MasterCoin: New Protocol Layer Starting From “The Exodus Address”

[Super T]

Not wanting to be pedantic, but let's stop naming these currency issuers "escrows", shall we? They're not escrows. They're much closer to the concept of currency boards than that of an escrow.

Call it what you like - i guess i have a problem with the box on the left in this picture.



I just think the solution needs to be something other than big dumb buckets of money programmed to blindly buy and sell at predictable points.  To me this is the achilles heal of the entire project (besides the UTXO issue, which i suspect will be resolved in time) and i'd rather see it sidelined whilst alternative models for trade are considered.

I dont understand. Someone please explain how the 'formulaec escrow funds will fail?'

Not trying to be a troll, just new to all this.

Explain it to me like im a kid

please

A couple of reasons below why I don't think the "escrow" solution is viable (some of these are variations of points orig posted by others).

1. Price variance. Instruments designed to offer exposure to the price movement of an underlying asset (e.g. "Goldcoin") can never offer true 1:1 exposure, since the differences in market environment conditions between the underlying and the tracker instrument will always create different risk profiles, and therefore different valuations once risk is priced in.  Buying a "Goldcoin" with mastercoins for example introduces several layers of risk on top of buying "Gold", such as the risk bitcoin itself may implode, that the mastercoin protocol may be discovered to have technical vulnerabilities or may be ruled illegal.  As a result of these continually fluctuating conditions, price correlation with underlying assets will vary as risk premiums are priced locally.  An "escrow" which steps in to prop up a market which has dipped due to a change in environmental conditions is distorting the market, not correcting it.  As a result the fund would continue to push prices up beyond "fair value" toward it's programmed target, with sellers happy to continue selling as the fund perpetually depletes itself.

2. Depletion. Once any escrow becomes depleted, the underlying value of the instrument backed by the fund is reduced (the total potential value which could be injected into the market is reduced, and if nothing else the risk that the escrow will become fully depleted has increased).  Not only does this create a a vicious circle with increased risk causing reduced valuations and feeding into scenario 1 above, but at this point, anyone duplicating the instrument feed can offer the chance for investors to jump ship and enter a new version of the same instrument (one with a new and healthy escrow). This in turn amplifies the downward pressure, and escrow-depletion of the original instrument.

3. Manipulation. A trader aware of the escrow logic could conceivably game it for profit. Let's say a trader is bullish and holds the highest open bid on the market, now say there happens to be a thin volume on the sell side and a buy of 5 MSC would push the asset price up 300 basis points and beyond the escrow trigger threshold. Knowledge that doing this would trigger the escrow to sell into the bidwall might be worth far more than the 5 MSC outlay (and if he's really savvy he'll have also reduced his bid to a sliver above the next highest offer). In this way people will be looking for opportunities to trigger escrow events to their advantage when certain market conditions exist.

[Tachikoma]

I've been working on some proof of concept code for Mastercoin since there is not much around yet. I decided to put my work to some practical purpose and made a quick page that uses the Mastercoin libraries to run through the blockchain and count how much coins were bought by a specific address.

A huge disclaimer: This is not the official code and things are often guestimated. For instance the whitepaper does not mention which time to use as basis for the extra coins for early adopters. I've opted in to use the time your transaction got added to a block but the reference spec might change this, although I'm not sure how.

You can check how many Mastercoins you bought here.

Full transparency; IPs for visits site are currently logged by the webserver software. If you don't want your ip in combination with your bitcoin address logged don't use it.

[superfluouso]

I've been working on some proof of concept code for Mastercoin since there is not much around yet. I decided to put my work to some practical purpose and made a quick page that uses the Mastercoin libraries to run through the blockchain and count how much coins were bought by a specific address.

A huge disclaimer: This is not the official code and things are often guestimated. For instance the whitepaper does not mention which time to use as basis for the extra coins for early adopters. I've opted in to use the time your transaction got added to a block but the reference spec might change this, although I'm not sure how.

You can check how many Mastercoins you bought here.

