StableCoin

[herzmeister]

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 (edit: and volume) 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?

[1714567736]

1714567736

[qxzn]

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

[Stampbit]

Tie it to fiat? Then you're giving the fed free reign to print your currency.

[ehoffman]

I was thinking of something similar...

Have a coin with a new RPC function called "get_market_value".  This could then be increased by a fix percentage at each found block.  The value is arbitrary, but hardcoded.  Let's say for example that the value is set to double each year.  

Then, whenever you want to trade it, you would have a reference that is untouchable as a blue chip stock, yet give 100% profit year after year.  And this would still be protected from bubbles, get-rich-quick bulls driving the price insane, etc.  People would jump in for the stability, without any speculation, knowing exactly where is money is going to be worth in X years. There would always be constant flow as people would sell when needing fiat, while other would buy knowing that it will continue to have the same growth year after year.  Miners could just sell immediately or hold.  The number of mined StableCoins could be defined as a constant market value increasing with the typical inflation rate, so that someone finding a block today would get 100$ (for example), and someone finding a block in 10 years would still receive approximately 100$ worth of "today's" money.

We could start at genesis block with value of 1 USD (or 1 Euro, or whatever, we could even have StableCoinUSD, StableCoinEUR, etc. )

[herzmeister]

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

I was thinking of something similar...

Have a coin with a new RPC function called "get_market_value".  This could then be increased by a fix percentage at each found block.  The value is arbitrary, but hardcoded.  Let's say for example that the value is set to double each year.  

Both ideas want miners to request MtGox for the current market value or something. That's an outside dependency and probably a Point of Failure. That's not what I meant.

My idea is that such an external factor is not necessary. The transaction volume alone should be sufficient and decide how many new coins are minted. And the transaction volume alone is intrinsically known through the blockchain.

http://blockchain.info/de/charts/n-transactions

I think this chart (evened out a bit) pretty accurately reflects the true Bitcoin adoption.

[Stampbit]

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.

[Stampbit]

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

I was thinking of something similar...

Have a coin with a new RPC function called "get_market_value".  This could then be increased by a fix percentage at each found block.  The value is arbitrary, but hardcoded.  Let's say for example that the value is set to double each year.  

Both ideas want miners to request MtGox for the current market value or something. That's an outside dependency and probably a Point of Failure. That's not what I meant.

My idea is that such an external factor is not necessary. The transaction volume alone should be sufficient and decide how many new coins are minted. And the transaction volume alone is intrinsically known through the blockchain.

http://blockchain.info/de/charts/n-transactions

I think this chart (evened out a bit) pretty accurately reflects the true Bitcoin adoption.

What do the amount of transactions have to do with the volume or price of a currency?

[herzmeister]

What do the amount of transactions have to do with the price of a currency?

They measure how much the coin is actually used as a medium of exchange. There'll be statistical noise for sure. But on average it should do. Then there'd be a rule that says, e.g. 500 transactions per second means a money supply of e.g. 50 million coins is targeted, so that it would achieve stable value at the exchanges.

The problem might be how to remove coins from circulation if adoption shrinks. Destroying transaction fees maybe, but that might not be enough. Also, there'd probably be no incentive left to give to miners in that case.

[Red]

We kicked this idea around for a while. We came up with a couple of ideas for pegging the value to Electricity. I know it seems like it can't be done. But curiously, it can.

GEM - https://bitcointalk.org/index.php?topic=47628.0
EnCoin - https://bitcointalk.org/index.php?topic=49683.0
Decrits - https://bitcointalk.org/index.php?topic=91183.0

[Red]

Both ideas want miners to request MtGox for the current market value or something. That's an outside dependency and probably a Point of Failure. That's not what I meant.

I've been kicking around ideas for this sort of solution. I used to be repulsed by the idea of a "center-of-the-coin-universe." But as I've explained in other threads, bitcoin already has a center-of-the-bitcoin-universe and it seems to function adequately enough.

[FreeBit]

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.

Binding to some however defined external (and complex) property will increase complexity and induce/increase the possibility of failure regarded to design flaws.

What is "stable in value"? While btc crashed against the dollar, I saw no significant changes in the relation to ltc/ppc.

To get it "stable in value" against the dollar you need a market capitalization in dollar much bigger in relation to the availible speculation capital in dollar. And even then there could be hedging.

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?

ppcoin contains some features in that direction.

[BubbleBoy]

What do the amount of transactions have to do with the price of a currency?

They measure how much the coin is actually used as a medium of exchange. There'll be statistical noise for sure. But on average it should do. Then there'd be a rule that says, e.g. 500 transactions per second means a money supply of e.g. 50 million coins is targeted, so that it would achieve stable value at the exchanges.

There's little connection between the transaction rate and the monetary velocity. I can move money between wallets or I can pay using a PayPal like service, thereby introducing false or hiding real transactions from the chain. This is not simply statistical noise because high worth speculators will abuse your mechanism on purpose to move the exchange rate. Nevermind that there's very little connection between the exchange rate and the monetary velocity.

To control the exchange rate you need to watch it directly, because it's influenced by external factors: fundamental supply and demand, economic cycles, trade deficits relative to the fiat world, speculators, etc.

The problem might be how to remove coins from circulation if adoption shrinks. Destroying transaction fees maybe, but that might not be enough. Also, there'd probably be no incentive left to give to miners in that case.

