StableCoin

[don giovanni]

Ultimately the issue you will run into with free handouts or enforced penalties is that neither provides an incentive to do anything in particular, that is people will continue to do whatever it is they want. Its specious to say that because we have X system that this will produce Y behavior in its users.

There are some known variables of behavior that we can rely on:

It costs $ to make Coin
Miners have to remain liquid despite desire to hold
Miners wont dump coin for less than it cost them unless the whole market is on a downward spiral
Users dont care about price of coin, they just want to use it.
Speculators will do anything to destabilize the market to profit from the difference. 

Now if you give spenders free money to spend, then its going to enter the economy unvalidated, that means not only will you lower the price of coin (if that is your goal), but you will also lower the confidence in the value of the coin, this could have severe repercussions in the long run.

The issue here is the effect speculators have on the market, and without a central bank there is only one way to handle them, by increasing the monetary supply in concert with demand, in a controlled validated manner, that is by bitcoins very design solely through its miners.

[Red]

Ultimately the issue you will run into with free handouts or enforced penalties is that neither provides an incentive to do anything in particular, that is people will continue to do whatever it is they want. Its specious to say that because we have X system that this will produce Y behavior in its users.

Despite what it seems, I'm in complete agreement with you. However, I agree what I wrote was confusing.

But you need to be exceptionally careful who you give the new coins to...

I wrote about this in other placed, but I concluded that:
1. If you are creating new coins, because the coin price has gone above your stability target, then
2. The only effect you are trying to achieve, is to IMMEDIATELY reduce the coin trading price.
3. The only stimulus that can cause this effect, it to give the coin to some one who will IMMEDIATELY sell the new coin, FOR LESS than anyone else is currently offering.
4. Who are these people? Miners. They are the speculators ready to sell. The ones with coin addresses on the SELL side of current/recent transitions.

Giving them to hoarders will have zero immediate effect. Neither will giving them to the people buying coins current buyers. You can argue giving them out might have future effect. But that just makes over shooting the target (and oscillation) much more likely.

If only you would read what I MEANT, instead of just reading what I WROTE. :-)

I can make the case for incentives and disincentives too. But that is really a separate discussion from mining.

[Etlase2]

Ultimately the issue you will run into with free handouts or enforced penalties is that neither provides an incentive to do anything in particular, that is people will continue to do whatever it is they want.

And this is the expected behavior. Unexpected and unprofitable behavior should be acknowledged as a possibility.

Its specious to say that because we have X system that this will produce Y behavior in its users.

I am not sure who you're replying to, and Red has taken a crack, but I will take one as well.

It goes back to game theory. The Evil Guys or whomever may want to lower the value of the coin by minting unprofitably. However, with free coins given away, their unprofitability will be profit in the hands of others. The deeper they want to go, the more significant the investment that needs to be wasted to achieve further instability. This will likely only be accomplished when the network is small. These evil guys will make money for everyone else, and everyone is fairly likely to know what is happening, and no one is really worse for wear other than those who wasted the time, effort, and money to cause the problem. As transaction activity grows, the ability for anyone to do something like this diminishes.

What destruction are you accomplishing when you force other people to profit off of your expense? Evil Guys' attack fails at game theory.

Now if you give spenders free money to spend, then its going to enter the economy unvalidated,

Incorrect. It is validated by those who wasted effort in creating new currency by minting.

that means not only will you lower the price of coin (if that is your goal), but you will also lower the confidence in the value of the coin, this could have severe repercussions in the long run.

It will take some time for an "inertiacoin" to find its sweet spot. The sweet spot may move a few times as, for example, cheap electric economies start minting. But, as the network volume increases, a larger majority of the people around the world will have to be involved in all facets of the currency. Things will normalize. There are two big arguments against your "severe repercussions": 1) those who were already using the network will receive free money to account for losses in the value of each unit (market cap neutral), and 2) it does not affect other assets (this means that the currency will be seen as a "good deal", but only because it is selling for less than its cost to produce, not because it was cheaper than it was before). As the system grows, it will become more and more difficult to try to hide anything. The more you try to hide, the less of an effect you can have.