Full transparency; IPs for visits site are currently logged by the webserver software. If you don't want your ip in combination with your bitcoin address logged don't use it.

Cool! Thanks.  I'm guessing then you are now able to provide the total number of MasterCoins purchased.  Curious to know..how many?

[TomHirsch]

You can check how many Mastercoins you bought here.

Nope.  Doesn't work.  It picked up two of my three transactions - but missed the last one. 

[Tachikoma]

You can check how many Mastercoins you bought here.

Nope.  Doesn't work.  It picked up two of my three transactions - but missed the last one.  

My blockchain is still catching up; so it is possible some transactions are missing.

Cool! Thanks.  I'm guessing then you are now able to provide the total number of MasterCoins purchased.  Curious to know..how many?

That would require a different type of query; I will see if I can add that to my todo list.

[caveden]

big dumb buckets of money programmed to blindly buy and sell at predictable points.

Well, that's exactly what a currency board is, and there are many in the world which have managed to keep operating for decades now. Even Hong Kong, considered the freest economy both by the Fraser Institute and the Heritage Foundation, uses a currency board to issue HKD.

The biggest difference, tough, is that currency boards normally have reserves in the same asset they tie the exchange rate of their currency to. So, if your currency board wants a fixed exchange rate with the dollar, it will hold dollar reserves, if it's with the euro, it will hold euro reserves and so on.
Here, the reserves are in one asset (mastercoin), while the exchange rate is supposed to be pegged to another asset (gold, fiat, whatever). I know no example of a currency board operating this way and I ignore whether it's feasible or not.

differences in market environment conditions between the underlying and the tracker instrument will always create different risk profiles, and therefore different valuations once risk is priced in. 

This is true, but remember that such criteria only influences the demand side of the equation. Prices comprise both demand and supply. If the demand is lower, just make a lower supply until you get the same price.

Think of water and diamonds, for instance. The former is much more valuable to human beings than the latter, but due to its extremely higher supply, its price is much lower.

3. Manipulation. A trader aware of the escrow logic could conceivably game it for profit. Let's say a trader is bullish and holds the highest open bid on the market, now say there happens to be a thin volume on the sell side and a buy of 5 MSC would push the asset price up 300 basis points and beyond the escrow trigger threshold. Knowledge that doing this would trigger the escrow to sell into the bidwall might be worth far more than the 5 MSC outlay (and if he's really savvy he'll have also reduced his bid to a sliver above the next highest offer). In this way people will be looking for opportunities to trigger escrow events to their advantage when certain market conditions exist.

I'm not sure I follow your reasoning. Could you explain me like I'm five?

[cunicula]

big dumb buckets of money programmed to blindly buy and sell at predictable points.

Well, that's exactly what a currency board is, and there are many in the world which have managed to keep operating for decades now. Even Hong Kong, considered the freest economy both by the Fraser Institute and the Heritage Foundation, uses a currency board to issue HKD.

The biggest difference, tough, is that currency boards normally have reserves in the same asset they tie the exchange rate of their currency to. So, if your currency board wants a fixed exchange rate with the dollar, it will hold dollar reserves, if it's with the euro, it will hold euro reserves and so on.
Here, the reserves are in one asset (mastercoin), while the exchange rate is supposed to be pegged to another asset (gold, fiat, whatever). I know no example of a currency board operating this way and I ignore whether it's feasible or not.

I would say fixed exchange rate is a better term than currency board [currency board is really a euphemism for fixed exchange rate. The term has its roots in attempts to re-brand South American currencies, i.e. they renamed fixed exchange rate to convince people to expect a different outcome than the last ten episodes; just wait another twenty years and they'll tarnish the name currency board and introduce another neologism. I stick with currency board because it is much much better than "escrows,")

