Topic: GEM - as a potential stable value currency - page 4. (Read 6310 times)

I respect this opinion. But that was what everyone was saying when I was here more then a year ago. Bitcoins were 5 for a dollar then.

I am not trying to dog bitcoin. It is what it is, and in that regard it is awesome. Bitcoin was the first master planned scarce COMMODITY. Some people still think bitcoins should be used as money. Others still think it is a highly implausible foundation for monetary policy. 

However, you go on to make a very pragmatic argument.


This should be a clue that things are well beyond the early adopter phase. A year ago in that phase people said things like, "I have no idea if this will become anything. but its cool! Why don't we throw all our excess coins in a fountain?" Nothing pragmatic in early adopter sentiments.


Still waiting on "legitimate" uses, but I was encouraged to hear of even "illegitimate" uses like Silk Road. At least some people are trying to use bitcoins as actual money! Where do those folks get their training? I don't see a lot of chatter among them here.

It is way premature for any attempt at a "completely fair currency" like GEM, because there's no way it could acquire the critical mass of users.
Perhaps after the Bitcoin revolution hits mainstream ... although by then it would be too late, because Bitcoin's value has stablized.

This is why I don't see a future to any new currency that early adopters can't profit from.

Come on, people, get real.
Bitcoin are still at the very early adopter phase.



This means two things:

1. They are still, very difficult to use, even with the progress we're seeing in the last few months, #1 being wallet encryption. This will change with time.
2. They (IMHO) are still profitable as a long term investment, and this is the prime reason newcomers will start buying/mining them, beyond academic curiosity.

As time passes, we'll see more and more legitimate uses, but it will become progressively easier and safer to do so, and in parallel less lucrative to invest in.

I agree that value stability makes coins seem much more like traditional money to the average user. I'm just wondering if there are any "average users" actually using any of the coins.

Is there a forum anywhere that teaches people how to just use bitcoins to buy stuff? I mean how does the average Joe with a $10 bill learn the wonders of buying a cheeseburger with bitcoins?

Yep. Anyone who sees Bitcoin at $30 then at $5 will think immediately it is a scam. Price stability will make it much more adoptable by merchants etc. to be used as a real currency not just a nerd / speculator toy.

If stability is not why you are mining, I totally get that. I don't have a problem with competitive mining.

I'm just trying to sort out if anyone thinks stability is a feature. Is there a market for such a thing?

I think this is a similar idea to suggester's thread. However, after 18 months maybe sentiments have changed?

First Order (Monetary) Dynamics

So how can it possibly be done if it is not something that can be remotely monitored? Well it can't. But it can be increasingly approximated over time.

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Basing GEM on electricity absent any GEM/$ exchanges.

1) All miners use the same current POW difficulty, as in bitcoin.
2) The initial mining proof-of-work (POW) difficulty starts with a wild-ass-guess, scaled so that (36,000,000 joules) mines roughly (1 GEM) on current best-in-class mining rigs. Hitting an exact target is not important.
3) Over time, the mean electrical value of GEMs will tend toward the electrical consumption of the most electrically efficient miner. (MHash/j)
4) Left alone, this electrical consumption would tend to decrease over time according to Koomey's law.
5) To return GEM mining to its original electrical consumption constant,
GEM offsets Koomey's law by doubling the proof-of-work difficulty every 1.57 years.
6) However, the difficulty jump is smoothed using scaled 10 minute increases with each new block.
7) Difficulty never declines.

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Constraints:
a) If processor efficiency outpaces Koomey's law, there will be intrinsic inflation. Before: (1 Donut = 1 GEM)  After: (1 Donut > 1 GEM)
b) If processor efficiency falls behind Koomey's law, there will be intrinsic deflation. Before: (1 Donut = 1 GEM)  After: (1 Donut < 1 GEM)

Note: Extrinsic inflation and deflation (over/under mining) will be discussed in the next section.

