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Author Topic: [ANNOUNCE] The Proposal for EnCoin  (Read 8183 times)
Etlase2
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October 08, 2011, 02:57:06 PM
 #101

---
Each minter uses the same proof-of-work difficulty for minting.
As such, the value of ENC will tend toward the electrical consumption of the most electrically efficient minter. (MHash/ws)
Left alone, this electrical consumption would tend to decrease over time according to Koomey's law.
To return ENC minting to its original electrical consumption constant,
EnCoin offsets Koomey's law by doubling the proof-of-work difficulty every 1.57 years.
---

This makes total sense to me. I completely agree with this statement. I really hope it is what you have been trying to say.

I don't want to use a constant like koomey's law. I'd prefer to figure out a way to lower the award instead somehow. And raise it if necessary. I'm trying to think of a way to do it based on an algorithm that could determine how profitable it is. Or something. I don't know yet.

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The part that needlessly confused me for two weeks was your use of averaging. While it is true that if one guy mints coins for 8 kwh and another mints coins for 10 kwh, the average amount of electrical consumption is 9 kwh. You seemed to also be saying that the sell price and value of each coin will reflect this 9 kwh average.

That seems ill conceived. In a marketplace, all the lowest price ENC sells first. Higher prices might not sell at all. Thus prices would tend toward the lowest cost, not the average cost.

You're missing the ROI again (and the difficulty in time). Nobody is minting for free. People who pay 10-15c/kwh will not likely be able to supply all demand. The cost per kwh is a much bigger factor than how much kwh was actually used. If 75% produces at 11kwh and 25% produces at 9kwh, we have an average CTP of 10.5kwh PLUS 33% ROI (it may be higher, who knows, there aren't early adopters selling off) or 13.96kwh. That means someone can mint for 12kwh and still make a small profit. But the market (and the people) all has to determine this.

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I know now that is not what you were attempting to say. You were trying to say the more general, "If peers use more electricity prices will be higher. If they use less, prices will be lower." The use of specific numbers made it seem you were proposing precise targets.

This is why I used "about", "approximately", and "based on" throughout the proposal anytime 10kwh or 200W was mentioned.

Quote
This goes down as the worst sentence of the entire proposal! It made me think you were dismissing the likelihood of electrical efficiency increasing. All the talk about sunk costs, and the expense of upgrading made it seem like you were framing changes in overall efficiency as implausible. Having zero discussion of how you methodically change the difficulty level made everything seem even more hand wavy. "If in the unlikely chance that technology improves, we'll fix things by voting to change the difficulty." it was not very inspiring.

Well, it was a lead-in to the very next paragraph explaining a way that could help solve it, after all. Although at the time I didn't realize that specific scenario wasn't possible with the way coins are distributed.

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October 08, 2011, 04:29:21 PM
 #102

I don't want to use a constant like koomey's law. I'd prefer to figure out a way to lower the award instead somehow. And raise it if necessary. I'm trying to think of a way to do it based on an algorithm that could determine how profitable it is. Or something. I don't know yet.

I'm not saying koomey's law is the perfect final solution. But I'm saying koomey's law is perfect way for the proposal to introduce people to your concept. It is well known, and it makes a good concrete example of canceling a known tendency with a known function to create your proposed constant. No hand waving is involved. That is what you want at the beginning of a proposal. It is like an establishing shot in a movie. It helps people suspend their disbelief.

But it's fine to say "koomey's law[1]" and refer to a footnote that says, "See section 10.5 for a discussion of koomey's law and other possible alternatives for maintaining this constant."


You're missing the ROI again (and the difficulty in time). Nobody is minting for free. People who pay 10-15c/kwh will not likely be able to supply all demand. The cost per kwh is a much bigger factor than how much kwh was actually used. If 75% produces at 11kwh and 25% produces at 9kwh, we have an average CTP of 10.5kwh PLUS 33% ROI (it may be higher, who knows, there aren't early adopters selling off) or 13.96kwh. That means someone can mint for 12kwh and still make a small profit. But the market (and the people) all has to determine this.

