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Author Topic: MasterCoin: New Protocol Layer Starting From “The Exodus Address”  (Read 448413 times)
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Chang Hum
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August 05, 2013, 07:09:39 PM
 #261

You're confusing the question by adding other things in I'm not asking about, I'm asking very specifically what happens in Scenario 1) and 2) do you mind answering with your mathematical workings please?

So, with USDCoin backed by MasterCoin, if the price of MasterCoin rises 20%, price of USDCoin stays at $1 each. If the price of MasterCoin falls 20%, the price of USDCoin stays at $1 each.

If the USDCoin does diverge, the escrow fund intervenes as described earlier.

Now, if MasterCoin drops 99.9%, it's pretty clear that the USDCoin holders are screwed. Smiley

OK so you basically lose or gain 20% mastercoins if you sell respectively. Doesn't really matter from a buyers perspective as long as Mastercoin holds some value as it still translates back to the same usd value... but;

Wouldn't this sort of price fluctuation in the parent currency (let's just call the parent Mastercoin as not to confuse things further) completely undermine the viability of an escrow fund;

An escrow fund could be supporting a child currency at a cost of 1 Mastercoin worth $10 one day and 1 Mastercoin worth $15 the next day in which case the premise of the Escrow funds health based on buying "cheap coins" no longer makes sense because the Parent currency doesn't have a stable price.
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August 05, 2013, 07:11:47 PM
 #262

will mastercoin be initially worthless? I'm sorry, you probably explained this in other words but initially, what gives mastercoin that worth? its escrow, right? how do you put worth into this escrow?

Well, currently 100 MasterCoins are a little cheaper than 1 BTC (because of the time-bonus), because that is the initial price I set. After September 1st, their value will float freely. Hopefully up Smiley

but you won't be able to do anything with a mastercoin, at least until you get betting in for there to be any sort of market use, correct? then from there the sky's the limit?
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August 05, 2013, 07:22:07 PM
 #263

OK so you basically lose or gain 20% mastercoins if you sell respectively. Doesn't really matter from a buyers perspective as long as Mastercoin holds some value but;

Wouldn't this sort of price fluctuation in the parent currency (let's just call the parent Mastercoin as not to confuse things further) completely undermine the viability of an escrow fund;

An escrow fund could be supporting a child currency at a cost of 1 Mastercoin worth $10 one day and 1 Mastercoin worth $15 the next day in which case the premise of the Escrow funds health based on buying "cheap coins" no longer makes sense because the Parent currency doesn't have a stable price.

Price fluctuations of MasterCoin (within reason) should not cause a problem. If MasterCoin rises in value, the escrow fund gets healthier. If MasterCoins fall in value, the escrow fund gets less healthy. At some point, continually falling MasterCoin values will trigger a collapse.

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August 05, 2013, 07:22:53 PM
 #264

but you won't be able to do anything with a mastercoin, at least until you get betting in for there to be any sort of market use, correct? then from there the sky's the limit?

That about sums it up Smiley

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August 05, 2013, 09:03:45 PM
 #265

I got an interesting email:

Quote
Hi JR :-)

Thanks for accepting my friend request on Facebook, I clicked the button whilst searching for your email address, which I then subsequently found at the top of your Mastercoin paper.

I think Mastercoin is a fascinating concept, and I thought I'd write and make friendly contact and offer my services as an animator.

I read your original paper and the meme-version last year and thought it was great, I'm glad to see the project maturing and I wondered if you think it would be a good time to create an animation to explain the idea (much like the we-use-coins animation) in anticipation of the launch in September for the purposes of publicity and general understanding.

Here's the last one I did with my team here in London for a bitcoin mining service called 'Cloudhashing'. https://vimeo.com/70218869

Best wishes
Sincerely

Richard Boase

In a follow-up email he said that he charged 20BTC for the Cloudhashing animation, and an animation of similar complexity for MasterCoin would cost a similar amount. What do you guys think - would this be a worthwhile use of funds at the Exodus Address?

He's still stuck in the newbie area, so he couldn't post this here himself.

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August 05, 2013, 09:35:48 PM
Last edit: August 05, 2013, 11:34:51 PM by vokain
 #266

I got an interesting email:

Quote
Hi JR :-)

Thanks for accepting my friend request on Facebook, I clicked the button whilst searching for your email address, which I then subsequently found at the top of your Mastercoin paper.

I think Mastercoin is a fascinating concept, and I thought I'd write and make friendly contact and offer my services as an animator.

