StableCoin

[bnogal]

I used AI word so more people can understand the idea...

I would love to see the reasons cause it would be an "inevitable disaster"

[Red]

I used AI word so more people can understand the idea...

I would love to see the reasons cause it would be an "inevitable disaster"

I'm not saying it would be an "inevitable disaster". But you are using AI to mean "some magic algorithm" does the math. I'm just discussing what that magic algorithm might be.

[ElectricMucus]

I used AI word so more people can understand the idea...

I would love to see the reasons cause it would be an "inevitable disaster"

Anything related to transhumanism is. It's just a stupid concept to try to teach an algorithm decision making which affects more than the system itself.

[bnogal]

well, i am just proposing it. Of course it need work to decide the best way to do it, and a way that leaves space to be updated.

ElectricMucus, i suggest then to move to the jungle... cause now days the world is moving like this. From the invest, decisions of big companies, until the way of filling a container.

[ElectricMucus]

well, i am just proposing it. Of course it need work to decide the best way to do it, and a way that leaves space to be updated.

ElectricMucus, i suggest then to move to the jungle... cause now days the world is moving like this. From the invest, decisions of big companies, until the way of filling a container.

Name one company which leaves decision making to an algorithm. (Oh and yes I will ask you to cite it)
Filling a container doesn't require decision making.

[directedbit]

I think the mining difficulty (while not an exact match to exchange rate) is a strong and correlated signal of exchange rate. In addition it is easily obtainable / calculated for all miners in the system. 

[bnogal]

lot of companies use, just of course, they check after to think about.

Here, after checking how the coin is going, people will decide if continue using it or not. And the algorithm should detect it as something bad.

[Crypto Canary]

http://www.phauna.org/papers/freecoin/freecoin.pdf

It only took me a few minutes after researching bitcoin to realize these problems in bitcoin. If people were saying it back in 2011, no wonder bitcoin hasn't really taken off!

[ElectricMucus]

lot of companies use, just of course, they check after to think about.

Here, after checking how the coin is going, people will decide if continue using it or not. And the algorithm should detect it as something bad.

Cite it.

I told you.

[Red]

What you are proposing seems overly complicated, you would have to provide an integrated exchange mechanism and it has to have a monopoly. Doesn't seem doable

Keep in mind this is exploratory thought. I could be chasing a red herring.

You are right, having an monopoly trusted oracle is the simplest solution. But, it doesn't actually need to be a monopoly. You do need non-spoofable access to both halves of an exchange transaction. But, there could be many trusted parties all recording coin-exchange data into the transaction list. This could be used to deterministically calculate monetary policy decisions.

The real problem, as always, is anonymity. Someone has to be non-anoymous to someone else to make the system work. The question is who and when.

(Aside) The same is true of bitcoin. The system functions because miners are NOT ANONYMOUS to their respective electric companies. They have to pay the piper when they spend $1 to generate 50 cents worth of BTC. Also buyers and sellers are NOT ANONYMOUS to the exchanges on which they trade. There needs to be a process for them to receive their non digital goods (fiat).

Current exchanges are by their nature non-anonymous. They can be audited, sued or arrested. They can be trusted or distrusted. They have to behave to a higher standard than a random anonymous party. But history shows the standard is not much higher! :-)

Next what's the point in trying to match the value of fiat currency, rather than using that in the first place using for ex ripple?

Ripple is being reworked so I'm not an expert on it at the moment. But it looks like it depends on trusted central parities to validate transactions. Not sure how it handles anonymity.

The advantage of shadow-fiat over real fiat is anonymity and security. Every time a speculator trades in and out of bitcoins, an exchange makes a record of it. They also hold their trader's fiat in their personal accounts. As history has shown they often fall prey to hacking, fraud, incompetence and gov't auditors. These accounts could also become subject to Cypress style seizure.

However, if you could trade between bitcoin and shadow-fiat both parties to the transaction could be anonymous both to each other, and to the exchange. The exchange itself might even be pseudonymous to all parties while still providing verifiable trades. No one knows how much profit your speculation has wrought you until you want them to know.

