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Author Topic: Pegging the coin price..  (Read 1615 times)
niko
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May 30, 2013, 02:22:08 PM
 #21

Err.. So in Option 1) is $1 not the Peg Price ?

The problem with your idea is there is no mechanism for "pegging" it to $1.  Setting the initial price at $1 is just the initial price (in your scenario of a total of 1 billion coins, once the last coin has been sold for $1 you lose control over setting the price and it's up to the secondary market to discover the price then which could vary significantly from $1.)

In theory, if somebody owns vast majority of coins, they could place tight bid and ask walls at major exchanges with very narrow spread (defined by the trade fee), and thus peg the price until the walls melt away depending on the market sentiment. Note, this could be done without making the walls obvious by automated trading - maintaining small walls by replenishing of ask/bid orders as needed.

What's the point?

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spartacusrex
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May 30, 2013, 02:34:54 PM
 #22

Quote
What's the point?

As stated in my earlier post -

Quote
What I am looking for is a currency that has all the OTHER great features of bitcoin, p2p, pseudonymous, decentralised, crypto-dipto, no charge-backs, etc.. but without the constant value change.


And, if possible, a more stable economy.

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May 30, 2013, 04:08:57 PM
 #23

Due to limited supply of coins and unlimited supply of fiat money, it is possible to forever support the exchange price but it is not possible to forever limit the exchange price

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May 30, 2013, 04:54:46 PM
 #24

Yep.

I don't want to limit it forever..

I want to know what would happen if you did, for a certain amount of time, peg it, and then stopped. and let the price float.. once the economy had established..

Has this been tried before in History with non-disastrous effects ?

Also - the coin supply is not fixed.. as stated in my earlier posts in this thread.. it can grow/shrink.. just not sure about that bit yet. This bit first. 

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May 30, 2013, 11:40:05 PM
 #25

I've recently answered a similar concern in someone else's topic, but it's worth repeating. The thing you're missing is that you're only thinking from the perspective of the spender, but there are two sides to every transaction. As a prospective buyer, yes, you want to hold onto your deflationary currency. By that same token, vendors want to get ahold of that deflationary currency. If a vendor agrees with you about how the value of a bitcoin will go up over time, they have every reason to give you a discounted bitcoin price below the dollar price because they believe they'll be able to make up the difference as the bitcoins they receive go up in value down the line. At that point it's just a matter of whether the discount is big enough to attract your bitcoin spending and that takes us back to the conventional decision-making issue of whether a purchase is worth it to you. Do you want to pay $4 per gallon for gas in US dollars or, let's say, $3 per gallon in bitcoins?

Your interpretation of the merchants desire is incorrect because you are projecting the motivations of speculator onto the merchant, but speculation and being a merchant are incompatible uses for money.

A merchant makes his profit on a retail markup or on the added value of a manufacturing process (say for example someone who knits socks turning cheap yarn into a valuable sock) or both.  In both cases the merchant is trying to achieve maximum TURNOVER of stock both in manufacturing and in retail setting.  A merchant dose not want to sit on money waiting for it to appreciate in value so it can once again be turned into stock to be processed and or sold.  Sitting on money is exposing them to the huge valuation fluctuation risk of BTC but even if they never suffer any loss in a crash they are suffering a massive reduction in turnover.  Instead of going through the loop of acquiring stock, selling stock and buying new stock as quickly as possible they now have a loop that has a long period of sitting on money before it can be converted into new stock.  This slower cycle means that the merchant must be making more gross margin on each iteration of the cycle in order to cover overhead costs and to make his final profit large enough to be justifiable. 

Speculative holding of money and being a merchant are thus incompatible methods of making a profit, the more you try to do one the less you engage in the other, think of it as the Heisenberg Uncertainty Principle of economics "The more profit you make from speculation the less you make from Merchanting and visa-verse".  The proposed discounting and hold strategy you propose is a messy mix of the two and represents a very dangerous phenomenon as it moves more people into the speculative side of BTC and away from the real commerce side, that can only end in ruin.

 
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May 31, 2013, 04:04:20 AM
 #26

Your interpretation of the merchants desire is incorrect because you are projecting the motivations of speculator onto the merchant, but speculation and being a merchant are incompatible uses for money.

Except I'm not talking about speculators. Just about the incentives any typical holder of a currency would have and I'm sure the OP was as well. I mean it's certainly a fair point about how a lot of revenue goes into restocking, but merchants are human too and want to put some money aside as savings just as much as their customers do. So do their employees. Or their suppliers, for that matter.
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June 03, 2013, 08:38:34 AM
 #27

With all that is happening with MtGox and the US Government / Fed at the moment, I wish there were some other method of Price Discovery in the BitVerse.

I'm not an economist, but is there some other way of finding the value of Bitcoins other than the Exchange rate ?

That would be nice..

My OP was just an idea to get us away from the centralised exchanges, that now seem the bottleneck / attack points for bitcoin.


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June 03, 2013, 03:49:39 PM
 #28

What this would do is create a price ceiling, but not a floor.
(They would trade among users for less but never more than the price they could get them from the source)

Better would be a smoother move-up rate.  Jumping an order of magnitude at a time would not be as good as a continuously smooth progression.  This avoids the motivation for rapid world-wide price inflation as soon as a move-up occurs.

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