The RealCoin Idea

[drakahn]

Haven't seen anything about it lately, but i was thinking and throwing some ideas around

If there were to be a $1/coin altcoin, where all coins are premined and sold at $1, and bought back at any time for $1...

a) How would we remove trust from the equation? how could the money be stored in a transparent way with no way of 'running off' with it? How could we prevent chargeback fraud?

b) Is there a way we could always pay $1/coin?, if there are any fee's, taxes or frauds the money from selling will be less than would be owing if everyone cashed out at once, If there are zero fee's charged (pay $1/coin get paid $1/coin), could it qualify as a not-for-profit and skip some of those fee's and taxes?

c) Unlike realcoin i would want it to be decentralised from the start, what would be a good way to do transaction fees?

i was thinking 1% of the total amount sent by default but the miners can set the minimum they want to accept and the clients can send what they want to send, with a warning about not getting confirmations with <1% fees... or The base fee is the minimum for 51% of miners to accept and then the rewards will find a place between the maximum people are willing to pay in fee's and the minimum miners are willing to mine for

[SgtSpike]

There's no way for a currency to be both pegged AND decentralized.  It just doesn't work.

[Revalin]

Seconded.  A guarantee to peg has to come from a specific entity; that entity is effectively the central bank of the currency.

If you figure it out Bitcoin will be obsolete, but it won't be easy.  I'm not going to say it's completely impossible, but it's a hard enough problem that no one has proposed a realistic way to do it, despite plenty of people wanting a currency with those properties.

[k9quaint]

There's no way for a currency to be both pegged AND decentralized.  It just doesn't work.

Maybe with lots of pegs, and don't put any of them in the center....

Ya, I got nothin.  

[markm]

Maybe peg it at first, then let it float once all the coins are in circulation if demand then drives up the price?

-MarkM-

[cunicula]

You cannot enforce a peg of $1 without a centralized warchest of US dollars.

It might be possible to target $1 with decentralized proof-of-stake and voting on currency generation rules by stakeholders.

The assumption here is that the total value of the currency is maximized by keeping price near $1. If this is true, then stakeholders have an incentive to vote on currency generation rules that support a $1 price.

Stakeholders would report in the blockchain whether price is above or below $1. If they indicate it is above $1, then you increase the currency generation rate. If they indicate it is below $1, then you would decrease the generation rate. You charge a mandatory txn fee which is partially destroyed if stakeholders vote that price is below $1. This allows for negative generation rates, so that you don't get stuck with too much currency issued. If you issue too much currency without any mechanism to take it out of circulation, then the price could 'get stuck' below $1 with no way to recover.

It is not a very robust system because the incentives for truthful reporting are weak, but it could work. The incentives are much, much better than they would be with proof-of-work voting on currency generation rules. Proof-of-work miners would always have an incentive to inflate the currency by falsely reporting that price is high.

No one cares about this stuff though. Some idiot programmer will come out with their own crappy rules which they like because they created them.

[markm]

Actually I was thinking central bank style, but the "warchest" would simply or mostly be what coins were sold for. If no-one buys any, no warchest is needed. If someone buys five for $5, right there is sufficient warchest to back those five coins. If all 21,000,000 get sold for $ each, right there is the $21,000,000 to back them with.

The main problem seems to be having enough transactions happening to make merged mining seem worthwhile, which presumably means enough fees to pay the bandwidth the disk storage and some actual profit for devoting bandwidth and diskspace.

-MarkM-

[cunicula]

Actually I was thinking central bank style, but the "warchest" would simply or mostly be what coins were sold for. If no-one buys any, no warchest is needed. If someone buys five for $5, right there is sufficient warchest to back those five coins. If all 21,000,000 get sold for $ each, right there is the $21,000,000 to back them with.

The main problem seems to be having enough transactions happening to make merged mining seem worthwhile, which presumably means enough fees to pay the bandwidth the disk storage and some actual profit for devoting bandwidth and diskspace.

-MarkM-

Yes, sorry that is what I mean by a warchest. It has to be centralized as you can see. The party controlling it will be a target for legal action. End of Story.

[markm]

Yes, sorry that is what I mean by a warchest. It has to be centralized as you can see. The party controlling it will be a target for legal action. End of Story.

Yes, that is probably much more of a problem than any "technical" issues.

Kind of weird that the west painted the Soviet protection of their citizens from alien currencies yet oops looks like the west plans to do much the same itself. The fourth wall becomes an Iron Curtain?

-MarkM-

[Etlase2]

Maybe peg it at first, then let it float once all the coins are in circulation if demand then drives up the price?

-MarkM-

This was the basis for the very first proposal for encoin. Create a community trust where a certain amount of early mined coins were controlled by a large number of early participants to keep the price stable. It's kind of ugly in reality though, but it can probably work. The trust could buy and sell coins to the market in an effort to keep the "trust coins" stable with the marketplace, but only allow the trust coins to be transferred within the trust, unless the buyer wants to trade for regular coins for market price. I went into some detail with this, but I really don't think it's an option worth exploring because of the centralization issues. The trust would effectively act like paypal and probably be required to follow all kinds of regulations and so on.

[cunicula]

Maybe peg it at first, then let it float once all the coins are in circulation if demand then drives up the price?

-MarkM-

This was the basis for the very first proposal for encoin. Create a community trust where a certain amount of early mined coins were controlled by a large number of early participants to keep the price stable. It's kind of ugly in reality though, but it can probably work. The trust could buy and sell coins to the market in an effort to keep the "trust coins" stable with the marketplace, but only allow the trust coins to be transferred within the trust, unless the buyer wants to trade for regular coins for market price. I went into some detail with this, but I really don't think it's an option worth exploring because of the centralization issues. The trust would effectively act like paypal and probably be required to follow all kinds of regulations and so on.

