Another note on the doomsday scenario:
Even if you have shareholders as described above, a catastrophic loss of interest in stablecoins would eventually send share prices to zero, and there would be no further leverage to take coins off the market.
At this point, the shareholders are bankrupt, and it would seem wise for the protocol to "declare bankruptcy", wipe out the old shares, wipe out the excess supply of stablecoins (replacing them with some new post-bankruptcy shares), and go from there.
Topic: Goldcoin and Stablecoin proposals - page 2. (Read 19116 times)
I think a more direct control over the supply of coins is required. Some mechanism needs to be created that allows the user base and interest in stablecoin to shrink by a large amount while still maintaining stablecoin values.
What if stablecoin sells shares like a company? Instead of distributing all new stablecoins to miners, some of them could be distributed to shareholders.
IN ADDITION to a transaction fee when the stablecoin prices drop, the protocol could sell new shares in exchange for stablecoins, taking stablecoins off the market.
Obviously if NOBODY wants stablecoins, there is no way for it to survive, but I think an additional measure such as this could help it survive a much bigger hit.
What do you guys think? Morpheus, I'm especially interested in your thoughts, since this is your baby.
What if stablecoin sells shares like a company? Instead of distributing all new stablecoins to miners, some of them could be distributed to shareholders.
IN ADDITION to a transaction fee when the stablecoin prices drop, the protocol could sell new shares in exchange for stablecoins, taking stablecoins off the market.
Obviously if NOBODY wants stablecoins, there is no way for it to survive, but I think an additional measure such as this could help it survive a much bigger hit.
What do you guys think? Morpheus, I'm especially interested in your thoughts, since this is your baby.
So how about we contemplate the doomsday scenario for stablecoin:
What should the protocol do to transfer fees in this case? Is there a 90% transfer fee? 50%? 10%? If the transfer fee is too high, who is going to want to buy stablecoins? Transfer fees penalize buyers as well as sellers. If nobody wants to buy OR sell, there is no incentive for prices to go up. Stablecoin simply dies.
It would seem that the transfer fee needs to be pretty small even when the price diverges by a large amount from the underlying asset, otherwise the new currency is completely ruined. On the other hand, if the coins cease to track the underlying asset, nobody wants to hold the coins anymore, and the currency is completely ruined.
Morpheus - have you considered how to handle a doomsday scenario like this?
- stablecoin starts out wildly successful, miners get rich, everybody is happy
- Stablecoin 2.0 comes out, and nobody wants the original stablecoins anymore
- Everyone tries to sell their stablecoins all at once, price drops 99%
- All confidence in the protocol is lost except a couple hardcore believers holding out hope that the protocol will somehow correct itself
What should the protocol do to transfer fees in this case? Is there a 90% transfer fee? 50%? 10%? If the transfer fee is too high, who is going to want to buy stablecoins? Transfer fees penalize buyers as well as sellers. If nobody wants to buy OR sell, there is no incentive for prices to go up. Stablecoin simply dies.
It would seem that the transfer fee needs to be pretty small even when the price diverges by a large amount from the underlying asset, otherwise the new currency is completely ruined. On the other hand, if the coins cease to track the underlying asset, nobody wants to hold the coins anymore, and the currency is completely ruined.
Morpheus - have you considered how to handle a doomsday scenario like this?
I see that a decentralized system for tracking exchange prices has the points of failures in the exchanges miners watch, but still is an interesting concept. My proposal for the best use of this system is to define a nonexistent reference currency that is just useful for contracts. But it lacks a system to reward miners so it should be inside another chain. Another use could be a a currency for decentralized option trading. You need the spot prices in that chain anyway.
In the future, you may want to read the OP carefully in order to avoid disqualifying yourself like you did in this case. To quote the OP on stablecoin: "From then on, we keep track of how much USD has inflated/deflated using something like CPI or the Billion Price Index or even a combination of indices". Have a look at the wording: The idea is to introduce a single point of failure, either through CPI or Billion Price Index. "Or even" multiple points of failure through a combination of indices. But a stable, decentralized system is completely out of the question. Basically, stability is completely sacrificed, but ironically it is put into the name...
