agentbluescreen
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April 13, 2013, 11:32:19 PM
Last edit: April 17, 2013, 01:35:22 AM by agentbluescreen |
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As an engineer, technologist, ace troubleshooter, economics theorist and crypto-philosopher please allow me to answer this question for you all and offer you the only possible solution to the all too frequent and destabilizing recent "Bubbles with Bitcoins" Nightmares.
Preamble and disclaimer:
I am an avid supporter of and user of Bitcoins who has nonetheless become extremely disturbed at the serious and near fatally suicidal shortcomings of it's very, very poorly designed exchange-trading systems.
Bitcoins are the new virtual, encrypted, invisible, untraceable and anonymous "gold" for mankind. Most importantly, they are OURS and we all independently "back" and profit from owning them as a derivative of their greater use and wider acceptance. They, unlike even national-socialist tokens (Revolutionary Greenbacks) are the first TRULY HUMAN "globally freed market" currency!
Why the last statement above is so involves a rather long National Economics 101 and Theory of Money discussion/explanation I'll post for you here later. My crucial point here is that we all have a stake in the success of this new, digitally secure and decentralized human "Medium of Labor Exchange" utility, so we better get this right! We all know what is "right" about Bitcoins but now it's time to admit and to urgently fix what's terribly WRONG about them. The first aspect of them that we must address is the small matter of their "derivative resource" nature.
Einstein's definition of insanity is doing the same thing over and over again and expecting a different result.
The Pyramid-Derivative Trading Monster, explained:
A “derivative-stock” exchange is generally understood only as latter-day a scam designed to “churn value into” valueless assets that can neither be written off nor liquidated (sold for book-losses).
Say you have an Olympic pool full of sour, junk-mortgage-bond “watered down lemonade” but still want to keep yourself (or get back) all the nice properties the worthless stuff still holds titles to. So you stir them all up and “dilute them” with a half a shot of some good “Stella Artois” AAAA-rated mortgage bond joy-juice and then make a trillion worthless-nothing “shandy nano-shooter packs” out of them who's contents couldn’t make a newborn baby burp. The stuff in them once had some value which you now proclaim loudly as the "value of all of them". Now you name these trillion new worthless-derivative shooter-packs “Mortgage Backed Securities” and set up a “stock market” for them. The word “security” is always good in a name, even if it names a stupid, annoying battery eating thing that beeps like a UPS whenever your luggage moves.
All of a sudden your worthless non performing and illiquid liability-nothings are generating you an income and a cash flow! Buyers are buying them, trading things with each other for them, and outbidding each other and all sorts of real money is changing hands over them with your (small-fee) help, and suddenly they are “performing” (with “values” totally unrelated to their own) on paper again.
You have successfully made yourself (and a circle of your closest pals) a mountain of "something" out of an Olympic sized valley of near-nothings! No sane number of “shandy nano-shooter packs” has anything to do with nor actual claim to any bond or mortgage. Everybody who has or will ever have one merely holds a derivative-token of what (the somethings) the guy who sold it to him made off with.
In fact, the first, “top” floor of the derivative-pyramid-market “shandy nano-shooter packs” derivative traders have already paid you all the money you thought you’d lost before, and saved you your properties, which you've now recovered for yourself from mortgage auction fire-sales. Still the derivative market continues to churn more money into the now totally-nothing half-shot of good beer “shandy nano-shooter packs” derivatives you called “securities”, each happily passing on to the next their “shandy nano-shooter pack” derivatives for real loot unless or until everybody finally realizes (or it becomes all too obvious) they've all ended up with nothings for their somethings…
A worthless-derivative market allows you to put in a lot of money and make a lot of money on paper, or put in a bit of money and make, lose and/or take out a bit of money, but you can never ever (all) take a lot of money out of it. The one exception is that, if/once it flies, the originator (the apex) usually always gets all or most of of his money, first… Then there is the hugely troublesome matter of the upper-level "bought cheap and held" Nano-shandy-pack Derivative Pharaohs who, like the Rothschild-Bilderberg Gold Pharaohs of 1913-1971 begin to feel like Nano-shandy-pack Derivative Billionaires who should still own and rule the world market with all their unclaimed Gold-Reserve-Note Derivative "valuation", who get really edgy when things seem to be about to tumble, and hit their Office Depot "Easy" big dump buttons. (before the last Bretton Woods conference)
Anyways, you still have all the rest of your very fine AAAA-rated beer to enjoy, as long as not too many Pharaohs attempt to take a lot of money out of the rolling asset-exchange bubble of your derivative market.
If that happens you're either a Bernie Madoff, a John Corzine or (at very worst) a Ben Bernanke. The wise developers of Bitcoins kindly ruled out the last option, by making Quantitative counterfeiting impossible. Oddly enough this isn't a tabloid attack aimed at Bitcoins, all "token derived" currency systems (and other miscellaneous misdemeanors) are designed this way. But usually only big, "central" (Tory Trotskyite) "governments" can get away with it.
The above discussion of unsavory realities aside, they are important to understand when addressing the topic of monetary stabilty.
Exchange vs Speculation.
Bitcoin thus far has been a rather profitable and resilient trading-exchange commodity, but during the rather riotous taxi-cab type birth of our new Bitcoin "crypto-currency" (their name for it, not one of my first choices) we have come face to face with a few ugly realities. The first is that both speculation and mischief in the Market mechanisms cause wild fluctuations in the stability of the thing we are trying to promote as a stable "currency".
