I thought it was quite self-explanatory.
As I have been asked to further elaborate in a very professional and mature matter I will gladly oblige.
The basis of this coin (as I understand it) is that the developers will watch the market and if (when) market events start to devalue the currency they will step in and take action to circumvent this.
That's a very simple way of putting it, but yes. However, you do not address the mechanism by which we do this. The majority of this post will explain why, starting with:
This however, is wrong. The Federal Reserve has
four mechanisms of inflation and deflation control, none of which AIRcoin utilizes. They are:
1.
Interest Rate2.
Purchasing Securities from the US Treasury3.
Reserve Requirement4.
Open Market OperationsLet's break them down:
1. The Federal Reserve
loans to banks. AIRcoin does not. These loans to banks carry an interest (also called a Discount) rate, which incentivizes holding money (high interest) or spending/investing it (low interest). AIRcoin does not do this. To counteract inflation, the Federal Reserve raises the interest rate. This makes banks willing to hold on to more money, and not spend it. AIRcoin does nothing of the sort and does not claim control over loans or interest, and there is no third party (banks) between the AIRcoin pool and the users of AIRcoin. Therefore, in regards to the federal interest rate, there is no direct comparison between the Federal Reserve and AIRcoin.
You can actually read their daily interest rate selections on their website:
http://www.federalreserve.gov/releases/h15/2. The Federal reserve can choose to purchase securities (debt) from the US Treasury. This is one half of "printing" money. The treasury trades its debt to the federal reserve, putting funds into the Treasury's control to be spent according to the national budget requirements. In an ideal world, this is used to counteract the demand for withdrawls as people spend their money, and the economy grows.
Through the interest rate and reserve requirement (more below) the Federal reserve puts more money into the economy. In the US, we are not under a condition where this is the case. AIRcoin, because it does not utilize an interest rate, does not purchase debt from a third party, does not engage in this mechanism either.
3. (the other half of "printing money") The Federal Reserve can choose change the reserve requirement ratio for Banks. Banks are required to hold a certain amount of cash on-hand for withdrawls. This is strongly enforced, and is the second half of "printing money". After purchasing securities (debt) from the government, the Federal Reserve can now issue a lower reserve requirement, allowing more loans to be made (and they can also adjust the interest rate appropriately) or a higher one that prevents loans. This is the strongest method of controlling the money supply.
In some ways, this is similar to adjusting the block reward. It is only "1 step away" from directly affecting how much money is allowed to be in circulation, as it still needs to be issued through loans, whereas mining is "0 steps away".
However, the one thing unique to the Bitcoin code is that "printed" money in found blocks are not distributed to the group that created or manages the code, and are not used to purchase or issue debt, instead it is given directly to the miners. This has its down benefits and problems, but is generally is a better alternative that cuts out the "middle men" of the banks required to distribute cash to individuals.
Benefits to the mining system:
a. More evenly distributes the increasing money supply.
b. (in theory) has significantly less cost in intermediary actions (printing, minting, etc.) to generate a larger money supply
Problems:
c. Without intermediary action, there is no true mechanism for reducing inflation other than making the block reward approach 0.
d. Without controlling an interest rate, holding or selling a currency is unpredictable unless a mechanism for debt is employed.
e.
Reserve price, or price that miners would minimally sell at, is very low, whereas banks and individuals who withdrawl money maintain a high reserve price in exchanging it (just because the dollar is newly printed doesn't mean it will be sold lower!). This amplifies the effect each individual has on printing a small amount of coins, whereas the Federal reserve has a low effect on inflation spread out over a very large centralzied volume.
One thing of note is as a result of the relatively new phenomena of
Quantitative Easing the US Federal Reserve has been purchasing more and more federal reserve securities as an attempt to counteract the financial crisis. This involves buying private debt from financial institutions. Unconventional, indeed.
In concept and final effect, yes, it's like printing less or more money, but in mechanism and strength of effect, it is drastically different and almost incomparable.
4. This is the only, truly, the only way in which the Federal Reserve could be compared to the AIRcoin development team. We do, by definition, engage in open market actions! However, these actions are very, very different. AIRcoin provides liquidity services (closing spreads) and direct investment whereas the Federal Reserve purchases and sell government (and more recently, private) debt.
In a likely scenario, the developers will see the market plummet, and they will use their hefty coffers to start buying up all the low bids to create support and prevent the market from bottoming out.
We actually utilize a moving point-float system similar to that of British National Bank, called the
EMF.Now, immediately, you're thinking of George Soros who shorted $10B worth of Sterling in order to profit off of the removal of the Point-float system. It's a common misconception was that his actions
caused the removal of the system, but this is not true, he simply profited off of it, and it wasn't the Point-Float system that caused the dropping value: The Sterling had only been introduced 2 years ago into the EMF. Greater economic problems and problems with growth caused the dropping value.
