No it isnt. Its quite clear, accurate and a key point. Short term fluctuations are irrelevant and averaged out. If your point is that difficulty adjustments are too slow, I might even agree, but that issue is more easily addressed by.. you know, a minor tweak in the algorithm. But there are also arguments to be made for a slow difficulty adjustment, as it allows miner to plan at least a little bit ahead. Fact is on average, 1BTC will cost around 1BTC to produce. That for a week or so it might be more or less expensive is a non issue.
I'm sorry, but you are wrong. It has nothing to do with short term fluctuations, it has to do with long-term growth. There is a very limited supply of money, and a large percentage of it has already been produced for less than what later coins will be produced for. The more people that want bitcoins, the more they cost to create. This does not mean 1 BTC costs 1 BTC to produce on average. If 7.5 million BTC cost $2 to produce on average and bitcoin doubled in popularity and the award halved, and a BTC now costs $8 to produce on average between 7.5 and 15 million, that means the average cost to produce was $4 but currently costs $8 to produce. That value goes to those who mined or bought coins when they were $2 to produce. This can be brought out to extreme examples. It is meant to be deflationary, it is meant that later coins will cost more to produce assuming a growing economy. It definitely does not mean that 1 BTC will cost, on average, around 1 BTC.
What are you blabbering? Instability of what? This has nothing to do with BTC valuation, it only affects the hash rate which, for short periods of time, might be comparatively high or low compared to the exchange value of the block chain. So what?
Instability in the value of BTC. The halving of the hash rate because of the price halving does not suddenly refund those who didn't sell their BTC when the hash rate and value was double. I want a system where people can actually confidently store their wealth rather than having it be an investment vehicle that is, as far as anyone can tell, just as likely to go up or down. And it is much more likely that early adopters are the market force rather than any combined thinking of the people. This is power removed from the people in a manner very similar to government-backed currency. I do not believe that bitcoin is an improvement at all in this respect.
I havent fully read your proposal, as Im still waiting for an executive summary outlining the basic underlying principles, rather than just the goals and long pages descibing what certainly appears like an overly complicated scheme. It should not be hard to describe the main principles in a few paragraphs. Price is the meeting of supply and demand. Am I correct guessing you intend to vary money supply to match demand, using aggregate hash power (a proxy for electricity cost) as a measure of demand?
Rather than pooling resources together in large groups like bitcoin, small groups of peers are randomly assigned together to create coins (supplynet groups). There is no limit on the amount of groups there can be. Each group only competes within itself to grab a share of the mint block award which is proposed as either 4.5 or 6 coins. Based on the mint block rules described in TD-9, it is very un-advantageous to use a botnet or a super computer or even a 4x GPU rig to try to mint coins. It encourages everyday GPUs which means less overhead in creating coins; just electricity, not a huge investment in hardware.
Based on how quickly coins have recently been created, difficulty increases in a manner similar to bitcoin, except the difficulty is on a per-coin basis. However, after a certain time period has passed, the award will drop to 4.5 coins. This means more efficient machines can run at full power and still be profitable while less efficient machines will now make less money. This again increases the difficulty to account for improvements in electrical efficiency. When the award is raised again to 6, the difficulty will multiply back up now taking in to account this efficiency increase.
So it is not just based on hashing power = coins, it takes into account the improvements in hashing power over time plus the improvements in hashing power based on a restricted supply.
The example from TD-2 (assumes no improvement in hashing power based on hardware upgrades):
EXAMPLE:
1. The current difficulty for creating coins is a value of 100 which causes the average coin to be produced in 50 coin-hours.
2. The Network originally had 100% of computers producing coins using 150W of electricity to produce a coin in 50 coin-hours, 50 * 150W or 7.5kWh per coin.
3. 50% of the computers producing coins now use 125W of electricity while 50% continue to use 150W, while both produce coins at the same rate.
4. The cost to produce a coin in 50 coin-hours is now 50 * 137.5W or 6.875kWh.
5. When the Mint Block award drops to 4.5 coins, the difficulty drops to 75 as well and the client scales back computer output to 75% so that 125W computers are using 95W and 150W are using 115W.
6. By using the client calculator, those using 95W can easily see that they will make more coins at a profit by increasing their output to 115W (17%). Those using 150W computers cannot profitably increase their output because they are only getting 4.5 coins where they were once getting 6. The client can even be used to automatically increase this power output based on the market price supplied by the user (or by having the client contact a site in lieu of this).
7. Now the original 125W computers are producing coins at a 17% faster rate than their 150W competitors. This will cause the difficulty to increase by 8.5%.
8. When the block award returns to 6 coins, the difficulty will be 108.5, or 54.25 coin-hours to make the same coin as before. 54.25 * 137.5W ~ 7.5kWh.
kWh is only used as an example, but the cost per kWh is important as well, and this still works. Even if fusion comes around, it still works. People can pour more electricity in in times of short supply to make money. It's all market-based. The coin won't have a set kWh value, it will have a market value and it is up to the minter if they can profitably make coins.
The variable money supply allows the supply to grow as the economy grows, something bitcoin is designed not to do because "printing money is bad." Well this money is actually backed by its difficulty to produce; *always*. Not easy to produce from the start and progressively more difficult to produce, in more ways than one, as it gets more popular and time passes. And the difficulty to produce will remain relatively constant over time.
This is possible because hashing power is not required to secure the network, but describing that is the bulk of the proposal. In a few, quick points:
* Every transaction has a mandatory fee of 0.25% (min 0.05 max 10).
* Merchants are encouraged to secure the network by joining the tradenet, in which transaction fees will be refunded beginning at 25% on a tiered scale based on their reputation.
* Reputation is gained by receiving transactions and producing a confirmed transaction block containing transactions in a 10 second window. It is harder to gain reputation (more tx fees and txs are required) as your reputation increases.
* Reputation is awarded only once a day, so all merchants compete for these transaction blocks (that are randomly assigned based on previously confirmed transaction blocks). As more merchants compete, it will be tougher and tougher and cost more and more (in tx fees) for an agency to subvert this reputation.
* Merchants are required to hold a certain amount of ENC to reach the higher fee refund tiers (and reputation), which both creates demand for the currency and a real cost for anyone trying to subvert the reputation. When a node subverts the reputation intentionally by confirming a bad transaction, they will lose the money in the account (somewhat up for debate, but if it is a hacked account they are going to lose the money anyway).
* If they subvert reputation by splitting the network, all they can accomplish is delay transactions until reputation reaches a minimum of 50% of the total reputation ever seen in a day (see ATK-3 for more info). Assuming they are trying to make their own network, the "cloudnet" will be able to send transactions between both networks, and both networks will kill the others' reputation. Average users will be able to see which network has your Amazons and Neweggs and such while the other has a bunch of unknown and shady "merchants." They can't change even basic network operations because even end-users won't use the network then because the consensus block will not be valid in the client. This, I believe, is a better option than having developers intervene and having to release a new client in the case of a >50% hash power take over. Even then, someone with >50% of the hash will always be able to reverse transactions to some degree in bitcoin. Once a transaction is level 2 confirmed in Encoin, it is not reversible. This could take as little as 20 seconds. And no hashing power is necessary.