I read your original paper and the meme-version last year and thought it was great, I'm glad to see the project maturing and I wondered if you think it would be a good time to create an animation to explain the idea (much like the we-use-coins animation) in anticipation of the launch in September for the purposes of publicity and general understanding.

Here's the last one I did with my team here in London for a bitcoin mining service called 'Cloudhashing'. https://vimeo.com/70218869

Best wishes
Sincerely

Richard Boase

In a follow-up email he said that he charged 20BTC for the Cloudhashing animation, and an animation of similar complexity for MasterCoin would cost a similar amount. What do you guys think - would this be a worthwhile use of funds at the Exodus Address?

He's still stuck in the newbie area, so he couldn't post this here himself.

You're getting ahead of yourself here. Let's break it down into text first, we still have questions to settle here. Then we can get to writing a script. after writing it, we need to check it thoroughly for errors. THEN we can think about an animation

but this is a topic for down the road; let's get your source working first, then we can worry about that later. hopefully by then bitcoins are worth more and you'll get more for your coin
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August 05, 2013, 11:46:38 PM
 #267

I've been thinking about the fundraising part, and I can concede that being able to eat and keep a roof over your head is equitable. I'm just concerned about the nature of fundraising when it is paired with:

 
Quote
"Get 'em now folks, before they're worth SO MUCH MORE."*(multiple caveats in fine print)

Upon further consideration, that is the real 'meat' of my argument, in addition to the overall blockchain impact - which I'm not very pleased about, since I have no way (at this time) to say "no thank you, I will not verify your data". Bitcoin being what it is, it should be opt-in - the same way it is for what version of client you choose to run (unless we fork so hard we have to select one).

That's another problem, isn't it, it takes off and then we're talking not only about multiples of bandwidth/storage, but the ability of the main bitcoin devs being able to pick up the pace for future expansion and improvement. And since I've never bought the early-stressor argument either, please don't try it, it isn't very convincing.

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August 05, 2013, 11:59:38 PM
 #268

I've been thinking about the fundraising part, and I can concede that being able to eat and keep a roof over your head is equitable. I'm just concerned about the nature of fundraising when it is paired with:

 
Quote
"Get 'em now folks, before they're worth SO MUCH MORE."*(multiple caveats in fine print)

Upon further consideration, that is the real 'meat' of my argument, in addition to the overall blockchain impact - which I'm not very pleased about, since I have no way (at this time) to say "no thank you, I will not verify your data". Bitcoin being what it is, it should be opt-in - the same way it is for what version of client you choose to run (unless we fork so hard we have to select one).

That's another problem, isn't it, it takes off and then we're talking not only about multiples of bandwidth/storage, but the ability of the main bitcoin devs being able to pick up the pace for future expansion and improvement. And since I've never bought the early-stressor argument either, please don't try it, it isn't very convincing.


Yup. If MasterCoin is successful, it will add a lot of transactions to bitcoin, making the total size of the block chain even more painful.

You are right - there is simply no way to prevent people from trying crazy stuff like this on top of bitcoin. For someone like me, that's kind of cool. Other people may not be so excited about it Smiley

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August 06, 2013, 12:12:46 AM
 #269

I'm the guy who earned 10BTC convincing bytemaster that his original system would not track the underlying asset.

Look, let's state the problem theoretically.  Let us propose 2 independent entities "Digi", and "Commodity" which can be priced in a 3rd entity "fiat".   Now the task is to devise a system to create a 4th entity "DigiC", using exclusively Digi that reflects the value of Commodity.  

Since Digi and Commodity are independent variables, this is an impossible task.  Any escrow system that holds Digi and issues DigiC is promising 1 Commodity for every DigiC issued.  It is essentially SHORT Commodity.  So lets say everything starts at 1, so we have N DigiC backed by N Digi.  Now if Commodity goes to 10 fiat and Digi goes down .1fiat, the "expected" value of DigiC is 10*N, but the backing escrow is only worth .1*N.  A factor of 100 difference.  

This will happen in reality as well as theory.  

As Cyprus learned when it gave people CyprusEuro (DigiC) backed by loans (Digi).  When the value of those loans drops, the only solution is to give holders of CyprusEuro a "haircut".

If that doesn't convince you, look at the 7x appreciation of Gold 2000-2012.  Or imagine trying to create a "MasterBitcoin" with a 10x appreciation in 1 year!?  Or pretend that MasterCoin appreciates 10x like bitcoin did, while gold drops 20%.  Now you have the opposite problem your backing is worth SO much more then your coins.

