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Topic: Gold collapsing. Bitcoin UP. - page 396. (Read 2032286 times)

legendary
Activity: 1400
Merit: 1013
April 29, 2015, 09:36:36 PM
The comedians are the only ones left who can tell the truth:

http://www.theonion.com/articles/nation-just-hoping-next-president-can-prevent-coun,38512/

Quote
In addition, 87 percent of citizens confirmed that during the next presidential term, they merely hope to occasionally read something about their country in the news that doesn’t leave them feeling ashamed, angry, depressed, or completely mortified.

“It’s pretty simple, really: Just lay out a clear-cut, straightforward plan for a future in which we don’t totally go down in flames on a grand stage, and you’ve got my vote,” said Allison Joyce, a 47-year-old middle school teacher from Bethesda, MD. “Look, I don’t need to be inspired; I don’t need to be assured our future is bright; I don’t need to be told I’m strong and resilient in the face of hardship. Just convince me we can get through the next decade in the least demeaning way possible given all our problems with childhood poverty, gun violence, and people dying because they can’t afford medical treatment. That’s it.”

“That’s seriously all I want from my president going forward,” she added. “Just the faintest of silver linings that I can hold on to while everything else goes down the drain.”

Though they admitted to reporters that no one in the current field of presidential hopefuls seems likely to spare the country much humiliation while its infrastructure crumbles and its reputation is reduced to tatters, most voters expressed optimism that such a candidate will eventually emerge.

“We know what’s in store for America, so if we could elect someone who’s committed to keeping things somewhat tolerable while the whole place goes to hell, that’d be great,” said Seattle-based tax attorney Greg Hudson, 57. “It’s really our best hope at this point. The British Empire kind of just gradually fell by the wayside without too much embarrassment. Maybe we can, too. Who knows, we might still be able to go out with a little bit of class.”

“Then again,” Hudson added, “maybe at this point the best option is to put someone in the White House who will just bite the bullet and get this whole thing over with as quickly as possible.”
legendary
Activity: 1512
Merit: 1005
April 29, 2015, 09:28:56 PM
Technical functionality: It could work, but not as well as bitcoin does, because the manager will have to control not only the coin volume, but also the mining rewards (the new coins in an expansion will go to the Fed, not to the miners), so they will have to also manage the miners.

There can still be a coinbase reward for finding a new block, just like there is for Bitcoin miners.  In fact, this is necessary to allow what Andolfatto calls "disinterested third parties" (aka miners) to be paid for processing transactions and keep Fedcoin free from KYC requirements.  

What's new is that there would be a second type of coinbase transaction that only the Fed could issue.  This would be one of the Fed's tools for conducting monetary policy operations.  

Quote
The govcoin will have a marginally different value from dollar, since it has different traits. The Fed has control over both, so they can easily peg the two together in a narrow band, by buying one type with the other, this is different from pegging one national fiat to another.

Check out Andolfatto's actual article.  He makes the analogy that a Fedcoin would have the same value as a paper dollar for the same reasons that a $100 bill has the same value as 100 x $1 bills.  

Quote

The holding preference is the key parameter, if the public prefers govcoin, the volume of govcoin will have to increase, and dollar base money decrease. The debt, which can be regarded as a third money type in the dollar family, will complicate things a bit. The govcoin will be easier to transmit than debt (one reason to have a deposit, which is a loan from a person to a bank, is the debt's transmittability). I don't think they are interested in replacing the debt with govcoin, that will crash the pyramid.

It's not complicated.  Dollars in circulation are represented by liabilities on the Fed's balance sheet (offset by Treasury Bonds1 on the asset side).  To create a Fedcoin, the Fed simply extinguishes a dollar liability and creates a Fedcoin liability to take its place.

The Fed can still purchase Treasury Bond or other high-grade collateral.  But now it can pay either by writing a cheque (creating USD in the legacy banking system) or by creating a new coinbase transaction and paying out in Fedcoins.  

Quote
In fact, I don't think they really are interested in creating a bitcoin lookalike. I think it is an attempt at diversion, or positively thinking, just fumbling with ideas around a hip technology.

I think it's the latter; David is just personally interested in bitcoin and blockchain technology and is working though some ideas on his blog.  


1And other high-quality collateral (where the requirements for "high quality" have loosened recently).

It is not just to invent a new type of coinbase transaction. The value of the govcoin will decrease with the dollar (as you know, the target inflation is about 2 percent per year). If inflation proves to be different, they have to adjust the mining reward accordingly. That means the mining speculation will be about guessing the Fed's actions, not about the publics demand for coins. So a totally different mining model.

