Topic: Achieving stable prices through a reference currency - page 2. (Read 7084 times)

the current problem is the price stability of bitcoin. you can't start a shop by accepting a currency that pendels between $10 and $20 in one week, because a couple of news magazines release an article about it. as a result, the community has to built up a consensus how much a bitcoin is worth and express it with a currency that also seems to be stable. i suggest to use euro with an average inflation rate around 2% per year, as the dollar is too unstable at the moment (1€ = 1,462$; ), another option would be the chinese yuan.

so, what is the next step? ensure that the bitcoin value remains stable over a certain time, aiming to decrease the deflation rate to an acceptble level. lets say that 1 bitcoin is eqvalent to 15 € (almost 22$), how high should the deflation rate be? not more than 5% per week, I'd say. why? unlike euro and dollar bitcoin still has to be "produced" and people want to see reason why they should use bitcoin or mine them. 2,92% per week - in the first 10 weeks - seems to be a reasonable amount. after those 10 weeks a bitcoin is worth 20 € per coin. after that we decrease the deflation rate to 2,26% per week, leading, again, to a raise by 5€. The deflation rate over 40 weeks is around 180%, but falls with the nex 40 weeks to 50% and after that again. just an example how it could be.

By agreeing that a bitcoin gains a maximum of 5€ in worth after 10 weeks, we agree to a stable deflation rate and a calcuable worth of bitcoin.

sounds nice, but how do we achieve this? democracy. start a poll, spread the word, agree to a fixed amount to start with, agree to an acceptble growth rate, make a website with the current exchange rate according to the deflation rate most of the people agreed to, start your business with bitcoin as an accepted payment.

i read something about having a bank for bitcoins. i have to disagree, we simply need people who are willing to pay real money for bitcoins, and as it happens the best way to do so is sell them on a market, just like now.

brb, paying for my 5970 to farm bitcoins.

Well, i am was running, drunk and happy, with idea like that, just yesterday.

     There is a some obstacles, - process of making solid and reliable RC (I am reffer to it like to CU - Conventional Unit) is not simple by itself . Oh, its a realy hard project.
     That RC can be (and of course, there will be attempts to do it), object of standart statistyics manipulations,  we have too many examples of that practise.
     Why it would happen ? Lets imagine: Peaple will tend to compare other money to RC and will find out that inflation is not so low, like authoritys told them - authorities will try to manipulate RC value.

  So, i am think it is good idea, usebale not only to bitcoin community, but to all of    any currency holders. But i cant even imagine, how to make that project reliable, solid, well maintened, and resistant to manipulations attempts.

  For now, it seems, we are doomed to rely on other currencies when pricing our goods.

That thread talks about actually issuing and backing a currency, not the same thing.
Maybe modifying the bitcoin client is a stupid idea, but signing contracts denominated in a volatile currency is not a better one.
I think a reference currency could be very useful.
A reference currency could help international business to save a lot of money in derivatives, for example.

Anyway, the main point of this thread is to convince people that there's no need for backing and issuing for having an indexed "currency".

So instead of the prices of things I buy going up and down, my own bank balance goes up and down? Isn't that even more difficult than dealing with prices? C'mon.

Also, http://forum.bitcoin.org/index.php?topic=9923.0 and other threads have the same incredibly stupid idea.

After reading some proposals for currencies backed by bitcoins and such, I need to explain the way I think stable prices should be achieved.
Maybe I should have reply to ano of those threads instead of starting a new one.
A reference currency could be backed by nothing and hold by nobody. It would be defined (not backed) by a basket of commodities and services in a way similar to the Terra Reference Currency.
You just need a place to look at the prices of commodities and services relative to bitcoins.
There's no limit in the number of commodities in the basket because you don't need to store them to bakc the  

For example, you could define 100 reference units as:

5 barrels of oil
1 oz of gold
100 hours of labor (you would need an index for the medium wage per hour)
...

Merchants could set prices in the reference currency but charge in bitcoins.
You could have a bitcoin client that displays all balances in reference units instead of bitcoins.
If the price of bitcoin increases, your reference unit balance will increase too.
You could have contracts denominated in the reference unit but to be payed in bitcoins.
If a loan is denominated in RC and to be paid in BTC, the lender would have to take into account the deflation (or increase in bitcoin value) when calculating the interest rate to ask.

There's no need to issue or back the currency, it would be just for contracts and prices.

Right now, I think most merchant calculate their prices in USD and then "translate" them to BTC. But as we all know, USDs (although less volatile than BTCs now) aren't a stable measure of value at all.
Even if merchants show their prices in BTC, they could set the prices in RC and adjust automatically their webs using a BTC/RC index.

This way we can achieve stable prices without messing with the money supply.

EDIT: Now I propose referenceCoin, you don't need to issue it, just provide its btc price inside another chain using the same voting system is being thought for stablecoin.


Referencecoins aren't created, they just have a defined price that is function of the exchange rates.
Since you can't pay the miners, you need to put it inside another chain that sustains it. Probably DerivativeChain that also needs them.