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Author Topic: Digital currency backed by Bitcoin  (Read 10781 times)
Anders
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May 26, 2011, 12:28:37 AM
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I came to think of a cool idea that maybe already has been discussed but the idea is to create a new digital currency backed by bitcoins. In the past, currencies were often backed by gold. Today, bitcoins can be seen as a digital version of gold or similar scarce resource. And it should be possible to create a new kind of digital currency that is backed by bitcoins.

What would the purpose of the new digital currency be? The main purpose would be to create a currency that was stable when it comes to inflation and deflation. So that prices for goods and services in the new digital currency would remain very stable over time. Another purpose would be to create a convenient level of the value of the new current. With bitcoins the price in the future for say a cup of coffee could be something like 0.0000032 BTC. That can be a bit unpractical. The price in the new currency, such as NDC (new digital currency) for the same cup of coffee could be 20 NDC, and remain fairly steady at that price.
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May 26, 2011, 12:34:39 AM
 #2

This is what pretty much every site that holds a bitcoin balance for you is doing. I have BTC credits at Mtgox. I expect it's fully backed, but it's still not the same as actual bitcoins. Betco gives you 100 cents for each bitcoin you send. They could call them chips and it would work exactly the same way.

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May 26, 2011, 12:35:06 AM
 #3

Something you could possibly look into is a DigiCash backed by Bitcoin.

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May 26, 2011, 12:36:50 AM
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Another purpose would be to create a convenient level of the value of the new current. With bitcoins the price in the future for say a cup of coffee could be something like 0.0000032 BTC. That can be a bit unpractical.

0.00000032 BTC = 0.32 µBTC = 320 nBTC
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May 26, 2011, 12:42:19 AM
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This is what pretty much every site that holds a bitcoin balance for you is doing. I have BTC credits at Mtgox. I expect it's fully backed, but it's still not the same as actual bitcoins. Betco gives you 100 cents for each bitcoin you send. They could call them chips and it would work exactly the same way.

Ok, but if 100 Betco cents equal one bitcoin then those cents follow the same deflation as the bitcoins. My idea was to create a currency that remains stable without inflation or deflation.
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May 26, 2011, 12:44:21 AM
 #6

Something you could possibly look into is a DigiCash backed by Bitcoin.

I read about DigiCash that it is a currency that started in the 90s. I was thinking about a new currency created especially for the purpose of being backed by bitcoins and resilient against deflation and inflation.
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May 26, 2011, 12:46:10 AM
 #7

Another purpose would be to create a convenient level of the value of the new current. With bitcoins the price in the future for say a cup of coffee could be something like 0.0000032 BTC. That can be a bit unpractical.

0.00000032 BTC = 0.32 µBTC = 320 nBTC

Yes, it would be fairly practical using such terms but it still would be a currency with deflation (at least for many years to come).
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May 26, 2011, 12:53:18 AM
 #8

How would the new currency be made stable when it comes to inflation and deflation? One idea would be to pin the value of the new currency so that a Big Mac in the U.S. costs say 20 NDC. It might sound silly to use the Big Mac as a reference, but there actually exists a serious economic model called the Big Mac index. See for example: http://www.economist.com/markets/Bigmac/Index.cfm

Then bitcoins could be exchanged for the new currency and vice versa.
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May 26, 2011, 01:02:54 AM
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What would the purpose of the new digital currency be? The main purpose would be to create a currency that was stable when it comes to inflation and deflation. So that prices for goods and services in the new digital currency would remain very stable over time.

Prices don't have to be stable.  They have to reflect economic reality.

Trying to cheat with price signals does nothing good for the economy, and it defeats the purpose of the very concept of price.
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May 26, 2011, 01:14:03 AM
 #10

What would the purpose of the new digital currency be? The main purpose would be to create a currency that was stable when it comes to inflation and deflation. So that prices for goods and services in the new digital currency would remain very stable over time.

Prices don't have to be stable.  They have to reflect economic reality.

Trying to cheat with price signals does nothing good for the economy, and it defeats the purpose of the very concept of price.

But the currency would only be pinned to the Big Mac! So the price of cotton, oil, gold, wheat etc would still fluctuate relative to the price of a Big Mac.

The purpose is to create a currency that remains fairly stable for consumer goods.

Let's look at an example of how it would work. John wants to buy 100 NDC. How many bitcoins would he have to pay? First we check what the current price of one bitcoin is in USD = $8.20. Then we take the current price of a Big Mac = $3.80. 100 NDC = 5 Big Macs = 5 * 3.80 = $19. In bitcoins: 19/8.20 = 2.32 BTC. So at the moment John would have to pay 2.32 bitcoins for 100 NDC. Pretty cool, eh?  Cheesy Cool
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May 26, 2011, 01:16:26 AM
 #11

This has already been done.

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May 26, 2011, 01:59:16 AM
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Very interesting. It looks similar to my idea but not exactly the same. This part is very similar: "The purpose of the Beertokens trust is an attempt to create a more stable currency that will not change in value more than  between +-3% over time..."

The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.
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May 26, 2011, 01:59:58 AM
 #13

The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.

That's why I suggested Chaum's DigiCash as a starting point. All the patents should be expiring very soon or already expired.

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May 26, 2011, 02:04:46 AM
 #14

The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.

That's why I suggested Chaum's DigiCash as a starting point. All the patents should be expiring very soon or already expired.

How does DigiCash work in a distributed anonymous world?  I thought that what happens if you double spend is that your identity is revealed.  That works in meatspace where the signer is a bank, can have you arrested for bank fraud, etc. 
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May 26, 2011, 02:07:58 AM
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The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.

That's why I suggested Chaum's DigiCash as a starting point. All the patents should be expiring very soon or already expired.

How does DigiCash work in a distributed anonymous world?  I thought that what happens if you double spend is that your identity is revealed.  That works in meatspace where the signer is a bank, can have you arrested for bank fraud, etc. 

If you value your anonymity, you won't attempt to double spend. If you attempt to double spend, first the transaction fails, and the consequences are whatever are specified by the bank.

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May 26, 2011, 02:13:12 AM
 #16

If you value your anonymity, you won't attempt to double spend. If you attempt to double spend, first the transaction fails, and the consequences are whatever are specified by the bank.

Well, no I mean let's say you buy digicash with bitcoins.  No one really knows who you are -- you are just a bitcoin address.  If you double spend, the sender bitcoin address might be revealed, but so what?  In order for there to be any real deterrent to double spending, it has to be some kind of real identity, like going to an actual bank and having them check your ID, fingerprints, iris scan, etc.  I don't see how you do that online.

There is online detection of double spending with digicash, so perhaps that is still helpful relative to waiting for bitcoin confirmations, even if not as useful as allowing offline transactions (with detected and deterred double spending).



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May 26, 2011, 02:19:02 AM
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If you value your anonymity, you won't attempt to double spend. If you attempt to double spend, first the transaction fails, and the consequences are whatever are specified by the bank.

Well, no I mean let's say you buy digicash with bitcoins.  No one really knows who you are -- you are just a bitcoin address.  If you double spend, the sender bitcoin address might be revealed, but so what?  In order for there to be any real deterrent to double spending, it has to be some kind of real identity, like going to an actual bank and having them check your ID, fingerprints, iris scan, etc.  I don't see how you do that online.

There is online detection of double spending with digicash, so perhaps that is still helpful relative to waiting for bitcoin confirmations, even if not as useful as allowing offline transactions (with detected and deterred double spending).

I don't think you took my advice to go study DigiCash; you seem to be quite confused, still.

If you attempt to double spend DigiCash, the DigiCash issuer learns your identity. This has nothing to do with Bitcoin, except that the issuer is almost certainly who you would have bought the DigiCash from. And the issuer can set whatever rules they wish with regard to identity, etc., so long as their customers accept the rules.

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May 26, 2011, 02:28:56 AM
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I don't think you took my advice to go study DigiCash; you seem to be quite confused, still.

Not me, must have been someone else.  I studied DigiCash quite a while ago, which included reading Chaum's papers, FYI.

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If you attempt to double spend DigiCash, the DigiCash issuer learns your identity.

The issuer learns the "identity" you used to used to submit the bill request.  But unless that identity is somehow linked to your REAL identity, it's not clear why you care.  The DigiCash system depends on the deterrence of being prosecuted (or at least chased by bill collectors) if you double spend.  At least for offline transactions.  For online transactions i think you can just immediately reject double spends in a way that Bitcoin by itself can't.



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May 26, 2011, 02:46:57 AM
 #19

Instead of using DigiCash I would invent a new digital currency which would be centralized controlled so that double-spending would be impossible.

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.

Of course, to get people to start using the new currency in the first place would be really tricky. Who would want to buy a currency that nobody uses?
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May 26, 2011, 02:50:59 AM
 #20

Instead of using DigiCash I would invent a new digital currency which would be centralized controlled so that double-spending would be impossible.

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.
Congratulations you've just invented mybitcoin.

