10 BTC Bounty to reduce prisoners dilemma and stabilize bitcoin

[adpinbr]

Fellow Bitcoiners,

   All of us are in the prisoner's dilemma. What I mean is that we would all be better off if the price is stable and held our bitcoins (this rule does not apply to purchase of G&S) rather than selling them. Stability would result in more merchant acceptance, and the price would go up, while instability may result in failure of the bitcoin and adoption of another P2P decentralized system. Furthermore knowing that a sell off is not going to occur would result in added confidence and more people buying in to the BTC economy.
   
   However because we believe that most others will sell first, the value of our bitcoins will go down anyways, therefore we might as well sell and beat others in the race to the bottom, basically it is profitable to betray the bitcoin community. In the Prisoners dilemma, the reason the logical result is betrayal is because the prisoners were isolated and could not communicate, however with bitcoin not only can we trust each other, but we can verify what we are saying. If we were to form a union, a pseudonymous system, members could pledge not to sell off their bitcoin. A score of some sort, based on parameters that will be defined by the community, can credit a members contribution (amount of btc) and loyalty (odds he will follow through with his pledge) to the  union. The union could act as an escrow. For example the union could provide proof that 40% of the BTC that is in the "cash flow" has been locked away, release will occur in 1 year or if BTC goes below 100, whichever comes first (Timelock can be done in the protocol and the union would not have to be trusted with a potentially large sum of BTC).
   
   Simultaneously action must be taken to avoid price inflation due to a liquidity squeeze, and deflation due to a sudden abundance of liquidity when the funds are redistributed. A combination of a system mandated function, that distributes amounts of time and money available into different pools based on an algorithm, along with rational human intelligence and cooperation are necessary to minimize "price bumps" that such a scheme would produce.
   
   I feel like its in everyones best interest to see something like this happen. Most people hoarding would be willing to lock away their bitcoins to see them rise in value. Stabilizing and having an index is something necessary to reduce speculation and see bitcoin really take off.

If you believe in this project feel free to start developing, or adding more BTC on top of my bounty.

PS My bounty goes to the person I deem has created the system for the "successful union" after the time that it has seen reasonable adoption of 10,000 members or 1,000,000 BTC whichever comes first.

[NewLiberty]

Selling is also buying by someone else.

Can you clarify the problem you are seeking to solve, that is not already solved by the free market, with the proposed structure?

[adpinbr]

Selling is also buying by someone else.

Can you clarify the problem you are seeking to solve, that is not already solved by the free market, with the proposed structure?

If people are selling because they feel the fundamentals of bitcoin have changed than my proposition is irrelevant.
If people are selling because they think the price is about to drop, because a lot of people are speculating and they don't want to suffer from speculation. This method solves that. By participating in this you are making a pact saying you prefer the value of your coins to rise rather than increase the number of coins in possession due to taking them from others due to their stupidity.

[Abdussamad]

Sounds like socialism.

[dexX7]

I call option C - use them! For every coin you'd spend fiat otherwise, you can buy that coin back. Both your coin and fiat stacksize remains the same, but an additional coin is in the wild. And if you have both Bitcoin and USD on the exchange, there wouldn't be any delay.

But. I need more shops. Right now, at least for the stuff I buy and where I live, there is nothing competitive. ;/

[neurobox]

It sounds like what's needed is a community-driven exchange of sorts, that tempers the rate by only offering exchanges at a stabilized rate based on a weighted historical averages from other exchanges. This can act as a safe-harbor from the storms of speculation, for both buyers and sellers, but might require some type of incentive, like a slight bias in favor of BTC sellers, or slight fees resulting in payment of interest on deposits. The very act of placing a deposit with this exchange would be a strong indicator of long-term confidence, a fact that could be touted by the community as a whole.

[acs26]

I'm not sure if I read correctly, but here's a guess:

Make a circle of certified exchanges, stores, etc. By doing this, it will decrease sells towards scams, but could possible stabilize Bitcoin, and if the stores was in the 'Union', it would just increase the circulation of Bitcoin in the Union. Thus, we'd be able to hold on, but still be able to exchange, and not do any idiotic things.