The issue here is the effect speculators have on the market, and without a central bank there is only one way to handle them, by increasing the monetary supply in concert with demand, in a controlled validated manner, that is by bitcoins very design solely through its miners.

Speculators in an inertiacoin style market will have no more power over a regular market. They will not be able to manipulate the money supply in the same way they can with bitcoin. Buying large amounts over short periods is the surest way to lose money. Bubbles will not be caused by speculation because everyone can at least have an idea of what it would take them to create currency. This fact can't be hidden. Any short-term instabilities created in a small market will almost invariably benefit the general user base rather than the manipulators, at least if you give money away to transaction activity.

[BubbleBoy]

Processor cycles are not "useless in themselves."  The computing power/energy can be put to other uses. That's the point.

Do Koomey normalized hashes really jump a whole order of magnitude (i.e. 10x) during a year or two?  Source?

Processor cycles are not useless but hash collisions are. So while it's easy to produce more hashcoins when they are valuable, nobody gives a damn that your hashcoin took 10x more cycles to produce a year ago than they do today. You can't recoup those cycles and put them to other uses. So unlike bricks, there's no built-in inflation protection.

For the hash energy cost variation, just look at the Bitcoin mining market during the ASIC and GPU revolutions. We should not expect each new incremental technological improvement to affect the mining market. It's a small market where a single product can change the game. If 120nm ASICs are available today, we should not expect a 90nm ASIC a few months from now because of fixed development costs, economies of scale for the incumbents, etc.. If mining stays profitable a few years from now someone will introduce a 22nm chip which will have a rapid impact. Maybe not 10x, but even a 2x efficiency improvement (or rumors thereof) will be highly disruptive for the hashcoin currency market and it's users.

[BubbleBoy]

I think if the market actors generally understood and accepted the theory that i put forward in my original comment than the market could (mostly) price all of this in and bitcoin would experience steady growth that corresponded to the average mans time value of money. The problem is that we have never had a deflationary currency and most people dont think in abstract logical terms they tend to rely on empirical data (if they are rational at all) of which we have very little.

While this is plausible in a steady state, it is not possible during rapid economic expansion, like the early adopter phase. The only way to have bitcoin stability now is to convincingly convey gradual higher targets for the eventual size of the bitcoin economy. Price will immediately jump to that value, with a small time preference discount and a large internet-funny-money-better-go-to-the-bank risk discount.

If there is room for economic growth, and the market sees it, it will internalize it as deflation, preventing growth.

So for this reason im not prepared to say that deflationary currency is a bad thing per-se, mostly because the inflationary currency that could theoretically solve this problem would be unlikely to ever be adopted because it would be rational for the collective to use an inflationary currency but irrational for the individual

It's unlikely to follow the same adoption paradigm as Bitcoin, people won't hoard it because it loses value and can't use it yet because there's no market for it. So Bitcoin is a great forerunner, creating the infrastructure and the market for cryptocurrency. If at a later stage a stable and slightly inflationary currency appears, the community would be all over it because it's a better currency. The marginal cost of extending mtgox, bitpay, silkroad etc. to support this new bitcoin-like currency is negligible. You could incentivize them by giving away lots of the initial batch of currency to prospective customers and make the market for a limited time to give it value.

So with a little help from a centralized pusher in the bootstrap phase, decentralized inflatacoin could survive and disrupt bitcoin.

[Etlase2]

Maybe not 10x, but even a 2x efficiency improvement (or rumors thereof) will be highly disruptive for the hashcoin currency market and it's users.

Are you planning on responding to any of the nice posts I've written for you?

At least in Decrits, because of the difficulties associated with minting, you must have both a significantly more efficient piece of hardware AND enough of them to begin a Mint Block AND enough of them to mint a large portion of that block all at once. If they can't, there will be big penalties. This will require a massive, very risky investment. And because the rest of the network knows someone is minting while minting looks unprofitable for all of them, they are given the opportunity to defend currency creation by joining the queue and keeping difficulty normalized. Because creation is limited by transaction activity and there are minimums of time that must pass, this opportunity to defend is specifically designed to exist.

[wingding]

I think there is a much simpler solution to the problem: constant increase in new coins beeing produced.

