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Author Topic: Idea for a constant-value currency  (Read 589 times)
godislove (OP)
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December 12, 2013, 08:31:16 AM
Last edit: December 12, 2013, 05:57:45 PM by godislove
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Imagine a cryptocurrency that has a publicly accountable central authority that can issue any amount of coins that it wants.  The prospectus says it will publicly state the value of the currency in dollars based on a 2010 basket of commodities (spot prices) that it calculates, an idea that is widely supported by the economic spectrum, from Hayek to Keynes.  It will gladly issue new coins to anyone who wants to pay 1% LESS than the stated value. The company will simply keep the proceeds.  Why would anyone want such a coin?  The same people who are not going to sell it for anything less than the stated value, otherwise they would not buy in the first place. It's kind of a joking mind game that depends totally on an agreement between everyone, but that's what perceived value is.  The only important thing is that we agree on the value.  What prevents the central authority from cheating? It wants to keep its reputation so that the money can keep rolling in, in addition to its contract with the coin holders and public.  How do you exchange your coins for dollars?  You don't, unless you want to lose more than 1% of the stated value because no one is going to pay more than the central authority is selling them for.  So you get retailers to accept them, who will exchange them for dollars from the central authority for 10% below the stated value, or the retailers can sell them at 1% to 10% loss to others who want to pay even less than the central authority is issuing them.  Or the retailers can get 100% return if they can get their suppliers to accept them.  So products priced in the coin may initially be 5% above the dollar price of the goods so that new retailers can be sure of getting most their money back.  Newcomers can get into the coin at a discount if anyone is trying to unload them.  If a lot of people decide they don't like the constant value and start selling at once, they sell at a loss and others get in at a discount.  If they trust the coin.  Mutual agreement and community trust creates the value.
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