Several Comments on caveden's points:
 
a) http://www.scmp.com/article/683788/soros-praises-hk-blocking-his-dollar-attacks http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20130424000046&cid=1502The HKD is a bit of a hard target because Hong Kong can get credit from mainland China to defend the HKD and mainland China has very deep pockets. Hong Kong is special because of its link to China. You are highlight an unusual case that makes currency boards seem more sustainable than they usually are.
In most cases, this is what currency boards in developing countries look like to speculators http://www.youtube.com/watch?v=fS3Z8Xv-vUc

b) There are examples of currency boards  that hold reserves in third-party currencies. Countries almost always hold reserves in very stable currencies/commodities such as Euros, Yen, gold, and first and foremost USD. The USD is the most common target for a fixed exchange rate. Sometimes, however, countries peg their currencies to neighboring economies that are major trading partners. For example, the Brunei dollar is pegged to the Singapore dollar:
https://www.google.com.sg/search?q=1+brunei+dollar+in+sgd&oq=1+br&aqs=chrome.1.69i57j69i59j0l2.3117j0&sourceid=chrome&ie=UTF-8
But the Brunei central bank holds reserves in gold and USD rather than SGD. (I can't document this because this info is typically secret. You just have to trust me.) Why?
1) Because the SGD is not very volatile against the USD (the Singapore central bank regular intervenes to ensure this). To allow for this volatility, the Brunei central bank needs to hold a larger stock of reserves than if it held SGD. However, the difference in reserve requirements is not that big.
2) If Singapore goes belly up and Brunei holds SGD reserves, then Brunei gets screwed too. Small economies are much more volatile than large economies, so linking your fortune to Singapore is risky relative to linking it to the US. If Brunei holds USD, then it can readily abandon the SGD peg and move to a USD peg. It is worth holding reserves in USD to allow for this option.

c) Developing countries also have credit lines from the IMF (essentially the US + some help from allies of the US). It's not just reserves that back the currency. Even if reserves run out, they can be replenished via IMF bailout. This makes it much easier to maintain a peg then it would be if the IMF didn't exist. (I'm not justifying the IMF. This is just how it is. Whether it is desirable or not is another matter entirely.) There will be no IMF bailouts for mastercoin and that makes it harder to maintain a peg.

d) In general, peg's are successful for countries that hold large war chests. If you have 1 USD backing every unit of USD value you issue, then you can never be forced off the peg. If you have 10 USD in gold, for every USD in value you issue, then you can only be forced of the peg in theory if gold drops by 90% vs. the USD and in practice it would need to drop by much more than that maybe 98%. Taiwan for example has a big bag of money set aside to fund war with the mainland. (I guess the hope is to take some mainlanders out before the island is over run. More money means more casualties for the CCP.) Singapore taxed a whole generation of workers at 50% of their annual wage. The opposite of a normal gov't but just as bad for national welfare, the Sing gov't is completely crazy about saving money. They hold an ever-growing rainy day fund. Mainland China has maintained an undervalued Yuan for about two decades now, accumulating a vast war chest of USD. Should the Yuan ever become overvalued, the war chest can defend against any conceivable speculative attack. The big oil exporters often have war chests too, so-called sovereign wealth funds.

Implications: The main implications come from (b) and (d). (b) tells us that currency boards fail more often than they succeed. (d) tells us that currency boards can be sustained if gov'ts act like Scrooge McDuck (either out of insanity [Singapore] or because they anticipate a lead role in WWIII [Taiwan]) A currency board in mastercoin will have to implement Scrooge McDuck in order to be credible. This begs the question of where the funds for Scrooge McDuck's gold pile come from. Who gets to play dictator and tax to fund public savings? If there's no dictator how do private parties profit from sinking their savings in the war chest?

[StarenseN]

I've been working on some proof of concept code for Mastercoin since there is not much around yet. I decided to put my work to some practical purpose and made a quick page that uses the Mastercoin libraries to run through the blockchain and count how much coins were bought by a specific address.

A huge disclaimer: This is not the official code and things are often guestimated. For instance the whitepaper does not mention which time to use as basis for the extra coins for early adopters. I've opted in to use the time your transaction got added to a block but the reference spec might change this, although I'm not sure how.

You can check how many Mastercoins you bought here.

Full transparency; IPs for visits site are currently logged by the webserver software. If you don't want your ip in combination with your bitcoin address logged don't use it.

