Stability mechanism for bitcoin/altcoin

[freet0pian]

With these wild price moves during each run-up, could some kind of stability mechanism be implemented in bitcoin or an altcoin?

Can this be done when the majority of trading is handled in centralized exchanges or could this be accomplished only with some kind of cluster of distributed exchanges? It sure would be beneficial to do this if there was a way without hampering its properties as a currency.

What other inquiring minds think of this? 

[alishawkat]

seems impossibru

[kwukduck]

It would mean somebody or group has the control to stabilize the value, *poof* free market gone. Also, if you can stabilize it, you can probably also push it in whichever direction you want.

[mootinator]

Arbitrage would help, but it isn't very practical for anyone to do for more than one currency.

[shawshankinmate37927]

Keep the markets free.  As bitcoins become more widely dispersed and there are more market participants, the spikes and crashes will settle down.  Right now, there are too many coins held by a small number of people and they can exchange a lot of them all at once, which causes the price to plummet.

[blablahblah]

Bitcoin is still immature and not used very much. Once usage increases, the fee system will create negative feedback, which should reduce swings.

It's a very simple formula:

Exchange rate too high? --> Ramp up the fees so it cools off.
Exchange rate too low? --> Reduce fees to make Bitcoin more attractive.

Big stake holders will want to protect their stake against unwanted instability, and one way to do that is by being a miner (and/or running lots of nodes) and fine-tuning transaction fees so the monetary velocity doesn't get too high or too low.

The only thing is that it relies on human oversight, and I know that a lot of people here are really idealistic and imagine that fees can somehow can be set automatically and in a friendly decentralised manner. It won't work. If anyone tries, it will be gamed, just like all the other ideological stuff in the world seems to get gamed when people get greedy. Even the above formula will likely be a chaotic battle against speculators.

[zachcope]

With these wild price moves during each run-up, could some kind of stability mechanism be implemented in bitcoin or an altcoin?

Can this be done when the majority of trading is handled in centralized exchanges or could this be accomplished only with some kind of cluster of distributed exchanges? It sure would be beneficial to do this if there was a way without hampering its properties as a currency.

What other inquiring minds think of this? 

This thread is retro 2012 style.

[Sage]

Solution: The FREE market.

We won't have a true free market in Bitcoins until we have a fully decentralized exchange.

[blablahblah]

Solution: The FREE market.

We won't have a true free market in Bitcoins until we have a fully decentralized exchange.

If it's not free right now, then what's stopping it?

[Sage]

It's not a truly free market until we get rid of the centralized exchanges and the fiat->>bc and back chock points.

Evidence?  There would not be such a price spread between BTC-E and BTCchina if we had a truly unrestricted free market.

[porcupine87]

A thing, which has the potential to move to 10 000$, 100 000$ and more or to 0$, is moving hard, when it is in the range of 500$. Everything else would be not normal...

[dancupid]

It's sort of possible if you link difficulty change to block reward.

Difficulty change has a relationship with value (edit: and userbase) - if you factor in Moore's Law (and then ASICs Law), then you can use an inflationary mechanism to control the value as it rises by printing more coin.

The problem is if the price drops then you have to rely on zero (or very low) block reward, to increase the value of the altcoin, which makes it unattractive to miners and makes a 51% attack more likely.

You can't easily create negative difficulty, unless coins start being destroyed to create deflation - perhaps destroyed coins could be given to miners to keep them interested.

Maybe there's a balance somewhere.

A stable altcoin would be useful as something to trade against instead of fiat.

I've blocked watching the altcoin section, so maybe it already exists.

[kwest]

Velocity.

[Ecurb123]

I don't think it's possible to stabilize the price of btc from bitcoin side because bitcoin isn't the one setting it's own price, it's the various markets. So if people wanted more stable prices maybe the market companies could put mechanisms which could slow the rate of change. 

[Kprawn]

A more equal distribution of bitcoins would certainly help to reduce volatility. We have a bunch of early adopters with loads of

coins that are supposedly manipulating the Bitcoin price. If more people take small chucks of those coins away from these

whales, then manipulation becomes more difficult. The problem is, most of these whales are selling a bunch of coins and this is

driving the price down and then they buy back some of those coins at a lower price. This is being done over and over again

and the weak hands are the losers in this game. 

[megasynk]

Wow this is a thread from 2013.. if you bought Bitcoin that year and held until today, than you are a very lucky person. I wish I knew about BTC at that time..

[blackhawkeye1912]

Reviving a thread which really make sense compared to the tons of almost same topic.

Almost 5 years, until now bitcoin is highly volatile. The developers aren't thinking of a mechanism to make bitcoin's price stable. For now that would be good, developers should concentrate on significant improvements on the blockchain. Then from there, things might change.

[BTalarmus]

I think that over time, very large hedge funds will be created, which will stabilize the price for large players. In addition, when bitcoin capitalization becomes several dozen times larger, the volatility of the price will also decrease by the same order.