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Author Topic: Goldcoin and Stablecoin proposals  (Read 11262 times)
morpheus
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July 15, 2011, 08:08:05 PM
 #1

First, I don't think there is anything wrong with bitcoin. However, people have brought up the idea of "backing" bitcoin with gold or otherwise controlling deflation. I'm proposing two types of coins which could be created with a modified version of bitcoin (possibly multicoin: http://forum.bitcoin.org/index.php?topic=24209.0). One would be based on the price of gold, Goldcoin, and the other would be stable with little to no inflation or deflation, Stablecoin.

I would like to see them created. I do not want to see bitcoin changed in any way to support them. I think there are enough other bitcoin like currencies out there that the idea of yet another competing currency would not harm bitcoin in any way.

Both coin programs I'm proposing, would need to include the bitcoin like program, and an exchange. There is not currently an exchange attached to any version of bitcoin to my knowledge. I'm working on a distributed exchange outside bitcoin (https://github.com/macourtney/Dark-Exchange), and you could use a centralized exchange like MtGox or TradeHill, but that would defeat the decentralized aspect of a bitcoin like program. More work and though is needed in this area.

For now, I'm assuming there is both the bitcoin program and an exchange which can be queried for the current exchange rate.

Goldcoin

The purpose of Goldcoin is to create a bitcoin like coin which could be exchanged for a set amount of gold, let's say 1 Goldcoin equals 1 ounce of gold.

Besides a modified bitcoin program (I'm calling the Goldcoin program), we need an exchange. This exchange will only exchange Goldcoin with gold. The price is listed in ounces of gold, and the current price can be queried at any time.

You can mine Goldcoin, and there are transaction fees for sending Goldcoins. However, the transaction fee is not given to the miners directly. The transaction fee and mining award is adjusted to keep the price of Goldcoin as close to 1 Goldcoin equals 1 ounce of gold.

How does it work? The Goldcoin program watches the exchange for Goldcoin and does the following:

If the price of Goldcoin increases above 1 ounce of gold, the Goldcoin program increases the number of coins given as an award to the miners. Also, the transaction fee is lowered, possibly to 0. If 1 Goldcoin is trading for 1.1 ounces of gold, then the Goldcoin program can increase the mining award by 10% (maybe more) until the price of Goldcoin goes back to the target.

If the price of Goldcoin decreases below 1 ounce of gold, then the Goldcoin program decreases the number of coins given as an award to the miners. However, the award for mining can never go to 0 since that would cause all miners to quit. The transaction fees are raised. Any coins captured by transaction fees are not given to minors, instead they would be destroyed. With less Gold coins floating around, the price of Goldcoin should move back up to 1 ounce of gold.

Thus, without an authority (besides programming code), and without using actual gold as a backing, Goldcoin will tend toward 1 Goldcoin equals 1 ounce of gold.

Of course, it would not be perfectly stable with sudden interest causing the price to go up temporarily and loss of interest could bring it down. In either case, you can always assume if you wait long enough, the price will go back to the target price.

One last point. The exchange could use USD instead of gold, and since the price of gold in USD is well known, you could simply target the USD exchange to match the price of gold. You would then have exactly the same outcome as the gold exchange.

Using this method, you could create a coin targeted to almost anything. Which leads me to another coin:

Stablecoin

With Stablecoin, you have the same bitcoin like program and exchange as with Goldcoin with only a couple modifications.

The exchange is in USD. However, instead of targeting USD directly, we target a specific date. Let's say we use the date Stablecoin comes into existence. From then on, we keep track of how much USD has inflated/deflated using something like CPI or the Billion Price Index or even a combination of indices. If USD inflates say 1% we increase the target to $1.01 for one Stablecoin. On the other hand, if USD deflates by 1% we target $0.99 for one Stablecoin. Over time the increase and decreases would be added together to get some strange multiple as the target for Stablecoin.

The ultimate goal for Stablecoin would be to target a value not a price, and thus never inflate or deflate over time.

Stablecoin would be a great benefit to any merchant. They could simply price their goods and services in Stablecoin once, and never have to change the price again. They also know, no matter how long they hold Stablecoin, the value of Stablecoin would never increase or decrease significantly. If it does, they can wait until it makes it back to it's target.

Once Stablecoin is used to price goods and services online, you could then drop the use of CPI and Billion Price index and simply use a basket of goods priced in Stablecoin. If merchants start charging more or less on average for their goods, Stablecoin could adjust the number of coins accordingly.