Great, thanks for the tool.

[ripper234]

I've been working on some proof of concept code for Mastercoin since there is not much around yet. I decided to put my work to some practical purpose and made a quick page that uses the Mastercoin libraries to run through the blockchain and count how much coins were bought by a specific address.

A huge disclaimer: This is not the official code and things are often guestimated. For instance the whitepaper does not mention which time to use as basis for the extra coins for early adopters. I've opted in to use the time your transaction got added to a block but the reference spec might change this, although I'm not sure how.

You can check how many Mastercoins you bought here.

Full transparency; IPs for visits site are currently logged by the webserver software. If you don't want your ip in combination with your bitcoin address logged don't use it.

Great, thanks for the tool.

Sweet!

Added to the FAQ.

[caveden]

I would say fixed exchange rate is a better term than currency board

Well, fixed exchange rate is what they seek, but how do you call the institutions themselves? Currency board is, to my knowledge, the widely used terminology.

The HKD is a bit of a hard target because Hong Kong can get credit from mainland China to defend the HKD and mainland China has very deep pockets. Hong Kong is special because of its link to China. You are highlight an unusual case that makes currency boards seem more sustainable than they usually are.

Okay, that's a good point.

But what about currencies like the Bahamian Dollar or Panamanian Balboa?
The former is decades old, and the latter is more than a century old already. And they're both pegged to the USD.

In most cases, this is what currency boards in developing countries look like to speculators http://www.youtube.com/watch?v=fS3Z8Xv-vUc

Sorry, can't watch the video right now.

b) There are examples of currency boards  that hold reserves in third-party currencies. (...) For example, the Brunei dollar is pegged to the Singapore dollar:
https://www.google.com.sg/search?q=1+brunei+dollar+in+sgd&oq=1+br&aqs=chrome.1.69i57j69i59j0l2.3117j0&sourceid=chrome&ie=UTF-8
But the Brunei central bank holds reserves in gold and USD rather than SGD.

Interesting. Thank for the example.

1) Because the SGD is not very volatile against the USD (the Singapore central bank regular intervenes to ensure this). To allow for this volatility, the Brunei central bank needs to hold a larger stock of reserves than if it held SGD. However, the difference in reserve requirements is not that big.

Well, small volatility is far from being the norm on the cryptocurrency world. We can't expect MasterCoin being any different.

(b) tells us that currency boards fail more often than they succeed.

Even when you exclude the cases of currency boards acting like a central bank, i.e., manipulating interest rates as well as the exchange rate? This combination has shown to be very dangerous, but if all you want is to keep the exchange rate, I don't know....

(d) tells us that currency boards can be sustained if gov'ts act like Scrooge McDuck (either out of insanity [Singapore] or because they anticipate a lead role in WWIII [Taiwan]) A currency board in mastercoin will have to implement Scrooge McDuck in order to be credible. This begs the question of where the funds for Scrooge McDuck's gold pile come from. Who gets to play dictator and tax to fund public savings? If there's no dictator how do private parties profit from sinking their savings in the war chest?

Do The Bahamas or Panamá hold such large war chests? All the examples of currencies pegged to the euro?

Anyways, it's clear that high reserves will be very important in MasterCoin's case. Good thing the reserve volumes are public knowledge, at least.

[Tachikoma]

I've added the option to look-up MasterCoin transactions. If you know of a mastercoin transaction happening on the blockchain take the bitcoin tx hash and use it to lookup the details. You can see an example here.   

[ripper234]

I've added the option to look-up MasterCoin transactions. If you know of a mastercoin transaction happening on the blockchain take the bitcoin tx hash and use it to lookup the details. You can see an example here.   

Great!

Is the tool open source btw?

[Tachikoma]

It will be once there is a reference spec and I'm done with the internal structure. Right now it's mostly assuming and it won't do any good if it gets released before the reference spec since people might build faulty tools on top of it.

[dacoinminster]

OK, so when I said I'd be back today, I forgot about the Labor Day holiday. I'll officially be back tomorrow.

