Fuserleer,
I respect you're one of the few in this space actually working towards innovating, it's good to see more out there.
My opinion on the volatility issue isn't one of crypto but of free markets and human nature. Every little trade prompts different trades in reaction, a sort of causality chain based on user decisions. To try to control this is to try to restrict this causality chain, which just forces it into a different set of parameters.
Let alone the many different factors that go into free markets such as "volatility increases on full moons", among many other external factors that influence a free market.
Here's a good read on how lunar cycle affects markets: http://nowandfutures.com/large/E2008-1-1629870.texte20lunarcycle.pdf
Constraining human psychological tendencies in trading and setting value of an asset in hopes to attract more users to "stability" that allow them to say buy a cup of coffee without having a market fluctuation, is going against the basis of free markets.
Market cap and agreed value consensus generally have a greater effect on price stability in my opinion, as we've seen in bitcoin as its market has strengthened over the years.
It's a trade off, to attract people wanting "stability" is to push out the day traders that like to make money on the "volatility", when a currency will naturally mature over time with more users agreeing it is a decent container for their wealth.
I don't think it's right to take the free out of free markets.
To have a market's growth constrained to a few constants in my opinion is something that will work against you more than for you.
Thank You,
Viz.
Topic: Stabilized Bitcoin using eMunie economics (Read 4317 times)
Have you considered a totally different approach?
Lose the fungibility of the stable currency, instead have a leveraged trading market, where users go long/short against a feed price by putting their base currency up as collateral. A long must be matched with an opposite short in order for a trade to begin, and either side can close the trade at any time (by settling their collateral requirement which maybe +ve or -ve, paying the other side of the trade), which causes the other party to match against the next eligible order on the book.
This gives users a way to gain exposure to a stable currency, but you lose the ability to transfer it.
Lose the fungibility of the stable currency, instead have a leveraged trading market, where users go long/short against a feed price by putting their base currency up as collateral. A long must be matched with an opposite short in order for a trade to begin, and either side can close the trade at any time (by settling their collateral requirement which maybe +ve or -ve, paying the other side of the trade), which causes the other party to match against the next eligible order on the book.
This gives users a way to gain exposure to a stable currency, but you lose the ability to transfer it.
I considered this approach but it wasn't acceptable to the goal, I don't want to lose the fungibility and I don't want to have any reliance on any human element (going long/short). With an elastic supply my goals can be achieved without these more complicated additional mechanisms.
This test was to trial the buffer mechanics, and how it responds as a reaction to trade pressures in a fixed supply environment such as Bitcoin, and as far as I'm concerned the test was a success as I'm using historical data and using the same buy/sell pressures.
However, the argument up for debate here has now focused on trader mentality, and whether my test is valid when considering them. There are two main user sentiments that need to be accounted for when modifying the trades using historic data.
The first is, a user wants to buy X BTC, and in this case the volume doesn't need to be modified. The second is, a user wants to buy $XXXX worth of BTC and in these cases the test data volume DOES need to be modified.
In a live environment, the users trades wont be modified so the argument presented disappears.
The main issue is that if I scale the volume, then the test needs to move away from emulating Bitcoin, as with scaled supply there will not be enough BTC available to fill these scaled trades. To do this test the elastic supply needs to be enabled, it will stabilize and output a price curve exactly to the one posted, except the volumes will be much larger.
I'd like to do this volume scaling and run the sim with the elastic supply enabled, for my own peace of mind, and to appease people here...I'll post back the results if there is interest, but it wont be applicable to BTC anymore, so this topic now is probably not relevant in this forum.
Have you considered a totally different approach?
Lose the fungibility of the stable currency, instead have a leveraged trading market, where users go long/short against a feed price by putting their base currency up as collateral. A long must be matched with an opposite short in order for a trade to begin, and either side can close the trade at any time (by settling their collateral requirement which maybe +ve or -ve, paying the other side of the trade), which causes the other party to match against the next eligible order on the book.
This gives users a way to gain exposure to a stable currency, but you lose the ability to transfer it.
Lose the fungibility of the stable currency, instead have a leveraged trading market, where users go long/short against a feed price by putting their base currency up as collateral. A long must be matched with an opposite short in order for a trade to begin, and either side can close the trade at any time (by settling their collateral requirement which maybe +ve or -ve, paying the other side of the trade), which causes the other party to match against the next eligible order on the book.