Stablecoin could become the perfect currency for merchants. Which would make Stablecoin perfect for customers who want to buy from those merchants. Once enough merchants and customers adopt Stablecoin, everyone else would follow.

Making it happen

Unfortunately, I have my own bitcoin project to work on right now which is taking all of my time (did I mention Dark Exchange: https://github.com/macourtney/Dark-Exchange Smiley). However, I'm sure some goldbugs on this forum would be interested in the Goldcoin idea and take off with it (if you do, please make it open source).

I'm more interested in Stablecoin, and would be willing to put some time into building it. I just don't have the time right now.

Maybe one exchange could work for all of the targeted coin types. If the exchange could be built first (maybe Dark Exchange is that exchange), then I'll work on Stablecoin when I have more time.

Feedback

Please give me feedback on my two proposals. What works? What doesn't/can't work? What have I not thought through enough?

I'm not as interested in whether or not a gold based digital currency or a digital currency with no inflation or deflation is useful. By creating the currencies, they will be able to compete in the open market and the market will decide. I want to know if such coins could be created and how.

Any other feedback is welcome.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 15, 2011, 08:17:19 PM
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Your idea has merit but you could technically do the same thing with bitcoin. Find someone with ALOT of cash (market cap is about 100 million) and have them say "no matter how low the market says/goes I am willing to pay $x for a bitcoin". Your asking to peg bitcoin to something which I believe is the opposite of what bitcoin was made for.

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July 15, 2011, 09:20:57 PM
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It is not an attempt to peg bitcoin to anything.

It is entirely new coinbases.

However, if you are going to give out more or less coins depending on current prices you are probably chasing a red herring. The number of coins being created soon becomes quite small compared to the number of coins already existing.

So it seems likely that the number of already existing coins people decide to dump or hoard might have far more effect on prices than the number of coins being created by miners.

I do not really see all the alternate blockchain coinbases "competing with" bitcoin at all, I see them as "co-operating with" bitcoin.

It is painful trying to use fiat currencies, exchanges that exchange only between various blockchain-based currencies will I hope be much easier to deal with than trying to exchange with fiat currencies. So I'd like to see a whole bunch of different blockchain-based currencies one can trade between without needing to bother with fiat at all.

-MarkM-

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July 15, 2011, 09:39:11 PM
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Any other feedback is welcome.

just to clarify, you are not (and have no affiliation with) bitcoin morpheus, correct?
morpheus
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July 15, 2011, 09:52:48 PM
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just to clarify, you are not (and have no affiliation with) bitcoin morpheus, correct?

I am bitcoin morpheus.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
morpheus
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July 15, 2011, 10:02:25 PM
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...
However, if you are going to give out more or less coins depending on currenct prices you are probably chasing a red herring. The number of coins being created soon becomes quite small compared to the number of coins already existing.

So it seems likely that the number of already existing coins people decide to dump or hoard might have far more effect on prices than the number of coins being created by miners.

...

I don't want to say peg Goldcoin or Stablecoin to a price, since there will always be some volatility in the exchange. More like target a price. It won't be possible to smooth out every sudden jump or drop in price.

However, I think you could increase the transaction cost enough or increase the mining award enough to keep the exchange rate relatively close to the target rate.

On top of that, short term volatility would be smoothed out by speculators who could easily see when the price is above the target or below the target and buy or sell accordingly making a small profit and stabilizing the currency.

Would that not work?

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 15, 2011, 10:15:43 PM
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You could try some of your ideas simply by getting in as an early adopter on any new blockchain that is at low difficulty or low price, thus allowing you to becomea major holder of the things. Then in your capacity as a major holder you should be able to stabilise the price, yes?

I figured this is what would hopefully happen with bitcoin: major holders would hopefully obtain so much fiat by selling at peak prices that they could from then on use that fait to keep buying back bitcoin any time its price in terms of fiat starts to drop.

This assumes of course that major holders actually intend to stick around and support bitcoin rather than treat it as a ponzi scheme, cashing out to fiat and not using that fiat to uphold the value of bitcoins.

-MarkM-

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morpheus
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July 15, 2011, 10:24:04 PM
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You could try some of your ideas simply by getting in as an early adopter on any new blockchain that is at low difficulty or low price, thus allowing you to becomea major holder of the things. Then in your capacity as a major holder you should be able to stabilise the price, yes?

This could not work if the other blockchain became popular. Eventually it would cost too much to keep the price up or I would run out of coins from the other blockchain trying to sell enough to keep the price down.

