Topic: please delete - page 4. (Read 18351 times)

Hedging is doubtless a market, and it really need not have anything to do with actual fiat<->cryptocoin exchanges.

Just like one of the bitcoin<->USD conversion rate options sites resolves all balances only in bitcoins, hedging can also balance / strike only in bitcoins. All the people hedging need is a way to denominate their holdings in terms of a fiat unit of count during periods then they think the fiat unit of account will lose less actual buying power / value than the cryptocoin unit of account will.

It is merely about relative "value" of unit of account. Actually acquiring fiat upon eventually cashing out is totally independent of that.

So far the primary barrier really to doing this as blockchains has been the evident unwillingness of people doing merged mining to merged mine more chains, resulting in merged-mined chains having insufficient security so far to be suitable for this use.

Maybe we should right off the bat distinguish between fiat currency exchanges, cryptocoin exchanges and fiat<->cryptocoin exchanges, as they are maybe three different problems, albeit the first (fiat<->fiat) and third (fiat<->cryptocoins) might be somewhat similar in terms of the regulatory problems they might encounter (though still the third might have more or different regulatory problems in some details from the first).

Since the USD is not the only fiat in the world, and in fact some nations might even prefer that it not even be used as global reserve currency at some point going forward, the whole concept of allowing each Freeciv nation to issue their own blockchain-based currency was intended partly to actually get in place blockchains that could, once sufficiently secured, be used for this hedging type of use even if not directly convertible to fiat. I figured the whole problem of conversion of fiat can be left to bitcoin itself, allowing all other cryptocoins to get on with their own problems internalt to the cryptocoin world. If exchange to and from fiat does turn out to be a massive market, then bitcoin's position as the primary conduit for such exchanges should help keep bitcoin its current place as the pre-eminent cryptocoin. If however such exchange turns out to be a dwindling market as more and more business takes place purely within the cryptocoin world then who knows, maybe bitcoin will find being the main gateway will slowly lose its importance in the cryptocoin economy.

-MarkM-

Project page is updated:
https://litebit.co/project-item/p2px/

Almost all exchange volume is related to speculative or hedging purchases by people who regularly move between USD and bitcoin.  My idea addresses this use (but not for HFTs).  I don't have a solution for using VISA cards or bank accounts to buy bitcoin with out facing a reversibility problems. However, not much stuff is sold only for bitcoin, so there isn't much need for this. People can just use USD to purchase things.

Step 1 - Get fiat USD
Step 2 -
Step 3 - Have irreversible BitUSD you can trade for Bitcoin.

Do yo propose to just give out BitUSD to EVERYONE who wants to some day buy Bitcoin? Please explain what Step 2 is, because if that step is solved, I don't see why you can't just have

Step 1 - Get fiat USD
Step 2 -
Step 3 - Have irreversible Bitcoin

Please let me know if you are misunderstanding something, because I have been asking for you to explain this Step 2, this exchange from reversible to irreversible ANYTHING, this step 0 in the chain of 1, 2, 3, 4, 5, this entire time and all you've been giving me is Steps 3 and up, and calling me an idiot because you forgot about Step 2.

Well, of course there needs to be some exchange between actual USD and bitcoin somewhere. The point is that it doesn't need to bear the kind of volume MtGox bears. It could just be a trickle and the vast majority of exchanges could be carried out with bitUSD. In the worst case scenario, it could be isolated  exchanges of BTC for cash. This could co-exist with a deep, liquid market for bitUSD - bitcoin which is unconnected to the banking system.

And yes, you are an idiot.

In order to actually do this, we first need to test whether we can even actually get enough hashing power merged-mining a new chain to actually secure the chain.

There isn't much point starting to issue coins until the chain they are to be issued on has attained a secure level of hashing.

Miners could in fact "vote" for the idea of a pegged-to-fiat chain by merged-mining it in advance of the issuance of any actual coins on it.

-MarkM-

Because 0 x 1 x 2 x 3 x 4 x 5 is STILL 0

I guess you missed the whole purpose of the OP and this thread, which is that with centralized exchanges, this currency becomes an easy target for government laws and scammers. Look at Tradehill and all the issues MtGox has with keeping a bank account open.
Unless your proposed solution is to have BitUSD created and controlled by the government, thus being fully endorsed and legal... but in that case, why even bother, instead of just making ACH transfers irreversible? It's kinda funny how you keep making it sound as if you think everyone else is an idiot. 