Firstly, in the adaption phase where many people are getting in, the relative increase in volume would make hoarding less attractive

In the long run however, the inflation will approach zero.

I have proposed one way to achieve it here: https://bitcointalk.org/index.php?topic=181488.0

[Red]

We think it'll be quite "stable"...

I know I'm lame but I can't read Russian. Is their an english summary? Or can you tell us the basics?

[Red]

I think there is a much simpler solution to the problem: constant increase in new coins beeing produced.

Firstly, in the adaption phase where many people are getting in, the relative increase in volume would make hoarding less attractive

In the long run however, the inflation will approach zero.

I have proposed one way to achieve it here: https://bitcointalk.org/index.php?topic=181488.0

wingding would you post about you and your plan in this thread?
I'm trying to keep an index of all the on going efforts.
https://bitcointalk.org/index.php?topic=179918.0

[Etlase2]

We think it'll be quite "stable"...

I know I'm lame but I can't read Russian. Is their an english summary? Or can you tell us the basics?

From translating I think the gist was that there will be a market maker, someone with a lot of coins keeping the price stable. But I dunno for sure, it doesn't translate well. Not a particularly decentralized approach though if that's the case.

[Etlase2]

I can understand everything but part (4)

(4) the big premajn plans
(2-3 mils koinov.)
then there are the units
90 +% of the premajna will be sold
wishing to 111% of cost
premajna.
the remainder will profit premajna
project.
Exit the Exchange is not planned
prior to the distribution of premajna.
So no pamp'n'dampa
WILL NOT.


so premine 2-3 million coins, then 90% will be sold to something 111% of the cost of the premine. I can't fully understand that. It sounds vaguely like a market maker. Then you talk about the exchange. Are you trying to keep a price level equal to an existing currency?


Point (1) has many of the same problems as bitcoin:

(1) to be laid on the growth in the number of coins
at 7% per year (or still at 6).
Pure "inflation" but will be less.
Loss of coins, etc. things will be drawn from 7%.


This does not make it easy for the network to grow when it needs to grow. To start gaining acceptance by the world economy, the currency needs to be able to expand to it. 7% supply inflation will cause a lot of deflation because 7% can't keep up with the potential network growth--it could be several thousand times in a year. In my opinion, this will cause people to leave because the currency is a hassle to use (like bitcoin).

[don giovanni]

I am not sure who you're replying to, and Red has taken a crack, but I will take one as well.

It goes back to game theory. The Evil Guys or whomever may want to lower the value of the coin by minting unprofitably. However, with free coins given away, their unprofitability will be profit in the hands of others. The deeper they want to go, the more significant the investment that needs to be wasted to achieve further instability. This will likely only be accomplished when the network is small. These evil guys will make money for everyone else, and everyone is fairly likely to know what is happening, and no one is really worse for wear other than those who wasted the time, effort, and money to cause the problem. As transaction activity grows, the ability for anyone to do something like this diminishes.

What destruction are you accomplishing when you force other people to profit off of your expense? Evil Guys' attack fails at game theory.

Your concerns seem to be more geared towards dumping. This is only an issue in the real world when someone with a massive supply can continually dump to create a market dependence on them, but since anyone can be a supplier at any time in bitcoin this isnt an issue.

[Etlase2]

Your concerns seem to be more geared towards dumping. This is only an issue in the real world when someone with a massive supply can continually dump to create a market dependence on them, but since anyone can be a supplier at any time in bitcoin this isnt an issue.

Are we talking about the same bitcoin where greater than 50% of the currency to ever be created is in the hands of <100k people? Where 20% of it is probably in the hands of a few dozen? I don't know how you can possibly make the argument that bitcoin mining is somehow a solution to demand when it is, by design, a choke point of the currency. My concerns are not "more geared towards dumping", they are geared towards providing a stable currency base that is difficult to manipulate by those who mine, those who have coins, or anyone else. This is without resorting to some kind of centralized solution or being tied to hard formulas that will not be able to adapt to reality.

[don giovanni]

Your concerns seem to be more geared towards dumping. This is only an issue in the real world when someone with a massive supply can continually dump to create a market dependence on them, but since anyone can be a supplier at any time in bitcoin this isnt an issue.