Problem is, no real privacy unless you trust the bank (and also trust them to not be compromised).  Every time you spend the money they know.
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May 26, 2011, 03:30:54 AM
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Instead of using DigiCash I would invent a new digital currency which would be centralized controlled so that double-spending would be impossible.

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.
Congratulations you've just invented mybitcoin.

Problem is, no real privacy unless you trust the bank (and also trust them to not be compromised).  Every time you spend the money they know.

No no. the account can be anonymous. Bitcoin can be transferred to / from the account anonymously. Double spending in the new currency is still prevented by the central control (confirmation) of the transactions.

All the central authority knows is money transferred between two anonymous accounts.
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May 26, 2011, 03:32:43 AM
 #22

Instead of using DigiCash I would invent a new digital currency which would be centralized controlled so that double-spending would be impossible.

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.
Congratulations you've just invented mybitcoin.

Problem is, no real privacy unless you trust the bank (and also trust them to not be compromised).  Every time you spend the money they know.

MyBitcoin is for bitcoins I see. I was thinking of having a centralized service for a new digital currency. Yes, there are drawbacks with using a centralized service. But the good thing is that it would be possible to make very fast transactions that immediately checked for double-spending.

A use case would be using the new currency for online shopping:

1. The online shop pastes in HTML code on their website that shows a 'Buy with NDC' button.

2. The buyer clicks on the button and is redirected to his account page and a message: "Do you want to pay 43 NDC to www.onlineshop.com for Obama tea cup?"

3. The buyer clicks 'Yes' and the browser redirects back to the online shop with an OK status code for the transaction.

4. The online shop presents the message: "Thank you for buying the Obama Goes to Tea Party tea cup."
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May 26, 2011, 03:57:34 AM
 #23

MyBitcoin is for bitcoins I see. I was thinking of having a centralized service for a new digital currency. Yes, there are drawbacks with using a centralized service. But the good thing is that it would be possible to make very fast transactions that immediately checked for double-spending.

A use case would be using the new currency for online shopping:

1. The online shop pastes in HTML code on their website that shows a 'Buy with NDC' button.

2. The buyer clicks on the button and is redirected to his account page and a message: "Do you want to pay 43 NDC to www.onlineshop.com for Obama tea cup?"

3. The buyer clicks 'Yes' and the browser redirects back to the online shop with an OK status code for the transaction.

4. The online shop presents the message: "Thank you for buying the Obama Goes to Tea Party tea cup."

Shit, I missed something.  We started by wanting to lock the price of every product in the entire world into a fixed price for all eternity.  Then there was a digression into anonymity and double spending.  Now we've invented the website shopping cart with online payment processing.  Were the intervening steps in other threads or something?

Well, with regards to the shopping cart and payment processing, this is like the twentieth thread I've read in the last week where someone felt obligated to tell the world that they discovered that a third party was necessary to assume the risk if neither party to a transaction is willing to keep it.  On that point, you are totally correct.  There is no rollback for bitcoin payments (yet).  When you hit send, you are making an irreversible donation.

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May 26, 2011, 04:10:36 AM
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Sounds like you talking about BeerTokens that are a new crypto-currency allmost the same as bitcoin that uses a new block chain.  It requires the the multi crypto chain client called Freecoin to transact from person to person or preson to biz and can be converted into other currency at it's central exchange.   It's based on Beertokens being shares in a holdings trust that the owners of the beertokens control.  It's main objective of The Trust is to keep BeerTokens Value set at "The Price of one Beer".  see the forum for more details. http://forum.bitcoin.org/index.php?topic=9493.0 or come chat with us direct at the #beertokens freenode IRC . We now also have merge mining and escrow support in the new version of the MultiCoin-exp client
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May 26, 2011, 06:55:48 AM
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Sounds like you talking about BeerTokens that are a new crypto-currency allmost the same as bitcoin that uses a new block chain.  It requires the the multi crypto chain client called Freecoin to transact from person to person or preson to biz and can be converted into other currency at it's central exchange.   It's based on Beertokens being shares in a holdings trust that the owners of the beertokens control.  It's main objective of The Trust is to keep BeerTokens Value set at "The Price of one Beer".  see the forum for more details. http://forum.bitcoin.org/index.php?topic=9493.0 or come chat with us direct at the #beertokens freenode IRC . The next addition needed is p2p escrow to eliminate the need for most of the exchange transactions.  I am working on that also in our new version of the freecoin client

Yes, this was mentioned earlier in this thread. See: http://forum.bitcoin.org/index.php?topic=9923.msg142613#msg142613

It seems similar to the idea I had, especially the part about making the currency stable so that its value remains about the same all the time without having inflation or deflation. The main difference is (besides that BeerTokens is a real crypto-currency and my proposal is only a loose idea yet  Cheesy) that the idea I had is based on a much simpler model. No votes of trust needed. No public/private keys or chain of blocks needed (unless it's implemented as P2P perhaps).
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May 26, 2011, 07:04:49 AM
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Shit, I missed something.  We started by wanting to lock the price of every product in the entire world into a fixed price for all eternity.  Then there was a digression into anonymity and double spending.  Now we've invented the website shopping cart with online payment processing.  Were the intervening steps in other threads or something?

Well, with regards to the shopping cart and payment processing, this is like the twentieth thread I've read in the last week where someone felt obligated to tell the world that they discovered that a third party was necessary to assume the risk if neither party to a transaction is willing to keep it.  On that point, you are totally correct.  There is no rollback for bitcoin payments (yet).  When you hit send, you are making an irreversible donation.

The benefits with the new digital currency would be:

A) Stable value. The price for a product would be same today as tomorrow and the same next week and even in the years to come. The price could of course go up and down, but that would be based on the sellers choice, not something caused by inflation or deflation.

B) Fast transactions. Secure fast payments that directly check for double-spending.

C) Convenient value. No need for values with increasing decimals etc.
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May 26, 2011, 07:28:34 AM
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Very interesting. It looks similar to my idea but not exactly the same. This part is very similar: "The purpose of the Beertokens trust is an attempt to create a more stable currency that will not change in value more than  between +-3% over time..."

The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.

Have a look at FellowTraveler's Open Transactions:  https://github.com/FellowTraveler/Open-Transactions/wiki

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
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May 26, 2011, 07:34:58 AM
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Very interesting. It looks similar to my idea but not exactly the same. This part is very similar: "The purpose of the Beertokens trust is an attempt to create a more stable currency that will not change in value more than  between +-3% over time..."

The idea I had is simpler I think. I haven't figured out yet the technical solution for how the transactions would be made with the new digital currency though.  Huh Perhaps some kind of simple yet secure public/private key solution that would be very fast, much faster than the bitcoin transactions.

Have a look at FellowTraveler's Open Transactions:  https://github.com/FellowTraveler/Open-Transactions/wiki

I took a brief look at it. Could be very useful. The part about native API sounded a bit worrisome since I had planned to implement it using Google App Engine which does not allow native API calls.
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May 26, 2011, 08:02:44 AM
 #29

Since you probably cannot force all products to have the same relative values forever (are buggy whips still the same fraction of a buggy in value? Is one horsepower still worth the same number of buggy-whips as always? And the same number of buggies? With each of these things still being worth the same amount of gold as it always was, and of silver too of course? Etc.) Open Transactions or Loom or something along those lines seems called for. Specifically, something that lets you buy buggies using buggytokens and buggywhips using buggywhip tokens so that a buggy always costs the same number of buggytokens and a buggywhip always costs the same number of buggywhiptokens regardless of what exchange rates might be between the various tokens...

...If not then gee it sounds like I will probably be looking to buy bitcoins from you using your new currency if you have it pegged to big macs and automobiles and other day to day things' prices and yet also sell bitcoins for always the same number of your tokens constantly...

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May 26, 2011, 08:08:25 AM
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I'm going to bold the parts of my comment that you ignored.


Shit, I missed something.  We started by wanting to lock the price of every product in the entire world into a fixed price for all eternity.  Then there was a digression into anonymity and double spending.  Now we've invented the website shopping cart with online payment processing.  Were the intervening steps in other threads or something?

Well, with regards to the shopping cart and payment processing, this is like the twentieth thread I've read in the last week where someone felt obligated to tell the world that they discovered that a third party was necessary to assume the risk if neither party to a transaction is willing to keep it.  On that point, you are totally correct.  There is no rollback for bitcoin payments (yet).  When you hit send, you are making an irreversible donation.


The benefits with the new digital currency would be:

A) Stable value. The price for a product would be same today as tomorrow and the same next week and even in the years to come. The price could of course go up and down, but that would be based on the sellers choice, not something caused by inflation or deflation.

B) Fast transactions. Secure fast payments that directly check for double-spending.

C) Convenient value. No need for values with increasing decimals etc.

And just for fun:

A) requires that all prices be fixed all around the world, and until the end of time.  Do you comprehend this?  Do you understand what it means?

B) is the job of a third party, not a currency.