This gives users a way to gain exposure to a stable currency, but you lose the ability to transfer it.
fiat
A. 3-5 business days. for wire transfers, cheques and even paypal withdraws
D. comparing Visa worldwide is a failure of understanding visa.. dd you know that Visa has not 1 ledger.. but multiple ledgers. and the statistics of world transactions is based on the combined sum of all their ledgers.. on that note. i wish to combine bitcoins ledger to represent visa USA, litecoin to represent VISA europe, feathercoin to represent Visa UK. and a dozen other altcoins to represent the other dozen Visa ledgers.. and then lets combine the total transactions per second of cryptocurrency as a whole
A. 3-5 business days. for wire transfers, cheques and even paypal withdraws
D. comparing Visa worldwide is a failure of understanding visa.. dd you know that Visa has not 1 ledger.. but multiple ledgers. and the statistics of world transactions is based on the combined sum of all their ledgers.. on that note. i wish to combine bitcoins ledger to represent visa USA, litecoin to represent VISA europe, feathercoin to represent Visa UK. and a dozen other altcoins to represent the other dozen Visa ledgers.. and then lets combine the total transactions per second of cryptocurrency as a whole
A. 3-5 buisiness days for the payment to come in, but you have a central authority that can promise you within seconds that the money WILL come through. This element of trust makes VISA effectively REAL TIME.
With bitcoin you can't truly use it to buy day-to-day items, buying over the internet sure, but a coffee at starbucks? or a burger?
D. VISA can have 50 ledgers or even 1 trillion. This isn't the same as saying bitcoin represents X and litecoin represents Y.
VISA as VISA is a single protocol that can process many TX's at once. The exact details on how they implemented their technology isn't relevant, what is relevant is the outcome.
If you are able to force EUROPE to use ONLY litecoin, and the USA to use only BITCOIN, and somehow this is able to withstand VISA scale TX's world wide - FINE. But the current status is - if I want to use Bitcoin or any other crypto that has any activity at all, I will need to wait - this is what eMunie comes to fix.
...
lastly bitcoin is a great currency..
instead of centralized inflation that causes people to not save their income, and to spend it so much they even get loans to spend more, causing the country to have debt issues..
bitcoin is deflationry.
infact the coins i said in 2012-15 i am now spending happily without a care in the world. because the deflationary nature has helped me to turn a one hours wage into a weeks worth of spending. all because i saved.
...
lastly bitcoin is a great currency..
instead of centralized inflation that causes people to not save their income, and to spend it so much they even get loans to spend more, causing the country to have debt issues..
bitcoin is deflationry.
infact the coins i said in 2012-15 i am now spending happily without a care in the world. because the deflationary nature has helped me to turn a one hours wage into a weeks worth of spending. all because i saved.
...
Tell that to the people who bought at $1K and are now holding worthless bits and bytes.
In order for a crypto to actually work as a currency, for people to truly use it, and not use it as a means of converting fiat back and forth, you need it to be stable.
I will never use bitcoin to pay for anything, for the simple reason that what if 5 minutes after I pay for my dinner (for example), the price rises by 50% due to some whale buying.
So now the meal I just payed for $60 has now actually cost me $90.
In eMunie, when more supply is made, it is spread between all "share holders". Meaning that holding will benefit you. When the system creates new currency due to increase demand, a certain percent goes to those who have done work (i.e validate tx's and other actions that help the system) and a certain percent goes to the share holders based on the amount of shares they hold.
You should expect over time, that even though a single coin is still worth the same - the total amount of coins you have will rise, making your 1 hours work multiply.
Right so that brings me to the crux of the issue that needs to be addressed. You are right, these informed traders were not
I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price. (Are there even any valid reasons why they would?)
I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price. (Are there even any valid reasons why they would?)
That was my reasoning as well.
The Chinese adapt a lot of American things. I think Peking Crocodile would be on every street corner within 10 years.
Franky, the reality is that if the US goverment says that a duck is a crocodile, and sticks to it for a sufficiently long time, the duck becomes a crocodile.
and while america plays with crocodiles.. all 300mill amrican people see less utility in having "crocodiles" in their life.. yet
1.3BILLION people in china order duck
1.2BILLION people in india order duck
1.1billion people of the continent of africa order duck
742 million europeans order ducks
and now america loses its freedom to trade "crocodile" and the rest of the world wonder why duck is so cheap in america. and a great chance to arbitrage it on the crocodile exchange.. which chinese and indians find it weird to use a crocodile exchange that only supplies cheap duck.. but ultimately they dont care they are only going to use the crocodile exchange for a 2 minute flip to grab cheap duck
Franky, the reality is that if the US goverment says that a duck is a crocodile, and sticks to it for a sufficiently long time, the duck becomes a crocodile.
