Topic: New miner-centric site with hopes to stabilize the BTC economy - page 3. (Read 9147 times)

We could calculate price with a 7 day average, taking into account the 7day average of mining power (THs). We could use a price/difficulty constant to calculate price.

And we could create a website and a bot to trade all bitcoins automatically at that price. It looks like a great idea indeed and it would stabilize price indeed. But in order to make things more stable we not only have to sell if price rises above the price limit, we should buy bitcoins if price goes down too.

I am confused as what we as miners are supposed to do.  I agree it is critical to stabilize the price, but what can I do?  Do we simply sell above 22.6 and buy below?  Hmm, actually, that sounds like a great idea.  (I think the price is should be closer to $25-$30, but anyway.)  

Why don't we just use the 7day average?

I would be elated if the price just went from $30 to $10 every single day..

If enough people are selling coins at or around the average market-sustainable rate there wouldn't be anyone to buy them from you at MtGox for $24.

At the very least publishing the VALUE of 1 BTC versus the PRICE of 1 BTC should give an idea of the current status of the market. Try as I might there was no way I could justify $31 per BTC last week. Such a price was unsustainable and as we saw, it caused quite a little weekend crash. Things rebounded this time, but how many crashes can we really have like that without killing the project?

I sounds wonderful if it would fix the problem.  BUT, if you would actually sell coins to me for $22 then all I have to do is sell them at MtGox for $24.  Return and buy more coins...  Rinse.  Repeat.

Oh, and the network is at 6.550 TH/s right now, to add 0.5% to the network with his "couple rigs" your theoretical miner would have to be pulling 32,750 MH/s. That's something on the order of 61 5970s. Assuming quad-card rigs that'd eat up about 20 kilowatts of electricity, which would be interesting to see outside of a data center since most houses and apartments are fused at 100A (115V * 100A = 11,500W maximum load). That's also not counting the 8 kilowatts he'd have to spend cooling off the 70,775 BTU of heat he's dumping into his house for that "measly" 0.5%. Get an idea of the scale we're working with before you act like you understand things.

Then the total processing power of the network magically grew out of thin air with no new interest drummed up in the project whatsoever? Again, people posting crap about how screwed up my methods are without bothering to post their magical fix to the solution. What is your better option?

The hashrate is a product of the number of miners, which is a product of the number of users. The difficulty lags the actual network growths by a bit but yes, since hashrate is (albeit indirectly) a measure of network size/interest, it should raise proportionately with price per BTC which is also largely a function of network size/interest.

in·flat·ed  (n-fltd)
adj.
1. Filled or expanded by or as if by gas or air.
2. Unduly enlarged or aggrandized; swollen: an inflated estimate; an inflated ego.
3. Full of empty or pretentious language; bombastic.
4. Raised or expanded to abnormal levels: an inflated economy; inflated wages.
5. Hollow and enlarged: an inflated calyx.

I'm going with definition 4 on that one. If we have a baseline measure of average value for a span of time, and the currency is currently trading well above that value, I'm pretty sure the Oxford English dictionary says we get to use the word "inflated." It does, in fact, mean what I think it does.

The difficulty is set to go up about 50-60% in a few days.

Do you really think there will be 50-60% more Bitcoin users than there were 2 weeks ago?

When a miner adds a couple rigs, and increases the total network hashrate by 0.5%, do you think that the Bitcoin userbase also grew by 0.5%?

There really is no correlation between the two.

All right, fine, just pretend I'm not trying to accomplish anything by putting the information out there then. All I am is a guy who threw out a web site that shows, based on prior trends, what the average exchange rate for BTC should be for a given period as delineated by difficulty changes. Do with that information what you will - I still say it will keep bubbles from growing as large just for people to know exactly how inflated the currency probably is at a given moment.