C) is really just a restatement of A, but it makes you sound like someone that failed out of math class in 4th grade.

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May 26, 2011, 09:54:14 AM
 #31

I'm going to bold the parts of my comment that you ignored.


Shit, I missed something.  We started by wanting to lock the price of every product in the entire world into a fixed price for all eternity.  Then there was a digression into anonymity and double spending.  Now we've invented the website shopping cart with online payment processing.  Were the intervening steps in other threads or something?

Well, with regards to the shopping cart and payment processing, this is like the twentieth thread I've read in the last week where someone felt obligated to tell the world that they discovered that a third party was necessary to assume the risk if neither party to a transaction is willing to keep it.  On that point, you are totally correct.  There is no rollback for bitcoin payments (yet).  When you hit send, you are making an irreversible donation.


The benefits with the new digital currency would be:

A) Stable value. The price for a product would be same today as tomorrow and the same next week and even in the years to come. The price could of course go up and down, but that would be based on the sellers choice, not something caused by inflation or deflation.

B) Fast transactions. Secure fast payments that directly check for double-spending.

C) Convenient value. No need for values with increasing decimals etc.

And just for fun:

A) requires that all prices be fixed all around the world, and until the end of time.  Do you comprehend this?  Do you understand what it means?

B) is the job of a third party, not a currency.

C) is really just a restatement of A, but it makes you sound like someone that failed out of math class in 4th grade.

A) Prices would be set just as today. The only difference would be that there would be no inflation or deflation of the currency. Since the currency is based on the price of a Big Mac there will be potential inflation and deflation compared to other goods and services. To create an even more stable currency it could be pegged to a basket of well-know commodities. But to peg the currency to the Big Mac would be good enough I think.

B) It would be a currency, but backed by bitcoins. This creates a very stable reserve currency since bitcoins are a well-defined scarce resource, just like gold but more suitable for digital transactions.

C) Yes, the convenient value of the currency is a consequence of point A, but it's important to choose that value so that it becomes convenient in practice. For example 1 Big Mac = 100 NDC. Choosing other values would be impractical such as 1 Big Mac = 0.001 NDC or 1,000,000 NDC.
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May 26, 2011, 10:02:26 AM
 #32

It would be cool to create an open source project based on this idea. Then it would have to be a distributed peer-to-peer currency, similar to Bitcoin and BeerTokens. Otherwise people could use the open source code to create fraudulent services and other kinds of mischief. I don't know how to start an open source project though. Huh And I don't know exactly how the Bitcoin system works. It would be nice to use a similar solution but more lightweight so that transactions could be made very fast and less computationally demanding.
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May 26, 2011, 10:18:22 AM
 #33

Does the price of a big mac fluctuate wildly relative to the price of a beer?

How many beers does a big mac cost?

Aren't they within about an order of base-ten magnitude, therefore pretty much a who-cares proposition as to whether to peg to beer or burgers?

Peer to peer at high speed would probably have to be done by means of digitally signed contracts.

The protection from double-spending is provided by the recipient simply not accepting the same contract twice. If you want to spend to that same recipient a second time you have to issue a new contract to that same recipient, and a contract to a different recipient is totally different and separate.

Maybe if someone issues a whole lot of contracts and fails to make good on them a class action suit could be brought against them on behalf of all the creditors they have failed to pay?

Maybe you could peg it to a quarter-pounder, call it a quarter-pound of flesh, and make a Merchant of Venice drama out of it whereby if you don't' make good on your contract you'd best avoid dark alleys where bounty hunters lurk waiting to collect a quarter pound of your flesh and take a percent of it for providing the collection service.

Of course an actual quarter-pounder would probably cost many of these contracts due to the overhead expense of actually collecting on them. Take a look at the "Ripple" project, in which each user basically gets to issue their own currency. (Debt based, in that it is done by assigning a credit limit to someone else without any proof that they have ever yet actually given you the [whatever] that you are crediting them with.

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May 26, 2011, 10:22:47 AM
 #34

Another advantage to back the currency with bitcoins is that it would be legally isolated from the heavily regulated financial markets involving ordinary currencies and commodities like gold etc. If Bitcoin becomes illegal then the new currency would have to stop. So that is a potential threat. If on the other hand most governments would adopt Bitcoin, then it would be a very stable situation. Unless the Bitcoin would become heavily regulated by law. Then the new digital currency would also need to be regulated. But that could be doable too.
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May 26, 2011, 10:27:05 AM
 #35

Does the price of a big mac fluctuate wildly relative to the price of a beer?

How many beers does a big mac cost?

Aren't they within about an order of base-ten magnitude, therefore pretty much a who-cares proposition as to whether to peg to beer or burgers?

-MarkM-




Yes, the price of beer no doubt fluctuates somewhat in relation to the price of a Big Mac. But not by much. Not as much as an order of magnitude generally. And to create an even more stable currency it could be pegged to a basket of well-known commodities. My guess is that pegging only to the Big Mac would be enough. The price of a Big Mac in USD in the U.S. Super simple! Cheesy
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May 26, 2011, 11:18:04 AM
 #36

With an open source project using a distributed peer-to-peer model, the new digital currency could be backed by bitcoins by letting people lock their bitcoins into the distributed network. At the time a bitcoin, or a fraction of a bitcoin, or several bitcoins are locked into the system, the person owning the bitcoins receive the equivalent amount of the new currency into his or her own private wallet. To get a bitcoin back from the system a person has to send in the amount of the new currency equal to the value of a bitcoin, and then the bitcoin is sent to the person's private Bitcoin wallet.

The idea of locking bitcoins into the system instead of selling them using an ordinary currency exchange is that bitcoins are inherently deflationary. This means that the value of a bitcoin locked into the system can increase over time. The person who has locked the bitcoin into the system will receive more new currency if the value of the bitcoin increases. Therefore the person who locks a bitcoin into the system is freed from the worry of the bitcoin increasing in value. If the value of a locked bitcoin decreases, then nothing happens. The payment of new currency in response to increased bitcoin value is done via an algorithm that minimizes the possibility of currency rate change speculations.
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May 26, 2011, 12:00:42 PM
 #37

Bitcoin is a digital currency backed by bitcoin.

I'm the first person in this thread to actually understand what the OP is saying, because it's so incredibly stupid.

Quote
But the currency would only be pinned to the Big Mac! So the price of cotton, oil, gold, wheat etc would still fluctuate relative to the price of a Big Mac.

The purpose is to create a currency that remains fairly stable for consumer goods.

Let's look at an example of how it would work. John wants to buy 100 NDC. How many bitcoins would he have to pay? First we check what the current price of one bitcoin is in USD = $8.20. Then we take the current price of a Big Mac = $3.80. 100 NDC = 5 Big Macs = 5 * 3.80 = $19. In bitcoins: 19/8.20 = 2.32 BTC. So at the moment John would have to pay 2.32 bitcoins for 100 NDC. Pretty cool, eh?

You can *say* that 100 NDC = 5 Big Macs, but people will only actually believe you if they actually can spend 100 NDC to buy 5 Big Macs. So in other words you need to start your own central store and accept 100 NDC from any person and give them 5 Big Macs (or some currency they can actually spend at McDonald's).

In other words you need somebody (usually a government) with a lot of currency reserves, who is willing to use them to maintain NDC at a stable price. If their reserves run out it's like a dam breaking: the value of NDC would go haywire.


https://secure.wikimedia.org/wikipedia/en/wiki/Currency_peg
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May 26, 2011, 12:28:33 PM
 #38

Bitcoin is a digital currency backed by bitcoin.

I'm the first person in this thread to actually understand what the OP is saying, because it's so incredibly stupid.

Quote
But the currency would only be pinned to the Big Mac! So the price of cotton, oil, gold, wheat etc would still fluctuate relative to the price of a Big Mac.

The purpose is to create a currency that remains fairly stable for consumer goods.

Let's look at an example of how it would work. John wants to buy 100 NDC. How many bitcoins would he have to pay? First we check what the current price of one bitcoin is in USD = $8.20. Then we take the current price of a Big Mac = $3.80. 100 NDC = 5 Big Macs = 5 * 3.80 = $19. In bitcoins: 19/8.20 = 2.32 BTC. So at the moment John would have to pay 2.32 bitcoins for 100 NDC. Pretty cool, eh?

You can *say* that 100 NDC = 5 Big Macs, but people will only actually believe you if they actually can spend 100 NDC to buy 5 Big Macs. So in other words you need to start your own central store and accept 100 NDC from any person and give them 5 Big Macs (or some currency they can actually spend at McDonald's).

In other words you need somebody (usually a government) with a lot of currency reserves, who is willing to use them to maintain NDC at a stable price. If their reserves run out it's like a dam breaking: the value of NDC would go haywire.


https://secure.wikimedia.org/wikipedia/en/wiki/Currency_peg

The idea with the new currency is not to replace bitcoins as a reserve of value. The new currency will be backed by bitcoins. So it will have the same kind of value, and the new currency can be exchanged into bitcoins and vice versa at any time. This means that even if nobody at the beginning can use the new currency for anything more than exchanging it into bitcoins and back, there will opportunity to start experimenting with it.