The trust sounds quite centralized. Legal target. End of Story.

If you can decentralize the entity, and have its buying and selling activity decided by votes of stakeholders then it could be workable. If the decentralized entity does buying and selling to stabilize price, then it needs to control a secondary electronic asset. Accumulations and dispersals of the secondary asset would stabilize price of the primary asset. For example, suppose the entity used bitcoin as the secondary asset. It would need the ability to initiate sends of bitcoin in response to receipt of the primary currency automatically. The exchange rate between the primary and secondary asset would be specified by a democratic vote of primary asset stakeholders. You would need a mechanism to elicit responsible voting, for example only allow people who commit to holding the primary asset for one year to vote. The entity would manage the stabilized currency - bitcoin exchange rate to maintain USD parity for the primary asset. It would need to gradually tax users to accumulate a warchest of bitcoin in order to make this sustainable. Otherwise, any negative shock to the bitcoin exchange rate would create an uninsured fractional reserve. A run on the primary asset would ensue.

The programming for this would seem complicated and almost certianly infeasible given that it would need to be interwoven with bitcoin. It is just a set of contracts, however, so it is possible in theory.

[cunicula]

A feasible way of setting this up might be as follows:

1) Create an m-of-n multisig bitcoin account to serve as the trust. Find n trusted forum members to serve as signatories on txns. Any txn with m>n/2 signatures is approved.

2) Introduce a new blockchain currency with a fixed number of premined coins which is secured only by txn fees (perhaps via merged mining with bitcoin)

3) Set up the same m-of-n system for an account with the new currency. Initially, this account controls 100% of coins.

4) Set the bitcoin-new coin exchange rate such that at any time the new coins are priced at US$1.

5) Have n trusted forum members manually issue exchange txns based on the data coming from the Mt. Gox API and data on when sends occurred in the two blockchains.

6) Charge a 0.5% tax on exchanges in order to accumulate a warchest in the trust's bitcoin account. Nice people could also donate to the warchest. The warchest is absolutely necessary because bitcoin could decline in value and this would cause a bank run on the new currency.

It is not decentralized completely because you are relying on n trusted people, but it would serve as a proof-of-concept.

[markm]

Interesting, but why isn't the secondary asset a fiat currency? Purely the logistics of zooming such stuff around the net?

Now how about if there were 'n' blockchains, each of a fixed number of pre-mined coins, each agreeing to trade 1:1 with the others and some target fiat currency?

By 1:1 I mean close to 1:1, such as "we will buy 1000 of x for 999 of y and/or sell 1000 of x for 1001 of y" and so on... 10000 of one for 10001 of another; 100000 of one for 100001 of another...

-MarkM-

[zer0]

I second this motion of a pegged currency to prevent speculation and price crashes.

I would also use it even if cleverly semi-centralized offshore setup to avoid problems, something like HD-money/LR but as above posts indicate looks almost impossible to survive long term

[cunicula]

Interesting, but why isn't the secondary asset a fiat currency? Purely the logistics of zooming such stuff around the net?

Yes, it is because of logistics and legal concerns. It is not clear how you would arrange an m-of-n style txn with fiat currency. You would need a money transmitting service to participate (like Dwolla). You would also need a centralized exchange. The m-of-n system could be run by a committee of trusted people located all over the world without a centralized exchange. It could still be shutdown by going after at least m/2 of the trustees, but I think this would be considerably more difficult.

The same concerns also apply to the completely decentralized (but technically infeasible) system without any trustees.

As far as exchange rates go, it doesn't matter that the secondary asset is bitcoin. The primary asset would still be pegged to the USD because of arbitrage.

[markm]

Okay, so suppose we have a number of blockchain-based currencies, each of which would like to achieve some stable value.

Suppose we also have some secondary asset that might possibly be able to be Bitcoin but if Bitcoin gets too hot/dangerous to use, then some other similar asset that, like Bitcoin's current status, does have some way of turning it into fiat.

The currencies trying to achieve stability would issue all their coins in the genesis block or first block to their issuer.

Each of these currencies thus has one entity we have to trust to back their coins, but the larger the number of such currencies maybe the less we need to rely upon any particular one of them's backing entity.

Also the larger the number of them the less of a loss it would be to the others to pick up the slack if one of them's backer stops backing their currency for some/any reason.

Do World of Warcraft have to provide Know Your Customer and Suspicious Activity reports when characters amass or transfer large amounts of WoW Gold? How about EVE Online? Or Linden Dollars? If I wanted to cash in a few lindens would I have to go through the whole notarised ID thing that Mt Gox apparently now demands?

Lindens might be particularly relevant since they explicitly are exchange-able out to fiat.

There is still interest among some Galactic Milieu nations in selling their coins at relatively stable prices and at least exploring the concept of also buying them back at close to what they sold them for instead of telling players "oh well too bad, tough luck, you have to use them in the game, we cannot buy them back"...

-MarkM-

[drakahn]

okay, so we use the money to buy a bank, and if everyone tries to cashout at once we get a bailout?

[markm]

okay, so we use the money to buy a bank, and if everyone tries to cashout at once we get a bailout?

Good idea! Make sure to base the bank in a corporate-welfare state of course...

-MarkM-

[drakahn]

how bout we call it The "Digital Enumeration Authority" wait, is DEA already taken?

Cryptocurrency Investment Accounts? ... Financial Bank of the Internet? ... bah

[markm]

Martian Investment Bank.  

-MarkM-

EDIT some of the assets offered are in digitalis-assets.tgz file found at https://sourceforge.net/projects/galacticmilieu/files/

SEE ALSO https://bitcointalk.org/index.php?topic=53329.0