Of course when you trade shadow-fiat for paper-fiat you would have to be non-anonymous. But in this case that is almost always a brainless 1 for 1 transaction. Any convenience store on the corner could do that. With face to face exchanges like that, no personal information need change hands or be recorded.

Again, for those who don't know me. I'm a fan of anonymity. I'd like a stable digital currency that is as anonymous as cash has always been.

[bnogal]

My own bank, insurance company, to decide offers, even the electric companies are starting using computational systems to distribute energy.

I just google... cause i think most of the big companies uses it.

http://books.google.es/books?id=pxAKhMKQ_dAC&pg=PA185&lpg=PA185&dq=genetic+algorithm+decision+making+business&source=bl&ots=4yPcFYb6Lz&sig=oSBlw3Xgkbkfqg5KgW70dNOWs1k&hl=en&sa=X&ei=OthtUZjEH-Lb7Ab2kYAY&ved=0CDcQ6AEwAA

And data mining:

http://en.wikipedia.org/wiki/Decision_support_system

[Red]

I think the mining difficulty (while not an exact match to exchange rate) is a strong and correlated signal of exchange rate. In addition it is easily obtainable / calculated for all miners in the system. 

Actually, you are right. I retract some of my smugness from before.

Mining difficulty is related to total hashing calculations / time. So mining difficulty is also related to fiat through hashing efficiency * electrical cost.

It is hazy because average hashing efficiency is an unknown variable. Over time it converges to the most electrically efficient miners. However, its value is further obfuscated because the "future value" of bitcoins is considered unbounded.

That leads people to consider wasting "dollars" today by spending more than a coin is worth. While hoping to make that up over the long term via appreciation.

Stable money removes some of the unknowns and makes solving that calculation MUCH easier.

[Anon136]

Bitcoin is criticized for its high volatility that hinders commerce, and that it rewards early adopters too much.

How about a cryptocoin that is designed to be stable in value?

A stable national currency would probably tie its money supply to the GDP.

What would be the GDP equivalent in a cryptocoin system? How to measure its adoption and use? I'd say by the number of transactions.

So the inflation rate could be tied to the number of transactions occurring, by some formula that yet would have to be figured out.

How to discourage wannabe central bankers to send lots of meaningless transactions back and forth in order to increase money supply? I'd say a small amount of transaction fees that would be mandatory.

Thoughts?

i have a theory, and i know that im going to be attacked for this, that bitcoin is so volatile in part because its deflationary. Basically the mentality goes something like this. I should buy bitcoin because its deflationary so if it becomes widely adopted it should increase in value forever. Of course if this was the case everyone should just buy bitcoins and never work again. but then bitcoin wouldn't ever buy anything if that happened since nothing would be produced to be bought. So it both makes sense for the individual to buy bitcoins and horde them forever but it doesnt make sense for society as a group to do this. The net result of this is a series of speculative booms as everyone realizes they need to get on the train to infinity, but crashes when they becomes obviously over valued.

If this theory is accurate what i would do to address it is build in slow, steady, predictable inflation. This would have the added advantage of forcing inflationcoin users to use inflationcoin for what it is intended to be used for, trade, not a get rich quick scheme and not a savings account. After all we have gold coins that work wonderfully as savings vehicle but terribly as a media of exchange, there is no need to reinvent the wheel. Build a coin that compliments gold and doesn't attempt to replace it.

This coin would instead of having a specified amount of coins to be released with each block could release a number of coins as a function of the total number of coins minted. So for example each block might allow the miner to mint 0.0000001% (yes i pulled that totally out of my ass) of the total number of coins that have ever been minted.

I dont think this would lead to a parabolic expansion in the money supply but if im wrong about that than the coins should be released in such a manner that there is constant predictable inflation linearly not exponentially.

ok commence with the rageing.

[qxzn]

http://www.phauna.org/papers/freecoin/freecoin.pdf

This papers grand idea is to fix the difficulty. The author isnt aware that the difficulty cannot be fixed due to the 10-minute window that must be maintained (by the difficulty) in order to restrain orphaning of blocks.