I know how stablecoin would work. The source of conflict may be our definition of "single point of failure".
To simplify, let's use goldcoin. Miners would report the price in goldcoins of gold (getting information from various exchanges and probably averaging them).
You may think that gold and goldcoin exchanges are the points of failure in this case, but it can be discussed.
As I see it, instead of a CPI index miners would report spot prices from various exchanges and then the price index would be calculated from those spot prices.
I don't think that you can target the price of any commodity or that you can have a totally stable coin just through changing the money supply, but it could be more stable.
I don't think that you can target the price of any commodity or that you can have a totally stable coin just through changing the money supply, but it could be more stable.
You cannot have a totally stable coin, period.
The value of any currency is still dependent on how well the economy works. When the economy suffers, you can't do as much with your money, no matter how it is called.
But you can limit the effects, which is what bitcoin does: Other than a bad economy, it can't be hurt much. However, most ideas to "improve" bitcoin which came up lately just introduce more potential weaknesses: external currencies which may be wrecked through currency wars or simply by incompetent politicians, external commodities which may lose in value, external data sources to gather the value of the currencies or commodities, which may be manipulated, may fail etc. Essentially, you are making a mere toy from an experiment that may succeed (bitcoin).
If you really want to remove points of failure, you may want to make every node an exchange. But then, there is no point in weird coin supply strategies including artificial stagnation through transaction fees. Just make the exchange 1:1, and you have a distributed currency or commodity transfer network, which might be very useful. Should it manage to fly, I might even want to use it. But in terms of long-term stability, I still think it would not be able to compete with bitcoin.
Don't know what the OP is, but if you mean this thread, yes I've read it.
Maybe you didn't understand me because some of us have been discussing some topics of this thread in other threads.
The points of failure remain. You may have found a couple of people who don't mind in the other threads you mention, but it won't change the fact that those who care will still see the flaws even if you plainly neglect them. Maybe you didn't understand me because some of us have been discussing some topics of this thread in other threads.
Actually, the transaction fee may never get paid if the threat of a transaction fee causes people to hoard Stablecoin and drive prices back up.
This is amusing since I read somewhere that stablecoin is supposed to be attractive for merchants. I would like to meet a merchant who prefers a currency that will block the market from time to time... In the future, you may want to read the OP carefully in order to avoid disqualifying yourself like you did in this case. To quote the OP on stablecoin: "From then on, we keep track of how much USD has inflated/deflated using something like CPI or the Billion Price Index or even a combination of indices". Have a look at the wording: The idea is to introduce a single point of failure, either through CPI or Billion Price Index. "Or even" multiple points of failure through a combination of indices. But a stable, decentralized system is completely out of the question. Basically, stability is completely sacrificed, but ironically it is put into the name...
I know how stablecoin would work. The source of conflict may be our definition of "single point of failure".
To simplify, let's use goldcoin. Miners would report the price in goldcoins of gold (getting information from various exchanges and probably averaging them).
You may think that gold and goldcoin exchanges are the points of failure in this case, but it can be discussed.
As I see it, instead of a CPI index miners would report spot prices from various exchanges and then the price index would be calculated from those spot prices.
I don't think that you can target the price of any commodity or that you can have a totally stable coin just through changing the money supply, but it could be more stable.
Don't know what the OP is, but if you mean this thread, yes I've read it.
Maybe you didn't understand me because some of us have been discussing some topics of this thread in other threads.
I would not see them as an alternative to bitcoin, and neither would most of the people I work with, as these approaches backdoor the dependability which bitcoin achieves through decentralization.
Stablecoin is not beertoken. It tries to achieve stability within a decentralized system.
Maybe it can't work, but it has no single point of failure.
I think this is done in multicoin: "Multiple auxiliary chains mined together."
So many questions awaiting empirical answers! I strongly suspect that someone can design a better cryptocurrency, but I set high standards and look forward to seeing these and many other proposals in competition.
Some good software could open the field of currency design to anybody with an idea to test, not just C++ programmers with large time budgets. Namecoin and MultiCoin have made good progress, but we have a long way to go.