I'm not missing it. I'm not disregarding anything you are saying. Certainly, the price will never get too the lowest cost minter's cost. But that is the whole system's limiting condition.

I'm using the phrase "tends to" in the mathematical sense, as with Big O notation. "The time it takes to solve the proof-of-work based upon  difficulty (D) tends toward O(2^n). Sure that's not exactly right. The exact calculation would be: POW time = setup time + (time for one hash) * 2^(D-1) + completion time. But that just obfuscates the point I'm trying to make.

Again, I'm saying this is the best way to introduce the topic so unfamiliar people can grasp the system's dynamics. You can certainly put "electrically efficient minter[2]" and a footnote, "See section 10.6 on hashing speed vs hashing efficiency and how these effect total coins minted and the potential ROI of each minted coin.

This is why I used "about", "approximately", and "based on" throughout the proposal anytime 10kwh or 200W was mentioned.

Well, it was a lead-in to the very next paragraph explaining a way that could help solve it, after all. Although at the time I didn't realize that specific scenario wasn't possible with the way coins are distributed.

I'm not saying your intentions weren't correct. I'm saying your execution confused me repeatedly.

(addition)
By the way, ROI in the absence of a $/ENC exchange becomes a much more nebulous concept. Sure nothing really changes, someone spends $1 in electricity but takes their ROI in 1.3 loaves of bread. But I would certainly leave that discussion to a later section.

Quite frankly, given your target audience, I don't think you are going to have any trouble convincing people to mint. They are already used to paying high electrical bills in hopes of higher future payback. In the absence of an exchange, I don't think the early minters/merchants would have a problem trading among themselves at (1 ENC = 1 loaf of bread). Then when an exchange appears, pricing their coins for sale at (1 ENC = 1.3 loaf of bread = $1.30), to those who don't want to mint. Over time, those two prices will tend to converge toward a single market price.

But even accepting all of that, I still have trouble wrapping my head around the ROI dynamics of that final single market place. I'm sure it is describable. I'm just suggesting it is not where initial discussion of your concept should start.
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October 08, 2011, 05:34:25 PM
 #103

I'm not saying koomey's law is the perfect final solution. But I'm saying koomey's law is perfect way for the proposal to introduce people to your concept. It is well known, and it makes a good concrete example of canceling a known tendency with a known function to create your proposed constant. No hand waving is involved. That is what you want at the beginning of a proposal. It is like an establishing shot in a movie. It helps people suspend their disbelief.

The next version of the proposal already has bits of a first section that goes into this market effect because nobody really got it. I understand that it wasn't clear now. So yes, the first section is basically all just economy and why I think the system will work.

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I'm not missing it. I'm not disregarding anything you are saying. Certainly, the price will never get too the lowest cost minter's cost. But that is the whole system's limiting condition.

We've established this. Now HELP ME TRY TO FIX IT! Smiley If we establish a baseline of 150W instead of 200W and a gradual decrease in the award from 6 ENC to 2 ENC, the baseline goes from 150W to 50W. If the difficulty doesn't increase on the order of koomey's law, then the people are adjusting lower because technology is not keeping up. But once we hit whatever the final award is, 1 or 2 ENC, we can no longer adjust lower, only higher. Could this somehow be based on a year-to-year system? I wonder. -- Though in trying to keep coin production down in a stable economy, there might be very few miners at times from which to draw conclusions. This could lead to mistakes.

Quote
By the way, ROI in the absence of a $/ENC exchange becomes a much more nebulous concept. Sure nothing really changes, someone spends $1 in electricity but takes their ROI in 1.3 loaves of bread. But I would certainly leave that discussion to a later section.

I really don't think it does. I even mentioned this concept in one of the Q&As (on ukraine electricity). If I want to trade 1 ENC for a loaf of bread to the baker, the baker has some idea of what it took to make that ENC, just like he has a good idea of what it took to make his bread. Bakers in ukraine charge more because electricity is cheaper. Bakers in western Europe charge less because electricity is more expensive. Obviously there is little way of knowing if the coin was made in france or ukraine, but there are costs involved in that transport such as currency conversions.

