Prior to releasing the wallets we saw a large International appeal online, North Americans were associating the currency with Silver and whether we had pegged the price against the price of Silver or not (something which continues to be discussed by North American community members).
i do not know much about pegging, but would it be theoretically possible to do something like that?
With the upcoming Sterlingcoin hangout I thought I would look at a few options and provide some general info. for discussion by the community.
A currency peg is usually set against another countries currency, in traditional financial markets, although this can also be against other commodities or assets etc.
-
http://www.investopedia.com/terms/c/currency-peg.asp or
http://www.investopedia.com/terms/p/pegging.asp...
" 2. A practice of an investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price."This is actually how Nubits -
https://www.nubits.com/ (the first crypto currency to thus far mostly successfully fix its exchange rate to the US dollar i.e. One Nubit = One US dollar) has been using NuShares to maintain the exchange rate on crypto currency markets via its Nubot software -
https://bitbucket.org/JordanLeePeershares/nubottrading .
However, in a free crypto currency market (with Sterlingcoin already being listed on multiple exchanges and with existing mechanism in place) SLG is automatically indirectly
'pegged' to the value of Bitcoin and other crypto currency pairs, moreover supply and demand is the bigger factor in determining current price and/or value.
-
https://wikipedia.org/wiki/Fixed_exchange-rate_system and
https://wikipedia.org/wiki/Supply_and_demandTrying to fix or 'peg' and exchange rate can seem like a very good idea when the asset price is 'low' (or comparatively low) in the market, although for Sterlingcoin this would not be an ideal situation were 'value' to eventually exceed its pegged price.
Sterlingcoin, in reality (crypto currency) is an
intangible commodity (asset based)
money (currency) -
https://wikipedia.org/wiki/Intangible_asset and
https://wikipedia.org/wiki/Commodity_money1. Intangible - in that you can't physically hold Sterlingcoin in the palm of your hands -
https://wikipedia.org/wiki/Intangible_asset2. Commodity - in terms of a 'marketable' item in exchange for goods and services -
https://wikipedia.org/wiki/Commodity3. Asset - in terms of an economic resource in financial accounting i.e.
digital cash -
https://wikipedia.org/wiki/Asset4. Money / Currency -
https://wikipedia.org/wiki/Money and
https://wikipedia.org/wiki/CurrencyBeing a PoS coin (with perhaps some existing benefits over PoW) Sterlingcoin has a 5th incentive being 'risk-free' interest
https://wikipedia.org/wiki/Interest at the fixed rate of 5.5%
What gives Sterlingcoin, Bitcoin or any crypto currency its true 'value' is less defined today. We can see this clearly by how much the Bitcoin price has fluctuated since its inception. Given its intangible nature the only certain 'commodity' based value aspect is in fact the means and cost of production i.e. purchase and/or depreciation on mining equipment, the cost of electricity used in production and
time.
Other main aspects for consideration being the total supply, fungibility -
https://wikipedia.org/wiki/Fungibility and of course Rarity vs Scarcity -
https://wikipedia.org/wiki/Scarcity_valueThese main factors are exactly how the first Bitcoin exchange rate was established by NewLibertyStandard on this very forum.
-
http://newlibertystandard.wikifoundry.com/page/Exchange+Rate...
" The exchange rate is the average of the adjusted bitcoin production per day divided by the average production costs per day. The per day averages start with the previous day and will eventually extend back 365 days, but until then, they increase by half a day each day by taking the average of two averages. Production costs consist of the price of broadband Internet and metered electricity. The adjusted bitcoin production is the following spreadsheet calculation =if(M2>N2,((B2+F2)/2)*(1/(3-((N2/M2)*2))),((B2+F2)/2)*(3-((M2/N2)*2))) where M2 is the available balance of dollars times the exchange rate of that same day, N2 is the available balance of bitcoins, B2 is the amount of bitcoins produced the previous day and F2 is the average of the adjusted bitcoin production per day. "-
http://newlibertystandard.wikifoundry.com/page/2009+Exchange+Rate...
