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Author Topic: *old* BitShare Economic Theory 10 BTC bounty to prove me wrong... paid.  (Read 9774 times)
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May 29, 2013, 09:14:24 PM
 #141

So even if the hypothesis that 'market forces will cause price parity' proves to be false, we still have a better system than anything else proposed?

Third party backers come in to guarantee price parity, make money in the process, and would not require significant trust.

Im getting more convinced by this idea.

These businesses are 'market forces' and thus it would prove the hypothesis.

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May 29, 2013, 09:26:36 PM
 #142

Ok I wrote I big long rebuttal but have since deleted it.  I don't give up my claim to the bounty but I give up convincing you for awhile. 

I've already spent 10btc of my time, trying to couch my proof in a way you will understand.   So run your simulations, and fork Bitcoin and spend your 20k.  When you learn a bit you will see the exact issues I brought up.  But please fork Bitcoin into Bitshares publicly so the community will have a great basis to build a multi-currency distributed crypto exchange.

Fair enough, I have also spent 10 BTC of my time debating you and everyone else.

Oops except for this one last try (not going to respond though):

Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". 

And it was the lack of a solution to the byzantine general's problem that forced all crypto-currencies to be centralized before bitcoin's proof-of-work solution.  So this is a big problem.

Google it to really find out why, but in summary, there is no proof that all bitcoin nodes "see" any particular unconfirmed txn.  That's why some unconfirmed TXNs (esp. ones with no txn fee) don't make it into the blockchain right away.  So an "attacking" miner could simply claim to not have seen the "fill" orders (or any buy orders) and therefore mint coins to fill a very low priced buy of infinite coins that the attacker himself issued.  The likelihood of success is proportional to the miner's fraction of the total hash power. 

So bid/asks must be in the blockchain.  When this is the case the exchange slows down so much it is unusable and not scaleable.  Today we are irritated because Gox can't keep up with 10s of txn a second.  Imagine every 10 minutes. :-)  And even then a finney-attack variant (premining blocks but not submitting them until certain external conditions favor yourself) could get you an "infinite" minting event if you are lucky.

These are all good arguments regarding the 'scalability' and transaction rates that are possible on a blockchain.   But ultimately transaction rates don't matter to much as long as they can happen.  If it is 'slow' it just means the spreads will be slightly higher.  There are 'off-chain' exchanges that can be anonymous and fast with lower spreads, but BitShares solves the problem of getting value into and out of those anonymous exchanges without 'exchange risk'.

So, how fast can 'in-chain' transactions occur?  I could trade at the same transaction rate as Bitcoin's transactions provided both parties signed the transaction.   It is only the 'open-orders' that are 'slow' and open-orders are usually placed at prices slightly above or below the current market price and therefore having a 10 minute delay before an order can be placed or canceled would be perfectly acceptable.  It would prevent people from placing and retracting 'false bids' in an attempt to manipulate the market.

So a parallel network could exist where people broadcast half-signed transactions that could be accepted by anyone.  These transactions do not count for the purpose of establishing 'price' information used for issuing new crypto-Gold.   Only bids that go 'unfilled' and are placed in a confirmed block may be used for that purpose.  Only 'speculators' and 'experts' will ever mess with these details and so they will probably operate in volume.  In fact, centralized anonymous exchanges would probably 'back' their exchange by placing volume orders in the block-chain to provide liquidity and reduce spreads. 

Conclusion, I think BitShares solves a much bigger problem than creating a 'real-time-exchange'.

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May 29, 2013, 09:35:09 PM
 #143

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". 

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.   

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

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May 29, 2013, 09:39:47 PM
 #144

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid".  

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.  

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

You still haven't explained how the sub-currencies gain any relation to what they represent beyond more or less 'everyone is just going to work together to make it so regardless of money to be made (or losses to be avoided) by not doing so':

Quote
"How does everyone come to an agreement about what a particular sub-currency is supposed to track?