So basically a MINERS CARTEL!

i just want to correct a simple misunderstanding that many people have- it is speculators who bring consistency to a currency.  in the original post you badmouthed people who "buy the low and sell the high", but the more people who do that, the higher the lows are and the lower the highs are.  it is the actual action of price discovery that happens when buyers and sellers meet that decides the value of anything.  the more participants involved, the less extreme the extremes are- i for one know that i can make far more money trading bitcoins than mining them- and that will be where i concentrate my firepower.  i plan on being as large a player in the market as i can, and the only thing my "speculation" will bring is more stability.  as things are currently, it is impossible to short BTC- that being the case the only thing "speculators" can do is force the price higher by their mere involvement (basically why people hate long-only commodity funds currently even though i could prove mathematically that they should depress the front month [cash] markets by their involvement).  i might even start an intra-day BTC valuation thread, we'll see.  anyways, i digress, "speculation" is GREAT for BTC- it draws more attention to it and actually makes the moves on any given day LESS.

DING DING DING. This is why I price my loans in BTC with BTC in fees. If others with more money than I have ($220) don't have the balls that's their problem.

THIN MARKETS ARE SUPPOSED TO BE UNSTABLE. IF YOU DON'T KNOW THAT, WAIT A YEAR. The time for stability is when those who know the system know how to make it productive. You can't impose stability so you can play miniature golf in sand dunes.

This is like the DNS registrars saying that 2600.org was an unacceptable domain. Guess who won? 2600 kept hacking into the DNS and registering.


Fixing a problem that isn't there is the biggest problem of BTC.


Or someone more enterprising beats them to the punch.

i have made an android app monitoring bitcoin exchange rates, it's supporting around 20 currencies. I'm planning to add some more feature about the market in the near future, following this thread.

BitWid

Oh and just to reaffirm that a big enough wall of coins can stabilize the price of bitcoins, anyone else remember the $20, $25 and $30 marks and how we hovered around them so much longer than, say, the $16 mark or the $23 mark? Go look at Mt. Gox's market depth data. See those big spikes at the even $5 increments? That would be the source of that stabilizing factor so yeah we have actually seen that stabilization occur before - it couldn't stop the bubble but it did stall it at $5 increments. Those familiar spikes, by the way, represent about 2,000 BTC each according to Mt. Gox's chart, which is less than 1/3rd the kind of power a united coalition of miners could wield.

Regardless of the problems with my implementation, merchants will not enter this marketplace if they have to change their prices daily - and in the current market, daily wouldn't even be often enough! There is no reason that anyone anywhere should pay 1 BTC for a shirt and then twenty minutes later see a price tag of 0.8 BTC and then 1.4 BTC twenty minutes after that. The issue still remains that this market is too volatile for real commerce and if the only people in the market are the speculators, who thrive on volatility, there will likely never be a sufficient decrease in that volatility to make this a worthwhile mechanism for most businesses to transact in.

I see a lot of people reaffirming that I've spotted a problem and telling me that my solution is stupid, wrong or communist but not a lot of people stepping up to do anything themselves. So until someone has a better idea and wants to implement it, stop complaining about my imperfect solution.

Hadn't considered the tiny amount of btc introduced daily versus the sum that's already available. Good post.

Well I'm not about to join the argument. I don't think you'll be successful in controlling the prices, but I think it'd be a great idea to add a simple system to reflect upon what the suggested price of BTC is, however I also feel the formula is too simple (as many think).

I also read the part about just getting started and welcome for suggestion. So heres my suggestion, an important factor of how we miner's value BTC is via the difficulty. However, another important factor that can be as easily overlooked is the amount of investment that we put into the equipment, and the operating cost.

I believe the formula would have to factor both of these in as well to come up with a better metric of the value in 1 BTC. Which is to say instead of tackling how many people are mining, go straight to how much it cost to mine in the first place.

Irregardless of how many people is to mining, the difficulty adjusts so that 6 blocks are solve in an hour, that is 300 coins into the system. The person who has high hashing power also had to pay for his equipment and operation cost, also equally the risk he is taking. No one should be complaining about him getting the large piece of the pie imo.