Well, that's the difference between theory and reality. In theory BTC may be an asset and not a commodity, but in reality it is a commodity.
bitcoin is not a commodity.. which proves the commission have got the wrong theory, and it will eventually bite them in the ass.
its like the commission want to classify a duck is a crocodile.. so they can make money putting up signs in childrens parks next to lake that say, "dontfeed the crocodiles' they can class it all they like and get all the grants and budgets to make profit from all they like, but the reality is a duck is a duck and kids will still feed the ducks because they dont see crocodiles
As reported by Bloomberg, the Commodity Futures Trading Commission has now ruled that bitcoin, the peer-to-peer digital currency, is a commodity. This means the CFTC can regulate it and punish evildoers.
https://www.equities.com/news/is-bitcoin-a-commodity-or-a-currency
well we both know how american financial commissions work.. look at their blindness around the sub-prime loans that they classed as good investments..
so i dont hold much 'water in the faith of american financial commissions.
i prefer to use logic, and understanding or the reality of things. rather than what classification sits in purely based to make the commision most profit via licences, fines, taxes and fees
Well, that's the difference between theory and reality. In theory BTC may be an asset and not a commodity, but in reality it is a commodity.
In theory a bottle of water is a harmless drink, but try to exlain that to the guys of airport security.
Ok thanks for the list, some I agree with, some I do not so much.
However your last point is interesting and it captures exactly why Bitcoin will never be a mass market currency....because its a commodity used by traders to increase wealth, and that is not what a currency should be.
you know day traders dont just trade commodities.. they trade ASSETS too..
bitcoin is a asset. so dont think about the oil market.. think about the stocks and shares market and your mindset will shift away from thinking about bitcoin as s commodity (based purely on the ill informed analogy of gold) and instead think of the asset trading.
lastly bitcoin is a great currency..
instead of centralized inflation that causes people to not save their income, and to spend it so much they even get loans to spend more, causing the country to have debt issues..
bitcoin is deflationry.
infact the coins i said in 2012-15 i am now spending happily without a care in the world. because the deflationary nature has helped me to turn a one hours wage into a weeks worth of spending. all because i saved.
inflationary currency is bad. deflationary currency is good.
I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price. (Are there even any valid reasons why they would?)
i left that to last. because although your mindset might be a stable currency for consumer spending of goods and services.. exchange day traders love the opposite. they love price movements.
Ok thanks for the list, some I agree with, some I do not so much.
However your last point is interesting and it captures exactly why Bitcoin will never be a mass market currency....because its a commodity used by traders to increase wealth, and that is not what a currency should be.
As reported by Bloomberg, the Commodity Futures Trading Commission has now ruled that bitcoin, the peer-to-peer digital currency, is a commodity. This means the CFTC can regulate it and punish evildoers.
https://www.equities.com/news/is-bitcoin-a-commodity-or-a-currency
well we both know how american financial commissions work.. look at their blindness around the sub-prime loans that they classed as good investments..
so i dont hold much 'water in the faith of american financial commissions.
i prefer to use logic, and understanding or the reality of things. rather than what classification sits in purely based to make the commision most profit via licences, fines, taxes and fees
I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price. (Are there even any valid reasons why they would?)
the same reasons that there are 12 prominent exchanges in existance. if you can explain why there should be only one. then you will have your answer.
i would explain the answer but there are too many reasons to list them all.
summerised
features(troll boxes, put and call options. shorts vs plain standard no fancy feature, basic trading)
barriers of entry (kYC or no kyc preference)
liquidity(how much volume(your buzz word buffer))
trust that its not going to fail
trust that the prices move enough to make profit on
limits or lack of financial limits to deposit/withdraw (AML or internal profit making vs zero fee trading)
arbitrage oppertunities..
i left that to last. because although your mindset might be a stable currency for consumer spending of goods and services.. exchange day traders love the opposite. they love price movements.
not a speculative digital commodity.
i have to point out another fundemental flaw in your economics understanding.
bitcoin never is, was or would be a commodity.