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But even accepting all of that, I still have trouble wrapping my head around the ROI dynamics of that final single market place. I'm sure it is describable. I'm just suggesting it is not where initial discussion of your concept should start.

I don't know how it will work out either. We'll have to wait and see. Tongue

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October 08, 2011, 06:43:13 PM
 #104

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I'm not missing it. I'm not disregarding anything you are saying. Certainly, the price will never get too the lowest cost minter's cost. But that is the whole system's limiting condition.

We've established this. Now HELP ME TRY TO FIX IT! Smiley If we establish a baseline of 150W instead of 200W and a gradual decrease in the award from 6 ENC to 2 ENC, the baseline goes from 150W to 50W. If the difficulty doesn't increase on the order of koomey's law, then the people are adjusting lower because technology is not keeping up. But once we hit whatever the final award is, 1 or 2 ENC, we can no longer adjust lower, only higher. Could this somehow be based on a year-to-year system? I wonder. -- Though in trying to keep coin production down in a stable economy, there might be very few miners at times from which to draw conclusions. This could lead to mistakes.

I'm not exactly sure what you are tying to fix?

But my first guess you are trying to smooth out the function so that it does not change so dramatically by doubling in difficulty at 18 month boundaries. If that is the case, you want to reduce the ENC awards per block say every month, so you have an 18 step smooth exponential curve from 2 to 1. Then at 18 month intervals, you both double the difficult and double the ENC award/block and start down the curve again.

I can't give you the exact values for this because I forget how to calculate with logarithms. But in effect if you had Log base 2 graph paper. You plot one point at 1 on the bottom left, 2 at the top right and draw a line between them. Then you divide the line  into 18 intervals and read the intercepts. That is the old school, before calculators way.

So the answer is, if I understood the correct question, there is an easy answer that I don't know, but could probably look up.
If you are asking, "What if it MHash electrical efficiency doesn't follow koomey's law?" Then I really don't have any answer at all.


I really don't think it does. I even mentioned this concept in one of the Q&As (on ukraine electricity). If I want to trade 1 ENC for a loaf of bread to the baker, the baker has some idea of what it took to make that ENC, just like he has a good idea of what it took to make his bread. Bakers in ukraine charge more because electricity is cheaper. Bakers in western Europe charge less because electricity is more expensive. Obviously there is little way of knowing if the coin was made in france or ukraine, but there are costs involved in that transport such as currency conversions.

Honestly, I never bought that premise. I think (absent a currency exchange) the baker never sets prices based upon electrical costs. Instead he bases them on the cost of flour, eggs, rent, etc. delimited in ENC. He doesn't care what his customer's cost to acquire that coin was. The baker cares about the trade value of the coin when he goes to spend it.
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October 08, 2011, 07:39:10 PM
 #105

I'm not exactly sure what you are tying to fix?

Keeping the "value" stable over significant periods of time.

Quote
But my first guess you are trying to smooth out the function so that it does not change so dramatically by doubling in difficulty at 18 month boundaries. If that is the case, you want to reduce the ENC awards per block say every month, so you have an 18 step smooth exponential curve from 2 to 1. Then at 18 month intervals, you both double the difficult and double the ENC award/block and start down the curve again.

Right I'm not too worried about the details of how it changes, just how to adjust based on missing the expected curve. But I didn't think about doubling the difficulty and doubling the ENC, it's so simple that it passed me by apparently. We get it down to 2 ENC per block so that there is a baseline of the current, most efficient machines in the 50W range. Then we have a new baseline for bringing it back up again. If difficulty was the same at 75W as it is at 50W, then we know people have been cheating (or some other world circumstances have changed--or hardware has a new lower range on wattage output). Then we 3x the difficulty and 3x the award back to 6 and do it again. Damn, this might just work. The implications this might have on the network could be a bit tough to figure out though. More thought required.

But essentially, if common hardware uses only 50W in the future, when tripling it back up to 6, earning blocks will take 3x as long. It doesn't matter if it's 50W--it will be whatever equivalent is most efficiently possible to keep a reasonable profit and stable prices.

