has 7 months to adjust after you make your bet. The backing ratio has 7 months to adjust after you make your bet. If adjustment occurs within a 7 month time frame (quite a reasonable expectation in my opinion), the bet has negative expected value (on average you just lose 7 months interest on the invested capital and plus any txn fee you paid to place the bet). If you have some information advantage that is the basis for your bet, the bet reveals this information to the public, giving the market has 7 month to front-run you.

Alternatively: You may think that you exploit the realization of the bet by manipulating the mining process. I agree with you. I would handle this by using proof of stake mining. Then if you want to manipulate price reporting, you have to purchase a major ownership stake in the system first. If you have an ownership stake, you no longer want to manipulate price reporting.

If you still see a problem, outline it explicitly so I can address it. I laid out everything in mathematical detail.
You suggested there was a problem (likely a figment of your imagination) and then asked me to guess what you might be imagining. This is not productive. If you are so confident, say something specific.

[mercSuey]

First off, no, basecoin would be equity in the basecoin network just like bitcoin is equity in the bitcoin network. It has no intrinsic value or link to a real world value.

More importantly, you may have missed 7 month delay part as described below:

7) [allowable on the blockchain conversion txns in block t]
1 basecoin -> 1/b_(t+30000) USDcoins
1 USDcoin -> b_(t+30000) basecoins
Basically you can convert between the currencies, but with a ~7 month delay. The conversion rate depends on the backing level 7 months from now. The txn inputs and outputs remain unspendable until 7 months from  now when the coversion rate is revealed.

The only conversion txns allowed within the blockchain are described above.

There is an opportunity for arbitrage via conversion txns iff at time t

expected [market price of 1 basecoin at time t+30000 / backing of a USD coin at time t+30000 -  market price of a USDcoin at time t+30000| information available at time t] !=0

(note that t+30000 is approx 7 months after you lock in your bet at time t)

In January, you can commit x basecoin to the purchase of USDcoins at a future price equal to 1/backing of a USD coin in August. You cannot back out of this. The spot market price of a USDcoin has 7 months to adjust after you make your bet. The backing ratio has 7 months to adjust after you make your bet. If adjustment occurs within a 7 month time frame (quite a reasonable expectation in my opinion), the bet has negative expected value (you just lose 7 months interest on the invested capital and the txn fee). If you have some information advantage that is the basis for your bet, the bet reveals this information to the public, giving the market has 7 month to front-run you.

Alternatively: You may think that you exploit the realization of the bet by manipulating the mining process. I agree with you. I would handle this by using proof of stake mining. Then if you want to manipulate price reporting, you have to purchase a major ownership stake in the system first. If you have an ownership stake, you no longer want to manipulate price reporting.

If you still see a problem, outline it explicitly so I can address it. I laid out everything in mathematical detail.
You suggested there was a problem (likely a figment of your imagination) and then asked me to guess what you might be imagining. This is not productive. If you are so confident, say something specific.

So afterwards you say you'll add PoS mining to keep stake in check (consequently keeping supply/demand honest) and yet I also have no idea what I'm talking about...interesting. 

[cunicula]

First off, no, basecoin would be equity in the basecoin network just like bitcoin is equity in the bitcoin network. It has no intrinsic value or link to a real world value.

More importantly, you may have missed 7 month delay part as described below:

7) [allowable on the blockchain conversion txns in block t]
1 basecoin -> 1/b_(t+30000) USDcoins
1 USDcoin -> b_(t+30000) basecoins
Basically you can convert between the currencies, but with a ~7 month delay. The conversion rate depends on the backing level 7 months from now. The txn inputs and outputs remain unspendable until 7 months from  now when the coversion rate is revealed.

The only conversion txns allowed within the blockchain are described above.

There is an opportunity for arbitrage via conversion txns iff at time t

expected [market price of 1 basecoin at time t+30000 / backing of a USD coin at time t+30000 -  market price of a USDcoin at time t+30000| information available at time t] !=0

(note that t+30000 is approx 7 months after you lock in your bet at time t)

In January, you can commit x basecoin to the purchase of USDcoins at a future price equal to 1/backing of a USD coin in August. You cannot back out of this. The spot market price of a USDcoin has 7 months to adjust after you make your bet. The backing ratio has 7 months to adjust after you make your bet. If adjustment occurs within a 7 month time frame (quite a reasonable expectation in my opinion), the bet has negative expected value (you just lose 7 months interest on the invested capital and the txn fee). If you have some information advantage that is the basis for your bet, the bet reveals this information to the public, giving the market has 7 month to front-run you.

Alternatively: You may think that you exploit the realization of the bet by manipulating the mining process. I agree with you. I would handle this by using proof of stake mining. Then if you want to manipulate price reporting, you have to purchase a major ownership stake in the system first. If you have an ownership stake, you no longer want to manipulate price reporting.

If you still see a problem, outline it explicitly so I can address it. I laid out everything in mathematical detail.
You suggested there was a problem (likely a figment of your imagination) and then asked me to guess what you might be imagining. This is not productive. If you are so confident, say something specific.

So afterwards you say you'll add PoS mining to keep stake in check (consequently keeping supply/demand honest) and yet I also have no idea what I'm talking about...interesting.  

PoS mining keeps price reporting honest. Given that all existing discussions and implementations of PoS mining are based on (or at least pre-dated by) my work on the topic AND this is in a thread for a PoS coin, the idea that PoS mining is involved is kind of implicit.

Anyways...

Do you have any specific knowledge to share with us? I'm challenging you to come up with something here.

... I thought not.

[mercSuey]

If you still see a problem, outline it explicitly so I can address it. I laid out everything in mathematical detail.
You suggested there was a problem (likely a figment of your imagination) and then asked me to guess what you might be imagining. This is not productive. If you are so confident, say something specific.

So afterwards you say you'll add PoS mining to keep stake in check (consequently keeping supply/demand honest) and yet I also have no idea what I'm talking about...interesting.  

PoS mining keeps price reporting honest. Given that all existing discussions and implementations of PoS mining are based on (or at least pre-dated by) my work on the topic, the idea that PoS mining is involved is kind of implicit.

Anyways...

Do you have any specific knowledge to share with us? I'm challenging you to come up with something here.

... I thought not.

I see logic isn't your strong suit.  Or did Netcoin acquire trolls on the dev team and I just missed the ANN?

Or maybe you're just having a bad day?  Yes, this is definitely not productive.  I'm glad there's an ignore button.