It's not me the one who gives enormous power to exchanges. They DO have such a power now. The 100% of the price is defined by the exchanges. Please give my proposal (and the actual system itself) a second look.
Topic: A weighted price calculation for crypto (Read 126 times)
I have a better idea, how about we vote what the price should be?
And so nobody will be able to influence the price in a non-democratically way.
The main flaw in your system is that you're giving enormous power to exchanges, by adding a formula that counts coins on exchanges.
So, just because in day 1, Alice has 100 coins on an exchange she gets more voting power next day than Alex who sends his coins, also 100 on day two. And I'll ignore the fact that it will almost be impossible to get the number of coins sitting on an exchange correctly and fair (see huobi and okchina).
You're going to create a cartel with this stuff the Seven Sisters would be jealous.
Again, having an "zero hour' would open a Pandora's box.
Just wait, the so called manipulation and volatility will be at kindergarten level compared to your scenario.
Everybody will shake in fear at 23:59 praying to all the gods of crypto.
And so nobody will be able to influence the price in a non-democratically way.
The main flaw in your system is that you're giving enormous power to exchanges, by adding a formula that counts coins on exchanges.
So, just because in day 1, Alice has 100 coins on an exchange she gets more voting power next day than Alex who sends his coins, also 100 on day two. And I'll ignore the fact that it will almost be impossible to get the number of coins sitting on an exchange correctly and fair (see huobi and okchina).
You're going to create a cartel with this stuff the Seven Sisters would be jealous.
Again, having an "zero hour' would open a Pandora's box.
Just wait, the so called manipulation and volatility will be at kindergarten level compared to your scenario.
Everybody will shake in fear at 23:59 praying to all the gods of crypto.
BTC price is based upon the absolute decision of those who trade it, without even taking care of those willing to HODL.
Right now, if a whale takes the decision of selling all its BTC counting for 2% of the circulating supply, at, let's say, 80% of the current value, then the 98% of the remaining BTC will suddenly crash, no matters if were being held by long or by short term holders, or even by some one who sold his house because he believed in BTC.
If the price of a crypto decreases 10 percent, because the owners of 2 percent, suddenly decide to sell it, would be like the price of dollar could decrease because a millionaire decided to buy an international consortium, affecting the savings of a grandma in a cookies can, but this is not happening this way with fiat, doesn't it?
The guys who own the 2 percent of a given crypto decide the MarketCap because right now the price of all coins depend absolutely on exchanges. So the price calculation formula for that crypto, is something like this:
MarketCap = Coin Price * Circulating Supply
and
In this example, if the circulating supply is 100 million coins, if there are 10 million coins in all the exchanges, and if the last price of the coin in a given market is 1 U$, the price of the coin would be:
So, if the price decreases to 80 cents in one day in the exchanges, then:
This means that the price of the crypto is entirely determined by the coins in the exchanges. Period.
Well, perhaps the guys who have the 2 percent of that given crypto, should not decide the price of 98% remaining coins. This is nor democratic nor decentralized. To my point of view, this is not only unfair, but lacks of logic. I know it's just the way it is, but the extreme volatility of cryptocurrency is caused for this reason.
Calculating the price of assets, shares, commodities, or whatever could be traded based only on supply-demand ratio could have been appropriate for many things during mankind history, but not for crypto. Why? because crypto is the new technology to give an updated shape to a complex concept: "money".
As long as crypto show such an extreme volatility, their adoption for everyday use will be delayed. That is not what this community want, I guess. Maybe it is very profitable for day traders, gamblers, or whatever, but not for crypto community and probably not for what Satoshi was thinking when he started the fire on 2008.
There could be a solution for this issue, only if the whole community could agree on a new and different way to calculate the price of cryptos, just by a more democratic, decentralized and "weighted" way. The MarketCap formula will always remain the same:
and the grand difference would be in the Coin Price
Where
and
In the same example above, if the circulating supply is 100 million coins, if there are 10 million coins in all the exchanges, and if the price decreases to 80 cents in one day, then:
For this to become real it should also be necessary to define a "Zero Hour" to set base prices for every crypto on earth. This should be decided in consensus and widely announced very much the same way it happened with the BTC forks. Perhaps you will agree with me that there is no better moment than 7:17 pm, Jacksonville, USA time, on May 22, 2020. Would Laszlo Hanyecz be happy with this? Will Satoshi Nakamoto and the crypto community agree, and therefore find a consensus in just 2 years from now?