We would be using Bitcoin, but the circulation would still be flowing in all directions. Meaning if somebody wanted to  buy a Bitcoin, they could buy one within the circle, and the person who sells it would still allow it to flow in a circle. Thus, no stupid or idiotic sell outs, but if they happen, the Bitcoin would still be within the circle.

[adpinbr]

I'm not sure if I read correctly, but here's a guess:

Make a circle of certified exchanges, stores, etc. By doing this, it will decrease sells towards scams, but could possible stabilize Bitcoin, and if the stores was in the 'Union', it would just increase the circulation of Bitcoin in the Union. Thus, we'd be able to hold on, but still be able to exchange, and not do any idiotic things.

We would be using Bitcoin, but the circulation would still be flowing in all directions. Meaning if somebody wanted to  buy a Bitcoin, they could buy one within the circle, and the person who sells it would still allow it to flow in a circle. Thus, no stupid or idiotic sell outs, but if they happen, the Bitcoin would still be within the circle.

+1. I like that line of thought. This could be used to get rid of transaction fees, blocksize limits and limitations the blockchain has (bitcoins go "poof" when you send to wrong address). I was thinking of doing such a scheme myself but didnt understand why Flexcoin failed. Does anyone know why Flexcoin failed?

[td204]

For a trusted circle it should be easy to set up a 'middle man', an automated address that receives initial payments first, validates the intended recipient (sort of like a bank verifies the account number and name you are sending the payment to), and forwards the payment.
If the recipient is flagged by the 'community' as a fraud or criminal activity, the 'middle man' returns the payment to the sender.
I wouldn't mind building such a system, in which the community feeds data to the system to determine which addresses are trustworthy and which aren't.

But, a problem that occurs with such a system, is that the creator of the 'middle man', is able to regulate all payments within the circle. This would need an extra layer of validation, which means another Bitcoin-process within the Bitcoin-system. And with creating the 'middle man', we are actually creating a regulated system that could be taken over by authorities.

Just my 2 mBTC.

[acs26]

I'm not sure if I read correctly, but here's a guess:

Make a circle of certified exchanges, stores, etc. By doing this, it will decrease sells towards scams, but could possible stabilize Bitcoin, and if the stores was in the 'Union', it would just increase the circulation of Bitcoin in the Union. Thus, we'd be able to hold on, but still be able to exchange, and not do any idiotic things.

We would be using Bitcoin, but the circulation would still be flowing in all directions. Meaning if somebody wanted to  buy a Bitcoin, they could buy one within the circle, and the person who sells it would still allow it to flow in a circle. Thus, no stupid or idiotic sell outs, but if they happen, the Bitcoin would still be within the circle.

+1. I like that line of thought. This could be used to get rid of transaction fees, blocksize limits and limitations the blockchain has (bitcoins go "poof" when you send to wrong address). I was thinking of doing such a scheme myself but didnt understand why Flexcoin failed. Does anyone know why Flexcoin failed?

Thanks. As for Flexcoin, I have no idea how it failed.

Thanks for the '+1' by the way.

(Hopefully, I stand a chance against getting the bounty.)

[adpinbr]

For a trusted circle it should be easy to set up a 'middle man', an automated address that receives initial payments first, validates the intended recipient (sort of like a bank verifies the account number and name you are sending the payment to), and forwards the payment.
If the recipient is flagged by the 'community' as a fraud or criminal activity, the 'middle man' returns the payment to the sender.
I wouldn't mind building such a system, in which the community feeds data to the system to determine which addresses are trustworthy and which aren't.

But, a problem that occurs with such a system, is that the creator of the 'middle man', is able to regulate all payments within the circle. This would need an extra layer of validation, which means another Bitcoin-process within the Bitcoin-system. And with creating the 'middle man', we are actually creating a regulated system that could be taken over by authorities.

Just my 2 mBTC.

You can't use an address to identify fraud because the fraudster can use multiple addresses, what you can do is have a trust rating for an address and have people attempt to build an addresses trust rating. The "wall/circle" can be blockchain based, just a M of N sig wallet with certain functions such as escrow with timelock, you send money to the wallet and it would be returned by X date unless you and circle agree to send the money to recipient. That way the circle could protect you but not fuck you over. If the circle's "founder" where to be captured and tortured, he still could not steal the funds and at the end of X time you would recieve the funds back

[acs26]

I dont mean to be rude, but when willthe bounty end? There doesnt seem to be that many peopl joining (td204, nuerobox, dexX7, and I) Will it keep going on until someebody is ddeemed?