I read the article you referred quickly, and he is right about the analogy to different bill sizes, and the article as such is marginally interesting. A problem is that he seems to get all the basic assumptions wrong.

Bitcoin is money, it is not a payment system, but the bitcoins themselves are easily transferable. The money is comparable to a commodity, so is gold, so is fiat base money. The preference to aquire it is what gives all things value, for money, that means the preference to hold. We are not in the business of registering sales and cost, we are in the business of enabling indirect exchange. My brain cell started to ake when I read his article. It is not virtual currency, it is crypto-money. There is no trust in money, there is only speculation of future value.



legendary
Activity: 1162
Merit: 1010
April 29, 2015, 09:01:00 PM
Technical functionality: It could work, but not as well as bitcoin does, because the manager will have to control not only the coin volume, but also the mining rewards (the new coins in an expansion will go to the Fed, not to the miners), so they will have to also manage the miners.

There can still be a coinbase reward for finding a new block, just like there is for Bitcoin miners.  In fact, this is necessary to allow what Andolfatto calls "disinterested third parties" (aka miners) to be paid for processing transactions and keep Fedcoin free from KYC requirements.  

What's new is that there would be a second type of coinbase transaction that only the Fed could issue.  This would be one of the Fed's tools for conducting monetary policy operations.  

Quote
The govcoin will have a marginally different value from dollar, since it has different traits. The Fed has control over both, so they can easily peg the two together in a narrow band, by buying one type with the other, this is different from pegging one national fiat to another.

Check out Andolfatto's actual article.  He makes the analogy that a Fedcoin would have the same value as a paper dollar for the same reasons that a $100 bill has the same value as 100 x $1 bills.  

Quote
The holding preference is the key parameter, if the public prefers govcoin, the volume of govcoin will have to increase, and dollar base money decrease. The debt, which can be regarded as a third money type in the dollar family, will complicate things a bit. The govcoin will be easier to transmit than debt (one reason to have a deposit, which is a loan from a person to a bank, is the debt's transmittability). I don't think they are interested in replacing the debt with govcoin, that will crash the pyramid.

It's not complicated.  Dollars in circulation are represented by liabilities on the Fed's balance sheet (offset by Treasury Bonds1 on the asset side).  To create a Fedcoin, the Fed either buys a new asset and pays in Fedcoin or it extinguishes a dollar liability and creates a Fedcoin liability to take its place.

For example, the Fed can still purchase Treasury Bond or other high-grade collateral.  But now it can pay either by writing a cheque (creating USD in the legacy banking system) or by creating a new coinbase transaction and paying out in Fedcoins.  

Quote
In fact, I don't think they really are interested in creating a bitcoin lookalike. I think it is an attempt at diversion, or positively thinking, just fumbling with ideas around a hip technology.

I think it's the latter; David is just personally interested in bitcoin and blockchain technology and is working though some ideas on his blog.  


1And other high-quality collateral (where the requirements for "high quality" have loosened recently).
legendary
Activity: 1512
Merit: 1005
April 29, 2015, 08:36:07 PM
Why would this not work?

If they take away all of anonymity, non-intervention in payments and the hard limit, there is not much left that can compete, and it will not take off.

So that it functions like cash, Andolfatto suggests that FedCoin transactions should be processed by disinterested third parties (e.g, miners).

Like Rocks touched on earlier, this is important as it's contrary to the "can't-trust-anonymous-Chinese-miners" rhetoric. 

Quote
If they take away only the hard limit, that could work for a while, because people seem to like the alleged stability of dollars, and it could be a softer transition.

In the end, it will not work, because market actors will always prefer one money type over all others, the one that is most liquid. All other money types will be marginal, and will only exist to the degree that they have some trait that is substantially better than the primary money. There is no room for a long standing balance, it will tip over to one side or the other.

OK, it sounds like both ZB and you agree that Fedcoin could be made to work technically.   

The question of whether the market would prefer it over Bitcoin is a different question.  I like Andolfatto's work because he forces me to think carefully about why exactly I'm such a fan of bitcoin.  In his own words, he views:

  1. "A payment system as a protocol (a set of rules) for debiting and crediting accounts"

  2. "Money as widely agreed-upon record-keeping device"

  3. "Monetary policy as a protocol designed to manage the supply of money over time"

His Fedcoin proposal is a thought experiment which uses (1) the same payment system, (2) the same media for money (digital entries recorded in a blockchain), but (3) a different monetary policy (Bitcoin has a fixed supply; Fedcoin has a fixed exchange rate).  From the comments already, I think most here (myself included) think the free market would choose bitcoin (it's obvious, isn't it Cheesy). 