Why would such new currency be needed? Consider the following scenario: I want to buy an Obama tea mug for bitcoins. Let's say that the price of the mug is $5.95 at one online shop. I go to another online shop that has the same mug and the shop uses bitcoins for payments. What would the price of the mug be in bitcoins? It would depend on what the current value of bitcoins is. And the value of bitcoins changes much, at least this can be seen by checking the history of bitcoins vs USD up till now. So it would be tricky for the online shop to set the price, and it would be difficult for me to know if it's a good price because I would have to calculate what the price is in USD. And even if the online shop would show the price in both USD and in bitcoins, how do I know that they use a fair conversion rate? Maybe they are trying to rip me off?

In to the picture comes the new digital currency (NDC): I know that 100 NDC equals one Big Mac, and when I go to an online shop that sells the same Obama tea mug for 149 NDC I know directly a good estimate of what the price of the mug actually is.  (I have used 100 NDC = 1 Big Mac instead of 20 NDC here.)
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May 26, 2011, 12:42:42 PM
 #39

How do you know that 100 NDC equals one big mac? Is there somebody you can go to with your NDC to get Big Macs?
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May 26, 2011, 12:49:15 PM
 #40

How do you know that 100 NDC equals one big mac? Is there somebody you can go to with your NDC to get Big Macs?

The price of a Big Mac is used to determine how much one NDC is worth. This can be set arbitrarily, but the rate must be fixed before the new currency starts to be used. It can be set to 20 NDC = 1 Big Mac, or 1,000,000 NDC = 1 Big Mac, or 0.0001 NDC = 1 Big Mac. It's important to choose a rate that is practical however, and one such rate could be 100 NDC = 1 Big Mac.
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May 26, 2011, 12:55:48 PM
 #41

How do you know that 100 NDC equals one big mac? Is there somebody you can go to with your NDC to get Big Macs?

The price of a Big Mac is used to determine how much one NDC is worth. This can be set arbitrarily, but the rate must be fixed before the new currency starts to be used. It can be set to 20 NDC = 1 Big Mac, or 1,000,000 NDC = 1 Big Mac, or 0.0001 NDC = 1 Big Mac. It's important to choose a rate that is practical however, and one such rate could be 100 NDC = 1 Big Mac.

You didn't answer the question... suppose I have 100 NDC. Suppose the rate was set as "100 NDC = 1 Big Mac". Suppose I want to buy a big mac, and I don't want to hold NDC any more. What do I do?
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May 26, 2011, 12:58:30 PM
 #42

How do you know that 100 NDC equals one big mac? Is there somebody you can go to with your NDC to get Big Macs?

The price of a Big Mac is used to determine how much one NDC is worth. This can be set arbitrarily, but the rate must be fixed before the new currency starts to be used. It can be set to 20 NDC = 1 Big Mac, or 1,000,000 NDC = 1 Big Mac, or 0.0001 NDC = 1 Big Mac. It's important to choose a rate that is practical however, and one such rate could be 100 NDC = 1 Big Mac.

You didn't answer the question... suppose I have 100 NDC. Suppose the rate was set as "100 NDC = 1 Big Mac". Suppose I want to buy a big mac, and I don't want to hold NDC any more. What do I do?

Oh, I forgot that part. You would have to convert the 100 NDC into bitcoins and then exchange the bitcoins for dollars and then use those dollars to buy a Big Mac at McDonald's.
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May 26, 2011, 01:07:50 PM
 #43

Oh, I forgot that part. You would have to convert the 100 NDC into bitcoins and then exchange the bitcoins for dollars and then use those dollars to buy a Big Mac at McDonald's.

How do you know somebody will give you enough bitcoins for your 100 NDC to exchange those bitcoins into dollars and then use those dollars to buy a Big Mac at McDonald's?
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May 26, 2011, 01:12:45 PM
 #44

Oh, I forgot that part. You would have to convert the 100 NDC into bitcoins and then exchange the bitcoins for dollars and then use those dollars to buy a Big Mac at McDonald's.

How do you know somebody will give you enough bitcoins for your 100 NDC to exchange those bitcoins into dollars and then use those dollars to buy a Big Mac at McDonald's?

This is the really cool part. Described in this previous post: http://forum.bitcoin.org/index.php?topic=9923.msg143440#msg143440

It's just a recent idea I got. I don't know yet if it's possible to implement such peer-to-peer network in practice. Huh
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May 26, 2011, 01:19:42 PM
 #45

This is the really cool part. Described in this previous post: http://forum.bitcoin.org/index.php?topic=9923.msg143440#msg143440

It's just a recent idea I got. I don't know yet if it's possible to implement such peer-to-peer network in practice. Huh

It is possible, you might need some alterations to the BitCoin protocol, but it can be done.

Let's say I buy 100 NDC by locking 0.5 BTC. One week later, the price of big macs is the same, but the BTC/USD exchange rate has gone down. So a big mac which used to cost 0.5 BTC now costs 1 BTC.

Now I sell my 100 NDC by unlocking 1 BTC. But where did the extra 0.5 BTC come from? Also, everybody else who bought NDC at the same time as me will choose to sell as well, because they can now get more BTC. So the system runs out of BTC to unlock and people are left with loads of NDC which they can no longer exchange for BTC at all.

Edit: also this:

Quote
The person who has locked the bitcoin into the system will receive more new currency if the value of the bitcoin increases. Therefore the person who locks a bitcoin into the system is freed from the worry of the bitcoin increasing in value.

The worry of the bitcoin increasing in value? I'm pretty sure nobody who owns bitcoins is worried that they'll increase in value. "Oh no, I might become richer!" Roll Eyes
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May 26, 2011, 01:57:12 PM
 #46

This is the really cool part. Described in this previous post: http://forum.bitcoin.org/index.php?topic=9923.msg143440#msg143440

It's just a recent idea I got. I don't know yet if it's possible to implement such peer-to-peer network in practice. Huh

It is possible, you might need some alterations to the BitCoin protocol, but it can be done.

Let's say I buy 100 NDC by locking 0.5 BTC. One week later, the price of big macs is the same, but the BTC/USD exchange rate has gone down. So a big mac which used to cost 0.5 BTC now costs 1 BTC.

Now I sell my 100 NDC by unlocking 1 BTC. But where did the extra 0.5 BTC come from? Also, everybody else who bought NDC at the same time as me will choose to sell as well, because they can now get more BTC. So the system runs out of BTC to unlock and people are left with loads of NDC which they can no longer exchange for BTC at all.

Edit: also this:

Quote
The person who has locked the bitcoin into the system will receive more new currency if the value of the bitcoin increases. Therefore the person who locks a bitcoin into the system is freed from the worry of the bitcoin increasing in value.

The worry of the bitcoin increasing in value? I'm pretty sure nobody who owns bitcoins is worried that they'll increase in value. "Oh no, I might become richer!" Roll Eyes

The freedom from worry would be when a person locks bitcoins into the system. If he or she only gets new currency for what the bitcoin is worth at that moment, then the person would not likely want to do that since that would be like giving away future increase of value for the bitcoin. By having the bitcoins locked into the system, the person will get fully (100%) compensated for future increase of value for the bitcoins the person has locked into the system.

Your example of the value of bitcoins going down... Yikes! Not good. One way of solving that problem would be to only allow people to unlock bitcoins THEY THEMSELVES previously have locked.
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May 26, 2011, 02:17:14 PM
 #47

The freedom from worry would be when a person locks bitcoins into the system. If he or she only gets new currency for what the bitcoin is worth at that moment, then the person would not likely want to do that since that would be like giving away future increase of value for the bitcoin. By having the bitcoins locked into the system, the person will get fully (100%) compensated for future increase of value for the bitcoins the person has locked into the system.

The person isn't fully compensated because if they lock in 1 BTC for 100 NDC, and then bitcoins increase in value, their 100 NDC converts back to 0.5 BTC. So their compensation is actually -0.5 BTC. Hardly "full compensation".

Quote
Your example of the value of bitcoins going down... Yikes! Not good. One way of solving that problem would be to only allow people to unlock bitcoins THEY THEMSELVES previously have locked.

So in other words the bitcoins and NDC can be exchanged freely, but the NDC will never be worth more than the BTC which I put in? What's the point?
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May 26, 2011, 02:51:22 PM
 #48

The freedom from worry would be when a person locks bitcoins into the system. If he or she only gets new currency for what the bitcoin is worth at that moment, then the person would not likely want to do that since that would be like giving away future increase of value for the bitcoin. By having the bitcoins locked into the system, the person will get fully (100%) compensated for future increase of value for the bitcoins the person has locked into the system.

