Topic: How to profitably create Bitcoin forks without causing economic chaos - page 2. (Read 5212 times)

This implies there is a finite amount of value in BTC, and that any fork will neccesarily draw that value away from BTC into the fork. 

any fork will get value the same way BTC did - People buying into it with an existing currency.  That will most likely be USD.

This is only a problem because there are problems funding with USD right now.

As far as relative valuations go, whats the point of having a fork if they trade for exactly the same value?  If you want something to be priced exactly the same as BTC I recommend.... BTC.....

lol

Unless the point here is to create a new "early adopter" gold rush while also guaranteeing against non-adoption (the peg), this is a non-starter

Ahh, I get it now.

New problems.

1) The exchanger needs to be able to prove that it has destroyed the bitcoins, or no one will trust it.

2) The exchanger needs to be able to prove that it has created no more newcoins than the number of bitcoins destroyed, or no one will trust it.

So, the exchange needs to be a trap door, or the whole thing falls apart.  But, by being a trap door, it brings fear back in, since no one will give up their bitcoins unless they are pretty confident that the new system is not only viable, but will eventually dominate.  Most people would be better off using a floating exchange, at least until the question of dominance has been settled.

Provided this isn't all one giant brain fart, I believe this solves the problem of investment uncertainty created by the expected introduction of newer, better crypto-currencies supplanting the old ones.  Well, that is if people all agree that this is the best way to roll new ones out  

Maybe the confusing part is recognizing that arbitrage seekers would exchange their bitcoins for forkcoins via the central bank in the event that forkcoins became more valuable on the market than bitcoins.  This would bring more forkcoins into circulation, driving their value back down, and it would take bitcoins out of circulation, driving their value back up to parity.  And similarly if the forkcoin market value drops below bitcoin's.

Whoa, brain fart.  I had it right the first time.  Your sig must have shaken my confidence  

The whole idea is to have value transferring seamlessly from bitcoins to forkcoins in such a way as to not disrupt prices denominated in bitcoins.  For every bitcoin's worth of value that leaves the Bitcoin economy for Forkcoin's, a bitcoin leaves the Bitcoin economy too - via the owner of that value.  And so bitcoin denominated prices will be completely unaffected by the introduction and existence of Forkcoin!  And vice-versa.  And if Forkcoin is at all utilized, then it adds to the value of a bitcoin by providing more utility to it than it otherwise would have had.  This way you don't need to leave the forkcoin valuation, and the bitcoin revaluation up to the speculators, who would no doubt flail wildly.  And if Forkcoin is at all successful, then you don't end up screwing the people that didn't move enough of their bitcoin into forkcoins at the right times.  You draw people to use forkcoin based purely on its merit, and untainted by their fear or greed.

In the extreme case where Forkcoin completely dominates Bitcoin, you'd actually see bitcoins totally disappear from circulation forever.

If the both end up living side by side, then they do so symbiotically instead of rivalrously (at least until the central bank dissolves itself).

And notice that there is always an equal number of forkcoins in existence as there are bitcoins when you include the central bank reserves, provided the central bank gets all newly mined forkcoins while it exists, or it starts out with the current total bitcoin supply plus what will be mined while it exists.  The central bank can always make good on its promise.

I really think this proposal achieves just that.  Users are voting by deciding which one to hold on to.  And in a non-disruptive way.

If forkcoin transaction fees to be earned, miners would no doubt mine, as doing so doesn't impose much extra cost to them because mining is merged.  And if forkcoin users demand more miners to come on board, then all they have to do is up their transaction fees.

Haven't read these two links just yet, but thanks for all the ones you've been posting for me, they're always very enlightening.

That's what a peg is.

I'm sorry, I didn't mean to say peg!  I only meant that the central bank would guarantee the one-to-one exchange rate...

what is the purpose of making another currency and pegging it to bitcoin???  It seems to me the entire purpose of making another is if you believe it will be better or different in some way, and hence be valued differently.

If you want something like bitcoin but to tweak parameters, here is a plan for "the ultimate fork" I outlined.  The idea is to create the fork-of-all-forks, where all network parameters are set by vote:

https://bitcointalksearch.org/topic/price-stability-difficulty-changes-fairness-infnite-coins-is-not-inflation-24929

Also, merged mining requires getting all the miners to use your software.  There's another way to accomplish the same thing.  It needs a bit more work, but as is it seems pretty good.  The idea is to PAY miners to mine what you want with bitcoins, rather than you pay yourself with hash power.

https://bitcointalksearch.org/topic/oblivious-merged-mining-or-getting-miners-to-work-for-free-31111

Pegs are only possible under very special circumstances, none of which will ever apply to bitcoin.  Ever.

Situation 1 is where you can create at least one of the two currencies in unbounded quantities.  Really, you need to be able to do both, but if you can do just one, you can keep the game rolling for a long time.

Situation 2 is where the two currencies are identical, which makes the peg (and the new currency) pointless.  By identical, I mean created at the same time and in the same amounts, and totally identical supply and demand.

I'm pretty sure this proposal is valuable, as it removes the rivalry and barriers to entry due to network effects in the crypto-currency market.  And it incentivises people to discover and implement significant protocol improvements.  Well, for the ones that expand at the same rate, anyway.

Are you really so convinced that Bitcoin is the paragon of crypto-currency?

LOL. let me know when I can exchange my forkcoins for BTC :-)

Sounds like a very good idea to me.

Whole thread is tl;dr = increase confidence that cryptocurrencies in general are a safe store of value that you don't have to babysit by rolling out your new ones, and protocol-breaking updated ones with a peg to BTC, as this strengthens the common currency unit, and solves your initial distribution and valuation problems quickly, and in an economically non-disruptive way.  Do it profitably and in a low-trust way via the "distributed central bank" described here, or come up with a way that the peg can be maintained in a truly trust-free way.


Say a group of people want to create a Bitcoin fork that they think will rival Bitcoin.  This rivalry would normally force people to choose which currency to hold on to, and would create winners and losers.  In order to avoid such a disruption, they could start a whole new blockchain, use Mike Hearn's merged mining, and create a temporary central bank that starts out with the initial distribution of forkcoins, equal to the current supply of bitcoins.

It would then trade bitcoins one-to-one for forkcoins, maintaining a peg.  It can do its trades in a trust-free way via this: https://bitcointalksearch.org/topic/m.286054, and it could use CHECKMULTISIG to spread the trust in it over many people, in multiple jurisdictions.  Of course it would want to dissolve eventually, so it might state in the beginning that it will begin gradually lowering its bitcoin/forkcoin exchange rate to zero after a given time.  Afterward, it would fulfil a promise to destroy any bitcoins and forkcoins remaining in its possession, so as not to cause any market distortions by releasing them into the market.  Notice that the total bitcoin + forkcoin circulated money supply still grows at the rate that bitcoins alone would have, absent Forkcoin.  They have a symbiotic, rather than rivalrous relationship.

They could even make a business model out of this by charging a fee for issuing or redeeming.

This method could also be used for necessary or experimental protocol updates that break backward compatibility.