Are we talking about the same bitcoin where greater than 50% of the currency to ever be created is in the hands of <100k people? Where 20% of it is probably in the hands of a few dozen? I don't know how you can possibly make the argument that bitcoin mining is somehow a solution to demand when it is, by design, a choke point of the currency. My concerns are not "more geared towards dumping", they are geared towards providing a stable currency base that is difficult to manipulate by those who mine, those who have coins, or anyone else. This is without resorting to some kind of centralized solution or being tied to hard formulas that will not be able to adapt to reality.

This chokepoint you speak of was the result of a fixed block reward coupled with a moving difficulty. In the early days the difficulty was so low anyone could earn the block reward easily, this being the same block reward that as of last winter took incredible amount of investment to earn. Had the block reward been pegged to the difficulty then it would not have cost its users any more to win the same amount of currency than had they been the first and only miner.

This is why most of the currency is in the hands of so few people, when you have a pit full of gold and no one else to compete with, then winner takes all. Widen the pit with the influx of new miners and now everyone will have an equal take no matter how many join.

[Etlase2]

We're not talking bitcoin here, we're talking stablecoin. You quote one part of a 5 paragraph post and say I'm focusing on dumping. Are there any specific things you don't think I've addressed, rather than just leaving it open ended and implying a failure to account for something else?

[don giovanni]

We're not talking bitcoin here, we're talking stablecoin. You quote one part of a 5 paragraph post and say I'm focusing on dumping. Are there any specific things you don't think I've addressed, rather than just leaving it open ended and implying a failure to account for something else?

There is no such thing a free money, this is what the fed attempts to do with quantitative easing and stimulus bills. There is only so much value in a network, if you increase the amount of money in a system without validating its existence, it decreases the value of all money proportionally. What you are suggesting is a tax on the network to the advantage of transactors in an attempt to further stimulate spending.

These inflationary measures will not doing anything but trickle-up, as we have seen in recent years. Creating a central-bank in protocol is opposite to the bitcoin design philosophy.

[Etlase2]

There is no such thing a free money, this is what the fed attempts to do with quantitative easing and stimulus bills. There is only so much value in a network, if you increase the amount of money in a system without validating its existence, it decreases the value of all money proportionally.

But as I said, mining validates the need for new currency. Currency will only be given away when people are mining, and mining is not ever required to be happening like it is in bitcoin and its derivatives. Security of the network is completely separate from mining.

What you are suggesting is a tax on the network to the advantage of transactors in an attempt to further stimulate spending.

These inflationary measures will not doing anything but trickle-up, as we have seen in recent years. Creating a central-bank in protocol is opposite to the bitcoin design philosophy.

As we have seen? We have seen nothing but crony capitalism. The fed doesn't print money and helicopter it into the economy, it prints new money to bail out banks and serve congressional interests.

In addition to that, as I have stated, mining is required before free money will be created. One way or another, as the economy expands, value has to go somewhere. It either goes into existing currency by enriching only those who hold more than average amounts of the currency, or you can use it to enrich a much wider array of people. Including those who might be on the fence about accepting the currency.

[wingding]

I think there is a much simpler solution to the problem: constant increase in new coins beeing produced.

Firstly, in the adaption phase where many people are getting in, the relative increase in volume would make hoarding less attractive

In the long run however, the inflation will approach zero.

I have proposed one way to achieve it here: https://bitcointalk.org/index.php?topic=181488.0

wingding would you post about you and your plan in this thread?
I'm trying to keep an index off all the on going efforts.
https://bitcointalk.org/index.php?topic=179918.0

I checked your link. Great! And yes, I will keep you updated!
(I got so much piss from other users just for proposing this thing - you wouldn't believe...)

[Red]

I checked your link. Great! And yes, I will keep you updated!
(I got so much piss from other users just for proposing this thing - you wouldn't believe...)

Yes I would! 

[jjiimm_64]

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. )

This would not work when deep pockets come...

 OK, i can double my money in a year...
OK, how much is available... hmm i could buy it all..


then what coins would you use for commerce?