The person isn't fully compensated because if they lock in 1 BTC for 100 NDC, and then bitcoins increase in value, their 100 NDC converts back to 0.5 BTC. So their compensation is actually -0.5 BTC. Hardly "full compensation".

Quote
Your example of the value of bitcoins going down... Yikes! Not good. One way of solving that problem would be to only allow people to unlock bitcoins THEY THEMSELVES previously have locked.

So in other words the bitcoins and NDC can be exchanged freely, but the NDC will never be worth more than the BTC which I put in? What's the point?

The compensation will be an active and ongoing one. So if you lock in say 1 bitcoin, and let's assume that it just happened to be at a time when 1 bitcoin was worth $3.80, which also happened to be the price of a Big Mac at that time, then you will receive 100 NDC. Ok, you say, what happens if the value of a bitcoin the next week after that is $7.60? It could happen! In that case you will receive an ADDITIONAL 100 NDC from the system. That's pretty neat. So now you have 200 NDC, which, if you want to, you can use to unlock your previously locked bitcoin in the system.
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May 26, 2011, 03:05:45 PM
 #49

The compensation will be an active and ongoing one. So if you lock in say 1 bitcoin, and let's assume that it just happened to be at a time when 1 bitcoin was worth $3.80, which also happened to be the price of a Big Mac at that time, then you will receive 100 NDC. Ok, you say, what happens if the value of a bitcoin the next week after that is $7.60? It could happen! In that case you will receive an ADDITIONAL 100 NDC from the system. That's pretty neat. So now you have 200 NDC, which, if you want to, you can use to unlock your previously locked bitcoin in the system.

So when the value of a bitcoin is $7.60 you have 200 NDC and the exchange rate is 200 NDC = 1 BTC.

Then when a week later the value of a bitcoin is $3.80 again, if NDC stays stable that means the exchange rate has to be 100 NDC = 1 BTC, the same as the time two weeks previous when bitcoins were worth $3.80.

So now I can unlock my bitcoin and now I own 100 NDC and 1 BTC, whereas before I owned just 1 BTC. Free money! Also, the remaining NDC I own is not "backed" by anything, because I can't use it to unlock BTC, which means I can't use it to buy a Big Mac.

wtf?

Please read the article I linked to: https://secure.wikimedia.org/wikipedia/en/wiki/Currency_peg
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May 26, 2011, 03:40:44 PM
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The compensation will be an active and ongoing one. So if you lock in say 1 bitcoin, and let's assume that it just happened to be at a time when 1 bitcoin was worth $3.80, which also happened to be the price of a Big Mac at that time, then you will receive 100 NDC. Ok, you say, what happens if the value of a bitcoin the next week after that is $7.60? It could happen! In that case you will receive an ADDITIONAL 100 NDC from the system. That's pretty neat. So now you have 200 NDC, which, if you want to, you can use to unlock your previously locked bitcoin in the system.

So when the value of a bitcoin is $7.60 you have 200 NDC and the exchange rate is 200 NDC = 1 BTC.

Then when a week later the value of a bitcoin is $3.80 again, if NDC stays stable that means the exchange rate has to be 100 NDC = 1 BTC, the same as the time two weeks previous when bitcoins were worth $3.80.

So now I can unlock my bitcoin and now I own 100 NDC and 1 BTC, whereas before I owned just 1 BTC. Free money! Also, the remaining NDC I own is not "backed" by anything, because I can't use it to unlock BTC, which means I can't use it to buy a Big Mac.

wtf?

Please read the article I linked to: https://secure.wikimedia.org/wikipedia/en/wiki/Currency_peg

Hmm... I haven't thought this through. Ok, change in strategy. You will NOT be compensated when locking a bitcoin into the system, BUT you will be able to unlock that bitcoin for the same amount of NDC you got when locking it. This was just a quick fix. I must admit that I haven't thought this new idea through either. Grin
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May 26, 2011, 03:55:55 PM
 #51

Hmm... I haven't thought this through. Ok, change in strategy. You will NOT be compensated when locking a bitcoin into the system, BUT you will be able to unlock that bitcoin for the same amount of NDC you got when locking it. This was just a quick fix. I must admit that I haven't thought this new idea through either. Grin

OK so that means that my 100 NDC unlock 1 BTC whereas somebody else (who buys NDC at a different time) has 200 NDC which unlock 1 BTC? So we both hold the same currency but it has two different values?

What the fuck is this shit?
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May 26, 2011, 04:03:34 PM
 #52

Hmm... I haven't thought this through. Ok, change in strategy. You will NOT be compensated when locking a bitcoin into the system, BUT you will be able to unlock that bitcoin for the same amount of NDC you got when locking it. This was just a quick fix. I must admit that I haven't thought this new idea through either. Grin

OK so that means that my 100 NDC unlock 1 BTC whereas somebody else (who buys NDC at a different time) has 200 NDC which unlock 1 BTC? So we both hold the same currency but it has two different values?

What the fuck is this shit?

lol. Yes. Even one person can have several locks of different values depending on when the locks were done. But remember, this is only for unlocking bitcoins the persons themselves have locked previously. It doesn't change the value of the currency. 100 NDC will remain equal to the value of one Big Mac in USD in the U.S. (And, yes, if someone from the UK locks bitcoins into the system, it's still the U.S. price of a Big Mac in the U.S. that is the reference value.)

It's working! It's working!!! I think. Huh
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May 26, 2011, 04:41:10 PM
 #53

So, you've invented the world's most complicated non-interest paying savings accounts?

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May 26, 2011, 04:55:43 PM
 #54

So, you've invented the world's most complicated non-interest paying savings accounts?

Yes, non-interest, but it gives you the great value of having a digital, open source, non-centralized, distributed peer-to-peer crypto currency, 100% backed by solid bitcoins, lightning-fast-transaction capable, computationally light-weight compared to Bitcoin, guaranteed protection against double-spending and with the amazing property of being resilient against both inflation and deflation. It's the wet dream for online consumer markets.
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May 26, 2011, 05:05:37 PM
 #55

Except that it only makes sense to unlock when the exchange rate is exactly what it was when you locked.  So, you are giving up the use of your bitcoins in exchange for the chance that they will be worth exactly the same amount at some point in the future.

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May 26, 2011, 05:16:27 PM
 #56

Except that it only makes sense to unlock when the exchange rate is exactly what it was when you locked.  So, you are giving up the use of your bitcoins in exchange for the chance that they will be worth exactly the same amount at some point in the future.

Oh no. Not like that. Let's say that you lock in 1 bitcoin and get 150 NDC at a certain moment in time. Then after a month, the bitcoin you locked in is worth 200 NDC. You can then unlock your bitcoin in the system for 150 NDC. So there is zero risk for you to lock bitcoins into the system.
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May 26, 2011, 05:20:40 PM
 #57

Yes, non-interest, but it gives you the great value of having a digital, open source, non-centralized, distributed peer-to-peer crypto currency, 100% backed by solid bitcoins, lightning-fast-transaction capable, computationally light-weight compared to Bitcoin, guaranteed protection against double-spending

Bitcoin already has that.

Quote
and with the amazing property of being resilient against both inflation and deflation. It's the wet dream for online consumer markets.

Bitcoin doesn't have that, but neither does your thing. Think about it.
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May 26, 2011, 05:27:32 PM
 #58

Yes, non-interest, but it gives you the great value of having a digital, open source, non-centralized, distributed peer-to-peer crypto currency, 100% backed by solid bitcoins, lightning-fast-transaction capable, computationally light-weight compared to Bitcoin, guaranteed protection against double-spending

Bitcoin already has that.

Quote
and with the amazing property of being resilient against both inflation and deflation. It's the wet dream for online consumer markets.

Bitcoin doesn't have that, but neither does your thing. Think about it.

Bitcoin is not lightning-fast-transaction capable in reality. In fact it's tremendously sluggish. I had to wait several minutes when I did a test to receive a small amount of bitcoins. Nor is Bitcoin computationally lightweight.

And the new digital currency IS resilient to both inflation and deflation. 100 NDC today equals one Big Mac. 100 NDC next month equals one Big Mac. 100 NDC next year equals one Big Mac. 100 NDC two decades from now equals one Big Mac. Need I go on? Think about it.
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May 26, 2011, 05:39:42 PM
 #59

Except that it only makes sense to unlock when the exchange rate is exactly what it was when you locked.  So, you are giving up the use of your bitcoins in exchange for the chance that they will be worth exactly the same amount at some point in the future.

Oh no. Not like that. Let's say that you lock in 1 bitcoin and get 150 NDC at a certain moment in time. Then after a month, the bitcoin you locked in is worth 200 NDC. You can then unlock your bitcoin in the system for 150 NDC. So there is zero risk for you to lock bitcoins into the system.

So, the value of the NDC has fallen by 33%, but I don't have to take that loss, because I can get my BTC back for exactly the amount I paid for it?

What if it went the other way?  Say I buy 150 NDC for 1 BTC, then the exchange rate goes to 100 NDC/BTC.  I can now sell my 150 NDC for 1.5 BTC, right?  Or am I somehow forced to buy my own BTC back for 150 NDC?