I don't think there is a way to target a price for coins from an alternative blockchain without issuing more coins when the price goes up, and destroying coins when the price goes down.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 15, 2011, 10:31:35 PM
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Oh well I wasn't worrying about the early adopters trying to keep the price *down*, I figured in most new blockchains keeping it *up* would be the challenge. If it goes *too far up*, you can simply start yet another blockchain, which is almost certain to start out nice and low in price. Smiley

Also, if there is any truth in ideas that alternate chains would be *competing* to lower each other's value instead of *co-operating* to make them all in general rise in value, then maybe starting a new chain might help bring down the value of your previous chain. If so you wouldn't have to mess with making more of the previous chain to lower its price, just start up a "competitor".

I still think these alternates should help bitcoin value not lower it though, at least as long as the people or groups behind them continue to treat original bitcoins as the grand-daddy of them all, the blue chip, the most attractive one to use as "reserves" for "backing" your alternates and so on.

-MarkM-

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marcus_of_augustus
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July 16, 2011, 08:19:55 AM
 #10


bitcoin needs to compete or fade away on its merits/flaws ... co-opting competing chains only devalues/dilutes its worth by making a mockery of the "only 21 million claim" ...

.... at least the deflation scaremongers can go fo now that the true nature of free market money is made obvious.

Monetary Freedom - a basic human right
"Disarming money as a tool for tyranny."
"Disintermediating the State."
morpheus
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July 17, 2011, 12:26:30 AM
 #11

After sleeping on it, I've decided that even though I still like the idea of Stablecoin, it would be easier to use multicoin to create a coin like Stablecoin but manually peg the value on the market.

I could do this by issuing all of the coin to myself and only selling it for a set price. I could then keep the money in trust, and buy back the coin if it every drops below the target price. I would sell the coin at a slightly higher price than the target, and buy it back at a slightly lower rate to absorb some of the fluctuation in the currency, while still keeping it targeted at a certain value.

There are a couple problems with that type of coin. The one obvious one is everyone has to trust that I will buy and sell at certain prices to keep the value of the coin stable. This is why I would prefer a market solution where you would only have to trust the market. However, for a test of the concept, it may work until a market driven solution can be made.

The next problem is, if the coin became very popular, I could run out of it and not be able to hold the price down. That would be a good problem to have, but it would still break my original promise to keep the value stable.

Also, the reserve could be stolen and sold on the market driving the price down. I would take precautions to avoid this happening. It's still a risk and requires people to trust me.

I'm going to go with it anyways and see how the market reacts. I'm going to create a block chain called 1971coin which will be pegged to the value of a 1971 dollar. Why 1971 dollar? It's the year the US completely dropped off the gold standard. That seems like a good value to peg.

I'm going to issue as many 1971coins as I can to myself and start selling them 1% above the value of a 1971 dollar (approximately $5.57 current USD). I will hold any money I get in trust, and buy back the coins if they fall below 1% less than the value of a 1971 dollar. I will likely also sell them for bitcoin and other digital currencies.

I will come up with a standard way to calculate the price of a 1971 dollar in current USD. I will the calculation method and the current rate at any given time online. I'm thinking of using the CPI for now. I haven't found a good way to use the billion price index. They don't seem to post the index at any given time on their website.

Once I have the program working, I'll ad 1971coins to the list of currencies you can buy and sell on Dark Exchange.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 17, 2011, 06:35:10 PM
 #12


In a very short time I've come to admire both your work and thought process. And I am trying to think through the essence of the problem you're dealing with, and I suppose that it's:

centralization V decentralization

or stating the same thing another way:

stability V accuracy

With centralization we get currency stability, which is vital for trade, but we lose the accuracy (truth) of the currency's true market worth. We might also say that we lose the integrity, honesty, of the market by exposing the currency to enormous risk vis-a-vis the fiat of centralization powers, people (or person).

With decentralization we get accuracy (honesty), which is vital for integrity. And integrity is the cornerstone of the currency's strength, its durability, its ability to fight off competitors, usurpers, exploiters. Whereas a centralized currency will always be on the knife's edge of destruction, from within or without, because of its targetable point of failure. However, the price for this durability is stability. We lose stability when valuation is turned over to the market.

From a psychological perspective, I suppose the problem could be characterized as one-man's-reality Vs. the reality-of-the-collective...and then all of the inherent pros and cons that flow out from each.

...all of this leads me back to thinking that your darknet exchange is so important.