How did language develop?  Who decided what words would track what ideas?  The answer is that anyone who doesn’t learn and adapt to the consensus would be unable to communicate.  This is a very natural process and does not require any central authority or formal ‘contracts’ between people to define the meaning of words.  

Likewise, people will naturally come to a consensus about what currencies track what ideas and there would be ample market pressure for all participants to find a way to reach consensus.  Any individual who is wrong about the consensus opinion would end up mispricing assets. "

That's not how economics or game theory work. People try to maximize their own utility (value gained from their actions). Collective action is the result of many individual actions. Bitcoin is not some project where everyone works together to make it valuable for its own sake. Everyone is trying to make money, that's why Bitcoin has value. There is no trust involved.

If any asset can take on any label, there is nothing holding the value of crypto-gold to that of gold whatsoever (even recognizing your interest paying proposal). Even calling it crypto-gold, crypto-usd etc is totally baseless. Market forces as you currently have things set up work against you and would make the whole thing fail.
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May 29, 2013, 09:47:46 PM
 #145

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You have now engaged in circular reasoning yourself.  You claim they have no value because it doesn't work, then you claim it doesn't work because it has no value.

I am willing to buy Bitshares right now, therefore if someone had bitshares they could sell them, therefore they have value in the market.

So the creator of the project says he wants to buy them, therefore they have value? You don't see the obvious problem with that logic?

There is no circular reasoning on my side.

Quote
You can never 'mathematically peg' anything, that would be called price fixing.
There is a 'forced' relation to actual USD value of crypto-USD and that 'force' comes from the buyers of crypto-USD who will not pay with paper-USD unless it has parity.

So if buyers of crypto-USD won't buy unless it has parity, then how does it get parity in the first place? Buying is the behavior which causes the price to rise.

Yes, I represent market demand for this to exist.  I suspect that others in this thread would experiment with $20 to buy some 'just in case' and in which case they also represent demand.  So, there is demand for BitShares among those who believe it works and therefore they have value today simply because we believe they have value.

Everyone has profit motive to see the peg hold, but lets assume it is only 1 party:
1) eGold was in the business of providing backing to digital gold.  They made their money off of transaction fees.  If they could have pegged crypto-eGold to gold they could still make their money off of transaction fees while not having to even be public about their promise to peg.  This is a profit-motive, self-interest based reason for them to peg it.
2) Assuming eGold was trying to peg crypto-eGold to gold and they had the reserves 'backing' their peg, could any other market participant 'break the peg'?

If you can show me how eGold could be cheated out of their business by a 3rd party attempting to devalue crypto-eGold then you will probably have the key to convincing me this will not work.  If no third party can break an intentional peg, then I have shown you the profit motive that ultimately drives the two to parity.




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May 29, 2013, 09:55:01 PM
 #146

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". 

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.   

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

If I have 1% hash power, I have 1% * 1% (one ten thousandth of a chance to get two blocks in a row):

Block 1: Buy all the bids in the block chain.
Block 2: I (the miner) pick the block contents -- required in byzantine general's solution -- so:
It will only contain 1 minting txn (mine)
It will cointain no trades.
It will contain a minting transaction of *the rest* of the currency for .0000001 BS

It will be a valid block that gives me ALL THE COINZ!!!!! and therefore ALL THE BACKING DIVIDENDS!!!  Grin
And would even be legal!  Its not like I'm double spending to steal from you.

I can't believe I have to spell it out for you... Put your thinking cap on.

You can increase chain-depth requirements... and I can increase my hash power through pools.

If a bitcoin miner gets 51%, he can only double spend HIS OWN MONEY (which would become pretty obvious quickly and in fact simply means that he has liabilities against he double spent and they bring him to court if they can identify him) or block you from spending.  He can't get all the coins.  Its an important distinction.

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May 29, 2013, 09:57:03 PM
 #147

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid".  

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.  