As reported by Bloomberg, the Commodity Futures Trading Commission has now ruled that bitcoin, the peer-to-peer digital currency, is a commodity. This means the CFTC can regulate it and punish evildoers.
https://www.equities.com/news/is-bitcoin-a-commodity-or-a-currency
Indeed, and again, I never suggested that it could indefinitely prevent this from happening, but that it simply postpones the "crash" in case the cause is actually a whale/s colluding as per an agenda. But the same can work in reverse surely, if the backing currency crashes, then the value of the asset it is backing is also in jeopardy.
It can, but there is no dependency between the two, which is critical. A dependency can cause the spiral of death as devaluation causes further devaluation and market panic.
Right, you don't want dependency, but even without out any, the effect can still occur.
Right so that brings me to the crux of the issue that needs to be addressed. You are right, these informed traders were not accounted for in the test, I considered it and maybe wrongly determined that their effect would not be great enough to deplete the buffers.
However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?
However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?
You can actually get an estimate for the proportion of informed traders present in the market from your data - it can be approximated by orderflow, so take a sliding window of trades and calculate the buy volume and sell volume, then the VPIN = (buy-sell)/(buy+sell). This goes between -1 and +1, so just abs() it to give you your normalised proportion.
Ok great thanks for that. I might call upon you as I'm implementing the modifications if thats OK with you , as you've looked into Informed Traders and other such phenomenon in more detail than I have.
I largely considered the activity of buying low on the internal exchange and selling high on an external one as irrational, as the barrier to entry cost to trade on the internal exchange is minimal, I (perhaps incorrectly) assumed that no one would buy at the higher external price. (Are there even any valid reasons why they would?)
Indeed, and again, I never suggested that it could indefinitely prevent this from happening, but that it simply postpones the "crash" in case the cause is actually a whale/s colluding as per an agenda. But the same can work in reverse surely, if the backing currency crashes, then the value of the asset it is backing is also in jeopardy.
It can, but there is no dependency between the two, which is critical. A dependency can cause the spiral of death as devaluation causes further devaluation and market panic.
Right so that brings me to the crux of the issue that needs to be addressed. You are right, these informed traders were not accounted for in the test, I considered it and maybe wrongly determined that their effect would not be great enough to deplete the buffers.
However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?
However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?
You can actually get an estimate for the proportion of informed traders present in the market from your data - it can be approximated by orderflow, so take a sliding window of trades and calculate the buy volume and sell volume, then the VPIN = (buy-sell)/(buy+sell). This goes between -1 and +1, so just abs() it to give you your normalised proportion.
A. Fast payment. Customers are not willing to wait for more than 10-15 seconds for payment processing.
B. Value stability. After looking at the menu and ordering a steak dinner, customers cannot be expected to pay 10% more due to market instability when they are done eating.
C. Decentralization. The payment system should not be controlled and potentially manipulated by a bunch of people.
D. Scalability. Preferably scalable to Visa dimensions..
E. Easy of use. A grandma should be able to use it without a computer science course.
Currently everything available on the market fails on at least three of these five properties.
Bitcoin fails at A, B, arguably at C (huge block chain size, Chinese miners behind a slow firewall controlling a large portion of it), D (7 TX / sec) and arguably at E.
B. Value stability. After looking at the menu and ordering a steak dinner, customers cannot be expected to pay 10% more due to market instability when they are done eating.
C. Decentralization. The payment system should not be controlled and potentially manipulated by a bunch of people.
D. Scalability. Preferably scalable to Visa dimensions..
E. Easy of use. A grandma should be able to use it without a computer science course.
Currently everything available on the market fails on at least three of these five properties.
Bitcoin fails at A, B, arguably at C (huge block chain size, Chinese miners behind a slow firewall controlling a large portion of it), D (7 TX / sec) and arguably at E.
fiat
A. 3-5 business days. for wire transfers, cheques and even paypal withdraws
D. comparing Visa worldwide is a failure of understanding visa.. dd you know that Visa has not 1 ledger.. but multiple ledgers. and the statistics of world transactions is based on the combined sum of all their ledgers.. on that note. i wish to combine bitcoins ledger to represent visa USA, litecoin to represent VISA europe, feathercoin to represent Visa UK. and a dozen other altcoins to represent the other dozen Visa ledgers.. and then lets combine the total transactions per second of cryptocurrency as a whole
now lets talk about this topics theory..