And these aren't even "Black Swan" events (or Black Swans are the new normal).


I think you know that it won't track.  You use terms like "Given a reasonably stable MasterCoin".  But Bitcoin has shown that to be VERY unlikely.  Also, its not even a stable MasterCoin that matters, but a stable RATIO between MasterCoin and the commodity...


The sooner the powerful collective intelligence and creative force moves from this pipe dream to creating a system that simply allows identity-verifiable entities to back digital commodities with a legal framework to enable criminal prosecution if the digital commodity does not meet its contract (AKA no gold in the vault), the sooner we will have a workable system.  Also, look at how the Winkelvoss' (and other) ETFs work to see how multiple backers could exist for a single DigiC.

...You can gain respect for Satoshi's intelligence both by what he did AND by what he chose NOT to do...

Hi TheZerg!

I followed the posts on bytemaster's thread with great interest, since obviously I have similar goals.

You are quite right that some currencies will fail. For instance, if I define a currency that appreciates at 10% a day, it will definitely not be able to track that. In fact, I plan to create some currencies of that type, just to watch them die. I think we will learn a lot about how to tune the parameters for real currencies from their deaths.

The point is not to make currencies that never fail, but rather to make currencies that can conceivably track their target values for a very long time before finally degrading in a graceful and predictable fashion when nobody wants them anymore.


I'm sorry to disappear for 3 days and then dredge this up, but I can see that you and I have a difference of opinion on the time frame here, and on the idea of the value of the "black swan" events in a commodity speculator's portfolio.  But even if you continue with these attempts at a trustless representational currency, let me very respectfully ask you to also include the ability for people to create their own (trust-required) exchangeable entities, with a reference to a signed legal document describing the entity in its genesis block.  These new "currencies" could be a mortgage, stock in a company, a commodity with real backing, etc.  That is, add "native" support for colored coins within your system.  Whether or not your trustless representational currencies work, these trust-backed currencies will be very valuable, will utilize most of the same software infrastructure as your trustless and would make MasterCoin still useful if your trust-backed currency system does not work.  PM me if you need some impl help maybe I can find some time...




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August 06, 2013, 12:19:25 AM
 #270

hehe somoene sent 0.pi coins
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August 06, 2013, 12:23:15 AM
 #271


I'm sorry to disappear for 3 days and then dredge this up, but I can see that you and I have a difference of opinion on the time frame here, and on the idea of the value of the "black swan" events in a commodity speculator's portfolio.  But even if you continue with these attempts at a trustless representational currency, let me very respectfully ask you to also include the ability for people to create their own (trust-required) exchangeable entities, with a reference to a signed legal document describing the entity in its genesis block.  These new "currencies" could be a mortgage, stock in a company, a commodity with real backing, etc.  That is, add "native" support for colored coins within your system.  Whether or not your trustless representational currencies work, these trust-backed currencies will be very valuable, will utilize most of the same software infrastructure as your trustless and would make MasterCoin still useful if your trust-backed currency system does not work.  PM me if you need some impl help maybe I can find some time...


That's a very interesting idea. I suppose we might as well support currencies that work like colored coins. It doesn't really add any complexity to the design, and it seems likely that people would use it.

That would also give people one way to "invest" in the success of coins which work like colored coins - by buying MasterCoins. Previously there was no way to do this.

The built in decentralized exchange between MasterCoins and the other backed currencies would support something like this with almost no modifications.

Now, why didn't I think of that??

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August 06, 2013, 12:31:35 AM
 #272

Quote
Yes, I control the Exodus Address. Any funds sent there are to be used for making this a reality.
Doesn't this mean you are the only investor who bears zero risk for investing, and so have a heads-I-win-tails-I-get-my-money-back situation?   If this is genuinely as good an opportunity as you represent it to be, and the number of coins created (and therefore the relative value of each) is determined by the total amount of investment.... You see where I'm going with this?  You have the most to gain, and you hold no risk whatsoever.

I think it would be more appropriate to have these funds create and finance a non-profit foundation dedicated to stewarding the development of Mastercoin, with the funds being controlled by a fragmented key.

The concept here is really solid, and I think it's fine to fundraise in this fashion but I am uncomfortable having the entire finance under the control of a single individual even if he is the founder and especially if he is the largest investor and primary beneficiary of funds.  That is not investment, it is savings being rewarded as the highest of risk activities.