I am thinking specifically of:
I have the C++, network, database, and thread programming background, and I will eventually do this if I live long enough, but I can not donate enough time to it in the foreseeable future.
Will you help me elaborate this vision until someone picks it up and runs with it?
Some good software could open the field of currency design to anybody with an idea to test, not just C++ programmers with large time budgets. Namecoin and MultiCoin have made good progress, but we have a long way to go.
I am thinking specifically of:
- Bitcoin client plugin interface: plugins can define block acceptance rules.
- Bindings to facilitate plugin development in high-level languages.
- Set of highly configurable plugins extending MultiCoin's advanced configurability.
- Multiple currencies handled by one client process.
- Multiple currencies on one p2p network with a facility for negotiating which chains to relay to which peers.
- Further development of merged mining:
- Multiple auxiliary chains mined together.
- Multiple proof-of-work formats per chain.
- Effective difficulty able to vary according to proof-of-work size/complexity.
- New type of "inv" message for broadcasting a new currency definition (plugin code and parameters).
- Block chain browser (Abe) and exchange (Bitcoin Central?) automatically supporting new currencies.
- Graphical wizard/tools to put it all together: plugin architecture, configuration, testing, and launch to the network. Marketing is still a Phase 2 feature.
I have the C++, network, database, and thread programming background, and I will eventually do this if I live long enough, but I can not donate enough time to it in the foreseeable future.
Will you help me elaborate this vision until someone picks it up and runs with it?
Stablecoin is an appealing goal, but ultimately it's not necessary.
Over time, Bitcoin usage will grow rapidly and then eventually stabilize. Over time, new Bitcoins are generated but in smaller and smaller quantities, so the supply will eventually stabilize.
Therefore, if we give Bitcoin a bit of time to find its long-term value, it's going to be fairly stable anyway.
We don't know how long it will take for bitcoin to get stable, or how stable it will be. Stablecoin gives us known stability right now. Also, this method of tracking an external price has a HUGE number of applications. Stablecoin is only one of them.Over time, Bitcoin usage will grow rapidly and then eventually stabilize. Over time, new Bitcoins are generated but in smaller and smaller quantities, so the supply will eventually stabilize.
Therefore, if we give Bitcoin a bit of time to find its long-term value, it's going to be fairly stable anyway.
I can only think that only a real market can control a price of any commodity or currency and the a central bank that dumps and buys as needed to control the price would be the only way I know to make a stable currency possible. as I said before you can peg the value of a currency to anything you want. It's "The Trust" holders that should decide what they want to hold as there base of value of the asset holdings and just use the crypto coins to pass the value for P2P transactions. I have almost completed the infrastructure to make all that possible in the BeerTokens model https://bitcointalksearch.org/topic/m.138247. The first beerA coins have already been minted with the new merge mining feature using MulitCoin-exp https://bitcointalksearch.org/topic/m.300830. With MultiCoin we also can setup secure exchanges with escrow deposits to prevent third parties from stealing from a central exchange. I will continue to develop what I feel is missing in the infrastructure to make what sounds some of you want in the near future. The basic concept is that the holders of "The Trust" decide how they want things to be and what needs to be changed, Not the developers and miners. Each holder on record has a voice. You just have to make it heard by being a part of it.
Like you, I started with the idea of a fund which would be collectively held to back up the value of new coins/tokens released. I eventually became convinced that Morpheus' idea was better due to its incredible simplicity.
I haven't tried to use Multicoin, but morpheus stated he was unable to get it to work. The future of distributed currencies is definitely going to be one client which is able to support multiple block chains, and hopefully even a distributed exchange built in for converting between them. I suggest you put some effort into getting morpheus set up to use multicoin!
