Topic: MasterCoin: New Protocol Layer Starting From “The Exodus Address” - page 154. (Read 448489 times)

Take a look at the "aggression factor" described in the specification. How quickly the escrow fund reacts is defined by whoever launches the currency, using this parameter.

No it doesn't matter if it's you, what do you see as the escrow fund taking as a cut for buying and selling, or in other words what % can it drop by before it starts buying back given the point of the escrow is to pay buyers the value of the coin back

Probably initial people buying a stabilized coin would be buying small amounts out of curiosity. If the currency holds the target value as promised, the infrastructure would definitely follow!

The primary question here assumes that people would be buying these currencies from me, which is not the case. Their money automatically goes straight to the escrow fund. The only trust at this point is in the protocol, not in a human being.

Let me try your thought experiment, on the basis people only buy up to the value of backed assets for $1coin

Escrow fund $1000

market buys 1000 $1coin @ $1 each Q) Why are people buying $1 coins with no infrastructure supporting their use and no speculative value isn't this a bit of a chicken and egg situation?

$1coin trade at around $1 but with no practical use for them and no speculative value demand drops and people start to sell

Escrow fund buys 500 $1coin for $500

Q) by definition an escrow means the original purchaser handed that money to you on trust that it was backed so when you pick up "cheap coins" how much do people lose off there originally backed sum?

can you clarify the points above as can't really do a thought experiment without clarifying those points first!


 

I remember when you posted a similar bounty

Bless you sir. I have other work I need to do today!

Why do you think investors would act against their own self interest? I thought we were agreed that would never happen. Regardless, the escrow fund still makes a profit in this scenario.


Again, the escrow fund still makes a profit in this scenario unless it is too weak to return the price to target.  If it succeeds, anybody who decided to panic loses money (and the escrow fund takes that money as profit). If it is too weak, then everything falls apart.

Determining how weak is too weak is part of this experiment.

I suggest your first bounty should be the following:

10 BTC to anyone who can convince 50% of your investors that your system is economically unsound and not viable.  

I will no longer respond until such a bounty is posted.

You could also get in trouble selling currency...... Either way your personal 'situation' is irrelevant and unprofessional to use as a bargaining chip.

Anyway, I've voiced my criticism and you've made it clear that you see no problem proceeding as is and have no intention of addressing the serious issues raised in a reasonable way.

You make a good point that my investors aren't experienced. I could actually get in big trouble if I represented MasterCoins as an equity stake, since it is illegal to sell equity to investors who aren't "accredited" (rich). I was very careful to structure this as a sale of currency for just that reason!

Also, my wife isn't a bargaining chip. I'm just describing my personal situation. It could be that bounties are the way to go as a result.

I have run this through in detail and can show you the 0-sum game, so lets work through the numbers for you:

Assuming 100% MC backing then the price of GoldCoin == 1 Oz of Gold.

If MC goes up in value, then you will have 150% MC backing... this will cause users to value GoldCoin above the value of Gold and bid it up to 1.5 Oz of Gold.

The network will then debase GoldCoin until once again 100% backing is achieved and anyone who invested above 1 Oz price has lost 33% of their investment... a dumb financial move given the rules of the game.

If MC goes down in value, then you will have 50% MC backing and GoldCoin would be worth 0.5 oz of Gold.  

If the network uses 10% of the backing to buy back 5% of the GoldCoin at market price (1 oz) then the Fund will have 45% backing and be worth 0.45 oz of Gold after your manipulation ends.

The only way for the fund to recover is if MC goes back up in value or Gold comes down... either way the value of GoldCoin has all of the Downsides of MC but none of the upsides of gold.

If the price doesn't go over target, that's great. The escrow fund doesn't have to do anything. But if a bunch of people decide they have to have GoldCoins even if they pay a slight premium for them, the escrow fund takes that premium.

This is supply and demand, folks.

No, they most certainly don't . You're using your wife as a bargaining chip. You seem to forget that you're not dealing with experienced investors. You've set up a system where there's no accountability for MasterCoin's finances and you've rushed the fundraising along before a proper detailed plan is explained. No investor worth one's salt would touch this.

I still think you're under-qualified. When this falls apart either because you can't put it together in the first place or the house of cards falls your reputation is ruined.

Why would the price go above target isn't that an escrow backed value people wont buy over? Why will coins be worth more in a few days if demand dropped out in the first place?