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May 26, 2011, 05:49:41 PM
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Except that it only makes sense to unlock when the exchange rate is exactly what it was when you locked.  So, you are giving up the use of your bitcoins in exchange for the chance that they will be worth exactly the same amount at some point in the future.

Oh no. Not like that. Let's say that you lock in 1 bitcoin and get 150 NDC at a certain moment in time. Then after a month, the bitcoin you locked in is worth 200 NDC. You can then unlock your bitcoin in the system for 150 NDC. So there is zero risk for you to lock bitcoins into the system.

So, the value of the NDC has fallen by 33%, but I don't have to take that loss, because I can get my BTC back for exactly the amount I paid for it?

What if it went the other way?  Say I buy 150 NDC for 1 BTC, then the exchange rate goes to 100 NDC/BTC.  I can now sell my 150 NDC for 1.5 BTC, right?  Or am I somehow forced to buy my own BTC back for 150 NDC?

It's not the value of the NDC that has fallen. It's the value of the bitcoin that has become deflated. That's an important distinction. The new digital currency is simply a convenient 'mapping' into a inflation- and deflation-free space. So what the system does for you is preserving your right for that bitcoin, and regardless of its future value, lower or higher, you will always get the bitcoin back for exactly the same amount of NDC that you got in the first place.

When the value of the bitcoin goes down compared to when you locked it into the system, then yes you will still have to unlock it for the original amount of NDC. But you are not forced to unlock the bitcoin when the value of it is low. You can wait until the value has increased again.
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May 26, 2011, 05:54:28 PM
 #61

You still haven't explained how your system is decentralized, faster than Bitcoins and more computationally  light-weight (whatever that means).

This is just too stupid. I'm not going to bother replying any more.
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May 26, 2011, 06:04:57 PM
 #62

You still haven't explained how your system is decentralized, faster than Bitcoins and more computationally  light-weight (whatever that means).

This is just too stupid. I'm not going to bother replying any more.

The system is just an idea at the moment, but the idea is that the logging algorithm for transactions using private and public crypto keys could be made much less computationally heavy for the new digital currency than for Bitcoin. I don't know much about crypto keys and things like that so it's just a guess at the moment I must admit.
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May 26, 2011, 06:06:21 PM
 #63

Except that it only makes sense to unlock when the exchange rate is exactly what it was when you locked.  So, you are giving up the use of your bitcoins in exchange for the chance that they will be worth exactly the same amount at some point in the future.

Oh no. Not like that. Let's say that you lock in 1 bitcoin and get 150 NDC at a certain moment in time. Then after a month, the bitcoin you locked in is worth 200 NDC. You can then unlock your bitcoin in the system for 150 NDC. So there is zero risk for you to lock bitcoins into the system.

So, the value of the NDC has fallen by 33%, but I don't have to take that loss, because I can get my BTC back for exactly the amount I paid for it?

What if it went the other way?  Say I buy 150 NDC for 1 BTC, then the exchange rate goes to 100 NDC/BTC.  I can now sell my 150 NDC for 1.5 BTC, right?  Or am I somehow forced to buy my own BTC back for 150 NDC?

It's not the value of the NDC that has fallen. It's the value of the bitcoin that has become deflated. That's an important distinction. The new digital currency is simply a convenient 'mapping' into a inflation- and deflation-free space. So what the system does for you is preserving your right for that bitcoin, and regardless of its future value, lower or higher, you will always get the bitcoin back for exactly the same amount of NDC that you got in the first place.

When the value of the bitcoin goes down compared to when you locked it into the system, then yes you will still have to unlock it for the original amount of NDC. But you are not forced to unlock the bitcoin when the value of it is low. You can wait until the value has increased again.

Wouldn't it make more sense to leave my coin locked, and find someone else willing to buy my 150 NDC for 1.5 BTC?

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May 26, 2011, 06:08:43 PM
 #64

The system is just an idea at the moment, but the idea is that the logging algorithm for transactions using private and public crypto keys could be made much less computationally heavy for the new digital currency than for Bitcoin. I don't know much about crypto keys and things like that so it's just a guess at the moment I must admit.

I have an idea for a flying car. It's just an idea at the moment, but the idea is that the engine could be made much more efficient and use less fuel compared to current cars, while also being stylish and safe. I don't know much about physics and things like that so it's just a guess at the moment I must admit.
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May 26, 2011, 06:15:54 PM
 #65

You are trying to solve two problems.  First, provide a method for fast transactions.  Second, find a way to hold a fixed value.

The first problem requires a third party that is willing to take on the rollback risk of a transaction.

The second was solved centuries ago by King Canute.

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May 26, 2011, 06:37:50 PM
 #66

The system is just an idea at the moment, but the idea is that the logging algorithm for transactions using private and public crypto keys could be made much less computationally heavy for the new digital currency than for Bitcoin. I don't know much about crypto keys and things like that so it's just a guess at the moment I must admit.

I have an idea for a flying car. It's just an idea at the moment, but the idea is that the engine could be made much more efficient and use less fuel compared to current cars, while also being stylish and safe. I don't know much about physics and things like that so it's just a guess at the moment I must admit.

Building an open source system that I propose would be possible within a relatively short period of time I think. The flying car would be more of a challenge.
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May 26, 2011, 06:39:23 PM
 #67

You are trying to solve two problems.  First, provide a method for fast transactions.  Second, find a way to hold a fixed value.

The first problem requires a third party that is willing to take on the rollback risk of a transaction.

The second was solved centuries ago by King Canute.

Actually BeerTokens has already solved the problem with deflation. Maybe it would be easy to tweak the BeerTokens system to become like the currency I propose.
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May 26, 2011, 06:42:21 PM
 #68

Wouldn't it make more sense to leave my coin locked, and find someone else willing to buy my 150 NDC for 1.5 BTC?

There could be external markets for trading with NDC, so sure, if you managed to do that then that's a possibility.
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May 26, 2011, 07:44:36 PM
 #69

If the new digital currency would be implemented in a centralized system, then it would be quite easy to do. Just have a Bitcoin wallet, and then store all currency, transaction and locking data in a large database. I could implement that myself using Google App Engine, except that it doesn't allow opening the network connections needed for the Bitcoin wallet.
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May 26, 2011, 07:46:39 PM
 #70

If the new digital currency would be implemented in a centralized system, then it would be quite easy to do. Just have a Bitcoin wallet, and then store all currency, transaction and locking data in a large database. I could implement that myself using Google App Engine, except that it doesn't allow opening the network connections needed for the Bitcoin wallet.

You're just trying to get to 100 posts aren't you?  Smiley
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May 26, 2011, 07:48:40 PM
 #71

If the new digital currency would be implemented in a centralized system, then it would be quite easy to do. Just have a Bitcoin wallet, and then store all currency, transaction and locking data in a large database. I could implement that myself using Google App Engine, except that it doesn't allow opening the network connections needed for the Bitcoin wallet.

You're just trying to get to 100 posts aren't you?  Smiley

You will probably beat me to it. Grin
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May 26, 2011, 07:51:22 PM
 #72

If the new digital currency would be implemented in a centralized system, then it would be quite easy to do. Just have a Bitcoin wallet, and then store all currency, transaction and locking data in a large database. I could implement that myself using Google App Engine, except that it doesn't allow opening the network connections needed for the Bitcoin wallet.

You're just trying to get to 100 posts aren't you?  Smiley

You will probably beat me to it. Grin

Yup!
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May 26, 2011, 09:36:31 PM
 #73

... and with the amazing property of being resilient against both inflation and deflation.

Bitcoin doesn't have that, but neither does your thing. Think about it.

Oh crock! You're right. If I for example lock 1 bitcoin and get 100 NDC, then that would represent the price of a Big Mac. But imagine that after a year, the price of a Big Mac is 2 bitcoins. If we started with an empty system, then only 1 bitcoin exists in it. Yet if I have spent my 100 NDC so that another person now has them, then when he or she wants to exchange those 100 NDC for 2 bitcoins, then the system cannot produce them since it only contains 1 bitcoin.

Epic fail. Darn.  Embarrassed Angry
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May 27, 2011, 05:54:29 AM
 #74

Let's try another approach. The NDC is pegged to the price of a Big Mac at a certain moment in time so that 100 NDC = 1 Big Mac. After the peg the future prices of the Big Mac are ignored.

Then as an example if I lock one bitcoin into the system and get 100 NDC because it happened that 1 bitcoin at that moment equaled 1 Big Mac. Then what will happen in the future if next year the Big Mac costs 2 bitcoins? Then I would only get half a Big Mac if I unlocked my bitcoin from the system. That's ok. Because the peg is for a certain starting point, not a continuous pegging to the Big Mac. And the value of my bitcoin is what it is. The value of the bitcoin would have been the same regardless whether I had locked the bitcoin into the system or kept it 'under my pillow'.

