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Author Topic: Digital currency backed by Bitcoin  (Read 9564 times)
ene
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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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Anders
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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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ene
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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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Anders
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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.
Anders
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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.
Anders
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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.
Anders
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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.
ffe
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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
Anders
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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
ffe
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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!
Anders
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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
Anders
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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.
grondilu
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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?
ffe
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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?
Anders
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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.
Anders
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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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Anders
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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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