Proof Of Work Stablecoins

[scottppp]

Hi all,

A philosophical / product discussion to see community sentiment.

Would the Bitcoin / Proof Of Work community be interested at all in a proof of work stablecoin?

The design would be oracle free, governance free, reserve free and algorithm free, but maintain stability. It would hold independent monetary policy.

To acheive this, the monetary theory would need to break the impossible trinity, which is possible in cryptocurrency systems, only proof of work however. https://en.wikipedia.org/wiki/Impossible_trinity

Is a proof of work stablecoin that is as open as Bitcoin something that would interest the community?

Many thanks and look forward to discussion on the concept.

Scott

[goldkingcoiner]

Hi Scott. Welcome to Bitcointalk! 

Sure, the concept of a stablecoin on PoW could be very interesting, however I think most people would dismiss this idea because it would not really be stable in the first place.

How would you achieve stability? What would it be pegged to? How would it maintain a peg without intervention? Nothing about PoW alone implies stable purchasing power.

Most stablecoins are just a fiat proxy. And those that are not, are proxies of other pegged value reserves.

[proofra]

Hey,

The design would be oracle free, governance free, reserve free and algorithm free, but maintain stability. It would hold independent monetary policy.

The idea sounds good, but unfortunately only at first glance. I don't see how there can be a truly stable currency without some form of reserve, collateral, redemption mechanism, oracle and/or algorithmic stabilization.

Since you already exclude reserves, oracles, governance and algorithms, the only obvious remaining mechanisms would be collateral and/or redemption (even if both are very close to reserve). Is that what you mean, or are those excluded too? Because if they are also excluded, I don't see where the stability would come from.

As stated, the definition sounds internally contradictory. You probably have to compromise somewhere.

You can say "but real country currencies are not backed by anything!", but they are backed by more than nothing. They are backed by state power, taxation, central bank policy, legal enforcement, markets, and often some form of reserves, even if not 1:1.

If we are talking about crypto, there has to be some logic, some code. For PoW, there are nodes, consensus rules, an algorithm everyone agrees on.

The scope of "algorithm-free" should also be specified. What exactly is supposed to be algorithm-free? The peg mechanism, the monetary policy, the issuance, or the consensus mechanism? Because PoW itself is algorithmic.

Even Bitcoin is not stable. It is fair, open, decentralized, and checks many boxes, but it is not stable in price or purchasing power.

On the other side, maybe I got it wrong. If there is a real concept behind it instead of just words, I would like to hear it and discuss.

The main questions for me are:

If there is no reserve, where does the stability come from? What is backing it? What is it linked to? How do you prevent volatility? If there is no oracle, how does the system know the target price? If there is no governance, who reacts when conditions change? And what exactly is the purpose of PoW in this idea? Removing governance?

[IShishkin]

Hi all,

A philosophical / product discussion to see community sentiment.

Would the Bitcoin / Proof Of Work community be interested at all in a proof of work stablecoin?

The design would be oracle free, governance free, reserve free and algorithm free, but maintain stability. It would hold independent monetary policy.

To acheive this, the monetary theory would need to break the impossible trinity, which is possible in cryptocurrency systems, only proof of work however. https://en.wikipedia.org/wiki/Impossible_trinity

Is a proof of work stablecoin that is as open as Bitcoin something that would interest the community?

Many thanks and look forward to discussion on the concept.

Scott

Hello Scott. Welcome to Bitcointalk.

I think ordinary people and ordinary regulators have built a very strong association between the word "stablecoin" and centralised, oracle-based, collateralised digital securities such as USDT and USDC. The usage of the word "stable coin" might trigger scrutiny and demands to disclose collateral, governance, "proof of USD stability" and etc.

I think, the proper "MICA complied" term for this concept is a "simplified price discovery coin".

[asriloni]

Hi all,

A philosophical / product discussion to see community sentiment.

Would the Bitcoin / Proof Of Work community be interested at all in a proof of work stablecoin?

POW stable coin sounds so terrible. The up and down of its backing asset will not able to maintain its peg. I give you an example a stable coin called APX usd. This stable coin used Bitcoin credit owned by Saylor as its peg through backing it with Saylor's preferred stock STRC. It's now depegging because the dump of Bitcoin, which is also dumping the price of STRC used to back it went down.

So i think POW stable coin will never work. The most important thing in the stable coin is the stability of its peg. That's why it's being called stable coin.

[noorman0]

-snip-

If there is no reserve, where does the stability come from? What is backing it? What is it linked to? How do you prevent volatility? If there is no oracle, how does the system know the target price? If there is no governance, who reacts when conditions change? And what exactly is the purpose of PoW in this idea? Removing governance?

If the Bitcoin premium is based on the cost of producing "new" coins, my first approach would be to force a cap on the mined block reward or stabilize energy consumption (I think it's a protocol adjustment).

This is interesting because it mentions no currency backing.

[Findingnemo]

The design would be oracle free, governance free, reserve free and algorithm free, but maintain stability. It would hold independent monetary policy.