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Honestly, I never bought that premise. I think (absent a currency exchange) the baker never sets prices based upon electrical costs. Instead he bases them on the cost of flour, eggs, rent, etc. delimited in ENC. He doesn't care what his customer's cost to acquire that coin was. The baker cares about the trade value of the coin when he goes to spend it.

same difference! A baker doesn't care about the customer's cost to acquire a gold coin either, he cares about its trade value.


What do you think about my post on giving interest?

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October 08, 2011, 07:41:44 PM
 #106

Please just get this started already. Too much thinking no doing around here.

Cannot wait to buy 10 000 EnCoins then dump them ASAP as price rises. Please hurry up ! Thanks !
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October 08, 2011, 07:52:20 PM
 #107

Please just get this started already. Too much thinking no doing around here.

Cannot wait to buy 10 000 EnCoins then dump them ASAP as price rises. Please hurry up ! Thanks !

I'll sell you 10,000 now from the initial pre-mine. Just send $10,000 to... Wait, you are right. You deserve a pre-adopter discount so you can get some serious return on your investment. Just send $8,000 to me!
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October 08, 2011, 07:53:56 PM
 #108

Please just get this started already. Too much thinking no doing around here.

Cannot wait to buy 10 000 EnCoins then dump them ASAP as price rises. Please hurry up ! Thanks !

I'll sell you 10,000 now from the initial pre-mine. Just send $10,000 to... Wait, you are right. You deserve a pre-adopter discount so you can get some serious return on your investment. Just send $8,000 to me!

Maybe more like 8 cents !
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October 08, 2011, 07:54:20 PM
 #109

What do you think about my post on giving interest?

I have so many different versions in my head right now. I would have to read your latest on fee and interest to be able to respond coherently. I know anything I say right now would sound hopelessly lost in the weeds.
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October 08, 2011, 07:59:06 PM
 #110

I have so many different versions in my head right now. I would have to read your latest on fee and interest to be able to respond coherently. I know anything I say right now would sound hopelessly lost in the weeds.

Merchants get whatever fees that they can back based on how much money they are willing to put on the line. Anyone else just loses their fees. These lost fees get redistributed to people hoarding currency. So in down times, instead of selling, people can hoard and earn interest on those who do sell or trade at inflated prices. No one who buys cheap is going to care that they're getting inflated goods, only people who saved would care. So instead of freaking out, savers can just sit back, earn interest, and wait for the economy to get back.

And as an addendum to the other stuff, instead of basing the ENC reduction on time, we could do it based on the number of coins produced. This means if we get to a period where things are too cheap, it will last a shorter amount of time while ENC gets to a new baseline. HOLY SHIT.

I think I've fricken solved it. Tongue

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October 08, 2011, 08:01:29 PM
 #111

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I think I've fricken solved it. Tongue

OK now get coding and send me over 10 000 coins please. Thanks !!!
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October 09, 2011, 04:01:51 PM
 #112

I'm pretty sure I'm in general agreement with you. Not sure I understand all the mechanisms you have for paying interest. But I agree you are pushing the system in the right direction.

The hardest thing about monetary policy is that you are optimizing against a hidden variable. Nobody really knows what the break even point is for ENC. Once you have a $/ENC exchange, individual decisions becomes easier (I know what my cost, and immediate return would be). But still if you wanted to know what the system's optimal ENC price should be, there are too many hidden variables to get an accurate calculation.

That's what led me to try and detect what the "human" consensus on the money supply was (too high, just right, too low). Technically, I think you could get away with detecting just two states (too high, too low). In that case the stable (just right) state would be when the system was oscillating between too high and too low. However, in my personal analysis, I always tend to think about the optimal stable state first. Then I look at how the other two differ from optimal.

I'm pretty sure you are working on the same detection issues. It sounds like you are detecting money supply is "too low" by how many coins are minted. Or perhaps a ratio of minted coins/traded coins over a fixed period. Your money supply is "too high" as that ratio tends toward zero.