I agree that the idea isn't too well thought out, but I think the idea is more to fix the ratio of difficulty to reward. Thus, as the difficulty goes up, so does the reward. As difficulty goes down, reward goes down. Difficulty could still be adjusted to maintain a steady 10-minute block window.

Thus, when the price spikes as it recently did, it becomes incredibly lucrative to mine and sell bitcoins. Everyone and their grandma starts mining, driving difficulty and reward both way up. The increased reward causes bitcoins to flood the market, putting downward pressure on prices. A similar pressure happens in the opposite direction.

[Red]

i have a theory, and i know that im going to be attacked for this, that bitcoin is so volatile in part because its deflationary. Basically the mentality goes something like this. I should buy bitcoin because its deflationary so if it becomes widely adopted it should increase in value forever. Of course if this was the case everyone should just buy bitcoins and never work again. but then bitcoin wouldn't ever buy anything if that happened since nothing would be produced to be bought. So it both makes sense for the individual to buy bitcoins and horde them forever but it doesnt make sense for society as a group to do this. The net result of this is a series of speculative booms as everyone realizes they need to get on the train to infinity, but crashes when they becomes obviously over valued.

Welcome to the rationalists club! But you're right that kind of talk doesn't go far here. We should start a sub-forum for everyone that likes bitcoin as a concept but thinks most of the people here are certifiably insane. :-)

[Red]

I agree that the idea isn't too well thought out, but I think the idea is more to fix the ratio of difficulty to reward. Thus, as the difficulty goes up, so does the reward. As difficulty goes down, reward goes down. Difficulty could still be adjusted to maintain a steady 10-minute block window.

Thus, when the price spikes as it recently did, it becomes incredibly lucrative to mine and sell bitcoins. Everyone and their grandma starts mining, driving difficulty and reward both way up. The increased reward causes bitcoins to flood the market, putting downward pressure on prices. A similar pressure happens in the opposite direction.

The problem of course is if you are trying to create a stable coin there are extended periods of time when the appropriate thing to do is to generate ZERO new coins. That makes mining unprofitable for everyone,so everyone stops. In a bitcoin style framework that means that block creation gets seriously delayed and transactions don't get confirmed. After a while difficulty drops to speed the process back up, but the supply&demand exchange value hasn't necessarily fallen with difficulty so coin creation starts again. Even though the correct monetary policy may be to still create ZERO new coins.

As far as I can tell this doesn't produce a stable currency. It osculates tending toward a zero coin value. (continuous over production of coins) It also tends to drive the difficulty level down along with the coin values.

[Anon136]

i have a theory, and i know that im going to be attacked for this, that bitcoin is so volatile in part because its deflationary. Basically the mentality goes something like this. I should buy bitcoin because its deflationary so if it becomes widely adopted it should increase in value forever. Of course if this was the case everyone should just buy bitcoins and never work again. but then bitcoin wouldn't ever buy anything if that happened since nothing would be produced to be bought. So it both makes sense for the individual to buy bitcoins and horde them forever but it doesnt make sense for society as a group to do this. The net result of this is a series of speculative booms as everyone realizes they need to get on the train to infinity, but crashes when they becomes obviously over valued.

Welcome to the rationalists club! But you're right that kind of talk doesn't go far here. We should start a sub-forum for everyone that likes bitcoin as a concept but thinks most of the people here are certifiably insane. :-)

i really wasn't expecting the first response to my comment to be positive O.o

[qxzn]

I agree that the idea isn't too well thought out, but I think the idea is more to fix the ratio of difficulty to reward. Thus, as the difficulty goes up, so does the reward. As difficulty goes down, reward goes down. Difficulty could still be adjusted to maintain a steady 10-minute block window.

Thus, when the price spikes as it recently did, it becomes incredibly lucrative to mine and sell bitcoins. Everyone and their grandma starts mining, driving difficulty and reward both way up. The increased reward causes bitcoins to flood the market, putting downward pressure on prices. A similar pressure happens in the opposite direction.