This intrinsic inflation or deflation will tend to be predictable rather then wildly dynamic. If efficiency isn't following the current Koomey ratio, it is likely following a close cousin.

There exist no automated solution for detecting or remedying intrinsic inflation or deflation. Monitoring processor efficiency requires external human observation. In cases where technology makes extreme deviations from Koomey's predictions, I see only two possibilities. Either, everyone must tolerate the inflation/deflation, or, everyone must tolerate developers modifying the protocol ratio.

Consequences:
a) Mining rigs lose profitability over time. Since difficulty is monotonically increasing, eventually it will cost more in electricity for a given rig to mine then the resulting GEMs can be traded for.
b) Computationally speedy rigs mint faster. Electrically efficient rigs last longer. The electrically efficient displace the electrically inefficient regardless of computational speed.

GEM Basic Premise

One GEM always represents a fixed number of Joules. (Punny huh!) The price of the Joules used to create a GEM will vary over time and across locations.

1 GEM = (a fixed number of) joules = (a variable number of) $

For reference: (36,000,000 joules) always equals (10 kwh) which currently sells for about ($1)

The actual GEM/joule constant ratio will be an emergent property of the system. See, the "First Order Dynamics" section.


GEM Basic Goal

The goal is a digital currency where GEM value remains stable over time. Meaning, a future "basket of goods (BOG)" costs the same number of GEMs as it does now. Even if the $/BOG ratio changes over time.

If you delay gratification now, you receive exactly the same future gratification value. Nobody should save the value of a cup of coffee, expecting to exchange it for a steak dinner in the future. You are going to get a cup of coffee.

GEMs are not intended as long term investments. If you want to invest in a commodity that might appreciate in value, trade GEMs for BTC, or gold. If you want to earn interest on someone else's effort, you'll have to arrange your own GEM loans and negotiate your own terms.

If you can mine GEMs for $X today and sell them for more than $X in the future, knock yourself out. But consider yourself more an electrical futures trader than a GEM speculator.

[edit]
I'd like to start a discussion about stable crypto-currency. I'm just trying to get a sense if anyone is interested in non-speculative coins. As an example, I've extracted the concepts from EnCoin and simplified them for discussion into a system I call GEM. It is based on creating coins using constant electrical cost (in joules) over time.

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I've been working for two weeks trying to understand the details of Etlase2's EnCoin proposal. Originally I thought the idea of basing coins directly on kwh was impossible. There are simply too many hidden variables to make it possible to monitor an arbitrary peer's energy consumption.

I have recently adjusted my opinion from "impossible" to "plausible within constraints". I would like to discuss these constraints and the resulting economic and social dynamics.

However, I can't in good conscience suggest anyone go read the EnCoin proposal until the the next version is released. Etlase2 is a bit hostile to some of the existing bitcoin design decisions. Reading philosophy mixed with economics only serves to obfuscate the points I want to talk about.

As such, I want to distill his underlying concept (as I see it) into its most important dynamics. To reduce the learning curve, I'll frame my discussion around a theoretical bitcoin code fork (and new block chain) that I'll call GEM.

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I want to put all the GEM dynamics into one thread. But, I don't want to cause an argument cluster-fluck. As such, I'll post the outline of where I'm going, but I'll post the detail sections one at a time. Meaning, if discussion survives the first, we can move on to the second. If not, discussing the second dynamic would be pointless.

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GEM Basics
Premise
Goal

First Order (Monetary) Dynamics
Basing GEM on electricity absent any GEM/$ exchanges.

Second Order (Economic) Dynamics
Springs and Shocks to smooth GEM value convergence.

Third Order (Social) Dynamics
Variation from the existing Bitcoin protocols.
- 10 Minute Timekeeping
- Block Chain Consensus
- Network Partitioning and Reconciliation

Fourth Order (Moral) Dynamics
Detecting Fraud
Outing Fraudsters

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