In 1999, the Euro was introduced alongside of
ERM II, which is the mechanism currently employed. This is closer to what policy we engage in, but still relatively crude. This means we don't buy and sell "at a whim" but have "trailing" volumes that get stronger and stronger as prices go higher and higher, providing greater and greater resistance for buyers and sellers selling or buying out of the range. It's a little more sophisticated than EMF II in that regards, because we have the option to manage it a little closer on a few exchanges than a business can do to an entire country's worth of trade.
So it's not as if we just "Decide" to move the price up or down or keep in in a range, we provide hands that get stronger and stronger the more you deviate. This prevents shocking the market.
This will keep the price above a certain level but in no way means there wont be inflation as unlike the fed, the developers of aircoin have a limited budget.
(I'll leave the inflation stuff alone for now, that 's adequately addressed elsewhere in this post)
How to Kill AIRcoin:As explained below, the amounts of currency not immediately being used are re-invested. If, for example, the 24H volume of currency movement increases by 10% per day (highly unlikely) starting at 36 BTC, then (at our average price) we only need to make 1% (due to leveraging our large volume in investment) to keep up.
Here's the formula:
(A * B * (C ^ D)) - (E * F * (G^D)) = H
A = starting 24H volume
B = % of volume consistently above our range
C = % growth of 24H volume
D = Days growth is maintained
E = Value of our investment volume in AIR
F = Average Price we are trying to maintain
G = % gained per day on our volume
When H > 0, at that day D we run out of volume.
So at a 24H volume of 36 BTC and growing at 10% per day, with 20% of it out of our range, an average maintenance price of .00135, and us only able to get 1% per day, we could then sustain that for:
(36 * .2 * (1.1 ^ D)) - (2500000 * .00135 * (1.01^D)) = 0
Solve for D and you get about 72.05 days, meaning that with those assumptions, after 72 days of pure 10% growth, AIR would have a 24H volume of
45788.2333702 BTC at .00135 on average, which is
339,172,099.039 AIRIn reality, volume growth would be closer to 2-3% per day, and our investment gain would be about 2% per day, and only 10% or less would be outside of our volume. This puts us running out of volume after 701 days with a final volume of 36367799637 BTC per day. Or 1700 times more BTC than would ever exist, or 20 Trillion Dollars (about 25% larger than the entire United States Government GDP in one year) moved per day. Yes. That means that, with realistic assumptions, our coin would have to have more exchange volume in 1 day than the USD has in a year.
And all we have to do is raise the price from .00135 just a tiny bit to rectify that, if it manages to happen.
What does this mean? As long as our "limited" budget grows at an equal or faster rate, leveraged by having a much larger volume, we will always be able to sustain a huge volume of trading. It's about leverage and competing rates.
It should be noted at this point the developers investing pool is entirely in Aircoin, to the sum of 2,500,000. In order to counteract large price movements they will need access to bitcoins. So in order to have this "safety-net" they must first sell aircoin. In the short term this would contradict what they hope to achieve as they would be releasing more Aircoin into the market supply (inflation).
The aggregate demand incurred during the early stages of exchange is "thinned" at a dividing price, with a portion being sold to low reserve prices (a problem with cryptocurrency I pointed out earlier) with the BTC going to those who have mined the coin and wish to exit it immediately. The other portion (significantly larger) goes to the AIRcoin pool to be grown to return to meet increasing demand.
We do not need a large amount of BTC to regulate the price. The formula for this is the following:
[(A * B) - (A*C)] * D = (E+F) * G^D
A = Volume in 24H
B = % of volume traded over our range and adjusted
C = % of volume traded below our range and adjusted
D = Days of sustained trading
E = Buying power of AIR (in BTC) = Pool proportion in AIR * average exchange rate
F = Buying power of BTC = Pool proportion in bTC
G = Growth of Buying power per day (Pool growth)
In a worst-case scenario, let's assume that there is a constant 20% buying power above a median price of .00135 BTC/AIR, on a daily volume of 36 BTC, and there is NO sell volume outside of our range.
[(36 * .2) - (36*0)] * D = (3375) * 1.01^D
On day 469 is when we just can't keep up anymore with the market making, since the market has been one-sided for over a year and a half. That would, indeed, be quite amazing.
More realistically, there will be a disproportionate amount of demand but also some supply sale. Let's assume there's 10% outside of our volume, changing the formula to:
[(36 * .2) - (A*.1)] * D = (3375) * 1.01^D
Which has no real solution, since as D gets larger, the two equations never cross.
But how much do we have to sell in AIR to be able to start that cycle?
If the liquid volume for our coin is 36 BTC per day, and 20% of it falls outside of our ranges (same extreme % from the previous example) and the amount we buy and the amount we sell is 50/50 then we only need to hold roughly 3.6 BTC and 3.6 BTC worth of AIR in the market. Even if the sell amount is 100% of the amount outside of our range, we only need to hold 7.2 BTC and 0 AIR. If we launch at our current mining opportunity price, that's only
3000 AIR.
Again, highly unlikely that cannot be sustained.