I'd like to propose is ratio for discussion. (minted coins/trading fees) Where minted coins is the total number of minted coins in a given period.  Trading fees is the total number of destroyed coins in the above period. Meaning total number of traded coins times whatever fixed fee you decide on.

(total minted/trading fees) < 1
If this ratio is zero, there is a 100% consensus that there is too much money currently available for circulation.
In this situation, I propose you attempt to do two things.
1. Encourage potential buyers NOT to buy. (Hoard coins until prices recover)
2. Destroy the coins of panicking actual buyers. (Your coin destroying fee)
3. Encourage potential sellers to sell NOW! (Stop hoarding goods)

Psychologically, I suggest charging your *panic* fee ON TOP OF the price the seller is asking. As opposed to requiring the seller to hide that included fee in his price. The former tends to make clear to *panicked* buyers that prices are *already* considered too high. It also makes it clear to sellers that NOW is a great time to actually close the deal. The later tends to encourage sellers to inflate their prices (which is what we are fighting against). And if they think prices are moving higher, they are further encouraged to hoard goods.

I think you are saying, "Instead of actually destroying these coins, they go into a system managed hoard for later re-distribution." If that is what you are saying, then I agree. Hoarding those coins is monetarily indistinguishable from destroying them.


(total minted/trading fees) = 1
If you are minting exactly what it take to replace your fees then there is a 100% consensus that the money supply is "just right".
Who should receive the newly minted coins is NOT a monetary policy decision. It can be adjusted to encourage other behaviors as you see fit.


(total minted/trading fees) > 1
This ratio is unbounded, so it has no way to express 100% consensus that the money supply is "too low". But the farther this ration moves above one, the closer you get to that consensus.
In this situation, you have too many goods trading for the existing amount of coins. So I propose you attempt to do two things.
1. Encourage, hesitant buyers to buy NOW! (Stop hoarding coins)
2. Discourage sellers from panicked selling of goods. (Hoard goods)

As this ration tends above 1, your fixed transaction fee tends to fight against your monetary policy goals. You are destroying coins during a period where everyone is in agreement that more coins need to be minted. The consequences of this should be minimized whenever possible.

This is a good time to re-distribute all fees. Both the system's previously hoarded fees, AND the current transactions fees. Who receives those re-distributed fee coins is NOT a monetary policy decision. It can be adjusted to encourage other behaviors as you see fit.


Merchants get whatever fees that they can back based on how much money they are willing to put on the line. Anyone else just loses their fees. These lost fees get redistributed to people hoarding currency. So in down times, instead of selling, people can hoard and earn interest on those who do sell or trade at inflated prices. No one who buys cheap is going to care that they're getting inflated goods, only people who saved would care. So instead of freaking out, savers can just sit back, earn interest, and wait for the economy to get back.

I think I'm generally agreeing with this, as stated above.

And as an addendum to the other stuff, instead of basing the ENC reduction on time, we could do it based on the number of coins produced. This means if we get to a period where things are too cheap, it will last a shorter amount of time while ENC gets to a new baseline. HOLY SHIT.

I'm not sure I understand this enough to comment.

EDIT: LMAO, I really didn't understand what you meant when I started typing below. (Basing ENC reduction on time.) I thought you were talking about the logarithmic reduction to compensate for increasing CPU efficiency. Now that I read what I wrote, and re-read what you suggested. It seems like I just re-wrote exactly what you said. If that is the case, I guess I do understand it enough to comment!


But I wrestled with a similar sounding conundrum:
If (total minted/trading fees) greater than one, persists for multiple periods in a row. It seem like coins should be easier to mint. That is what I was getting at when I added the +2 level to my system.
If (total minted/trading fees) less than one, persists for multiple periods in a row. It seem like fees should be higher. However, both of these lead to more abrupt final transition states.

I hadn't considered the above ration when I was thinking about that though. Perhaps things could be smoothed by considering the ratio rather than time? [edit: Smiley]

Say perhaps, the number of coins awarded per block is in proportion to (total minted/trading fees). Does that tend toward stabilization or toward more dynamic swings?

