Hypothetical currency with decentralized monetary policy - page 2.

Lolcust

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Hillariously voracious

Quote from: JohnDoe on September 15, 2011, 11:11:53 PM

So you believe over 51% of coin holders will intentionally vote against price stability, making the currency useless?

That is entirely plausible.

Also, anonymous vote systems, even ones with complex mathematical magics securing a reliable crypto-pseudonym, are very hard to get right.

For a really obvious one, you can not (should not) neglect time a node spends online when assigning "voting power", otherwise, on the voting day, you will find yourself flooded with strange "noob nodes" that never transacted and never mined, and just arrived to cast votes and disappear.

maaku

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I value price stability, just as you do. But you and I are working to create an alternative currency, so naturally we think about these long-term, macroeconomic issues. On the other hand, most people will be driven by short-term self-interest. Merchants will want higher prices, consumers will want lower prices. Miners will want more subsidy, investors/hoarders will want deflation. Yes, it will reach some sort of equilibrium--but there is no reason to presume that it'll be at stable spending power.

JohnDoe

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So you believe over 51% of coin holders will intentionally vote against price stability, making the currency useless?

maaku

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It won't balance out unless the miners and speculators just happen to have equal assets, which is unlikely.

JohnDoe

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If miners vote for higher subsidies and the rest for low then it should balance it out no? Although I don't believe doing this is in the self-interest of any coin holder. The main point of the currency is roughly achieving price stability so if it can't perform this function the currency will be abandoned.

I see this as more of a 51% attack but with currency instead of mining power, rather than something people will naturally want to do. Some checks could be set to minimize such an attack, like invalidating votes that deviate too much from the average, hardcoding limits to the supply growth rate, implementing demurrage so that an attacker would have to constantly be buying/mining coins to maintain 51%, extending the time frame for calculating the average so that the average moves slower, and supplying a sensible default vote for people that won't likely pay much attention to monetary policy. This default would be updated based on a commodity price index.

I don't think this would be an economical reasonable attack though, it probably would be way cheaper to get 51% hashing rate than buying and maintaining 51% of the coins.

maaku

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How does that achieve price stability, however? People would vote with their self-interest in mind, probably with the miners voting for higher subsidies, and everyone else voting for lower.

JohnDoe

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Quote

One way to moderate this is would be by introducing a simple voting mechanism where bitcoin account holders would periodically submit their desired inflation or deflation rate through a cryptographically secure vote stored in the block chain (which could later be purged to save space).

This would in effect create a decentralized central bank, where currency holders decide somewhat democratically on their desired level of expansion. The currency wouldn't be deflationary or inflationary in principle, since prevailing market conditions and the community's own aggregate economic interests would determine supply.

If miners held a majority of currency in reserve, they would still dominate any voting system, but they would need to take the minority view into account, since minority users could switch to alternative currencies and the market would shrink.

Got that from here: http://culubas.blogspot.com/2011/05/timejacking-bitcoin_802.html

I think most would agree that it is more desirable to have price stability than either deflation or inflation so I'm mainly interested in discussing the viability of implementing something like this. I was thinking that instead of having a special voting transaction, which only a few would bother to use, votes could be embedded into every normal transaction where each unit of currency sent is 1 vote. An average of all votes taken during the last 30 days or so would then determine what nSubsidy should be.

Thoughts?

Topic: Hypothetical currency with decentralized monetary policy - page 2. (Read 2439 times)