StableCoin: please criticize

[turtlepower]

Here is an idea for an alternative coin which is pretty simple.  It would be exactly like bitcoin, except that there is a mathematically defined governor, or multiplier, which changes the amount of stableCoin in existence.  The amount of coins owned at time i, SC(i), is equal to a multipler k(i) times the previous amount of coins owned SC(i-1).  The value of the multiplier is defined in terms of the current stableCoin/USD exchange rate and the desired exchange rate, namely 1:1.  The theory of control systems gives the optimal rate of change of the multiplier to avoid wild oscillations but to approach equilibrium quickly.  Even if the exchange rate is "noisy" the equations should give a multiplier value that results in a stable value of money.  Thus, volatility is decoupled from the coin.

[DeathAndTaxes]

Can't be done without a central authority.    Where does the exchange rate come from.  How do all nodes agree upon the exchange rate.  Remember it has to be a deterministic process such that all nodes everywhere in the world get the same answer under all conditions without a central authority.  If you want to use a central authority then you don't need a blockchain (see amazoncoins).


Also you do realize as the exchange rate falls the number of coins will be reduced.  It isn't a store of value.
100 coins at $100.  Demand falls. What is the difference between 90 coins @ $100 or 100 coins at $90.  Either way 10% wealth is lost.

[turtlepower]

It doesn't much matter where the exchange rate comes from.  If two exchanges differ by 5% its not going to matter, because stableCoin is only an *approximation* of the dollar.  At any one time it may fluctuate by a percent or two.  It doesn't jump around spastically.  Thats what a governor *does*, it regulates something in a smooth manner and is robust to temporary fluctuations.

[turtlepower]

I don't understand your second point.  Say there is 10 coins which were last valued at $10.  Now someone sells a coin on an exchange but it only goes for $0.9 dollars.  The software scales the coins in existence so that now there is approximately 11 coins total.  11 coins times $0.9 dollars is still $10.  Perhaps I'm missing something.

[turtlepower]

Ahh, I think I get what you were saying now.  But I'm not totally convinced.  Have to think about it more.

[Red]

@turtlepower, I linked your topic here. The thread is intended to help gather everyone on this site who is interested in a potential stable valued coin. When you get out of jail come join the conversation.

https://bitcointalk.org/index.php?topic=179918.msg1878011#msg1878011