Fee's are more difficult to adjust because they affect the ratio itself. But you could add a "surcharge" as the ratio moved below one toward zero. Perhaps a surcharge using the inverse ratio (trading fees/total minted) makes sense. (As minting moves to zero, the surcharge moves to infinity.) That would provide a strong disincentive to panicked selling!
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October 09, 2011, 04:04:33 PM
 #113

Can you at least give us an ETA for this please  Roll Eyes
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October 09, 2011, 04:13:30 PM
 #114

Can you at least give us an ETA for this please  Roll Eyes

No, because this is not a trivia: Take bitcoin's code base, change one constant, recompile and offer a release. At least we haven't figure out if it could be done that way yet. Some ideas actually take work.

I'll keep working on this until we can simplify the idea into something easy to implement. If that becomes the case, I'll just do it. But if the minimal implementation is going to take several man years of coding, I can't commit that much time and energy for free.

Eitherway the work would go so much faster if you would send in that $8,000 already!
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October 09, 2011, 04:57:44 PM
 #115

I think I've fricken solved it. Tongue

Me too!

I think it might be possible to implement this economic model on top of the bitcoin code base. I'm kicking around in my head if the reconciliation/consensus stuff could be avoided by using varying speed block creation.

Someone wrote GeistGeld was experimenting with 15 second block creation times? I think the feasibility of that depends on how many peer nodes they have in the network. But if they could substantially speed up the rate without overwhelming the network, then their appears plenty of room for flexible block creation rates.
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October 09, 2011, 05:18:46 PM
 #116

The hardest thing about monetary policy is that you are optimizing against a hidden variable. Nobody really knows what the break even point is for ENC. Once you have a $/ENC exchange, individual decisions becomes easier (I know what my cost, and immediate return would be). But still if you wanted to know what the system's optimal ENC price should be, there are too many hidden variables to get an accurate calculation.

Right, this is why the award would gradually (or perhaps not so gradually) lower on occasion, to weed out the less efficient.
If FPGAs or low-wattage GPUs become prevalent, these devices are making coins at a lower cost to produce than previously possible.
If the award is dramatically lowered to 3 instead of 6 coins, inefficient cards have to lower their output while efficient cards can remain at the same output (assuming they use about half the electricity). This provides a new baseline that I mentioned. Inefficient cards will have to quit, and efficient cards will have to compete against each other instead of siphoning off the inefficient cards. Then, after a period of time, the award and difficulty can double back to 6 so that the process can start over.

Since, in a stable economy, coins may not need to be produced all that much, I came up with the idea of doing this by the number of coins produced rather than time. Perhaps the award could adjust every 250k coins or something.

But this provides a potential attack. Supercomputers and/or pools could get in and intentionally raise the difficulty if not too many people are making coins. This could be alleviated by having a minimum amount of time before producing a block and having a maximum difficulty increase per chunk of coins produced (this figure will be hard to determine though because we have both Moore's and Koomey's Laws we need to account for). It's a band-aid though. Intentionally raising the difficulty means the coins would start trading for more than their CTP, and this gives an opportunity for hoarders to make a lot of money. So it might encourage them to raise this difficulty. That's why I'm thinking a bigger chunk like 250k coins, it would cost a lot of money to do it. But by making it so high, this means that coins may be produced for a long time at less than the CTP, but at least there is a cap on it.

Quote
I'm pretty sure you are working on the same detection issues. It sounds like you are detecting money supply is "too low" by how many coins are minted. Or perhaps a ratio of minted coins/traded coins over a fixed period. Your money supply is "too high" as that ratio tends toward zero.

Not trying to detect anything; trying to foster competition among the more efficient so that it can happen automatically.

Quote
Psychologically, I suggest charging your *panic* fee ON TOP OF the price the seller is asking. As opposed to requiring the seller to hide that included fee in his price. The former tends to make clear to *panicked* buyers that prices are *already* considered too high. It also makes it clear to sellers that NOW is a great time to actually close the deal. The later tends to encourage sellers to inflate their prices (which is what we are fighting against). And if they think prices are moving higher, they are further encouraged to hoard goods.