Maybe something like,

Amount of power required to solve a block/50 BTC = Amount of power required to put 1 BTC into the system
Global average cost of electricity x Amount of power required to put 1 BTC into the system = generation cost of 1 BTC
(Remember to adjust when block solve = 25 BTC later on)

then we find the amount of hardware cost (normalised) at current retail price to put 1 BTC into the system, (risk of miners)

if we take what I assume is the most common build around, take it's cost (not forgetting the 5xxx series would phase out soon) divide by the amount of Mhash/s
i.e [ 4x5850 + ~700W PSU + [3SlotPCIex16 + 1SlowPCIex1] MOBO + Avg(Sempron140+Sempron145+Athlon2XII) + 2GB RAM + 8 GB Thumbdrive ] ~ 1.4 GHash/s @ $ x $
I believe almost everyone is averaging between $0.75/Mhash(/s) ~ $1/Mhash(/s)

However, if we include total network capacity, it will not be fair since many people would have broken even and the only cost would be operation. If we were to take for example the last 3 month's increase of network capacity cost weighted maybe it'd be fairer to those who are diving into mining currently since those who are already moving towards breaking even are carrying lesser risk then those who are just starting. (or the newer hardware)

Assuming 3 months window, thus accordingly we should 6 difficulty adjustments (example of weighted, should change to exponential)
cost of increase in network capacity would be
$/Mhash*{
11/36 * most recent adjustment +
9/36 * 2nd most recent adjustment +
7/36 * 3rd most recent adjustment +
5/36 * 4th most recent adjustment +
3/36 * 5th most recent adjustment +
1/36 * 6th most recent adjustment
}

Since, Current hash (2**32*Difficulty)/Total Network Speed = 1 blk/10 mins = 50 BTC / 10 mins
600 secs/ 50 BTC = 12 secs / BTC
thus 12 secs of total network speed would generate 1 BTC,

also not forgetting that we are paid to do these transactions taking an average, (although many of us exchange these for less variance, we have to account these in, since they are there to replace the generations when generation starts to decay 50>25>12.5 per block solved)
Fees paid to miners per BTC = Total Transaction Fees/(Total Block Solve*50 BTC)

Therefore,
cost of electricity (Base)
cost of increase in network capacity (last 3 months maybe?)
less transaction fees per BTC (last 3 months maybe)

1 BTC = Avg Cost of Electricity to Generate + Weighted Cost of Inc in Network Capacity - Transaction Fees Per BTC

Also, maybe as more factors maybe included, they should as well be weighted (probably). I think most importantly, what a BTC cost should be heavily weighted by the true demand

I didn't really go into numbers but I think this might be a good start for other people to add onto, the difficulty is already in the network capacity. This concept should be somewhat a fair & agreeable to what a miner would perceive is the price of a BTC. Also, a decrease in difficulty would decrease this number heavily since it'd be the most recent adjustment. In the long run, if the network capacity were to become stagnant, the cost would be calculated as the generation cost less transaction fee. I am negating the rent for the space the rigs & cooling since it isn't mandatory for everyone.

Again, I don't encourage controlling the currency neither do I think it's possible, as mentioned 7200/day isn't a lot to play around the market with especially when there's 6.5 million out there. However, I do think adding some sort of a reflective guide would help vastly in the reduction of speculation (that is beyond reason), since as of now there is no means to measure the true demand. (We don't really see/know it)

History has proven time and again that this sort of manipulation is doomed to failure.  You cannot control the price of a currency unless you can completely control it's supply.  For a recent and famous example, research how Soros broke the Bank of England.

If you do find limited success, it will only serve to worsen the problem.  When the market finally does break you, the dislocation will be many orders of magnitude greater than anything we have seen yet.
This is due to the fact that, the more successful you become at manipulating the price, the more a competitor can profit by breaking your hold.  Markets are designed to make what you are attempting impossible.

Speculators are not a bad thing in a market.  They serve to provide liquidity and price stability.  When they buy low and sell high they effectively put a floor and a ceiling on the market.  Speculators profit on the volatility, and in doing so actually leach the volatility out of the system.  The price swings in bitcoin are fundamental in nature.  They are happening because the actual value of bitcoin is changing very rapidly.  This is not good for people who want to use bitcoin as a currency, but it is unavoidable.  If bitcoin survives, the price will stabilize on its own.

Regardless, I applaud you for actually trying to fix the problem.  Good luck.  Your going to need it.