" During 2009 my exchange rate was calculated by dividing $1.00 by the average amount of electricity required to run a computer with high CPU for a year, 1331.5 kWh, multiplied by the the average residential cost of electricity in the United States for the previous year, $0.1136, divided by 12 months divided by the number of bitcoins generated by my computer over the past 30 days. "Other factors determining the Bitcoin price on the free market are now of course Supply and Demand, as well as the Goods and Services that Bitcoin can be exchanged for (including the exchange to alt. coins).
- Bitcoins, Alt. coins, Pizzas and Haircuts. -
https://bitcointalk.org/index.php?topic=323188.msg3460909#msg3460909...
" What is Bitcoin’s value backed by?
Bitcoin is valued for the things it can be exchanged to, just like all the traditional paper currencies are.
When the first user publicly announces that he will make a pizza for anyone who gives him enough Bitcoins, then he can use Bitcoins as payment to some extent – as much as people want pizza and trust his announcement. A pizza-eating hairdresser who trusts him as a friend might then announce that she starts accepting Bitcoins as payment for fancy haircuts, and the value of the Bitcoin would be higher – now it would be backed by pizzas ”and” haircuts. When Bitcoins have become accepted widely enough, he could retire from his pizza business and still be able to use his Bitcoin-savings. "... and this is why Lazlo offered to buy a Pizza for Bitcoins ! To create supply and demand !
These aspects make up the intrinsic value of Bitcoin (or Sterlingcoin), an intrinsic value which is often hard to fully grasp considering crypto currency is fully decentralized peer-to-peer money.
So, for Sterlingcoin (and its current position) I think that the question is how best to try and build intrinsic (actual) value. Merchants, goods and services help a lot, although as others have described this is a double edge sword and a slow burn in terms of price.
The strengths of Sterlingcoin are clearly demonstrated in its potential association with
Sterling Silver or a Silver Standard in terms of actual value -
https://en.wikipedia.org/wiki/Silver_standardI've already highlighted the pitfalls of a pegged value, however I can envisage a useful potential for a linked exchanged rate to the Silver Fix.
- The London Bullion Market Association (LBMA) sets the daily fix for Silver against the GBP, USD and EUR -
http://www.lbma.org.uk/pricing-and-statistics once per. day.
... " The LBMA Silver price auction is operated by CME and administered by Thomson Reuters. The price is set daily at 12:00 noon London time. The price is expressed in $ per troy ounce. Reference prices are also available in £ and & euro. "Plotting the London Silver fix against an average daily Sterlingcoin price would provide an interesting measure of linked / perceived value, moving forward. To be able to easily say that Sterlingcoin is Up or Down against physical Silver today would give a new dimension to trading.
I also feel that it could be a good way to attract individuals and businesses with an interest in numismatics to Sterlingcoin. Folks trading physical Sliver (and gold) coins and/or small quantities of numismatic collectables / bullion on the Sterlingcoin forum (on a personal basis) would be a fantastic way forward.
For example, it could be possible to start the ball rolling by offering heavily discounted physical Silver from the Sterlingcoin Store and/or forum when being brought with Sterlingcoin. For example, bullionbypost.co.uk/silver-bars/ offers considerable discounts on orders of over 100 Sliver bars, with the price of a single bar being x 2 that of a bulk order price of a min. 2.5 g Sliver Bar. This saving (less P&P costs) could easily be passed on to anyone wanting to buy with Sterlingcoin. Many other options are ofc available.
However, doing something like this is not dissimilar to say Lazlo and his Bitcoin for Pizza, as today Lazlo's Bitcoin's are clearly worth much more than the $ price of the pizza.
Another option might be to back Sterlingcoin (or a percentage of the total circulation) with physical Silver through the creation of a Foundation or other means. Not fractional reserve banking, but Full Reserve banking
https://wikipedia.org/wiki/Full-reserve_banking and to then offer dividends or some incentives on this basis. However, this is probably something for consideration much later on.
Anyway, some food for thought.
To "peg" a currency it requires a lot of whatever you are wanting to "peg" it to. Also this basically means centralised backing of a currency, something we are very much against. However utilising silver within cryptocards, coins with privkeys etc. is definitely an option.