I think if you encourage hoarders to hoard during inflation (via interest), this works itself out. As I said, new buyers won't care if prices are inflated because they paid less for their coins. If 1 ENC costs 0.5 ENC from a year ago, they have no issue with paying 2 ENC for a loaf of bread. They shouldn't be penalized for buying in during inflation. It sounds like you are trying to prevent an inflationary spiral which I think is awfully unlikely with the monetary policy. No one is going to make coins during inflation, so the economy should eventually recover, so this will encourage people to buy coins and remove them from circulation.

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As this ration tends above 1, your fixed transaction fee tends to fight against your monetary policy goals. You are destroying coins during a period where everyone is in agreement that more coins need to be minted. The consequences of this should be minimized whenever possible.

But they are minimized. Merchants will be providing a service to the network by confirming transactions and so on, and in doing so they are receiving a large chunk of these transaction fees back. Hoarders receive a small interest payment and this payment could be used to sell on the market. May as well sell now before the coins get back to CTP.

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This is a good time to re-distribute all fees. Both the system's previously hoarded fees, AND the current transactions fees. Who receives those re-distributed fee coins is NOT a monetary policy decision. It can be adjusted to encourage other behaviors as you see fit.

I think it is more fair to go to the hoarders as they are people who already believe in the system. Distributing these fees to miners only encourages more people to mine when the price is high, sell, and be done with it.

Quote
Say perhaps, the number of coins awarded per block is in proportion to (total minted/trading fees). Does that tend toward stabilization or toward more dynamic swings?

I think it is just too hard to predict what will happen by doing this.

If the award lowers over time, people have to adjust their output or risk making coins unprofitable. This is kind of annoying because people who want to go full blast still can (supercomputer/pool problem). Certainly the software can automatically adjust when the award changes, but each time every person will have to look at their mhash compared to their watts compared to the market price to see if what they are doing is profitable (going full blast is likely going to subsidize others as described before). But I think this is the only way to do it and really let the market decide. 1 ENC tends to 1 ENC.

If prices of electricity increase faster than fiat inflation, people will have to wait until more efficient hardware can catch up. In the mean time, hoarders will have the opportunity to smooth out deflation by selling. They will make a profit, but not by their "early" investing, just by an unpredictable consequence of the world.

If fiat inflation increases faster than the price of electricity, there will be more competition to make coins and this will cause the difficulty to go up and the market price to go up, as it should.

If the price of electricity falls or hardware becomes more efficient faster than expected, the lowering of the award causes renewed competition that will increase the difficulty faster than normal (it's profitable for me to mint at full blast, so I will).

The *only* problem I see is, like I said, someone with the time and the means to intentionally try to drive up prices. If there are always people minting it is a lot less easy to do, but during times of inflation it would be even easier to accomplish. I'm not sure how to safely account for this yet.

Etlase2
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October 09, 2011, 05:26:03 PM
 #117

Me too!

I think it might be possible to implement this economic model on top of the bitcoin code base. I'm kicking around in my head if the reconciliation/consensus stuff could be avoided by using varying speed block creation.

Someone wrote GeistGeld was experimenting with 15 second block creation times? I think the feasibility of that depends on how many peer nodes they have in the network. But if they could substantially speed up the rate without overwhelming the network, then their appears plenty of room for flexible block creation rates.

Some of it could be applied, sure, but certainly not all of it. Bitcoin is secured by hashing power. This is a joke that needs to be eliminated. I've spent too much time thinking how to get away from how bitcoin works, so no offense, but I'm not spending any effort on trying to figure out how to hack the encoin idea in.

bulanula
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October 09, 2011, 05:38:09 PM
 #118

Me too!

I think it might be possible to implement this economic model on top of the bitcoin code base. I'm kicking around in my head if the reconciliation/consensus stuff could be avoided by using varying speed block creation.

Someone wrote GeistGeld was experimenting with 15 second block creation times? I think the feasibility of that depends on how many peer nodes they have in the network. But if they could substantially speed up the rate without overwhelming the network, then their appears plenty of room for flexible block creation rates.