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August 06, 2013, 12:43:26 AM
 #273

Quote
Yes, I control the Exodus Address. Any funds sent there are to be used for making this a reality.
Doesn't this mean you are the only investor who bears zero risk for investing, and so have a heads-I-win-tails-I-get-my-money-back situation?  

not really. All MSC purchasers bear the risk of what he has spent going sour. if it turns out that the project can't go on, the remaining funds will be returned to the sending addresses. the risk is shared proportionate to the investment, though he has control of the funds. the question of what he pays himself is another matter to be discussed.....
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August 06, 2013, 12:45:55 AM
 #274

Quote
Yes, I control the Exodus Address. Any funds sent there are to be used for making this a reality.
Doesn't this mean you are the only investor who bears zero risk for investing, and so have a heads-I-win-tails-I-get-my-money-back situation?  

not really. All MSC purchasers bear the risk of what he has spent going sour. if it turns out that the project can't go on, the funds will be returned to the sending address. the risk is shared proportionate to the investment, though he has control of the funds

But if he controls the address and the only meaningful development cost is paying himself a salary....   Mastercoins aren't BACKED by bitcoins, they are just initially funded - the funds deposited to the exodus address are to be used to fund development, which means paying the founder/developer.   

So where is the risk?

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August 06, 2013, 01:17:58 AM
 #275


I'm sorry to disappear for 3 days and then dredge this up, but I can see that you and I have a difference of opinion on the time frame here, and on the idea of the value of the "black swan" events in a commodity speculator's portfolio.  But even if you continue with these attempts at a trustless representational currency, let me very respectfully ask you to also include the ability for people to create their own (trust-required) exchangeable entities, with a reference to a signed legal document describing the entity in its genesis block.  These new "currencies" could be a mortgage, stock in a company, a commodity with real backing, etc.  That is, add "native" support for colored coins within your system.  Whether or not your trustless representational currencies work, these trust-backed currencies will be very valuable, will utilize most of the same software infrastructure as your trustless and would make MasterCoin still useful if your trust-backed currency system does not work.  PM me if you need some impl help maybe I can find some time...


That's a very interesting idea. I suppose we might as well support currencies that work like colored coins. It doesn't really add any complexity to the design, and it seems likely that people would use it.

That would also give people one way to "invest" in the success of coins which work like colored coins - by buying MasterCoins. Previously there was no way to do this.

The built in decentralized exchange between MasterCoins and the other backed currencies would support something like this with almost no modifications.

Now, why didn't I think of that??

Being able to fund your mortgage through something like this would be epic.  And I didn't want to say it but it might even be a subset of the functionality you'll have to implement for your trustless coin.

Of course many jurisdictions will have regulatory issues but it is essentially impossible to get the laws changed in advance.

Ok next: you have done some amazing work in cramming this protocol entirely inside bitcoin.  I skimmed this but did not analyze.  But there seem to be clear issues with this such as data density (space efficiency), complexity (bugs), lack of control over the underlying Bitcoin protocol (as BitcoinX discovered with the "dust" patch), and possibly a perception of SatoshiDice-like spamming from the point of view of Bitcoin-only users.  At the same time the critical issue with alt chains is the lack of atomic exchange between BTC and the altcoin.

So, have you considered running a parallel chain for MasterCoin, but one that ALSO uses your research into overlay protocols to stick the minimum possible information into the bitcoin chain?  For example, it would be possible to encode in your alt-chain a txn that enters the MasterCoin-chain but is only valid if and when a bitcoin txn enters the bitcoin blockchain.

MasterCoin clients would need access to both chains.  This would require no more data than an overlay protocol would use -- its just a different organization.  But that organization solves all the problems I described above.  And I think that with clever coding someone in the future could allow a "non-btc-validating" MasterCoin client that sees only the MasterCoin chain (and can only issue intra-MasterCoin transactions).


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August 06, 2013, 01:21:36 AM
 #276

If the OP is interested then I would be happy to create a project on CIYAM Open for this (subject to *zero* fees).

CIYAM Open is a project management system that unlike traditional "bounties" (where multiple contributors compete for a reward that only one will get) locks in a single contributor to finishing the task by an agreed date and time (with a merged git commit being generally used as "proof of delivery").

The system is currently being used to help manage the Moneychanger project (https://ciyam.org/open/?cmd=view&data=20130606055250338000&ident=M100V137&chksum=a2a9d6d5) and note that all BTC is held by the project's owner (i.e. no actual BTC is held on CIYAM Open and each project manager provides their own BTC addresses).

An introductory slideshow about the workflow can be found at http://ciyam.org.

With CIYAM anyone can create 100% generated C++ web applications in literally minutes.