I can only think that only a real market can control a price of any commodity or currency and the a central bank that dumps and buys as needed to control the price would be the only way I know to make a stable currency possible. as I said before you can peg the value of a currency to anything you want. It's "The Trust" holders that should decide what they want to hold as there base of value of the asset holdings and just use the crypto coins to pass the value for P2P transactions. I have almost completed the infrastructure to make all that possible in the BeerTokens model https://bitcointalksearch.org/topic/m.138247. The first beerA coins have already been minted with the new merge mining feature using MulitCoin-exp https://bitcointalksearch.org/topic/m.300830. With MultiCoin we also can setup secure exchanges with escrow deposits to prevent third parties from stealing from a central exchange. I will continue to develop what I feel is missing in the infrastructure to make what sounds some of you want in the near future. The basic concept is that the holders of "The Trust" decide how they want things to be and what needs to be changed, Not the developers and miners. Each holder on record has a voice. You just have to make it heard by being a part of it.
The source of info on exchange rates is the single point of failure. Ever heard of the mtgox flash crash. Yup, that's failure.
Any coin traded is going to need multiple independent data sources, and some way to deal with data sources getting hacked. Keep in mind that the external price only sets a target which is approached over time by controlling supply. The actual price of the coins is set by supply and demand. A flash crash isn't going to change what people are paying for goldcoins. A sudden change like that might lower the amount of coins being generated, but it would not raise transaction fees - I expect they would come into play very slowly over a long period of time.
If the protocol sees that its data sources have wildly different prices, it won't know which target to use, and the rules to deal with that will need to be flexible enough for everyone using the coins to agree that "at block 1024, we'll stop using this compromised data source and add these two new sources". If your client doesn't vote on a decision like that, you get stuck with the new target that everyone else decides they want.
What if two of your three sources for gold prices get hacked, and there is significant disagreement on which new sources to use? In that case, you might split off a new block chain so you have two chains which recognize the old coins, but each chain uses their own rules for new coins (and new coins wouldn't be equivalent). Any old coin would get onto one of the new chains the next time it was spent.
I do not get Goldcoin. I mean, I understand the wildly awesome idea of selling free coins for the price of Gold. However, I do not understand why anyone would buy them instead of Gold itself. There is tremendous risk that Goldcoin would not actually match the price of Gold. There is exactly 0% risk, however, that Gold will not match the price of Gold. Saving transaction fees is not good enough to make up for the risk. I store gold. I do not pay transaction fees anyway.
So, lets say the first block of GoldCoins come out. What if nobody wants to buy them on an exchange? Simply reducing new supply will not help. It would be Dead on Arrival. Destroying coins will not work either. Why would I buy coins that can be destroyed? Why would I use transactions that have fees significant enough to make any difference on overall inflation/deflation rates? They would have to be huge. No thanks.
Even if the first few mined coins could be sold, the problem is new on every new block. If there are not enough buyers, GoldCoin would drop and may never come back. Price fixing on the exchanges cannot create demand, either.
I suppose you could destroy coins uniformly to get the price up. But, remember, you are destroying someones real wealth when you do that. If you need to delete half my GoldCoins to get the price up, how exactly does that help me? I paid for 10oz of gold and if I now have 5oz that means I lost money.
I am not saying Goldcoin is impossible. I just think that the equilibrium that keeps the price right would likely be a very small population of true believers. (You might be generating 1 goldcoin per day to avoid oversupply and God forbid if demand drops too fast.) Everyone else would find real gold much less risky and coin shops more convenient than Paxum/MtGox or whatever it takes to get GoldCoin. Or they buy bitcoin if they want a new currency. At least that has potential upside.
So, lets say the first block of GoldCoins come out. What if nobody wants to buy them on an exchange? Simply reducing new supply will not help. It would be Dead on Arrival. Destroying coins will not work either. Why would I buy coins that can be destroyed? Why would I use transactions that have fees significant enough to make any difference on overall inflation/deflation rates? They would have to be huge. No thanks.
Even if the first few mined coins could be sold, the problem is new on every new block. If there are not enough buyers, GoldCoin would drop and may never come back. Price fixing on the exchanges cannot create demand, either.
I suppose you could destroy coins uniformly to get the price up. But, remember, you are destroying someones real wealth when you do that. If you need to delete half my GoldCoins to get the price up, how exactly does that help me? I paid for 10oz of gold and if I now have 5oz that means I lost money.