BTConomist
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July 17, 2011, 08:59:08 PM
 #13

First, I don't think there is anything wrong with bitcoin. However, people have brought up the idea of "backing" bitcoin with gold or otherwise controlling deflation. I'm proposing two types of coins which could be created with a modified version of bitcoin (possibly multicoin: http://forum.bitcoin.org/index.php?topic=24209.0). One would be based on the price of gold, Goldcoin, and the other would be stable with little to no inflation or deflation, Stablecoin.

What's the point in making an accounting ledger (read: bitcoin) to be more than just an accounting ledger?

Bitcoin is already backed by the computing power of good/friendly nodes. Let's just make sure that their number always exceeds the number of rouge nodes. This can be achieved simply by spending bitcoins, rather than hoarding them (as if it's a commodity).

Bitcoins are earned, not traded! If you plan on hoarding BTC, you're on my target list. (And yes, it is possible to swim in BTC.)

Don't give me that Bull... I'm one of those honey eating Bears that the bees hope to never meet again... Viva la BTC!!!
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July 18, 2011, 01:30:45 PM
 #14

Your idea has merit but you could technically do the same thing with bitcoin. Find someone with ALOT of cash (market cap is about 100 million) and have them say "no matter how low the market says/goes I am willing to pay $x for a bitcoin". Your asking to peg bitcoin to something which I believe is the opposite of what bitcoin was made for.

I have an idea very similar to this. I have funneled money into it, and I have an investor who is helping. The point won't be to peg the currency, but to try something similar at a risk of loss to myself as a wager in the future of bitcoin.
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July 18, 2011, 06:57:21 PM
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In a very short time I've come to admire both your work and thought process. And I am trying to think through the essence of the problem you're dealing with, and I suppose that it's:

centralization V decentralization

This is correct. However...

or stating the same thing another way:

stability V accuracy

I don't think this is a good comparison. Especially since I would be basically selling the coin on the open market to force the price to be in a certain range, then the price is still accurate.

I would say, it's more like:

stability V freedom

If I'm controlling the supply of 1971coin, then you have to trust me to only release the coin at a specific rate to keep the price from rising too much, and buy it back up to keep it from falling. I would be the Federal Reserve for the 1971coin with the only difference being that my goal is to remove all inflation and deflation while making my formula for doing this as clear and public as possible. But, you still lose a bit of control and I would have at least some control over you at all times.

In the Stablecoin version, you don't have to trust me, just the code which you can see and audit at any time. The formula for keeping the price stable is written, not in stone, but in code. You can accept that law or not, or even change it to your needs (though you would be forced to use a different block chain). In the end, I don't have any control over you at all, and you always have control over your own finances.

...all of this leads me back to thinking that your darknet exchange is so important.

For this reason, my priority is the Dark Exchange. Even though I'm creating 1971coin, I don't want it to take much time from me bringing Dark Exchange to a point where it is useful and used.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
morpheus
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July 18, 2011, 07:03:53 PM
 #16

First, I don't think there is anything wrong with bitcoin. However, people have brought up the idea of "backing" bitcoin with gold or otherwise controlling deflation. I'm proposing two types of coins which could be created with a modified version of bitcoin (possibly multicoin: http://forum.bitcoin.org/index.php?topic=24209.0). One would be based on the price of gold, Goldcoin, and the other would be stable with little to no inflation or deflation, Stablecoin.

What's the point in making an accounting ledger (read: bitcoin) to be more than just an accounting ledger?

Bitcoin is already backed by the computing power of good/friendly nodes. Let's just make sure that their number always exceeds the number of rouge nodes. This can be achieved simply by spending bitcoins, rather than hoarding them (as if it's a commodity).

I don't think I'm proposing making an accounting ledger any more than it is. I'm just suggesting a way to make the currency in that ledger have a stable value.

And, I'm not suggesting changing bitcoin, but creating a competing currency which would survive only if others found merit in it.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 18, 2011, 07:33:11 PM
 #17

First, I don't think there is anything wrong with bitcoin. However, people have brought up the idea of "backing" bitcoin with gold or otherwise controlling deflation. I'm proposing two types of coins which could be created with a modified version of bitcoin (possibly multicoin: http://forum.bitcoin.org/index.php?topic=24209.0). One would be based on the price of gold, Goldcoin, and the other would be stable with little to no inflation or deflation, Stablecoin.

What's the point in making an accounting ledger (read: bitcoin) to be more than just an accounting ledger?