The merchantability of any Medium of Labour Exchange rests upon it's absolutely assured stability of value. Merchants simply cannot afford to reprice products innumerable times a day, let alone bear the nuisance of doing so continually. Entrepreneurs of every single type including the largest group of professionals/labourers cannot contract their services at a price denominated in a token of wildly variable and unpredictable values! (unless the tokens are guaranteed to always rise-deflate or, at very worst, only fall-inflate in value over nominal holding time by a very small amount.)
The Economic Nation of Bitcoin's Labour-Exchange Currency has already suffered at least three major devaluations!
Labour is the PRIME COMMODITY in all economies. Without it nothing happens, and there is none! Even if it is writing something, down, passing a note, picking up a phone or tapping a key some entrepreneur must get paid for it. The fundamental purpose and utility of a National Economic Labour-Exchange Currency Token ("money") is it's inter-exchangeability for BOTH labours and for all other commodities. For a contractor to offer an assured contract to a property developer priced in a "money" the assured value of that "money" must be stable. He cannot offer to pay his tradesmen different wages for different minutes, hours, weekdays or months in tokens who's future values are always uncertain!
As it is, Bitcoin can never ever become a “currency” or be used in business and commerce as a stable Medium of Labor-Exchange of Reasonably-Assured (more or less constant) Value, because it's derivative market trading mechanism is mis-configured to do the exact opposite, or adversely over-do the desirable, rather than to assure incremental and gradually deflationary added-value to the stability, dependability and benefit of itself and equal benefit to all who use it.
To be a successful candidate in the global marketplace as a stable Medium of Labor-Exchange of some reasonably-assured “currency-value” range, that economic token’s “assured value” must, in the eyes of the Global Marketplace, vary only by a few minor 100ths of a percentile of daily, weekly or monthly “drift”. It cannot be subject to wild, daily, hourly, weekly or monthly swings, let alone 15 minute ones.
The entire notion of the speculative market-trading of the value of the Bitcoin derivative itself is almost nonsense, if you ever honestly intended it to be a “currency”.
If the BitCoin asset pool were merely valued by simple Debit-Balance and Credit-Balance Bookkeeping all varied-currency-converted values coming into it would always exceed all varied-currency-converted values flowing out of it. It’s mere “funding” would generate a constant surplus that would assure each token’s constant value. But that would require an accountable “Central Exchange Authority” to take in the value and dispense the tokens.
But, the BitCoin “asset pool” is a Derivative Market where the coins themselves are ALSO THE DERIVATIVE, and are only worth their FUTURE (not current), highly volatile gambling-derivative market value, an hour from now. This derivative market also suffers from the underlying "pyramid pressures" where a few Bitcoin-flush “somebodies” got (or feel they deserve) a lot of something for little and are unafraid to go in hard after that something whenever the grass starts looking a bit greener.
Meanwhile the Bitcoin buyers are merely holding a derivative of it’s former owner’s withdrawal from the asset-exchange system. The only thing that keeps it's value-growth expanding are the "buy and holders" who don’t (and can’t really) spend their derivatives anywhere save by cashing them in, or by patiently selling them (at some break even or gain) to newbies or other speculators, so as not to tip the applecart.
The corollary is that despite there being no central boardroom-socialist banksters, the more aggressive BitCoin Pharaohs can (must and do) still take every opportunity to devalue “our” currency, and they are not alone as other enemies can come in with worthless cash that costs them nothing to feed speculative bubbles and then dump too, to devalue the currency and discredit us..
Bitcoin will never work, regardless of it’s value-transfer utility, if they cannot stabilize the price of it. If nobody can guarantee what it will be worth in the next ten minutes nobody can afford to contract, price, nor comfortably and safely wait the hour it takes to transfer, be paid in or even to spend it.
To be a Medium of Exchange it must be quick and easy to obtain an exchange value that's always close to what one would expect it's value to be very cheaply (in fees)
To NOT be a Medium of Derivative Speculation (wild gambling) it must be made much harder and more expensive in fees to enter bids or asks beyond a stable, small, restricted fine gradient trading range centered about the current value.
The only way to fix it is to impose a tightly-tiered sale and redemption trading priority system, imposing limited Asking and Bidding points very close in value and to current value, and imposing exponentially higher (punishing) extra fees for both less- and more- extremely out of current range Trading Orders
They must fairly reduce the numeric ranges between all valid competing bids and asks by extending the temporal (more sequential) queues of buyers and sellers instead of promoting sparsely populated price level differences (with big jump-gaps) between them. This simple "counter-speculative fee market policy" would form a natural price stabilizing Exchange Market Regulation that would greatly increase the appeal of Bitcoin to savers, spenders and merchants, while making it far less attractive and conducive to hostile traders and speculators.
In addition trading (sheer speculation) fees must not encourage and promote "churning volatilities" by offering bargain fees for larger amounts of BTC/X exchanges, they must do the opposite and penalize farther out of reasonable-bounds bids and asks, that create an "irrationally exuberant" auctioning mechanism that will always increase volatility.
Is Bitcoin intended as a money or as a derivative?
Cheers!
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