The problem of course is if you are trying to create a stable coin there are extended periods of time when the appropriate thing to do is to generate ZERO new coins. That makes mining unprofitable for everyone,so everyone stops. In a bitcoin style framework that means that block creation gets seriously delayed and transactions don't get confirmed. After a while difficulty drops to speed the process back up, but the supply&demand exchange value hasn't necessarily fallen with difficulty so coin creation starts again. Even though the correct monetary policy may be to still create ZERO new coins.

As far as I can tell this doesn't produce a stable currency. It osculates tending toward a zero coin value. (continuous over production of coins) It also tends to drive the difficulty level down along with the coin values.

Your analysis seems pretty sound. Before I start agreeing with you, let me propose one change (at the risk of going out to la-la-land):

Let C and D be some constants, their value TBD.

  subsidy = C * difficulty

This is the original idea, keeping the ratio of subsidy to difficulty constant. Now also, to deal with the times when the subsidy ought to be zero (and is so low that it's effectively zero):

  mandatory transaction fee = D * moneysupply / subsidy

(It could equivalently be D * moneysupply / difficulty, with a different D value)

Thus we would have:
1. During "boom" or expansionary times, there is much demand for the coin and the exchange rate begins to increase. As the rate increases, it becomes more profitable to mine, so more people do it, so the difficulty increases, so the money supply increases and eventually applies downward pressure on prices.
2. During slow times, the exchange rate begins to drop. Mining becomes unprofitable. Less people mine. Difficulty decreases, and so does the subsidy BUT, counteracting this effect, mandatory transaction fees begin to increase, to maintain a baseline incentive to keep mining.

This might mitigate the effectively-zero subsidy issue.

Now, switching back to agreeing with you; here's another problem with the design: when a new mining technology appears that allows people to generate a lot more coins with a lot less electricity (e.g. ASICs), there will be a sudden major inflation. If the ratio of coins generated to electricity consumed increases by a factor of 100, I see no reason the money supply wouldn't also increase a hundredfold. At this point, the miners have most of the coins (they just generated 99% of all coins generated to date), and transaction fees are now 100 times higher. Whoops. We were s'posed to be getting a StableCoin, but instead we got a ZimbabweCoin.

[Impaler]

Welcome to the rationalists club! But you're right that kind of talk doesn't go far here. We should start a sub-forum for everyone that likes bitcoin as a concept but thinks most of the people here are certifiably insane. :-)

You and Anon are cordially invited to Freicoin ware as you say we believe in cryptographic currency but are convinced most people here on bitcointalk are hopelessly committed to incorrect economic theories (like deflation being a good thing) that are handicapping an otherwise excellent technology (I recall a vivid analogy someone on a blog used of a fine microscope being used to hammer in a nail).

[Etlase2]

Now, switching back to agreeing with you; here's another problem with the design: when a new mining technology appears that allows people to generate a lot more coins with a lot less electricity (e.g. ASICs), there will be a sudden major inflation. If the ratio of coins generated to electricity consumed increases by a factor of 100, I see no reason the money supply wouldn't also increase a hundredfold. At this point, the miners have most of the coins (they just generated 99% of all coins generated to date), and transaction fees are now 100 times higher. Whoops. We were s'posed to be getting a StableCoin, but instead we got a ZimbabweCoin.

I haven't followed everything that has been posted, and I believe you sent me an early stage design doc awhile back, qxzn, and I think I was fairly dismissive of it because of this issue.

In addition to the ones already listed in the thread, I also proposed this:

New musings for a stable currency

Which suffers from the same flaw but does address it.

However, as Red has thoughtfully mentioned, Decrits is my stable currency design of choice because it eschews the problems of the bitcoin block chain. I am still refining Decrits and have come so close to bringing many new cryptocurrency ideas together into one package. Unit tests of the primary consensus-based reputation design will be my first real coding task, which will be out eventually. But if you are looking for a solution to a stable value currency, there is no design that I have seen that compares to Decrits. I don't think anyone else has put as much effort in. What can I say except that I'm a total geek for the idea.