Another example would be that I lock in one bitcoin and get 100 NDC and then I wait a year and then the value of a bitcoin has increased 5 times. I unlock the bitcoin for 100 NDC and then I lock it again and get 500 NDC! That's ok too, because that reflects the actual value of the bitcoin at the time it is locked.

Then what would happen if I unlock a bitcoin when it has dropped in value? Let's say that instead of increasing 5 times the value becomes halved. Then I still have to unlock the bitcoin for 100 NDC and if I lock it again I will only get 50 NDC. That too will be ok, since that reflects the actual value of the bitcoin. The value of the bitcoin would still have halved even if I didn't lock it into the system.

So what say you? Isn't this a workable solution? The new digital currency would still be fairly stable in relation to inflation and deflation. And there would be no risk involved for people who want to lock their bitcoins into the system because they can always unlock them again without any loss in value.
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May 27, 2011, 05:57:26 AM
 #75

You do realize that only Mc Donald's Cie can peg a currency to a big mac, right?
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May 27, 2011, 06:08:00 AM
 #76

Then what would happen if I unlock a bitcoin when it has dropped in value? Let's say that instead of increasing 5 times the value becomes halved. Then I still have to unlock the bitcoin for 100 NDC and if I lock it again I will only get 50 NDC. That too will be ok, since that reflects the actual value of the bitcoin. The value of the bitcoin would still have halved even if I didn't lock it into the system.

So, let's say I still have my 100 NDC after the drop and I spend it on fries. What does McDonald do with the 100 NDC? can he cash it for bitcoin? Whose bitcoin and at what rate? Does the NDC he gets "remember" my lock-in rate?
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May 27, 2011, 06:29:37 AM
 #77

You do realize that only Mc Donald's Cie can peg a currency to a big mac, right?

McDonald's can change the price of a Big Mac, but they can't hinder anyone using the price as a measurement reference. They could perhaps claim trademark rights to using the term 'Big Mac' so yes it could be better to simply peg the new currency to a similar amount of money not connected to any trademark or copyright.
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May 27, 2011, 06:36:06 AM
 #78

Then what would happen if I unlock a bitcoin when it has dropped in value? Let's say that instead of increasing 5 times the value becomes halved. Then I still have to unlock the bitcoin for 100 NDC and if I lock it again I will only get 50 NDC. That too will be ok, since that reflects the actual value of the bitcoin. The value of the bitcoin would still have halved even if I didn't lock it into the system.

So, let's say I still have my 100 NDC after the drop and I spend it on fries. What does McDonald do with the 100 NDC? can he cash it for bitcoin? Whose bitcoin and at what rate? Does the NDC he gets "remember" my lock-in rate?

That example is actually the only way to break the system I think. You have locked in one bitcoin for 100 NDC, but have spent that money so that when the new owner McDonald's wants to exchange their 100 NDC they expect 2 bitcoins in return but the system only contains one bitcoin. That's similar to the earlier problem in a previous post.

In general, with many people using the system, the problem would only arise if the amount of bitcoins locked into the system would be worth less than the amount of NDC in circulation AND that everybody would withdraw their bitcoins all at once. That would be very unlikely, but yes it's a nasty problem that I think has to be solved.

Compare with banks using fractional reserve banking who only need to have 10% of the value lent out in deposit. And runs on banks are very rare nowadays. The system for the new digital currency would on average have 100% of the value in deposit.

And yes, the system remembers all lock in rates at the moment the locks were made.
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May 27, 2011, 07:21:40 AM
 #79

Okay here is another idea.

Forget about all this "locking" talk, "locking" bitcoins into your system.

Instead, "simply" (note the scare-quotes, they imply possible cans of worms lurking therein) use your big mac reserves, or maybe more reasonably your reserves of things that withstand time somewhat easier / at lower costs of preservative measures, to try very hard to keep the value of your currency from falling "too low" or rising "too high" in your estimation of how low is too low and how high is too high.

In other words do much as various Freeciv Galactic Milieu nations are doing or plan to do: instead of having only one reserve currency like earthling nations do (the U.S. dollar is claimed in various writings to be 'the' reserve currency for much of earth) they plan to have reserves of any/all currencies they consider 'major' enough in their view to be worth worrying about the conversion rates of their currency to those other currencies.

So for example if you see hamburgers are becoming too expensive in terms of your currency, you would promptly use your hamburger reserves to buy up as much of your currency as possible using hamburgers. In other words you would increase hamburger-demand for your currency, hopefully causing it to become worth more hamburgers than it had been.

Similarly if you see hamburgers are becoming too cheap in terms of your currency, you would promptly use your your-currency reserves to buy up large numbers of hamburgers - increasing the your-currency-demand for hamburgers hoping thus to drive up the price of them in terms of your currency.

I actually nurture some possibly small possibly doomed-to-be-dashed hope, by using hamburgers rather than some possibly a little harder to duplicate, substitute, counterfeit, forge, grow on meadows, etc currency in the preceding verbiage, to lead you to imagine that hamburgers might not actually be the smartest alternative currency to bother trying to keep your exchange rates within a certain range with respect to...

(Instead, maybe imagine each of the other alternative currencies as possible candidates to plug into the idea instead of hamburgers, or even, though it might not be much if any better than plugging in hamburgers, fiat currencies might also be interesting to consider in such roles... Also maybe bullions of various kinds might be interesting candidates...)

-MarkM-

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May 27, 2011, 07:30:45 AM
 #80

Actually not even Bitcoin has a 100% safety guarantee. The same thing with NDE. The probability of a problem in practice only exists when the system is still very small.
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May 27, 2011, 07:38:11 AM
 #81

Actually not even Bitcoin has a 100% safety guarantee. The same thing with NDE. The probability of a problem in practice only exists when the system is still very small.

When your reserves are small then yes you might have problems. It is apparently largely because the rest of the world's reserves of U.S. dollars might be becoming very small very soon due to devaluation of U.S. dollars that the U.N. is worried about the entire earthling monetary system...

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May 27, 2011, 07:40:07 AM
 #82

Actually not even Bitcoin has a 100% safety guarantee. The same thing with NDE. The probability of a problem in practice only exists when the system is still very small.

When your reserves are small then yes you might have problems. It is apparently largely because the rest of the world's reserves of U.S. dollars might be becoming very small very soon due to devaluation of U.S. dollars that the U.N. is worried about the entire earthling monetary system...

-MarkM-


The USD is insignificant next to the power of the Bitcoin.  Grin
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May 27, 2011, 08:14:43 AM
 #83

The USD is insignificant next to the power of the Bitcoin.  Grin

All the more reason to be nice to them by introducing game-bitcoins, compared to which their fiat might actually seem at least for a while to have value, maybe even seemingly quite a bit of value.

(I am thinking not of prestigious Martian Botcoins, nor even major galactic currencies such as CDN and UKB, of course... But maybe for example the blockchain of the tiny Czech nation whose single city is on a predominately Martian planet might make USD look relatively valuable?)

-MarkM- (Unless, of course, the Czechs too try to somehow peg their currency to currencies on the "mythical" planet known as Earth...)



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May 27, 2011, 09:07:36 AM
 #84

The USD is insignificant next to the power of the Bitcoin.  Grin

All the more reason to be nice to them by introducing game-bitcoins, compared to which their fiat might actually seem at least for a while to have value, maybe even seemingly quite a bit of value.

(I am thinking not of prestigious Martian Botcoins, nor even major galactic currencies such as CDN and UKB, of course... But maybe for example the blockchain of the tiny Czech nation whose single city is on a predominately Martian planet might make USD look relatively valuable?)

-MarkM- (Unless, of course, the Czechs too try to somehow peg their currency to currencies on the "mythical" planet known as Earth...)




The CIA is interested in Bitcoin. I don't know if they consider Bitcoin to be a potential threat or an opportunity. lol. Botcoin, is that compatible with Bitcoin?
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May 27, 2011, 09:35:41 AM
 #85

The CIA is interested in Bitcoin. I don't know if they consider Bitcoin to be a potential threat or an opportunity. lol. Botcoin, is that compatible with Bitcoin?

Very compatible. The clients and daemons used by Martian Bank branches on Earth (Sol III) actually function as normal standard Bitcoin clients when the command-line switch that causes them to use the Martian network and blockchain instead of the Hacker nation's network and blockchain (known here on Earth/Sol-III as Bitcoin) is not used.

-MarkM- (The Hacker nation is every bit as mythical as the planet known as Earth so if Earth exists why not Hackers, maybe even on Earth...)


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May 27, 2011, 10:20:22 PM
 #86

A centralized system for the new currency would be interesting to experiment with but not really so attractive as a real system, because even if people would trust the service/company there would still be the risk of something happening with it such as it being acquired by some nasty corporation or that governments start to mess with the system.