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

You still haven't explained how the sub-currencies gain any relation to what they represent beyond more or less 'everyone is just going to work together to make it so regardless of money to be made (or losses to be avoided) by not doing so':

Quote
"How does everyone come to an agreement about what a particular sub-currency is supposed to track?

How did language develop?  Who decided what words would track what ideas?  The answer is that anyone who doesn’t learn and adapt to the consensus would be unable to communicate.  This is a very natural process and does not require any central authority or formal ‘contracts’ between people to define the meaning of words.  

Likewise, people will naturally come to a consensus about what currencies track what ideas and there would be ample market pressure for all participants to find a way to reach consensus.  Any individual who is wrong about the consensus opinion would end up mispricing assets. "

That's not how economics or game theory work. People try to maximize their own utility (value gained from their actions). Collective action is the result of many individual actions. Bitcoin is not some project where everyone works together to make it valuable for its own sake. Everyone is trying to make money, that's why Bitcoin has value. There is no trust involved.

If any asset can take on any label, there is nothing holding the value of crypto-gold to that of gold whatsoever (even recognizing your interest paying proposal). Even calling it crypto-gold, crypto-usd etc is totally baseless. Market forces as you currently have things set up work against you and would make the whole thing fail.

+1 yes, someone who understands real systems instead of wishful thinking fantasies.  Welcome to the forum's most frustrating thread...
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May 29, 2013, 09:59:08 PM
 #148

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". 

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.   

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

If I have 1% hash power, I have 1% * 1% (one ten thousandth of a chance to get two blocks in a row):

Block 1: Buy all the bids in the block chain.
Block 2: I (the miner) pick the block contents -- required in byzantine general's solution -- so:
It will only contain 1 minting txn (mine)
It will cointain no trades.
It will contain a minting transaction of *the rest* of the currency for .0000001 BS

It will be a valid block that gives me ALL THE COINZ!!!!! and therefore ALL THE BACKING DIVIDENDS!!!  Grin
And would even be legal!  Its not like I'm double spending to steal from you.

I can't believe I have to spell it out for you... Put your thinking cap on.

You can increase chain-depth requirements... and I can increase my hash power through pools.

If a bitcoin miner gets 51%, he can only double spend HIS OWN MONEY (which would become pretty obvious quickly and in fact simply means that he has liabilities against he double spent and they bring him to court if they can identify him) or block you from spending.  He can't get all the coins.  Its an important distinction.
Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap.  Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.





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May 29, 2013, 10:08:47 PM
 #149

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Yes, I represent market demand for this to exist.  I suspect that others in this thread would experiment with $20 to buy some 'just in case' and in which case they also represent demand.  So, there is demand for BitShares among those who believe it works and therefore they have value today simply because we believe they have value.

Everyone has profit motive to see the peg hold, but lets assume it is only 1 party:
1) eGold was in the business of providing backing to digital gold.  They made their money off of transaction fees.  If they could have pegged crypto-eGold to gold they could still make their money off of transaction fees while not having to even be public about their promise to peg.  This is a profit-motive, self-interest based reason for them to peg it.
2) Assuming eGold was trying to peg crypto-eGold to gold and they had the reserves 'backing' their peg, could any other market participant 'break the peg'?

If you can show me how eGold could be cheated out of their business by a 3rd party attempting to devalue crypto-eGold then you will probably have the key to convincing me this will not work.  If no third party can break an intentional peg, then I have shown you the profit motive that ultimately drives the two to parity.

The whole scenario you have proposed is a bit insane. Egold is not going to back BitShares (and by extension so called 'crypto-gold') with real gold because you have proposed that BitShares pay out interest.

 Interest payments increase the supply of BitShares and cause them to become less valuable over time (like the federal reserve printing money).
Whereas Bitcoin's money supply is fixed to give people confidence their coins will not be subject to infinite term inflation. This makes people interested in Bitcoin and gives it value in the first place. Scarcity and desire combine to create value. If nobody wants them or the supply continually expands forever the price will only go down.