I have a couple minutes online, so I'll say a few things as quick as I can type them:

• I'm unbelievably excited about the money that has been raised. We actually crossed the seemingly impossible threshold I set earlier to be comfortable quitting my job. However, I'm not quitting my job, since my investors and I agree that a huge salary for J.R. is not the most efficient use of project funds.
• Whoever is behind buymastercoin.com thinks that MasterCoin values have doubled since the fundraiser. I don't know if the site is legit, but that's pretty cool. Hopefully we'll have that distributed exchange soon, but in the meantime we need a thread for buyers and sellers to find each other, with instructions on how to do it correctly. I'll try to set that up soon.
• The first transactions spending money from the Exodus Address will be refunds for those silly people who invested after the deadline (not counting advertisements), plus a couple bounties I have promised: bytemaster, d'aniel, and I'd like to give 2 BTC to our awesome logo designer (or the equivalent value in MasterCoins if that is what he wants)
• I've already gotten a couple inquiries from people interested in being our first hire. If you are interested in the job of lead software developer (and MasterCoin Evangelist, and project administrator), you should start coding now, because . . .
• Our next major initiative is going to be a BIG month-long coding contest: "Show us what you can do with MasterCoin". I plan on putting significant funds into the contest (need to get approval from the oversight board, but I'm hoping in the neighborhood of $25,000), and ALL serious entrants will earn a prize. There is already at least one coder making progress on a project which could be entered (as seen on this thread). This contest will have its own thread, and I'll give you lots of ideas of things to try (like demonstrating better methods of hiding our data in the blockchain, demonstrating retrieving and parsing data stored in such new ways, implementing more of the spec, porting MasterCoinAdvisor to greasemonkey and integrating it with the blockchain.info web wallet, parsing MasterCoin transactions in the block chain, building websites which parse MasterCoin transactions, etc). We'll be treating this coding contest as a job candidate search too (winning the top prize won't guarantee you the job, but participating in the contest would sure help your chances!)

That's it for today. More tomorrow!

-J.R.

[TomHirsch]

That's it for today. More tomorrow!
-J.R.

Excellent job J.R. Woot! Woot!  - This project kicks ass.

[maxmint]

I already invested in Mastercoin by sending funds to the Exodus address but I decided that I'd like to get some more.
If anyone wants to sell 500-1000 Mastercoins, please PM me. I'm not exactly sure about how to trade Mastercoins at this early stage, but selling the private key to your MC address would be my suggestion.

[TomHirsch]

I already invested in Mastercoin by sending funds to the Exodus address but I decided that I'd like to get some more.
If anyone wants to sell 500-1000 Mastercoins, please PM me. I'm not exactly sure about how to trade Mastercoins at this early stage, but selling the private key to your MC address would be my suggestion.

You should buy them from buymastercoin.com.  His price is very cheap.  I have some for sale - but they are at a far HIGHER price.  I am selling them 1:1 with Bitcoin.  If you've got 500 BTC to let go, I'll transfer 500 Mastercoin within the hour.  Let me know.

[moltenmich]

I'm cross posting this from the giveaway thread so everyone can have access to it. If anyone who is running the wiki or mastercoin related sites want a file in specific dimensions/formats, lemme know and I'll send them to you.

I created a vector package people can download and use:

(click the image to download the vector file)

I'm offering these images in vector format to Public Domain


And to top it all off, I made an animated intro video using the new logo:
https://vimeo.com/73592269


Tips of any sort are greatly appreciated! My address: 13x2dka6tVhjsNNNomGJjUPi2iJQCb67bw
Depending on what you guys think, I can probably help out more with explanation videos/ branding.

[ripper234]

FYI I know the owner of buymastercoin.com.

I trust this man to honor deals.
I am not promising anything regarding his site personally, and am not affiliated with buymastercoin in any way.
Do you own due diligence / risk assessment.

I do not know what is the "correct" value of MSC right now, nor am I selling MSC.

[ripper234]

P.S. he has requested to remain anonymous at this point.