GPG Public Key | 1ciyam3htJit1feGa26p2wQ4aw6KFTejU
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August 06, 2013, 02:26:01 AM
 #277

You have a deep seated assumption based upon circular logic... that assumption is that the price will maintain parity naturally without respect to the backing and that the fund would be able to profit on this natural market correction.   However, if this were a natural market response the fund would be unnecessary.  Every action taken by the fund will be at a loss.

Bitcoin succeeds based on circular logic. It is a meme. A self-fulfilling prophecy.
This is Satoshi's real genius, not the technical solution to the double-spend problem.

From the early days - the main reason to buy bitcoins is because it will appreciate in value because other people will buy bitcoins. You can't get more circular than this.

Bitcoin is the proof that "circular logic" by itself is not just cause to disqualify a financial scheme.
MasterCoins's funds use circular logic, but that doesn't make them flawed.

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August 06, 2013, 02:38:23 AM
 #278

I got an interesting email:

Quote
Hi JR :-)

Thanks for accepting my friend request on Facebook, I clicked the button whilst searching for your email address, which I then subsequently found at the top of your Mastercoin paper.

I think Mastercoin is a fascinating concept, and I thought I'd write and make friendly contact and offer my services as an animator.

I read your original paper and the meme-version last year and thought it was great, I'm glad to see the project maturing and I wondered if you think it would be a good time to create an animation to explain the idea (much like the we-use-coins animation) in anticipation of the launch in September for the purposes of publicity and general understanding.

Here's the last one I did with my team here in London for a bitcoin mining service called 'Cloudhashing'. https://vimeo.com/70218869

Best wishes
Sincerely

Richard Boase

In a follow-up email he said that he charged 20BTC for the Cloudhashing animation, and an animation of similar complexity for MasterCoin would cost a similar amount. What do you guys think - would this be a worthwhile use of funds at the Exodus Address?

He's still stuck in the newbie area, so he couldn't post this here himself.

Excellent. I do think 20 BTC for a good quality animation is great.
I suggest you start a dedicated post to discuss the animation, script, etc.

Please do not pm me, use ron@bitcoin.org.il instead
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August 06, 2013, 02:58:24 AM
 #279

You have a deep seated assumption based upon circular logic... that assumption is that the price will maintain parity naturally without respect to the backing and that the fund would be able to profit on this natural market correction.   However, if this were a natural market response the fund would be unnecessary.  Every action taken by the fund will be at a loss.

Bitcoin succeeds based on circular logic. It is a meme. A self-fulfilling prophecy.
This is Satoshi's real genius, not the technical solution to the double-spend problem.

From the early days - the main reason to buy bitcoins is because it will appreciate in value because other people will buy bitcoins. You can't get more circular than this.

Bitcoin is the proof that "circular logic" by itself is not just cause to disqualify a financial scheme.
MasterCoins's funds use circular logic, but that doesn't make them flawed.

No.   the main reason to buy bitcoins is because it will appreciate in value because other people will buy bitcoins to use them because they have extremely desirable properties as a currency.

Look, let's say we have 2 coins XxxCoin and YyyCoin.  X starts with 100 backing MasterCoins, Y starts with 1000 backing MasterCoins. Why would XxxCoin track the price of Silver and YyyCoin track the price of gold?

It'll only happen if the person (that you must trust) behind the escrow, issues and redeems xxx or yyy coins such that its supply vs demand creates a price that tracks gold and silver respectively.  First off, this requires you trust the escrow admin.  So its not a trustless coin.  Secondly, the escrow is gonna get drained or be so "full" it becomes more valuable than the commodity ... even just random walk math shows that eventually this will happen.  Deliberate speculator manipulation, profiting on the information asymmetry where they know how the other party (the escrow) will behave will make it happen sooner.

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August 06, 2013, 03:05:47 AM
 #280

Look, let's say we have 2 coins XxxCoin and YyyCoin.  X starts with 100 backing MasterCoins, Y starts with 1000 backing MasterCoins. Why would XxxCoin track the price of Silver and YyyCoin track the price of gold?

I'm only talking about trust in MasterCoin here, not derivative currency.
MasterCoin is the infrastructure.
If you buy MSC, you believe the infrastructure is useful, not any specific derived currency.

The theory is that some useful currencies will be created on top of MSC.

If this was a known fact, there would be no need to speculate, and MSC's valuation would already be very high.
Right now it's just a theory, so people buying MSC believe the theory has some merit, and wish to sponsor a real life experiment to test the theory.

Please do not pm me, use ron@bitcoin.org.il instead
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