So if Egold pays real gold for BitShares in any way they are going to be losing money. The system is not conducive to the behavior you have proposed.
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May 29, 2013, 10:20:37 PM
 #150

The interest payments in my system come from transaction fees.  My money supply is ultimately fixed just like BitCoins.

The 'interest' on the 'gold deposits' is paid in BitShares and comes from the 'revenue stream' backing the crypto-Gold, not from 'eGold'. 

Thus, the only thing eGold is interested in is that the peg remains *and* that it doesn't end up costing them money.   If you can show me how they would go out of business maintaing a peg then that will be a problem.

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May 29, 2013, 10:21:48 PM
 #151

The whole scenario you have proposed is a bit insane. Egold is not going to back BitShares (and by extension so called 'crypto-gold') with real gold because you have proposed that BitShares pay out interest.

Note, I didn't say eGold would back the value of BitShares... BitShares can fluctuate all they want.  I said eGold would back the value of 'crypto-Gold'. 

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May 29, 2013, 10:34:46 PM
 #152

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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". 

Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain.   

If the block-chain had a rules such as:
Does this block contain more than one minting transaction for crypto-Q?  Reject Block.
Does this block contain any trades of crypto-Q for BS in addition to the minting transaction?  Reject Block.
Does this minting transaction occur below the price of the highest bid from prior blocks?   Reject Block


This would prevent the mining attack you just proposed.

If I have 1% hash power, I have 1% * 1% (one ten thousandth of a chance to get two blocks in a row):

Block 1: Buy all the bids in the block chain.
Block 2: I (the miner) pick the block contents -- required in byzantine general's solution -- so:
It will only contain 1 minting txn (mine)
It will cointain no trades.
It will contain a minting transaction of *the rest* of the currency for .0000001 BS

It will be a valid block that gives me ALL THE COINZ!!!!! and therefore ALL THE BACKING DIVIDENDS!!!  Grin
And would even be legal!  Its not like I'm double spending to steal from you.

I can't believe I have to spell it out for you... Put your thinking cap on.

You can increase chain-depth requirements... and I can increase my hash power through pools.

If a bitcoin miner gets 51%, he can only double spend HIS OWN MONEY (which would become pretty obvious quickly and in fact simply means that he has liabilities against he double spent and they bring him to court if they can identify him) or block you from spending.  He can't get all the coins.  Its an important distinction.
Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap.  Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.

Ok, so in addition to having a large amount of CPU power, the attacker also has enough existing capital to buy up all bids.    It is good to know that we are getting to attacks that are now very expensive to carry out instead of just attacks that anyone could do.   The act of buying up all bids also means those with open bids didn't lose money they didn't "agree to". 

Lets look for counter-measures:

1) Everyone who holds crypto-USD could place a 'fail-safe' bid at say 90% of face value.   In this case the attacker would effectively do a hostile take-over of the currency but ultimately wouldn't be able to steal very much (less than 10%) .  Everyone else would then just switch to a new crypto-USD.
2) You could place a limit on the % of the order book that may be cleared by any one block.   I don't like this approach as the % is arbitrary, but it would probably be acceptable. 
3) With a hash-algorithm resistant to GPU and ASIC you would have to rely on pools to begin with (or have a bot-net).

Anyone else have any creative ideas on how to mitigate this rather 'expensive' attack?

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May 29, 2013, 10:36:46 PM
 #153

The whole scenario you have proposed is a bit insane. Egold is not going to back BitShares (and by extension so called 'crypto-gold') with real gold because you have proposed that BitShares pay out interest.

Note, I didn't say eGold would back the value of BitShares... BitShares can fluctuate all they want.  I said eGold would back the value of 'crypto-Gold'. 

Slight clarification, the BitShare revenue stream backs the value of crypto-Gold, eGold would just peg the exchange rate (prevent over-issuance).

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May 29, 2013, 10:41:52 PM
 #154

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If you can show me how they would go out of business maintaing a peg then that will be a problem.