Supporting the ability to lock bitcoins in the system would require a fairly large database that keeps track of all the locks; when they were made, by who, how many bitcoins etc. And this would have to be implemented as a part of the peer-to-peer open source network. Does any P2P distributed database exist today? The idea in itself is very cool. A database that is spread out similar to Bitcoin or BitTorrent and other P2P networks like that.
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May 28, 2011, 01:53:20 AM
 #87

Instead of calling it NDC, new digital currency, which is a somewhat cumbersome, the new currency can be called bitbacks as in backed by bitcoins. The value of one bitback is pegged at a certain date - say 2011-05-28 - to 1 bitback (BTB) = 1/10 USD. Which is the same as: 10 BTB = 1 USD.

Bitback symbol:

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May 28, 2011, 09:27:01 PM
 #88

Uhm? Think you need to think this one thru a bit more...

Holding the physical money commodity is always better then holding a money substitute.

The reason there are e-currencies that are gold substitutes is that walking around with gold is quite heavy (and dangerous in the wrong neighbourhood). So heavy that the downside of having to trust a issuer of electronic receipts for gold outweighs the nauseanse and risk of running around with gold in your pocket or sending it by postal service to the other side of the globe to pay for stuff.

BitCoin does not share these physical properties with gold since it is already a virtual commodity and so if you have any computer skills at all it is better to trade directly with BitCoin then to trust someone else to issue receipts of BitCoin holdings and trade those.

Even people that don't know anything about computers don't need to go as far down the value chain as to trade in money substitutes. They can use the web-interfaces available, they do need to trust there wallet file to someone else but they still have there own wallet of BitCoin. Rather then having electronic receipts of BitCoin to someone elses wallet...

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May 28, 2011, 09:41:00 PM
 #89

Uhm? Think you need to think this one thru a bit more...

Holding the physical money commodity is always better then holding a money substitute.

The reason there are e-currencies that are gold substitutes is that walking around with gold is quite heavy (and dangerous in the wrong neighbourhood). So heavy that the downside of having to trust a issuer of electronic receipts for gold outweighs the nauseanse and risk of running around with gold in your pocket or sending it by postal service to the other side of the globe to pay for stuff.

BitCoin does not share these physical properties with gold since it is already a virtual commodity and so if you have any computer skills at all it is better to trade directly with BitCoin then to trust someone else to issue receipts of BitCoin holdings and trade those.

Even people that don't know anything about computers don't need to go as far down the value chain as to trade in money substitutes. They can use the web-interfaces available, they do need to trust there wallet file to someone else but they still have there own wallet of BitCoin. Rather then having electronic receipts of BitCoin to someone elses wallet...

It's true that locking one's bitcoins into a centralized system is like storing one's gold in a bank. Even worse than that since the centralized system in this case can be threatened by government regulations or by the acquisition of it by a nasty corporation.

Therefore it's best to implement the bitback system as an open source distributed peer-to-peer network, owned by no individual institution, company, government or organization. Then, if the Bitback P2P network becomes large, it will be safe for people to store their bitcoins there. Just as safe as the Bitcoin P2P network.
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May 28, 2011, 09:47:39 PM
 #90

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.

Maybe there is a point if you keep it at 1:1 with say USD. But it would probably be pretty difficult to keep up and very weird to have that balance go up and down all the time. I wonder who pays for the exchange risk exactly in this system...
It seems a bit easier just to put a comparison value in USD next to the BC price...

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May 28, 2011, 09:51:49 PM
 #91

And then let people buy the new currency with their bitcoins. And have their saldo of the new currency increase when the Bitcoin value increases, so that the buyers of the new currency would not need to worry about spending their bitcoins in exchange for the new digital currency.

Maybe there is a point if you keep it at 1:1 with say USD. But it would probably be pretty difficult to keep up and very weird to have that balance go up and down all the time. I wonder who pays for the exchange risk exactly in this system...
It seems a bit easier just to put a comparison value in USD next to the BC price...

Yeah, it could be convenient to have the currency follow USD, BUT remember that the U.S. dollar is an inflationary currency. The Bitback would not be inflationary. And the balance of the bitbacks in a person's wallet remains the same just as an ordinary currency.
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May 28, 2011, 10:59:02 PM
 #92

How about this? http://www.echeque.com/Kong/anon_transfer.htm there doesn't have to be a central issuer, just a way of only accepting coins issued by someone you trust, or someone you trust trusts.

Spare some BTC for a biology student? 1DZcEUEo9rX7LQWcYzVR6Btqj2sMqRznbB
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May 29, 2011, 01:59:55 AM
 #93

How about this? http://www.echeque.com/Kong/anon_transfer.htm there doesn't have to be a central issuer, just a way of only accepting coins issued by someone you trust, or someone you trust trusts.

Trusting people is like old-school business. Trust in distributed peer-to-peer crypto currency is better. No trust in people needed.

'Your idea changes, doesn't it? "How could you let me down when I trusted you so much?" you say to someone. Did you really trust them? You never trusted anyone. Come off it! That's part of society's brainwashing. You never trust anyone. You only trust your judgment about that person. So what are you complaining about? The fact is that you don't like to say, "My judgment was lousy." That's not very flattering to you, is it? So you prefer to say, "How could you have let me down?"' -- Anthony De Mello
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May 29, 2011, 02:18:00 AM
 #94

Maybe you should use BitNickels (NKL) for now. They have the option of going up in value to be 1/20 of a bitcoin but in order to try to avoid complaints about rapidly changing value and also in order to try to avoid complaints about early adopters getting too rich they have stayed at about the price of a real-nickel old-style U.S. nickel, that is, about US$0.07 per BitNickel.

You can anticipate that some day, hopefully when they are in wide circulation long after any early adopter period is long past, they will starting moving toward being 1/20 of a bitcoin instead of 1/20 of a CDN or a UKB or a CZB or any of the various other blockchain-based digital currencies.

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May 29, 2011, 02:28:28 AM
 #95

Maybe you should use BitNickels (NKL) for now. They have the option of going up in value to be 1/20 of a bitcoin but in order to try to avoid complaints about rapidly changing value and also in order to try to avoid complaints about early adopters getting too rich they have stayed at about the price of a real-nickel old-style U.S. nickel, that is, about US$0.07 per BitNickel.

You can anticipate that some day, hopefully when they are in wide circulation long after any early adopter period is long past, they will starting moving toward being 1/20 of a bitcoin instead of 1/20 of a CDN or a UKB or a CZB or any of the various other blockchain-based digital currencies.

-MarkM-


If early adopters became super rich, then that would maybe be a problem. Like having 1% of people owning 99% of all available bitcoins. That would also be a kind of cornering of the Bticoin market. But fear not. The NSA has since the beginning plugged in their super computer mainframes to the Bitcoin P2P network and now owns 90% of all bitcoins and will own 99% of all bitcoins in two years time. Just kidding!  Cheesy

Not only that. The NSA were the ones who planted the idea of Bitcoin into the public market in the first place. A scheme for us gullible suckers to swallow hook, line and sinker. Just kidding again!
Anders
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May 29, 2011, 08:30:41 AM
 #96

Instead of calling it NDC, new digital currency, which is a somewhat cumbersome, the new currency can be called bitbacks as in backed by bitcoins. The value of one bitback is pegged at a certain date - say 2011-05-28 - to 1 bitback (BTB) = 1/10 USD. Which is the same as: 10 BTB = 1 USD.

Bitback symbol:



If we want a currency that follows the inflation/deflation of the U.S. dollar then we simply skip the fixed pegging date. That can be convenient because the value of the U.S. dollar changes, yes, but people are used to that so it's probably not a problem.

And to make it even more convenient the rate can be set to: 1 BTB = 1 USD at all dates, which means that the Bitback is totally pegged to the U.S. dollar all the time so that 1 bitback always equals 1 U.S. dollar.

Locking a bitcoin worth $10 will give 10 bitbacks. If the bitcoin then doubles in value after a year compared to the USD, then the bitcoin is worth 20 bitbacks, yet it can still be unlocked for 10 bitbacks since that was the amout we got when locking it one year earlier. If the bitcoin is then immediately locked into the system again, we will get 20 bitbacks.
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May 29, 2011, 11:19:29 AM
 #97

An alterantive name for bitbacks is bitdollars, since if it is pegged exactly to the dollar, then BitDollar, or bitdollar, is an appropriate name. The symbol can still be the same:

BitDollar symbol:

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May 29, 2011, 12:03:40 PM
 #98

Would the BitDollar be traceable? So that people can find out how you have spent and earned your bitdollars? I suggest that the bitdollars should be semi-traceable, meaning that only an international monetary control agency (IMCA) could perform traces of bitdollars while for ordinary people and companies etc the bitdollars would be untraceable. The reason for this is to have a means to track the bitdollars to investigate crime and terrorism and other illicit forms of use, while still have the currency untraceable for everybody except the IMCA which would only be able to perform traces of the currency, not in any way manipulate it.

Then what about minor crimes such as online poker in certain countries? For such purposes it would always be possible to use bitcoins directly. Wink
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