Some of it could be applied, sure, but certainly not all of it. Bitcoin is secured by hashing power. This is a joke that needs to be eliminated. I've spent too much time thinking how to get away from how bitcoin works, so no offense, but I'm not spending any effort on trying to figure out how to hack the encoin idea in.

Agree with you there mate !
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October 09, 2011, 06:45:48 PM
 #119

I think we are in, what an old professor of mine used to call, violent agreement. I think we are saying very much the same thing, but using different words. Inflation for one tends to be a maddening word for me. Normally I use it to mean goods prices are inflated against ENC. Meaning bread used to cost 1 ENC and now bread costs 2 ENC. But talking about buying and selling ENC using dollars the terms get more complicated.

In my mind if,
before: 1 ENC = 1 loaf = $1
after: 1 ENC = 1 loaf = $2   Then we are stable and have met our goals
after: 1 ENC = 2 loaf = $2   Then goods pricing, with respect to ENC, has deflated. Meaning mint more coins. Discourage hoarding.
after: 1 ENC = 1/2 loaf = $1  Then goods pricing, with respect to ENC, has inflated. Meaning destroy coins. Encourage hoarding.

But I think we are both pushing in the same direction, no matter what definitions we are using. So much so, that if I didn't reply to something in the previous post, assume we are in agreement.

Right, this is why the award would gradually (or perhaps not so gradually) lower on occasion, to weed out the less efficient.

I agree with everything in that section, but I'm confused by your use of "lower on occasion".

Wasn't the plan to lower deterministically (and smoothly) based upon the presumption that Koomey's law will hold? I think that is what you are saying. If so, I agree.

But on first read "on occasion" sounded like, "If things get wonky..." 

If the award lowers over time, people have to adjust their output or risk making coins unprofitable. This is kind of annoying because people who want to go full blast still can (supercomputer/pool problem). Certainly the software can automatically adjust when the award changes, but each time every person will have to look at their mhash compared to their watts compared to the market price to see if what they are doing is profitable (going full blast is likely going to subsidize others as described before). But I think this is the only way to do it and really let the market decide. 1 ENC tends to 1 ENC.

If you mean, "When the award lowers over time" then I totally agree with the rest of your statement. As far as I have been able to figure, people are required to pay attention and make decisions in their own self interest. Otherwise, they pay their own consequences with the electric company. (Like a gambler losing in Vegas)

However, THE GENIUS OF YOUR ENC=KWH IDEA means nobody else has to care.

If the award reduction/difficulty increase keeps everyone else aligned with Koomey's law. (for argument 1 ENC = 10 kwh) Then the run away minter is now minting at 1 ENC = 11 kwh. If he continues to do so causing an ENC glut and price inflation then he is compounding his loss because his 1 ENC buys < $1.

If enough people mint at a loss, it will temporarily trick the system into thinking the consensus is to add more money into circulation. Your proposed fee refund will begin dumping money into the market. This will temporarily increase inflation for the minter, but your "interest" compensates everyone else as an offset. This further compounds the runaway minter's losses.

But there is no way a runaway minter can profit. Like in Vegas, a time will come when he has to pay the piper. And that electric company piper is a real bitch!

---

"If the award lowers over time" makes it sound like, you still entertaining other concepts besides adjusting awards & difficulty towards Koomey's law? Are you considering another alternative.
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October 09, 2011, 07:04:00 PM
 #120

Some of it could be applied, sure, but certainly not all of it. Bitcoin is secured by hashing power. This is a joke that needs to be eliminated.

I agree with you here as well. Any idea I would propose would contain a smaller "trusted" core of peers with the basic characteristics you designed into your "TrustNet/FreeNet/CoreNet" entity. I just think it could simplify the (transaction union/reconciliation procedure) that you go through in creating Primary Blocks.

I've spent too much time thinking how to get away from how bitcoin works, so no offense, but I'm not spending any effort on trying to figure out how to hack the encoin idea in.

Fair enough!
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