To acheive this, the monetary theory would need to break the impossible trinity, which is possible in cryptocurrency systems, only proof of work however. https://en.wikipedia.org/wiki/Impossible_trinity

Explain this to even know what kind of stable coin you are talking about? A stable coin with zero value, is that what you are proposing?

It has to be independent like the value is coming from the demand and supply or it has to be pegged with gold, fiat or even water but backed by nothing and you call it a stable coin?

[scottppp]

-snip-

If there is no reserve, where does the stability come from? What is backing it? What is it linked to? How do you prevent volatility? If there is no oracle, how does the system know the target price? If there is no governance, who reacts when conditions change? And what exactly is the purpose of PoW in this idea? Removing governance?

If the Bitcoin premium is based on the cost of producing "new" coins, my first approach would be to force a cap on the mined block reward or stabilize energy consumption (I think it's a protocol adjustment).

This is interesting because it mentions no currency backing.

You are on the right track, cost of production models like Hayes do form parts of Bitcoin "value". There does not need to be a currency backing it.

I'll post the full whitepaper soon, the design is complete, it's sound, valid, needs no reserves or oracles and is 100% stable around a nominal rate.

I've been in monetary theory for 13 years and spent a full year trying to achieve it, it's genuinely novel.

You can literally update the monetary policy for every proof-of-work network in the market today and they would all stabilize around their recent averages. Monero, etc.

[noorman0]

So my shot almost hit.
I imagine it will be complicated, figuring out how to truly balance energy consumption while maintaining a stable supply. Normally, stablecoins cannot be produced continuously, even if strict block reward adjustments are implemented, because energy is infinite. Furthermore, the purchasing power of stablecoins is never stable over time.

[scottppp]

So my shot almost hit.
I imagine it will be complicated, figuring out how to truly balance energy consumption while maintaining a stable supply. Normally, stablecoins cannot be produced continuously, even if strict block reward adjustments are implemented, because energy is infinite. Furthermore, the purchasing power of stablecoins is never stable over time.

That's the right track.

It's actually incredibly simple and very elegant.

I haven't shown anyone yet as I'm looking to somehow profit from it, at this point it's going to be consultancy to financial market players for risk management as I'm specialized in foreign currency crises, including stablecoins.

Just looking to protect the I.P initially till I've set up a consultancy. Happy to discuss it in private if you have Signal however.

[bitgolden]

Nope. While I understand the concept and why people may think that this could work, in theory it looks good but in practice it would not work.

Proof of Work would not be a concept that would align with stablecoins because it would give power to "someone", not like one person, to some people, but the ones who do the proof, will be the ones who have power over others, and that is exactly why nobody would want something like that. We are not printing money, so where does the reward comes from?

[o48o]

Hi all,

A philosophical / product discussion to see community sentiment.

Would the Bitcoin / Proof Of Work community be interested at all in a proof of work stablecoin?

The design would be oracle free, governance free, reserve free and algorithm free, but maintain stability. It would hold independent monetary policy.

To acheive this, the monetary theory would need to break the impossible trinity, which is possible in cryptocurrency systems, only proof of work however. https://en.wikipedia.org/wiki/Impossible_trinity

Is a proof of work stablecoin that is as open as Bitcoin something that would interest the community?

Many thanks and look forward to discussion on the concept.

Scott

Can you elaborate on this concept? I am not a coder, so if you can dumb it down a little bit

Like where's enough liquidity to absorb the trade pairs supposed to be coming from? Maybe i am ignorant to understand, but energy doesn't magically turn into value just because it did with bitcoin. If it would, then every PoW coin would be profitable.

[Odusko]

Possible proof of work stablecoin on Bitcoin network could be an interesting concept and the problem is that we likely have a speration between interest and real adoption, there are a few things like trust on the third party involvement that comes from stablecoin like government involvement something that most bitcoinair won't b interested in based on the fully decentralized network provided with Bitcoin.

[IShishkin]

That's the right track.

It's actually incredibly simple and very elegant.

I haven't shown anyone yet as I'm looking to somehow profit from it, at this point it's going to be consultancy to financial market players for risk management as I'm specialized in foreign currency crises, including stablecoins.

Just looking to protect the I.P initially till I've set up a consultancy. Happy to discuss it in private if you have Signal however.

From your perspective, what networks, solutions and proposals are the closest to your vision? What is your prior art? What makes your proposal stand out?

[d5000]

cost of production models like Hayes do form parts of Bitcoin "value". There does not need to be a currency backing it.

I don't think that can be a solid foundation for a "stable" coin, because the proportion of the "newly produced" coins gets smaller and smaller, so the "stability" effect - if it exists! - will also diminish over time.

The only exception is if you include an asset into the currency system that leads to a real shrinkage of supply in some situations (e.g. via some kind of proof-of-burn mechanism).

The concept of an "energy referenced" coin is quite old. I don't know if you have seen the discussions about it in 2013-14, but you can find info in these threads:

StableCoin
[StableCoin] Welcome and Introduce Yourself....

The energy referenced type of coin is called "MordorCoin" in this discussion. There were also concepts like Encoin, GEM and Decrits.