Here's a failure scenario:

Company A has 1000 ounces of gold.
Company A makes 1000 crypto-gold and pledges to honor them for 1 ounce of gold shipped to your door each.
They sell all of their crypto-gold to investors while gold is worth $1400 per ounce.
The price of gold goes up to $2000 per ounce.
Many people decide to cash in their Crypto-gold to the company because the price has risen.
The company now has a ton of crypto-gold and no real gold and they can't buy enough to cover demand.
When everyone else realizes this (shortly after they begin refusing to honor trades of crypto-gold for real gold) the price of crypto-gold collapses because the company can't maintain the peg.
Crypto-gold is now worthless. Company A declares bankruptcy. Company A goes out of business because nobody can trust them anymore.

The only thing propping the whole system up is consumer confidence that the company has a practically infinite supply of gold.
 If too many people sell too quickly the company goes under.
The only reason people wouldn't sell is if they were confident that the company had a practically infinite amount of gold to trade for crypto-gold and felt secure holding it.
Because everyone is acutely aware that no company has infinite resources and crypto-gold would only be as good as the company's trust this is pretty much impossible.
It's about as far from a trustless system as you can get.
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May 29, 2013, 10:54:51 PM
 #155

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If you can show me how they would go out of business maintaing a peg then that will be a problem.

Here's a failure scenario:

Company A has 1000 ounces of gold.
Company A makes 1000 crypto-gold and pledges to honor them for 1 ounce of gold shipped to your door each.
They sell all of their crypto-gold to investors while gold is worth $1400 per ounce.
The price of gold goes up to $2000 per ounce.
Many people decide to cash in their Crypto-gold to the company because the price has risen.
The company now has a ton of crypto-gold and no real gold and they can't buy enough to cover demand.
When everyone else realizes this (shortly after they begin refusing to honor trades of crypto-gold for real gold) the price of crypto-gold collapses because the company can't maintain the peg.
Crypto-gold is now worthless.

The only thing propping the whole system up is consumer confidence that the company has a practically infinite supply of gold.
 If too many people sell too quickly the company goes under.
The only reason people wouldn't sell is if they were confident that the company had a practically infinite amount of gold to trade for crypto-gold and felt secure holding it.
Because everyone is acutely aware that no company has infinite resources and crypto-gold would only be as good as the company's trust this is pretty much impossible.
It's about as far from a trustless system as you can get.

Hold on buddy... you skipped some steps and created colored coins instead of crypto-Gold.   
First step, what is the current value of Gold in BitShares.
At what rate of exchange did they convert BitShares into Crypto-Gold.
When the price of gold changes, what is its new price in BitShares?
How many BitShares can they buy with the gold they have in their vault?
Is it more or less than the number of BitShares required to buy crypto-Gold?

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May 29, 2013, 11:02:41 PM
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Hold on buddy... you skipped some steps and created colored coins instead of crypto-Gold.  
First step, what is the current value of Gold in BitShares.
At what rate of exchange did they convert BitShares into Crypto-Gold.
When the price of gold changes, what is its new price in BitShares?
How many BitShares can they buy with the gold they have in their vault?
Is it more or less than the number of BitShares required to buy crypto-Gold?

So can changes in BitShare value make the value of crypto-gold fluctuate or not?
You just said it was irrelevant. You have to pick one.
Otherwise we are all wasting our time. You can't just change the rules on the fly like that.

Either scenario kills sub-currencies really.
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May 29, 2013, 11:09:56 PM
 #157

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Hold on buddy... you skipped some steps and created colored coins instead of crypto-Gold.  
First step, what is the current value of Gold in BitShares.
At what rate of exchange did they convert BitShares into Crypto-Gold.
When the price of gold changes, what is its new price in BitShares?
How many BitShares can they buy with the gold they have in their vault?
Is it more or less than the number of BitShares required to buy crypto-Gold?

