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
). 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.