Edit: sorry someone posted similar at the same time

Um, have you done this thought experiment in detail? In the first example, if GoldCoin holders don't drive up the price of GoldCoins above the target price, the escrow fund doesn't act at all. If they do, the escrow fund profits. Nobody has to act against their own self-interest for this to work.

And you are counting on everyone who pays above market rate to act against their own self interest?  Why in the world would any sane, profit-seeking, individual buy a GoldCoin for more than the gold price when they know 100% that the algorithm will be debasing them?   You are asking these people to subsidize prior losses with no gains.


Why will cheap coins be worth more in a few days?  Because you say so?  Because the rest of the players have had a change of heart and realized that GoldCoins don't need 100% backing or simply because MasterCoin has gone up in value and thus the value of the backing has increased?   

GoldCoin has no more value than the escrow fund backing it.  Every market intervention of the escrow fund to prop up the price debases the backing.

Angel investors and entrepreneurs have exactly the same relationship as this. It really shouldn't be so terribly controversial. Either the idea is great, and lots of money will be made, or it isn't, and investors will lose out.

Please don't hyperventilate

Let's imagine that GoldCoins is launched and a bunch of people buy it, driving the price up above target. The escrow fund then creates GoldCoins to match supply to demand, and sells GoldCoins at a higher price than they will be worth in a few days once supply catches up. This is profit for the escrow fund, and the escrow fund is now over-funded as a result.

Later, a bunch of people decide there is a better way to store gold, and they sell their GoldCoins driving the price below target. The escrow fund then buys those cheap coins until supply again matches demand. Again the escrow fund profits by buying cheap coins which will be worth more in a few days!

There's not circular reasoning here. Sovereign governments do this all the time (although they get in trouble when they try to also control interest rates, as described earlier).

You're negotiating against your own wife?? Do you even realize how insanely mixed your role is in this? I honestly find it hard to take you or MasterCoin seriously if you paid yourself any salary at all.

You point out that you'd lose equally as much as other "investors" (purchasers would be a more fitting term). You're essentially controlling expenses and your own salary which you "withdraw" from the exodus address. If you work on this for 6 months and return 50 % of all funds you have not lost  anything because those funds are withdrawn for your own personal use, claimed as "salary".

Just because you say a speculative attack wont happen does not make this an economically sound protocol. You're either knowingly or ignorant to the fact that you're setting up a game of musical chairs for everyone involved, with a twist where you've guaranteed yourself a chair.

I think you're economically under-qualified to lead this project. You've mixed your role on every side of the project which means this is de facto a premined-equivalent altcoin, leeching off the Bitcoin network. You still dodge the hard questions and appeal to greed in half of your posts.

An escrow fund will be operating at a loss at all times because the only time it will enter the market is when everyone else disagrees with the valuation and it will be making decisions that profit-seekers would not make!    The only way for the fund to raise capital is to sell above market rates and to convince some other investor to pay above market rates *knowing* that the fund will be working against their interest and that they will take a loss for paying above market rates.   The only way to keep the price from falling due to lack of backing is to purchase the coins at ABOVE MARKET RATES and thus at a loss.   

You have a deep seated assumption based upon circular logic... that assumption is that the price will maintain parity naturally without respect to the backing and that the fund would be able to profit on this natural market correction.   However, if this were a natural market response the fund would be unnecessary.  Every action taken by the fund will be at a loss.

I can't pretend that 100% of user-created currencies will maintain their values forever. That is patently impossible. I can't claim that any legitimate currencies which aren't Ponzi schemes will never fail - clearly some of them will.

I believe an escrow fund, even a modestly unhealthy one, can maintain a target value of a currency such as GoldCoins or USDCoins for many years. The tipping point where an escrow fund is too unhealthy, triggering a bank run of a large percentage of the users of that currency remains to be determined. However, as I have repeatedly said, the typical escrow fund should become more healthy over time, not less.

I'm pretty sure the tipping point is when the percentage of people who panic is higher than the percentage of outstanding coins backed. An over-funded currency is guaranteed to work correctly. A 50% funded currency should work as long as 50% of the coin-holders don't panic at the same time.

Keep in mind, like with bitcoins, many people will buy these currencies, and then lose them. Those people won't even have the option of participating in a bank-run.

It seems clear to me that once MasterCoins fall out of favor, ALL currencies built on MasterCoin will subsequently collapse as MasterCoin values approach zero and escrow funds become worthless. Hopefully that will be a few centuries from now