Yet it doesn't appear Prof. Andolfatto sees it that way:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Let the competition begin!

Technical functionality: It could work, but not as well as bitcoin does, because the manager will have to control not only the coin volume, but also the mining rewards (the new coins in an expansion will go to the Fed, not to the miners), so they will have to also manage the miners.

The govcoin will have a marginally different value from dollar, since it has different traits. The Fed has control over both, so they can easily peg the two together in a narrow band, by buying one type with the other, this is different from pegging one national fiat to another.

The holding preference is the key parameter, if the public prefers govcoin, the volume of govcoin will have to increase, and dollar base money decrease. The debt, which can be regarded as a third money type in the dollar family, will complicate things a bit. The govcoin will be easier to transmit than debt (one reason to have a deposit, which is a loan from a person to a bank, is the debt's transmittability). I don't think they are interested in replacing the debt with govcoin, that will crash the pyramid.

In fact, I don't think they really are interested in creating a bitcoin lookalike. I think it is an attempt at diversion, or positively thinking, just fumbling with ideas around a hip technology.


legendary
Activity: 3920
Merit: 2349
Eadem mutata resurgo
April 29, 2015, 08:34:13 PM
https://www.youtube.com/watch?v=EYhEDxFwFRU
Interview with Hayek on Denationalisation of Money (some gems in there about Keynes too.)
Quote
"I don't believe we shall ever have a good money again before
we take the thing out of the hands of government,
that is, we can't take them violently out of the hands of government,
all we can do is by some sly roundabout way introduce something
that they can't stop."

Reposted here since directly relevant.
legendary
Activity: 1162
Merit: 1010
April 29, 2015, 07:40:51 PM
Why would this not work?

If they take away all of anonymity, non-intervention in payments and the hard limit, there is not much left that can compete, and it will not take off.

So that it functions like cash, Andolfatto suggests that FedCoin transactions should be processed by disinterested third parties (e.g, miners).

Like Rocks touched on earlier, this is important as it's contrary to the "can't-trust-anonymous-Chinese-miners" rhetoric. 

Quote
If they take away only the hard limit, that could work for a while, because people seem to like the alleged stability of dollars, and it could be a softer transition.

In the end, it will not work, because market actors will always prefer one money type over all others, the one that is most liquid. All other money types will be marginal, and will only exist to the degree that they have some trait that is substantially better than the primary money. There is no room for a long standing balance, it will tip over to one side or the other.

OK, it sounds like both ZB and you agree that Fedcoin could be made to work technically.   

The question of whether the market would prefer it over Bitcoin is a different question.  I like Andolfatto's work because he forces me to think carefully about why exactly I'm such a fan of bitcoin.  In his own words, he views:

  1. "A payment system as a protocol (a set of rules) for debiting and crediting accounts"

  2. "Money as widely agreed-upon record-keeping device"

  3. "Monetary policy as a protocol designed to manage the supply of money over time"

His Fedcoin proposal is a thought experiment which uses (1) the same payment system, (2) the same media for money (digital entries recorded in a blockchain), but (3) a different monetary policy (Bitcoin has a fixed supply; Fedcoin has a fixed exchange rate).  From the comments already, I think most here (myself included) think the free market would choose bitcoin (it's obvious, isn't it Cheesy). 

Yet it doesn't appear Prof. Andolfatto sees it that way:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Let the competition begin!
legendary
Activity: 3920
Merit: 2349
Eadem mutata resurgo
April 29, 2015, 07:26:03 PM
http://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html?_r=0

"JPMorgan belongs to an association of big banks, the Clearing House, that has been confidentially putting together a “proof of concept” for a decentralized ledger, or blockchain, that would run on the computers of all the participating banks. According to people involved, this network, which is still in the conceptual phase, could allow instant transfers between accounts at all the member banks and eliminate the current risks involved in having billions of dollars in limbo for days at a time. For many bankers, the most valuable potential use of the blockchain is not small payments but very large ones, which account for the vast majority of the money moving around the world each day. The banks, though, are moving slowly, even as several start-ups are trying to use the Bitcoin blockchain to do the same thing on a global basis, cutting out the banks altogether."

When they inevitably realize that the only truly secure, decentralized blockchain is the original, well, you can't move "very large payments" with a 3.5 billion dollar marketcap.  Wink

Bitcoin technology, as it exists, is well-suited to a settlement/clearing network. It has a "value gap" problem (chasm of value). It is settling-clearing small-mid size transfers using tech. that is more advanced than SWIFT.