Actually I still do not think it is best to use bitcoin to back some token that is intended to actually represent, or be pegged to, fiat.

For one thing, doing it that way is most of the reason why you need multiple reserve instead of full reserve.

If you kept most of your reserves in the form of the actual fiat the token is intended to represent or be pegged to then your reserves enjoy the same increases or decreases in value as the tokens they are backing. That seems to me to eliminate most of the volatility problem as regards your reserves getting out of sync with the liabilities your coins/tokens represent.

Basically I would only issue USDcoins equal to the number of actual USD that I have hidden securely somewhere, possibly in the form of actual physical specie rather than as electronic deposits at banks susceptible to gosh knows what freezing of accounts, confiscation of funds and so on and so on.

I would probably need to have a friend to friend network of friends who are willing to buy the coins from people using various things along the lines of MtGox USD credits, PayPal, Pecunix, Liberty Reserve, Dwolla or whatever. They would do so because they trust me to actually go dig up the actual physical specie if necessary in the case of a run on the reserves. They could be connected to me via i2p or Tor or via Sone messages on Freenet or using RetroShare or maybe even by none of those specific programs since I am known to run all of those so maybe they might prefer to use some "none of the above" methods.

Trust would be just a matter of time, eventually people will notice that provided you allow for a modicum of profit on the behalf of the buyer you can always find someone who will buy as many USDcoins as you have at close to a dollar each. Since no more exist than I have issued, you cannot have more than can be bought back from you.

Really all that is necessary for any cryptocoin to maintain a stable value is to keep it from being issued by miners who have no interest in actually buying it back at close to the price they sold it for.

-MarkM-

You went through a lot there, markm. I am suffering from tl;dr. I apologize. Could you edit it to make it more concise? In brief, yes, the system requires a lot of bitcoin. Yes, excess hording of USD does increase the capital requirements. Excess hording is not too likely because there are better investments than USD. However, it is still a problem. The horders would require a large store of value to be set aside, but wouldn't generate revenue. Are you suggesting that the system should incorporate a modest demurrage fee to encourage use as a medium of exchange rather then as a long-term store of value. If yes, then I agree with you. Maybe an imposed demurrage of 2% per year is reasonable.

I remember that thread. Basically you suggest multiple, as opposed to fractional, reserve.

That might well require vast assets in order to accomplish it with a very wide aperture of how much value can pass through it per transaction, but it seems to me that the total amount of reserves on hand really only limit the aperture: the transaction size.

I wanted to go through an example of someone wanting to exchange, for example consider someone wishing to sell some NMC for some USD.

They buy some USDcoins from someone using a secure two-blockchain transaction in which both parties get the coins they bargained for or the transaction is invalid. (I think methods of doing that have already been worked out in some thread somewhere?)

However maybe NMC is a poor choice for an example if MtGox does go ahead and add NMC to its choices, since one could then go directly to MtGox instead of getting involved in this whole intermediary USDcoin stuff.

So lets pick some coin that currently has no established exchange that trades it directly for fiat, lets say bitNicKeLs for example

The person wants to exchange NKL for USD. So they buy some USDcoin with their NKL.

Now how do they turn their USDcoin into actual fiat USD? Presumably since this is decentralised there is no fixed publicly known exchange that will do that for them?

So as a potential issuer of some kind of "USDcoin", in order to avoid having a public exchange that is easily targetted, I will want to have market-makers or something? A bunch of partners who will appear on the p2p exchange-network as just another user, but who will happen to be willing to give someone some MtGox USD in return for USDcoins?

The more limited the actual USD reserves of the issuer(s)/backer(s) of the USDcoins the less tolerant the system will be of hoarding, due to the necessity of keeping multiple-reserve reserves instead of merely full or fractional reserves. For example if I commit to having two actual USD banked in an insured-deposit bank somewhere per each USDcoin I issue, there will be no more USDcoins available than half my USD reserves. This system has to make me at least 2 USD before I can legitimately issue another USDcoin.

