Very interesting PoS distribution strategy, and will keep an eye on the follow up.
IPO:Development is taking forever. Too much going on that is delaying actual work.
What we will probably do, is have a pre-IPO "order commitment". Users will Bitcoin account histories and/or Github accounts and project contributors will be allowed to commit to IPO, up to percentage of the IPO. Participation will be capped at 5 BTC and the cap will go down as the pool gets depleted.
Then the people who have been following project for a while, will get a guaranteed commitment to IPO, without worrying about timing. Then rest of IPO pool will be released after launch.
After the IPO, the rest of the coins will be allocated as salary and bounty for contributors who are working on projects which increase the value of Skycoin. Most of the coins will probably be allocated for the mesh deployment as incentives.
Economic Policy:We have been talking to a large Bitcoin market marker about how we can prevent a repeat of the Auroacoin crash and deter speculators.
We have a data guy doing models.
This is the linear scale Bitcoin price over time
This is log scale Bitcoin price, with regression line. When Bitcoin is over the line its over priced, when its below the line its underpriced.
This is the total number of subscribers in /r/bitcoin
This is the daily growth rate of subscribers in /r/bitcoin . Notice the massive spikes of new users rushing into Bitcoin
This is subscribers on /r/bitcoin against daily rate of return of Bitcoin. Rapid increases in new users, cause price volatility, run ups and crashes.
This is subscriber growth rate in /r/bitcoin against log Bitcoin price. This is log plot, so a small price swing can be $290 to $90 or $7 to $150.
A price swing from 5 to 4 on this graph is ~3x change in price from $150 to $50 (~3x). A swing from 6 to 4 is a ~9x change in price.
What these graphs show, is that news attention to Bitcoin drives a massive influx of new users all at once. The price goes up dramaticly as new users buy into Bitcoin and crashes once the capital inflows return to the long term trend. With Bitcoin, there is a fixed supply of coins in the short term and influx of capital inflows, driving up price in short term. The price collapses back to former levels after the capital inflows end.
There is a short term increase from new capital inflows and a rebound or crash when the short term capital flows end, but a long term increase from increased adaption and user growth. By looking at the Bitstamp order book, we can separate out these two components using the net capital inflows into and out of Bitcoin.
For Auoracoin, there was a massive influx of capital inflows from speculators before launch, driving the coin to almost a billion dollar marketcap. After the Airdrop, a massive number of coins came on to to the market, with no capital inflows to offset the coins being released. The result was a complete price collapse.
For Skycoin, to prevent an Auroracoin style pump and dump or speculator run up, we may start releasing coins on to the market if the price dramatically exceeds the long term average or user growth under our models. This would smooth out volatility from news events a bit.
If the price drops significantly below the long term average (50%), we will have bot that starts "easing" and buying coins back with Bitcoin from the run ups.
This means Skycoin will have low volatility, a relatively stable price level and known appreciation rate. This will decrease profits for day traders and speculators and make it a "buy and hold" long term coin. It will mean Skycoin will be a more stable "store of value" with less volatility. However, we do not know what trade offs this strategy may have.
This is a "hard management" approach. A hybrid approach, involves collecting user analytics and publishing metrics and models on github for predicting Skycoin's "fundamental price" . These public model would give guidance to market makers and reduce the range of short term price fluctuations.
The coin supply is fixed and new coins entering market will decline over time. The rate of new coins going onto the market will be less than the user-base growth, as a policy. Therefore we expect appreciation in value, until user base growth stops. Then the coin will be in "equilibrium" and be driven by other macro factors.
Policy Implications:- the rate that Skycoins are released on to the market should be constant and predictable
- the number of coins on the market should not increase faster than user base growth
- the rate that coins are released on to the market should taper and decrease over time
- if a shock (news event, massive influx of new users) occurs that drives up price, more coins should be released onto market for the duration of the shock, to smooth out volatility
- if a price decrease occurs, the rate of coins going onto the market should be decreased
- if a major price decrease out of line with long term fundamentals occur, a pool of coins should be reserved to begin buying back coins and stabilize exchange rates
- tracking and publishing data better enables market makers to calculate the "fundamental value" and may reduce price volatility
- increased price stability increases the demand for Skycoin. Currency traders, merchants and speculators prefer to hold reserves in the coin with the lowest foreign exchange risk.