What do you think?
Right now, if a whale takes the decision of selling all its BTC counting for 2% of the circulating supply, at, let's say, 80% of the current value, then the 98% of the remaining BTC will suddenly crash, no matters if were being held by long or by short term holders, or even by some one who sold his house because he believed in BTC.
If the price of a crypto decreases 10 percent, because the owners of 2 percent, suddenly decide to sell it, would be like the price of dollar could decrease because a millionaire decided to buy an international consortium, affecting the savings of a grandma in a cookies can, but this is not happening this way with fiat, doesn't it?
The guys who own the 2 percent of a given crypto decide the MarketCap because right now the price of all coins depend absolutely on exchanges. So the price calculation formula for that crypto, is something like this:
MarketCap = Coin Price * Circulating Supply
and
Code:
Coin Price = Price of last trade
That is equivalent to state that:Code:
Coin Price = Price of last trade * ((amount of coins in all the exchanges/amount of coins in all the exchanges) - (0 * Circulating supply))
In this example, if the circulating supply is 100 million coins, if there are 10 million coins in all the exchanges, and if the last price of the coin in a given market is 1 U$, the price of the coin would be:
Code:
Coin Price = 1 US$ * ((10M/10M) - (0 * 100M))
Coin Price = 1 US$ * (1 - 0)
Coin Price = 1 US$
Coin Price = 1 US$ * (1 - 0)
Coin Price = 1 US$
So, if the price decreases to 80 cents in one day in the exchanges, then:
Code:
Coin Price = 0.8 US$ * ((10M/10M) - (0 * 100M))
Coin Price = 0.8 US$ * (1 - 0)
Coin Price = 0.8 US$
Coin Price = 0.8 US$ * (1 - 0)
Coin Price = 0.8 US$
This means that the price of the crypto is entirely determined by the coins in the exchanges. Period.
Well, perhaps the guys who have the 2 percent of that given crypto, should not decide the price of 98% remaining coins. This is nor democratic nor decentralized. To my point of view, this is not only unfair, but lacks of logic. I know it's just the way it is, but the extreme volatility of cryptocurrency is caused for this reason.
Calculating the price of assets, shares, commodities, or whatever could be traded based only on supply-demand ratio could have been appropriate for many things during mankind history, but not for crypto. Why? because crypto is the new technology to give an updated shape to a complex concept: "money".
As long as crypto show such an extreme volatility, their adoption for everyday use will be delayed. That is not what this community want, I guess. Maybe it is very profitable for day traders, gamblers, or whatever, but not for crypto community and probably not for what Satoshi was thinking when he started the fire on 2008.
There could be a solution for this issue, only if the whole community could agree on a new and different way to calculate the price of cryptos, just by a more democratic, decentralized and "weighted" way. The MarketCap formula will always remain the same:
Code:
MarketCap = Coin Price * Circulating Supply
and the grand difference would be in the Coin Price
Code:
Coin Price = Weighted last exchange price + weighted last coin price
Where
Code:
Weighted last exchange price = Price of last trade * (amount of coins in all the exchanges/Circulating Supply))
and
Code:
weighted last coin price = last coin price * ((Circulating Supply - amount of coins in all the exchanges)/Circulating Supply)
In the same example above, if the circulating supply is 100 million coins, if there are 10 million coins in all the exchanges, and if the price decreases to 80 cents in one day, then:
Code:
Coin Price = (0.8 US$ * 10M/100M) + (1 US$ * (100M-10M)/100M)
Coin Price = (0.8 US$ * 0.1) + (1 US$ * 0.9)
Coin Price = 0.08 US$ + 0.9 US$
Coin Price = 0.98 US$
Coin Price = (0.8 US$ * 0.1) + (1 US$ * 0.9)
Coin Price = 0.08 US$ + 0.9 US$
Coin Price = 0.98 US$
For this to become real it should also be necessary to define a "Zero Hour" to set base prices for every crypto on earth. This should be decided in consensus and widely announced very much the same way it happened with the BTC forks. Perhaps you will agree with me that there is no better moment than 7:17 pm, Jacksonville, USA time, on May 22, 2020. Would Laszlo Hanyecz be happy with this? Will Satoshi Nakamoto and the crypto community agree, and therefore find a consensus in just 2 years from now?
What do you think?
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