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Author Topic: Altcoin tied to USD?  (Read 1012 times)
chsados
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February 15, 2012, 09:36:13 AM
 #1

I've never looked into altcoins, it seems like most of them aren't really offering anything new.  However, I am wondering if anyone has proposed an altcoin that was purely based upon the dollar/euro?

I understand that many people may hate this idea because the "dollar is going to DIE DIE DIE!!" but bear with me and just forget about that for a minute.

What would be the challenges of an altcoin being entirely based on the dollar?  

I can see a future where bitcoin fails, but the technology behind it implemented into a nations currency.  
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markm
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February 15, 2012, 09:53:29 AM
 #2

The Brits and Canadians in the Galactic Milieu keep coming back to this idea, except they are thinking GBP and CAD, respectively, instead of USD.

The main problem is having such a low budget for securing the blockchain, because it is not really economically practical to let random miners out on the net create dollars or pounds out of thin air thus the coins have to be issued initially only to the "central bank", the issuers, the people who are committing to buying them at very close to the price of a CAD dollar or a GBP pound.

In these two cases, their blockchains are just like Bitcoin's will be at some future date: about 21 million coins, all issued, with mining being paid for only by transaction fees.

The theory seems to be that if all the coins do eventually get into circulation, then it should be possible to allow the price to start to float higher, if the market chooses to let it do so, but the backers will always stand ready to buy back each and every coin at very close to the price they sold it for.

Think like maybe sell them for 1.01, buy them for 0.99, something like that.

Initially the General Mining Corp (GMC) and General Retirement Fund (GRF) coins seem content to follow along with this as if their coins are only worth the same as a CDN (Canadian Digital Note), so they have scripts ready to keep putting inn orders to buy 100 CDN for 99 GRF or GMC and to sell 100 GRF or GMC for 101 CDN, and also for higher scales too like 1000 GMC or GRF for 1001 CDN and so on.

Thus they too hope to maintain a stable target price for their coins.

No USD has been contemplated yet mainly because the "American" civilisation is not yet an active player in the Galactic Milieu, but since Freeciv includes nearly all currently existing nations of "the planet known as Earth" it is hoped that this approach can eventually lead to having a blockchain currency standing ready for each nation on the planet for its in game game-citizens to use even if here on that actual planet that nation chooses not avail itself of the opportunity by declaring it not an officially valueless game-token but, rather, an actual currency...

-MarkM-

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Revalin
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February 15, 2012, 05:18:21 PM
 #3

It depends what you mean by "based on" the dollar.  If you mean backed by the dollar, the problem is: who does the backing?  You can do it as a centralized system (one entity that guarantees an exchange rate back and forth, and which makes money on some kind of fee structure); that's basically PayPal.

It doesn't work as a decentralized system.  Think of it this way:  If I have a bunch of DollarCoins, and I want to turn them back into USD but there's little demand for them right now and lots of other people are trying to unload their coins too, who's going to put up the USD to buy them all?  You can lower the payout until people no longer want to sell them and things are back in balance - that's a market-based solution, which is how BitCoin works.  But what incentive does anyone have to guarantee a specific price?

Try running a little economy with a pencil and paper for a bit and you'll see the problems pretty quickly.

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markm
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February 15, 2012, 06:10:09 PM
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The point is that if you do have a bunch of dollarcoins, the issuer has the bunch of dollars that you or someone else bought them with, thus can buy them back from you. There will of coruse be a slight overhard, but there always is in financial services.

The important thing is not to have random miners minting coins they have no itention of buying back.

You issue all the coins to the backer at the outset, and no one else ever gets any except by buying them for at least a dollar each or some kind of transaction fee for merged-mining them, which will only be available if/when a transaction actually happens.

So the main obstacle is in getting to a large enough volume of actual transactions for their transaction fees to be sufficient to motivate people to merged-mine the chain.

-MarkM-

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