Once done, they would have a safety net available. I would assume that every time there is a dip in the market they would then need to deplete their bitcoin reserves by buying up the aircoin being dumped. Now using this method they can almost be assured to increase their investing pool because once that support is established the price will have no where to go but up, and they will be able to sell the cheap aircoin they purchased at a profit. This assumes non-repetititve crashes, as obviously their reserves could be depleted if a continued downward trend happened.
That BTC generated by meeting demand and market making? It doesn't just sit around. We reinvest it to grow enough to keep pace with increasing demand. This means we can not just return to the original price,
but return to a higher price. So even those extreme circumstances outlined earlier assume the price can't be increased through this method.
But you do identify the profit proposition:
Market Making. If the higher buyer only wants to buy for .001 BTC and the lowest seller wants to sell for .00135, we can put orders at .00101 and .00134 trailing down to .00116. and gain between 2-33% gain on making that sale. This means that not only do people get to move their funds quickly (liquidity) but the amount of buying power increases too, furthering the currency's strength.
So far, this is sound procedure and if trustable could function quite well.
But therein lies the problem.
Time and time again the fed, bankers and politicians have proven that they are not trustable.
You can rest easy that at least the fed will not take the nations money reserves and run off with them. They have oversight, regulations and laws.
With Aircoin they have no oversight, no accountability, no laws.
I would like to make the distinction that I am not calling the developers of Aircoin theives or criminals. I am not implying that they have malicious intent.
What I am saying is that Cryptocurrency was developed because we cannot trust humans not to be humans. At times we are weak, greedy and corruptable. Even the most honest man could be turned to crime should the circumstances be right (maybe your wife is dieing and needs a heart transplant but you dont have $1,000,000 to pay for the procedure... what would you do?).
I believe for anyone to put blind faith in anyone else in this community goes against what cryptocurrency stands for.
I want to emphasize the next quote:
The developers of Aircoin have an uphill battle to fight.
They have to prove that they are trustworthy but they can only do that by people trusting them blindly and waiting to see if it's true.
That is why I asked you to post. NO transactions occur without trust. Even in cryptocurrency. Bitcoin users may not know the location, identity, or thoughts of the person they are trading with, but they do have to have faith in any businesses, services, transactions, and the code will all work as intended. If we can't trust eachother, then the only method of conflict resolution is violence.
That being said, we have a
very difficult battle. But I think my team is exceedingly well equipped to deal with it.
My earlier comment was a bit rash (as many are) but the sentiment remains the same.
You have a decentralized currency with a centralized point-of-failure.
We could give any number of scenarios that would be potentially fatal to the currency (loss of investing pool funds due to theft, hack or virus comes to mind).
Maybe you get run over by a bus? To plan for that scenario you must trust another with access to the funds in the event of your death. By trusting another with access to those funds in the event you are immediately killed, you have created another point-of-failure.
The list goes on.
These are issues that are not easily solved.
In the result of failure, as insurmountable as it seems, AIRcoin doesn't technically fail, it simply becomes just another cryptocurrency that doesn't offer market services. If my entire development team were to die overnight, it would still operate with the same support of any other cryptocoin.
And that's the beauty of it. That's what makes this whole endeavor unique: Upon absolute failure of our development team, it is still a good cryptocoin with usable code.
Those that refuse to act out of fear are left behind. That is the cost of fear. There is a lot of fear in the cryptocoin community. In my whitepaper I identify a number of problems with the community and the technology's development thus far. The Pirates of Cryptocurrency are afraid, they run and move on fast ships stealing coins and hoarding, away from the prying eyes of the government. I described that in my whitepaper,
The Island Nations of Cryptocurrency.Like with all new technology, fear of contingency failures can only be rectified by faith in development. You need faith in our team and our capabilities.
That's why I asked you to respond, so that I may have the opportunity to prove ourselves. If you can't trust us, if you can't believe us, at the very least trust the math behind our ideas:
Strength in numbers.Our conquest is not one against human, but against fear as an idea. That's what we're really doing though, destroying fear. Fear of bitcoin crashes, fear of pumps and dumps, fear of US regulation, fear of financial slavery to large institutions, fear of Massive Investment Banks, and fear of government failure. But that is a large mountain to chip away at. However, one step at a time, my team is scaling it. This post, your post, all previous posts, are just little chips and rocks we've knocked down on our way up. As we climb higher, prove our concepts, the risk of falling will become greater and greater, but hopefully our, as in the collective strength of everyone behind AIRcoin, will grow as well. Not because "strength" makes something more valuable, but because
strength in oneself can kill fear.
That doesn't mean that fear isn't healthy, but there is an inordinate amount of it in this market. Enough that it will scare giants into doing something that could ruin this technology's future adoption for decades to come.
If you kill that fear through innovation and success, then you have solved the problem with this technology.
- Alexander