The first big banks that grok the logic of why they must use bitcoin/Bitcoin and choose to cut and run from the pack get all the marbles.
legendary
Activity: 1512
Merit: 1005
April 29, 2015, 07:06:39 PM

[..]

Why would this not work?


If they take away all of anonymity, non-intervention in payments and the hard limit, there is not much left that can compete, and it will not take off.

If they take away only the hard limit, that could work for a while, because people seem to like the alleged stability of dollars, and it could be a softer transition.

In the end, it will not work, because market actors will always prefer one money type over all others, the one that is most liquid. All other money types will be marginal, and will only exist to the degree that they have some trait that is substantially better than the primary money. There is no room for a long standing balance, it will tip over to one side or the other.


legendary
Activity: 3920
Merit: 2349
Eadem mutata resurgo
April 29, 2015, 06:18:01 PM
Quote
I really like this utxo discussion. It's been helpful.

you're welcome.
legendary
Activity: 1162
Merit: 1010
April 29, 2015, 03:39:17 PM
The rest of the world also may not like the Fed having coinbase transaction privileges (or a massive premine, whichever way they did it), so I imagine there'd be a big fear of forking.

It's interesting how cryptocurrency forces one to rethink what one previously took for granted in terms of paper money.  The Fed has effectively had "coinbase transaction privileges" for US dollars since 1913 and yet the USD has only really "forked" in 1933, 1971, and is possibly at risk of doing so again this decade.

I agree that FedCoin has obstacles that Bitcoin neatly solves by its trustless design.  But I thought Andolfatto's article was still interesting because FedCoin probably is technically feasible and the power bestowed upon the Fed to administer it is the power the Fed already has now in terms of fiat dollars.  
legendary
Activity: 1764
Merit: 1002
April 29, 2015, 03:12:07 PM
I think the water is starting to boil now. Exciting times ahead

i like where we stand at the moment.  at opposite ends of the respective cycles of every asset fiat-denominated.

down but not out and ready to rebound.
legendary
Activity: 1036
Merit: 1000
April 29, 2015, 03:11:50 PM
Why would this not work?

I tend to assume it would. It just wasn't initially clear what you meant by "identical to Bitcoin" but "with a peg."

However, I'm not sure they'd feel comfortable about having China possibly incentivized to perform a 51% attack just to mess with them. The rest of the world also may not like the Fed having coinbase transaction privileges (or a massive premine, whichever way they did it), so I imagine there'd be a big fear of forking.
hero member
Activity: 588
Merit: 500
April 29, 2015, 02:59:04 PM
I think the water is starting to boil now. Exciting times ahead
legendary
Activity: 1764
Merit: 1002
April 29, 2015, 02:57:01 PM
I believe the Bitcoin ETN listed on Nasdaq Stockholm deserves to be mentioned in this thread. Trading will start 18th of May Smiley

http://xbtprovider.com/lang_en


Firms who can trade on Nasdaq Nordic:

http://www.nasdaqomx.com/transactions/markets/nordic/membership/membership-lists

everybody who's anybody is on that list.
legendary
Activity: 1193
Merit: 1003
9.9.2012: I predict that single digits... <- FAIL
April 29, 2015, 02:51:25 PM
I believe the Bitcoin ETN listed on Nasdaq Stockholm deserves to be mentioned in this thread. Trading will start 18th of May Smiley

http://xbtprovider.com/lang_en


Firms who can trade on Nasdaq Nordic:

http://www.nasdaqomx.com/transactions/markets/nordic/membership/membership-lists
legendary
Activity: 1764
Merit: 1002
April 29, 2015, 02:45:39 PM
they will not be able to hold back the masses from digital, mobile currency:

donator
Activity: 2772
Merit: 1019
April 29, 2015, 02:45:19 PM
might be old news, but I just discovered kitco updated their bitcoin market stats with a gold/bitcoin page:



(klick on image, then on "precious metals")
legendary
Activity: 1153
Merit: 1000
April 29, 2015, 02:22:00 PM
@barrysilbert says trading of $GBTC should start today or tomorrow #BitcoinConf @BitcoinTrust
https://twitter.com/InsideBitcoins/status/593489106296012800

I can't wait to see if GBTC tracks the exchanges or if there develops a significant premium/discount spread. GBTC is the first mechanism to enable accounts that purchase assets through stock exchanges to buy BTC (indirectly). There is lots of money out there that can not easily access BTC today, and GBTC opens that up.
legendary
Activity: 1162
Merit: 1010
April 29, 2015, 02:20:12 PM
Lastly, and unrelated to the topic of who processes the payments, I liked this comment:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?