So can changes in BitShare value make the value of crypto-gold fluctuate or not?
You just said it was irrelevant. You have to pick one.
Otherwise we are all wasting our time. You can't just change the rules on the fly like that.

Either scenario kills BitShares and sub-currencies actually.

When BitShares go up the interest paid on crypto-Gold goes up.
When BitShares go down the interest paid on crypto-Gold goes down.

So clearly, price changes in BitShares to result in changes in crypto-Gold... the question becomes what is the opportunity to profit.

Clearly if BitShares go down in value then eGold would have to up the BitShare backing behind their goldcyrpto-Gold.  Do they have the money to do so?  Yes, they can sell some of their gold at the new exchange rate and re-issue crypto-Gold at the new price.

What if BitShares go up in value?   Then the value of crypto-Gold goes up to!  They can then buy crypto-Gold with less BitShares than it took to create it.  Then, redeem their mortgaged bitshares and the result will be enough BitShares to allow the to purchase more gold!  

End result is that as long as they charge a slight 'spread' or 'transaction fee' they can make a profit with 0 risk.

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May 29, 2013, 11:16:51 PM
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Hold on buddy... you skipped some steps and created colored coins instead of crypto-Gold.  
First step, what is the current value of Gold in BitShares.
At what rate of exchange did they convert BitShares into Crypto-Gold.
When the price of gold changes, what is its new price in BitShares?
How many BitShares can they buy with the gold they have in their vault?
Is it more or less than the number of BitShares required to buy crypto-Gold?

So can changes in BitShare value make the value of crypto-gold fluctuate or not?
You just said it was irrelevant. You have to pick one.
Otherwise we are all wasting our time. You can't just change the rules on the fly like that.

Either scenario kills BitShares and sub-currencies actually.

When BitShares go up the interest paid on crypto-Gold goes up.
When BitShares go down the interest paid on crypto-Gold goes down.

So clearly, price changes in BitShares to result in changes in crypto-Gold... the question becomes what is the opportunity to profit.

Clearly if BitShares go down in value then eGold would have to up the BitShare backing behind their gold.  Do they have the money to do so?  Yes, they can sell some of their gold at the new exchange rate and re-issue crypto-Gold at the new price.

What if BitShares go up in value?   Then the value of crypto-Gold goes up to!  They can then buy crypto-Gold with less BitShares than it took to create it.  Then, redeem their mortgaged bitshares and the result will be enough BitShares to allow the to purchase more gold!  

End result is that as long as they charge a slight 'spread' or 'transaction fee' they can make a profit with 0 risk.

If BitShares can be mined why would a company ever create a sub currency that they trade gold for based upon them? If the price of BitShares goes down, the value of their crypto-gold held goes down. They then can't buy any real gold and people who want to cash in can't get any. Everything collapses. They would basically be giving away all their gold. That's charity not business.

All BitShares would have to be mined already for a company to feel confident that trading gold for electronic currency would not be a risky investment due to inflation of BitShares.
Without a company to give away money, there is nothing to keep the price of sub-currencies corresponding to any physical currency in your proposal.

You are basically just assuming that BitShares will be valuable and always increase in value. Bitcoin has decreased in value many times and survived.  Under your current proposal if prices go down, everything collapses. That's not a stable system. The obvious instability of the system will prevent anyone from thinking it is valuable in the first place.
bytemaster
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May 29, 2013, 11:21:57 PM
 #159

All mining can do is affect the value of BitShares and as I have already demonstrated, if BitShares go 'down' then they can sell some gold to increase the 'backing'.

If bitshares go back up, then they can repurchase their crypto-Gold  to free their mortgaged BitShares with enough profit to repurchase the gold the previously sold.

This, mining is irrelevant to the price of crypto-Gold.

https://steemit.com  Blogging is the new Mining
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May 29, 2013, 11:25:23 PM
 #160

Quote
mining is irrelevant to the price of crypto-Gold.

Quote
So clearly, price changes in BitShares to result in changes in crypto-Gold

These are contradictions.
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