There's no need to do that, just let the money inflate. It will reach an equilibrium value reflecting the new scarcity level. People will lose money but so would fees make them lose money, or other random confiscation schemes.

[ElectricMucus]

Miners can control the money supply using a voting mechanism.
They simply write how much reward there should be for finding a block. Newcomers will most likely enter a high value, old miners most likely enter zero.
So the inflation automatically adjusts to the hashrate the newcomers are able to provide which should be correlated to economic growth,

This can be combined with a demurrage scheme where coins decay into nothing if the currency shrinks. (If the hashrate goes down for example)

[bnogal]

i copy here my post from other thread cause is the same topic.



I would keep the transaction fee in % as an extra way to stabilize it... (with a minimum working always)


This way we have a freicoin without 5 people controlling the 80% of the economy and without complicated algorithms to devalue each block.

And if you wanna complicate it, instead an algorithm or votes to define how many coins can be mined, i would think about a neural network or something similar, running in each client than accept some type of options, these options are used to feed data to the neural network. An option should be "user happiness", and one aim should be to keep it over the 50%, for example, others can be the exchange rate, n transactions, etc...

[Red]

It's amazing how many false relationships people see. Hash rate has nothing to do with exchange rate. Neither does the social dynamics of a popular vote.

Stable currency can be created but all the incentives need to be pointed in the correct direction. In the GEM proposal we solved the problem by introducing monetary risk. A person only attempts to create new coins when it is profitable to do so. He risks the cost of creating a coin against the current exchange value of the created coin.

In GEMs case the "risk" was actual electricity cost. If the exchange price of a GEM coin is above the cost of electricity needed to produce it, then there was profit to be had in minting new coins and IMMEDIATELY exchanging those coins for fiat currency. This immediateness is important. Coins minted and then hoarded do ZERO to change the exchange rate. Only coins attempting to be exchanged can do that.

And yes, there does need to be some downward pressure on the coin supply in certain circumstances. Demurrage doesn't really work. Destroying coins that aren't in the process of circulating has no effect on exchange rate. The only way to raise the trading price of coins when their value has fallen is to discourage people from spending them (at that moment). In GEM we introduced a "panic" tax. When the price of GEM coins falls below the target, an extra tax is imposed on spending the coins. The farther the price falls, the higher the tax (non linear). The tax is destroyed.

There is more to it but the above should give you a rough idea of the minimum concepts necessary to create a stable currency. The hard part is doing it without a trusted oracle which can supply external trade information.

[ElectricMucus]

Red, stop shilling your shit and contribute to the debate. If you think you've got the right answer go ahead and implement it.

[Red]

Red, stop shilling your shit and contribute to the debate. If you think you've got the right answer go ahead and implement it.

I think I'm 80% to the right answer. I don't think measuring coin value against electrical usage is (in general) a good idea. It was however the first proposed way to create stable currency. I did not create that concept. Another guy did with EnCoin. I just attempted to research and document what simple mechanisms could make the concept work.

Currently I like the idea of "shadow-fiat" coins pegged to the value of their base fiat currencies. These would be anonymous trading currencies with medium term predictable values. They could be used in contracts (like rental leases or installment plans) where you wouldn't currently use a volatile currency like bitcoin.

They aren't intended to serve as a replacement for bitcoin, but as a complement to bitcoin. Think of it as a place to keep your anonymous speculation gains. If bitcoin is rising, hold bitcoins. If bitcoin is falling, hold shadow-fiat until it starts to recover again. If you need to pay rent in 5 days, hold shadow-fiat just-in-case.

However, I haven't worked out the math of pegging to a fiat currency without using a trusted oracle (like Mt Gox) that sees both sides of the transaction.

My current chain of thought is to "introduce risk" through a para-mutual gambling incentive. The mining equivalent would be to put your existing coins at risk against receiving a share of the new coins created. However, it needs to be done in a way that doesn't tend toward price oscillation.

I don't expect that pegging a coin to fiat will be popular. But I keep watching these threads to see if anyone has a better idea. Really, I watch to see if anyone is discussing math that will work.

[ElectricMucus]

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
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?

[bnogal]

i am not discussing math, i am suggesting to let an IA system decide the math, setting inputs to the system and looking for certain outputs, as a stable coin or the happiness of the people.

Some inputs will come from facts as exchange rate, votes from the people (n accounts and n votes/coin)
Outputs can be:
-  happiness
-  % fee on transactions destroying coins (>0%) that would prevent from people opening million of accounts
-  amount mined
-  exchange rate


I would add the option to vote other people (and change the vote when ever u want) after a transaction. This way people being bastard in the system will lose people trusting them. The power of many against the one being bastard to many.

i could help with development.

[ElectricMucus]

i am not discussing math, i am suggesting to let an IA system decide the math, setting inputs to the system and looking for certain outputs, as a stable coin or the happiness of the people.

Some inputs will come from facts as exchange rate, votes from the people (n accounts and n votes/coin)
Outputs can be:
-  happiness
-  % fee on transactions destroying coins (>0%) that would prevent from people opening million of accounts
-  amount mined
-  exchange rate


I would add the option to vote other people (and change the vote when ever u want) after a transaction. This way people being bastard in the system will lose people trusting them. The power of many against the one being bastard to many.

i could help with development.

I'd rather not have anything to do with "AI". It's a weasel word, and if you are thinking about things like genetic algorithms for that I wouldn't want to have anything to do with that. That would be headed for inevitable disaster.