So if anyone hoards any of the coins instead of hurrying them along their path back to me, the supply will dry up. All it takes is a number of hoarders equal to half the reciprocal of (the amount they each hoard divided by my USD reserves).

So even if I start the system up with a trillion dollars somehow divvied up among enough deposits at banks to somehow keep it all insured, I can only issue five hundred billion USDcoins which means only one billion "hoarders" hoarding on average five hundred coins each would freeze the whole supply. A mere hundred million hoarders hoarding only five thousand coins each same thing. One million hoarders hoarding only fifty thousand each, same thing.

Now obviously if the entire 500 billion does get issued, I could increase my reserves by half that, so I could issue another 250 billion. But basically no matter how large my reserves there is some point at which any agglomeration of people out there controlling only three quarters as much as my reserves or thereabouts can dry up the whole system if hoarding is tolerated.

So maybe the coins would have to come with an expiration date, to make them "hot potatoes" (like the dollars they represent maybe only maybe more so), to force them to have to come back to me in a reasonable timeframe so the timespan over which I am liable for a coin once having issued it is limited?

If it all came back to me in a matter of minutes or hours, or even seconds, then the amount of reserves needed could be limited to that aperture, and it would be only a means of exchange not a store of value.

-MarkM-

I propose a mechanism in this thread. I fail to explain myself clearly, but DeathAndTaxes is able to understand me and writes a more comprehensible summary in this particular post:

https://bitcointalksearch.org/topic/the-realcoin-idea-66327

How?

Yes, why not? Please provide a logical argument.

That doesn't ever need to happen for the system to work. Bitcoin can be exchanged for reversible USD at MtGox or other exchanges as necessary. This is all the integration necessary and it is already in place.

This is the value that Bitcoin provides to all the other non-reversible currencies: it is the curtain behind which the whole can of worms that is the fiat system is hidden behind.

Only the people who are stuck with fiat, and the people who are willing to take the risk of accepting fiat, need worry about it. It is the users of fiat who don't seem to realise how untrustworthy their currency is, the irreversible currency users are well aware that fiat should be avoided unless some huge markup, presumably about what money-laundering usually goes for probably, is offered by those who wish to divest/launder themselves of fiat.

Really the overheads associated with accepting fiat currency are so ridiculously high that it should not surprise anyone that money-launderers thieves crooks etc are the folk most likely to be able to afford such overhead.

Put simply, fiat currency is so fraught with problems that it is worth far less than irreversible currency.

A DollarCoin thus needs to cost far far more than a dollar IF it is paid for using reversible fiat currency.

Maybe a Reversible Assets asset could be set up in which all reversible assets get put, then people who have irreversible assets can place offers so the market can discover how much people really think such reversible assets are worth. Bear in mind that the largest inputs of reversible assets to such a pool/fund will probably have the highest likelihood of being scams. So presumably it should come back again to the number of units in it that are more than six months old divided by the total number of units as the average value per unit. Interestingly that should result in an asset/fund that goes DOWN in value when units are put into it!

-MarkM-

EDIT: Hey that actually makes sense, as putting more paper printed by the fed into it is simply inflation just like it already is in the outside world when such paper is printed in the first place.

And how will irreversible BitUSD exchange from reversible USD? At some step there will still be reversible fiat needing to convert into irreversible currency. Again, all you're doing is creating more steps further down the road, but ignoring the problem with the very first initial one. I mean, hell, why not have irreversible BitUSD, that exchanges into irreversible BitEuro, that exchanges into irreversible BitUNcash, that exchanges into irreversible BitWorldCoin, that exchanges into irreversible BitCoin? Make the chain long enough, and maybe people will forget about the initial reversibility problem.

They will exchange 'irreversible BitUSD' with 'irreversible Bitcoin', obviating the need for bitcoin speculators/exchanges to interact with the banking system. Of course, BitUSD would likely develop other uses as well, but this thread is focused on development of a P2P exchange. Development of irreversible BitUSD is a necessary precondition.

Exchanges. What will they be exchanging? Irreversible BitUSD to irreversible BitUSD? I'm wondering the same about you.

Why? The exchanges could operate primarily with irreversible coins. You are not too smart.