I am not saying Goldcoin is impossible. I just think that the equilibrium that keeps the price right would likely be a very small population of true believers. (You might be generating 1 goldcoin per day to avoid oversupply and God forbid if demand drops too fast.) Everyone else would find real gold much less risky and coin shops more convenient than Paxum/MtGox or whatever it takes to get GoldCoin. Or they buy bitcoin if they want a new currency. At least that has potential upside.
You are assuming that the protocol would dump a ton of coins in the first block. But what if rather than dump 50 ounces worth of gold coins, it only gives out 0.00001 ounces? That is worth about $0.02, and I don't think you would have trouble with oversupply.
I believe the protocol will need to err on the side of scarcity, especially early on. Artificial scarcity won't generate a massive bubble, since everyone knows the price will eventually converge with the underlying commodity, so it would be silly to pay 2x what they will be worth in a couple years. However, it will give people more confidence to hold these coins if there is more demand than availability.
I predict USDCoins (not the stable 1971 variety) will actually be the most popular one among the masses here in the states, not because it is a good investment, but because it will be easiest to understand. In other parts of the world I expect Eurocoins to be equally popular.
One thing I love about this idea is how extendable it is. If people want to trade coins denominated as Google stock, boom, Googlecoins are born. You just need agreement among all the clients on what data sources to trust and how to deal with data sources getting hacked.
It would be sweet if the integration with bitcoin will allow me to hold my money as goldcoins, stablecoins, etc, but then spend them to any bitcoin or goldcoin address. If it is a bitcoin address, then behind the scenes, the client would exchange the gold coins for bitcoins, and then send the bitcoins.
The source of info on exchange rates is the single point of failure. Ever heard of the mtgox flash crash. Yup, that's failure.
I would not see them as an alternative to bitcoin, and neither would most of the people I work with, as these approaches backdoor the dependability which bitcoin achieves through decentralization.
Stablecoin is not beertoken. It tries to achieve stability within a decentralized system.
Maybe it can't work, but it has no single point of failure.
I very much like the idea of stablecoin. This would be a version of bitcoin that's better suited for commerce than the original. In order to use a currency in commerce, stability is very important. No merchant wants to constantly have to change prices.
As of today, you are wrong: many bitcoin merchants still change prices very often, even though this hurts stability. When they start to grow up and offer their services for dependable prices (I would call it that way at the point where they don't change BTC prices more often than e.g. USD prices), there will soon be no market for bitcoin adaptions with an additional single point of failure added, like stablecoin or goldcoin are.I would not see them as an alternative to bitcoin, and neither would most of the people I work with, as these approaches backdoor the dependability which bitcoin achieves through decentralization.
I still think that you can keep mining sustainable with demurrage, maybe even only with voluntary fees.
Merchants will not give up even the smallest percentage of their profit margin unless they have to. A mandatory TX fee is the only way to extract blood from that particular stone.
I think demurrage could work, but that users would prefer txn fees. Simply because people won't like the idea of money they have forgotten about slowly being drained away.
It is like signing up for a credit card with annual fees. I would much prefer that they gouge me only when I purchase something, rather then when I am not paying attention.
Merchant are also giving a percentage of their margin profits when customers pay fees. Demurrage fees are part of the merchant costs and customer will pay them indirectly just like they pay for bank fees.
And demurrage can be much cheaper then those.
It is possible that users prefer tx fees, though. Specially if they're not aware how much they will save thanks demurrage.
Most people think that they don't pay interest if they don't borrow money, but that's not true. Interest is factored in the price of every item you purchase.
I still think that you can keep mining sustainable with demurrage, maybe even only with voluntary fees.
Merchants will not give up even the smallest percentage of their profit margin unless they have to. A mandatory TX fee is the only way to extract blood from that particular stone.
I think demurrage could work, but that users would prefer txn fees. Simply because people won't like the idea of money they have forgotten about slowly being drained away.
It is like signing up for a credit card with annual fees. I would much prefer that they gouge me only when I purchase something, rather then when I am not paying attention.
I still think that you can keep mining sustainable with demurrage, maybe even only with voluntary fees.
Merchants will not give up even the smallest percentage of their profit margin unless they have to. A mandatory TX fee is the only way to extract blood from that particular stone.
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