Bitcoin is already backed by the computing power of good/friendly nodes. Let's just make sure that their number always exceeds the number of rouge nodes. This can be achieved simply by spending bitcoins, rather than hoarding them (as if it's a commodity).

I don't think I'm proposing making an accounting ledger any more than it is. I'm just suggesting a way to make the currency in that ledger have a stable value.

And, I'm not suggesting changing bitcoin, but creating a competing currency which would survive only if others found merit in it.


How about Namecoin?
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July 18, 2011, 07:52:41 PM
 #18

How about Namecoin?

While Namecoin is an interesting concept in the beginning stages of adoption, it doesn't do anything like what I'm suggesting.

However, like Namecoin, I'm suggesting creating a new block chain for these currencies.

I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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July 21, 2011, 01:46:38 PM
 #19

I'm a big fan of the "stablecoin" idea, in fact I even used that name earlier in one of my own posts suggesting something similar: http://forum.bitcoin.org/index.php?topic=7945.msg119375#msg119375

I like the concept of pegging to the 1971 dollar value. A central server that took deposits and withdrawals in bitcoins and issued a stable currency for commerce usage would be one way to do it, but then you have all the issues with central control that bitcoins circumvent (one server for the government to shut down, for instance.

A well-used and highly liquid bitcoin futures market would also go a long way toward solving this problem for big players, but wouldn't help much for your average joe.

What would be REALLY cool would be if some sort of automatic behind-the-scenes "stabilization option" could be built right into the bitcoin client. Imagine a radio button selection where I could choose to store my value in "1971 USD", "bitcoins", or "HyperBitcoins". The 1971 folks would be paired with the HyperBitcoin folks using contracts in the block chain. The contract allows the 1971 user to spend their bitcoins as if they have a set value in 1971 USD, and the hyperbitcoin contract holder is obligated to add bitcoins to the transaction if bitcoins are worth less, or pockets the extra bitcoins if bitcoins are worth more.

Edit: I created a separate thread for the HyperBitcoin idea above: http://forum.bitcoin.org/index.php?topic=30741.0

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July 22, 2011, 03:31:54 PM
 #20

Your hypercoin idea seems complicated and could easily be handled with bitcoin options. It seems almost like hypercoin is a bitcoin option of sorts

My original idea for Stablecoin was to create a new block chain for it, and have the program increase the mining reward when the price goes up, and increase the transaction cost (then destroy the coins) when the price goes down.

Since I don't have the C++ skills to create Stablecoin, I planned to use the Multicoin client to create my own currency, 1971coin, which I could then issue and buy back to keep stable at the 1971 dollar value. Unfortunately, I seem to be having trouble building Multicoin, and the creator of Multicoin doesn't seem interested in creating pre-built binaries for it.

I've also looked at using Open Transactions to issue my own currency, but that seems to be even more confusing than Multicoin (though they do seem to have pre-built binaries posted).

I still have a few things to try.

BTW, a 1971 dollar is worth about $5.50 now which tells you something about inflation recently. One bitcoin now, would be a bit more than two 1971coins at the current rate.


I'm a big fan of the "stablecoin" idea, in fact I even used that name earlier in one of my own posts suggesting something similar: http://forum.bitcoin.org/index.php?topic=7945.msg119375#msg119375

I like the concept of pegging to the 1971 dollar value. A central server that took deposits and withdrawals in bitcoins and issued a stable currency for commerce usage would be one way to do it, but then you have all the issues with central control that bitcoins circumvent (one server for the government to shut down, for instance.

A well-used and highly liquid bitcoin futures market would also go a long way toward solving this problem for big players, but wouldn't help much for your average joe.

What would be REALLY cool would be if some sort of automatic behind-the-scenes "stabilization option" could be built right into the bitcoin client. Imagine a radio button selection where I could choose to store my value in "1971 USD", "bitcoins", or "HyperBitcoins". The 1971 folks would be paired with the HyperBitcoin folks using contracts in the block chain. The contract allows the 1971 user to spend their bitcoins as if they have a set value in 1971 USD, and the hyperbitcoin contract holder is obligated to add bitcoins to the transaction if bitcoins are worth less, or pockets the extra bitcoins if bitcoins are worth more.

Edit: I created a separate thread for the HyperBitcoin idea above: http://forum.bitcoin.org/index.php?topic=30741.0


I'm selling Mt. Gox USD and Bitcoin for cash, check or money order in the mail: http://bitcoinmorpheus.tumblr.com/

Check out my 100% decentralized P2P exchange: https://github.com/macourtney/Dark-Exchange
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