Topic: Pegging the coin price.. - page 2. (Read 1630 times)

There have been instances, such as the Zimbabwe hyperinflation in 2009, where locals give up their currency and start using dollars or Euros or others, and then transition onto a different national currency. 

From the end of WWII until the 1970s USD was also exchangeable for gold so it was effectively "pegged" and any currency pegging to the dollar was also effectively pegging to gold.  1970 to today is basically uncharted waters, we will see how this global experiment plays out over the coming decade.

Addressing your example above, if I knew this was how the system operated and I were a speculator, what would prevent me from buying a large percentage of the coins and sitting on them until the billion has been sold and then make money from the rising price associated with growing demand and fixed supply?

I would not decide, the market would.

If there is a demand, they would come to the 'Coin Shop' and buy them, in as large or small a quantity as they like. Always at $1.

You have a job, and it pays you in these 'newcoins', then you go to your local coffee house and spend your coins, and then they spend the money they just made at your workplace, and the circle is complete..

You would not need to put more coins into the system for this transaction cycle to function.

As more people join the economy, there may not be enough Money in the system, so at that stage, they would go and buy some more coins from the Coin Shop.

That's what I like about it. The Money Supply would grow exactly as the economy requires it to.

Has a currency ever temporarily pegged itself to the USD ? And detached itself without disastrous consequences..?

One question I have is how would you determine how quickly to sell the billion.  I think what you're trying to accomplish is to lower the volatility in the currency so people invest and it builds a transaction based infrastructure and then you feel confident 'letting it float' so to speak.

The problem with any pegging mechanism that has been implemented is that once a system becomes dependent on low volatility or a pegged exchange rate it is very hard to wean it off.  Look at the Chinese peg to the dollar, anytime it moves very far away Chinese exporters start screaming bloody murder and Chinese central bank intervenes.

I like your idea but unfortunately part of the birth pains of such a revolutionary concept like Bitcoin is the volatility brought about by all of the different interested parties rushing into it.  I hope this addresses what you were asking, it's an interesting conversation to have.

Yes, that is what i expected would happen.

But, for a Billion coins to be bought, the ecosystem would have to be pretty established. That would take years.. maybe even decades..

At that stage, I totally agree that the exchanges would then dictate the price of the currency, but the whole system would have 'bootstrapped' into a viable economy by then.

Then, once the ecosystem is already up and running, it would revert to the same mechanisms as every other currency.

You peg the first billion only.. Then everyone would know what the currency is worth in its initial stages.

People, hopefully, would not need to switch back and forth between this coin and other FIAT/CRYPTO coins at this stage. They would simply stay only in the coin. It never really matters to me what the exchange rate of USD/GBP is.. I know what a cup of coffee costs in GBP, and that's what I pay (if I think it is reasonable).

In general, is it not possible to peg your currency to the USD for a limited period of time, and then to detach, once your economy is stable ?

( In fact, thinking about it, you could almost not put a limit on the amount of initial coins. If there was a demand for them, you would sell them, at $1. At some point there would be a large enough Money Supply in the system to keep the whole thing rolling, and no-one would buy new coins. No? )

The problem with your idea is there is no mechanism for "pegging" it to $1.  Setting the initial price at $1 is just the initial price (in your scenario of a total of 1 billion coins, once the last coin has been sold for $1 you lose control over setting the price and it's up to the secondary market to discover the price then which could vary significantly from $1.)

Err.. So in Option 1) is $1 not the Peg Price ?

Pegging is done by BUYING at the peg price, your idea is fail, it dose nothing  

Hello,

I was wondering something..

What would happen, in a hypothetical setting, if you had a new coin, you pre-mined 1 Billion coins, then you sold those coins at a 'known' rate ?

The 2 options I mean are

1) You sell them for $1 each. All the way to 1 Billion coins.

2) You sell the first 100 million for 0.1cents, the next 100 million for 1cent, the next 100 million for 0.1$ (10 cents).. etc.. x10 every 100 million. (or some other predetermined geometric rate)

I was thinking this would 'somehow' peg the value of the currency to a known amount?

I think I like (1), all the coins are sold at $1, and once all the coins are sold, THEN, the exchanges would take over. Not that you could stop them of course, but who would pay more than $1 when you could buy it for that.

Option (2) seems very similar to the mining concept as the early adopters would get their coins cheaper.

The reason I like it is that the coins can be introduced at whatever speed is required, as the economy grows AND a price for the coins would be much easier to determine. Especially in option (1). Psychologically you would be able to price things much better if you thought 1BTC = 1USD (or whatever).

In general, I would hope this would lead to economic stability while the coin matures and grows past the Billion dollar mark.. ?

There would be no mining rewards for miners, just a 0.1% txn fee or some other established amount.. and there may/may not be inflation in the coin.

Economically, is this viable/stupid/interesting/bollox ?