A. lets delay day trading instand trades because the emunie exchange has to find order matches to stay within the 10% preference. and delay some trades if they look like pumps/dumps
B. lets have a small value change per day, killing off day traders and ultimately alot of bitcoins free market spirit.
C.. lol so the solution to decentralization is to take away the dozen open markets and replace it with 1 market that has hard code to control trades...
D. if emunie is the only exchange, scalability wont be a problem. bitcoins free market utility and choice would die and so people would stick to fiat.
E. maybe emunie can make a easy use wallet. but desire to use bitcoin wont be there as its no longer better than fiat
thus even in a stable exchange. your supply buffer would not be the same. and because there is lack of supply. people can abuse that. by arbitraging. and only using your exchange as a temporary 'flip' rather than a permanent store
That is they buy at the buffers lowest bid, and sell at its highest ask, but the buffer doesn't post trades that other traders can see, it only reacts to trades that others posted. The rules that define how much it will buy/sell are strictly enforced but easy to calculate what the buffer will buy and sell at in any given moment.
no!
they sell at a higher price elsewhere... and then deposit fiat into emunie to buy your cheap controlled coins.. then withdraw.
basically the users dont hoard coins long term in your "buffer" they just use your exchange as a quick 2 minute flip.
im guessing your economics doesnt extend to flips and arbitrage of the open market.
so maybe its best you stick to your strengths of the centralised single exchange economy. as your theories fall flat and dont work out on bitcoins open market. but i do hope you get some fame in centralised markets and (utopian dream hope) that you become the person to solve world fiats issues.
Ok now I understand! If you had explicitly stated 5+ posts ago that these were external exchanges we could have saved some time, as with your mentioning of the buffers and such, I wrongly assumed you meant the internet exchange. Basically then your argument is the same as monsterers below?
There are two chief issues in play here, I think:
1. I believe CIYAM's point is that there is nothing backing the stabilisation of the currency, except for the currency itself, which is the same way bitshares works. If demand crashes, there could be a downward spiral of devaluation causing a black swan. This is largely a fair point, which can only be resolved by having the backing currency off chain, which is hard to say the least.
1. I believe CIYAM's point is that there is nothing backing the stabilisation of the currency, except for the currency itself, which is the same way bitshares works. If demand crashes, there could be a downward spiral of devaluation causing a black swan. This is largely a fair point, which can only be resolved by having the backing currency off chain, which is hard to say the least.
Indeed, and again, I never suggested that it could indefinitely prevent this from happening, but that it simply postpones the "crash" in case the cause is actually a whale/s colluding as per an agenda. But the same can work in reverse surely, if the backing currency crashes, then the value of the asset it is backing is also in jeopardy.
2. Having the blockchain as a market maker subjects the currency itself to the adverse selection problem due to 'informed traders', which all marker makers face. This scenario manifests itself as traders buying from you when you ask is too low and selling to you when you bid is too high. There are a proportion of informed traders present in any market, alongside 'noise traders' who buy/sell at any price. Your simulation won't have included the effect of informed traders because it only manifests itself in live forward testing. However, you can add it to your simulation - informed traders know with certainty the future direction of the price after time period X, so they profit from your pricing mistakes.
Right so that brings me to the crux of the issue that needs to be addressed. You are right, these informed traders were not accounted for in the test, I considered it and maybe wrongly determined that their effect would not be great enough to deplete the buffers.
However, as its been raised here, I'll revisit that thought process and look to include their effect into the test and rerun it. Should the result then be that the price is still stable and the buffers are healthy, perhaps we can begin to look at this model in a more serious manner?
not a speculative digital commodity.
i have to point out another fundemental flaw in your economics understanding.
bitcoin never is, was or would be a commodity.
a commodity is a raw material that can be deemed as an equal quality to others of the same type. but is then used to create something. where the value is not derived from its production, but comes from the utility of what it can create. (the demand)
EG
wheat creates bread
oil creates car fuel
gold creates electronics and jewellry.
.. now then
bitcoins cannot be created into anything else.. bitcoin, if you knew much about economics is an asset. its value is based on its own merits of what it is, not what it can be manufactured into.
i think that the misconception that bitcoin is a commodity must be the analogy comparison to golds rarity.. which makes some believe bitcoin must be gold in every characteristic that gold has.
this is where it goes wrong..
although gold can sit as an asset, it is also a commodity as described above. bitcoin is not a commodity and is only an asset... to be more precise an digital asset currency.
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