I don't see how they could be identical while maintaining the peg, unless the Fed used its financial power to buy 99.9% of the coins and continue to mine almost all of them, then sell them onto the market if the price got too high. They can raise the price if it gets too low, but they can't do anything about it being too high unless they own most of it.

Imagine that the mining reward was adjustable, thereby allowing the Fed to control the security level of the ledger, and imagine that a new Coinbase-type transaction was introduced, thereby allowing the Fed to create FedCoins with just a signature.  

Here's an example of how the Fed could maintain the peg:

A USD holder could take (e.g.) 1,000,000 USD to the Fed in exchange for FedCoins.  The Fed would "create" 1,000,000 FedCoins and give them to the USD holder.  The creation of these 1,000,000 FedCoins increases the liabilities on the Fed's balance sheet by $1,000,000.  But the Fed would then destroy the 1,000,000 USD that it received, thereby simultaneously decreasing the liabilities on its balance sheet by the same amount.  The end result is that the total assets and liabilities on the Fed's balance sheet are unchanged--it's just that $1,000,000 in cash liabilities was swapped with $1,000,000 in FedCoin liabilities.  

Similarly, a holder of FedCoins could take 1,000,000 Fedcoins to the Fed in exchange for USD, and the same process would operate in reverse.  Basically, the Fed credibly maintains the peg, allowing anyone to arbitrage (risk free) any price difference between FedCoin and the USD.  After this system operates for a while, the idea that 1 FedCoin would trade at a premium or discount to 1 USD would be as silly as thinking that a $100 bill would trade at a premium or discount to 100 x $1 bills.  

In summary, FedCoin seems to require three things:

1. A adjustment in the mining rewards to some amount deemed by the Fed as sufficient to achieve security of the ledger;
2. A new Coinbase-type transaction that allows the Fed the ability to mint new coins with only its digital signature.  
3. The willingness of the Fed to freely swap USD for FedCoins and vice versa.  

Why would this not work?

I'm not suggesting that this would be an improvement over Bitcoin.  I like Bitcoin's fixed supply.  I just thought Andolfatto's idea was interesting and feasible.

legendary
Activity: 1036
Merit: 1000
April 29, 2015, 01:19:24 PM
Basically, if you look at all the features Bitcoin offers: uncensorable transactions, predictable and limited supply, etc. The Fed could create a halfway coin that removes some (or all) of these features. The problem is that this fails to recreate some or most of the allure Bitcoin has. The more features they remove, the more market share they leave for Bitcoin.

On the flipside, the more features they keep, the more they artificially boost the advancement of Bitcoin's goals, though not necessarily such a great outcome for current investors. The Fed trying to imitate Bitcoin at all is a humongous boon to public perception, though, which is of course good for current investors. To illustrate it concretely:

Scenario 1: The Fed just buys Bitcoin as a reserve asset.
Result: Wonderful. Bitcoin adoption is turbocharged and everyone now holding BTC becomes very wealthy.

Scenario 2: The Fed endorses a completely identical Bitcoin started with a new genesis block today.
Result: Early adopters would lose most of their investment advantage, but otherwise wonderful. Bitcoin adoption is turbocharged.

Scenario 3: The Fed creates identical Bitcoin minus limited supply (i.e., a giant premine to enable "monetary policy").
Result: Great because uncensorable online transactions are turbocharged with all that entails, yet Bitcoin retains its unique appeal as an inflation-proof asset, plus the concept has a very effective endorsement from the Fed so adoption of Bitcoin will take off as well, even if they ban Bitcoin. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a big boost overall.

Scenario 4: The Fed creates identical Bitcoin minus uncensorable transactions.
Result: Great because they still can't inflate so hard money gets turbocharged, and Bitcoin still maintains its unique appeal for uncensorable transactions. The concept has a pretty effective endorsement from the Fed so adoption of Bitcoin will take off as well even if they ban Bitcoin. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a big boost overall.

Scenario 5: The Fed creates Bitcoin with neither limited supply nor uncensorable transactions (perhaps something like Ripple)
Result: Pretty good (assuming for the sake of argument that it actually works) because global friction is reduced and it's a fairly effective endorsement of the concept of Bitcoin, while Bitcoin retains all the rest of its allure (uncensorable transactions and unmanipulable supply) and people become accustomed to dealing with digital security. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a fairly nice boost overall.

None of these scenarios end badly for Bitcoin as a movement, though Scenario 2 wouldn't make current investors happy (but it also seems quite unlikely). In fact, of these only Scenario 5 seems likely in the near term, with Scenario 1 being of course the endgame. There are bunch of variations on Scenario 5 as well that are more likely.
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