(Sorry about the errors and stuff. I was on mobile)

[adpinbr]

I dont mean to be rude, but when willthe bounty end? There doesnt seem to be that many peopl joining (td204, nuerobox, dexX7, and I) Will it keep going on until someebody is ddeemed?

(Sorry about the errors and stuff. I was on mobile)

My bounty goes to the person I deem has created the system for the "successful union" after the time that it has seen reasonable adoption of 10,000 members or 1,000,000 BTC whichever comes first.

I realize that this is a lot of work for 10 BTC. I am not a developer but would want to see this happen so I am offering some incentive....I would hope that more people throw some more money on top of my bounty, or developers would be willing to pitch in their time because they realize this could raise the value of their BTC

[BitPappa]

However because we believe that most others will sell first, the value of our bitcoins will go down anyways, therefore we might as well sell and beat others in the race to the bottom, basically it is profitable to betray the bitcoin community.

That certainly isn't my position, but perhaps that's because I'm a relative newb, and not sitting on a boatload of coins with a cost-basis that's 1/10-1/100 the current price. I'm holding and buying on dips (and using, and accepting in business), not even considering selling my small but growing number of BTC when the market takes dives. To me, those are opportunoties, and I've talked to many who feel the same. Hopefully more and more people will come to Bitcoin, and also have my mentality. And maybe part of the solution is realizing we don't all have the same mentality, due to our vastly different relationships with Bitcoin. Maybe I'm a sucker in your game? Maybe because I've paid so much to own BTC, that for purely psychological reasons, I believe it has more value than those of you who mined or bought tons of it a couple of years ago? But many of us are not going to sell, we're going to buy all the way down.

[NewLiberty]

Fundamentally, the value of bitcoin goes up when more folks want them.
Folks might want them for two reasons.

1) They are like tulips (speculation)
2) They buy you what you want and are better money than other alternatives.

I am more interested in working on #2 than #1.

[BitPappa]

Fundamentally, the value of bitcoin goes up when more folks want them.
Folks might want them for two reasons.

1) They are like tulips (speculation)
2) They buy you what you want and are better money than other alternatives.

I am more interested in working on #2 than #1.

I think that's a good point. I have to admit, I was drawn to Bitcoin for reason #1 (I'm sure which isn't appreciated by many). But that initial motivation also makes me want to work to make #2 come to pass for the general public. And it also introduces me to all types of transactions I may not have considered (again, in the #2 category), and a group of people who I enjoy communing with.

Oh, and would you consider a third distinct group who might want Bitcoin: People who see Bitcoin as a favorable alternative to the depreciating currency of their home, but aren't quite speculators and don't have immediate plans to transact with Bitcoin.

Which of these motivations brings stability to Bitcoin's value? In the long run, I figure the more people who own and transact Bitcoin, the more stable it will be.

[acs26]

I don't think there's a possible way to make Bitcoin, 'stable'. A idea can kinda make it stable, but not 'stable' enough. If Bitcoin is powered by people wanting to buy more, and more.. How could we stop them? I think by balancing out Bitcoin itself. To balance out Bitcoin we'd have to balance out or feed the need for Bitcoin. Meaning, we could share and give our Bitcoin to other people, or get a equal amount of the wealth of Bitcoin, and the 'middle-class' evened out, so no group has more people.

The reason for this is: The wealthy would most likely buy things with Bitcoin, or mine it. The middle-class would most likely try and buy more, and the 'poor' might try to use faucets, etc. If we could shift the poor into the wealthy or middle-class, we'd have it evened out so everything is almost balanced. A normal amount would be buying more, and the other buying or mining things.

Unfortunately, we don't have a lot of people who could easily give you .01BTC, so that increases the lust of more keeping it off balance everyday. And the lust of buying things with it doesn't help.

I'm not sure if this is correct, but I feel like something is missing from this thought..


Edit: The circulation is missing. Since the middle-class would most likely keep buying it, most of the Bitcoin they buy won't enter circulation again, thus hoarded and never used. If we could find a way doing this through the Union, or 'Circle'.... We could probably stabilize Bitcoin.