Topic: StableCoin - page 3. (Read 8998 times)

Processor cycles are not "useless in themselves."  The computing power/energy can be put to other uses. That's the point.

Do Koomey normalized hashes really jump a whole order of magnitude (i.e. 10x) during a year or two?  Source?

Thanks.


It will probably be over the last 1 year rolling period. Because of the Consensus Block which you are familiar with from encoin, transactional activity is easy to keep known statistics on. If the mint block is 10,000 DCR, 50,000 DCR will be awarded to transactions and 50,000 DCR will be awarded to accounts. Only a small percentage of each will be awarded so that the award is meaningful and difficult to game.

Awesome post Etlase2!

I learned more of your basic principles from this post than I did from reading all the other pages! Thanks!


So a the number of coins a Minting block creates is dependant on recent transaction activity? Do I understand that correctly? This is where the 5X the activity (or fee? I forget which) comes from?

Enough with the facetiousness.

The goal has been to make sure that "the people" can not lose the ability to create the currency. If you allow the quick takeover, which a small number of ASICs could do, you destroy the minting mechanic as a response to changes in the economy. Minting, at least in decrits, is designed to be a short-term quick burst of profit. Perhaps longer-term if there is a serious and ongoing expansion. If ASICs were profitable, everybody would have to buy ASICs. For what? It's completely insane to have a rat race for who can maximize profit short term only to eventually screw themselves over to where they're at the same place as everyone was before. Now the minting is screwed and there will be upcoming massive deflation because no one can mint anymore without a huge slew of ASICs being purchased.

Decrits will attempt to maintain a common level of hardware that needs to be used to create currency. This level will gradually and naturally increase in response to moore's and koomey's "laws". The system will allow those common pieces of hardware to respond to a highly advanced piece of hardware. Hopefully to the point where there is no point making it in the first place. Money HAS TO BE INVESTED in minting. If people have to invest more money than they did before (buying ASICs), that will cause deflation. Severe. People who own a lot of decrits would be willing to cause this problem because they will make oodles of value on hoarding money.

The money supply must be UNMANIPULATABLE. And giving away free coins means that changes to the way coins are minted will have a multiplied effect.


It doesn't care. People create coins or they don't, that's up to them. Starting a new Mint Block will require a lot of investment. If 1 DCR = $1 and a mint block is 10,000 DCR, 500-600 DCR worth of time/hardware/electricity investment must be added to the queue before it will start. If they don't do it, the system doesn't make new coins.


See above.


Decrits does not propose to destroy coins as part of an economic model. It will destroy coins under a few, rare circumstances. An account that hasn't made a spend in 12 years, for example. Bitcoiners may complain all they fricken want, but useless data can not sit around forever. Once every 12 years to make 1 outgoing transaction to preserve your money is not too much to ask.

What you mean to ask is "what to do if there is price inflation?" And the answer is: very little. The price inflation would likely be a result of an economic change, not a problem with minting. I tried to prevent inflation in encoin because it meant that people were probably leaving the currency. But it's just a hack. If people are leaving the currency, making its value look better isn't going to fix anything.


As far as how many coins to create, I detailed that in the post. It is rooted in transaction activity. Transaction activity is charged a percentage fee and is thus strongly disincentivized from making bullshit transactions. I have not come up with exact figures for how transaction activity will be related to Mint Blocks because that will be a huge discussion point when Decrits gets there. The bootstrapping period will also have to work differently.


You focus too heavily on inflation. I do not think that price level inflation will be an issue if the system functions well. Encouraging spending is easy when you give away free money. The only time I foresee price level inflation is when a significant amount of the money supply is tied up in debt and banks start getting shy. Creating currency will become profitable, and the banks will lose their stranglehold on the economy. This will come at a cost of some inflation down the road, unless you propose to tax accounts with lots of money (not gonna happen). However, I expect that debt will never be a significant problem in Decrits. And, with money back in the hands of the people, I believe they will be less inclined to mortgage their lives away and will have wealth spread out so that a bit of inflation will not be disastrous (their other stuff should go up in price, so it's probably a wash). Again, I do not think this is a likely effect, but I can't predict the future and I have no real idea how it would all turn out. But I have thought of a lot of different scenarios.

I know you hate hearing this but, yet again, but I'm having trouble grasping the big pictures, because I keep getting lost in all your details.

I know you have a preoccupation with making sure P3 CPU miners can still generate coins along side new ASIC miners. But for the sake of an overview I really don't need to know.

I'm really most interest in knowing:
1. How does the system know that ZERO new coins need to be created at any given moment?
2. What needs to change in at next moment to tell the system to CREATE new coins?
3. What needs to change to tell the system to DESTROY unnecessary coins?
4. What metric tells the system HOW MANY coins to create/destroy?
5. What incentives and disincentives are used to encourage or discourage spending at appropriate moments?

I think if the market actors generally understood and accepted the theory that i put forward in my original comment than the market could (mostly) price all of this in and bitcoin would experience steady growth that corresponded to the average mans time value of money. The problem is that we have never had a deflationary currency and most people dont think in abstract logical terms they tend to rely on empirical data (if they are rational at all) of which we have very little.

So for this reason im not prepared to say that deflationary currency is a bad thing per-se, mostly because the inflationary currency that could theoretically solve this problem would be unlikely to ever be adopted because it would be rational for the collective to use an inflationary currency but irrational for the individual (market failure in economics speak). So we are kinda stuck with deflationary currency and so we just need to learn how to put reigns on this tiger, which fortunately i do think is possible.

Damn, I've been putting off reading his new proposal because the two of us always end up arguing!


I wrote about this in other placed, but I concluded that:
1. If you are creating new coins, because the coin price has gone above your stability target, then
2. The only effect you are trying to achieve, is to IMMEDIATELY reduce the coin trading price.
3. The only stimulus that can cause this effect, it to give the coin to some one who will IMMEDIATELY sell the new coin, FOR LESS than anyone else is currently offering.
4. Who are these people? The ones with coin addresses on the SELL side of current/recent transitions.

Giving them to hoarders will have zero immediate effect. Neither will giving them to current buyers. You can argue giving them out might have future effect. But that just makes over shooting the target (and oscillation) much more likely.


Damn there are so many important topics being mentioned. Perhaps the optimal GrailCoin is one that targets X% inflation. Boy that thread is going to cause flame wars! Want to start it? Are you listening Freicoin folks?

Solution: you award people transacting a much larger (in terms of award to volume) percentage of the pot. It's simple to fix this, and I already have.


"Inflation" isn't such a bad word when the new money goes to the people rather than the banks or government. It should not typically cause price inflation at all with the proper precautions in place (like in decrits).


I must point out that a big part of recession is a slowing of the velocity of money. Deflation should *almost always* happen during a recession, but it does not due to price stickiness. Look at gasoline in 2008. Because of the simple fact that gasoline is priced sometimes even hourly, it does not suffer from price stickiness, and it dropped in half. If prices become too high for the average person to afford (respective to salaries and such), minting will become lucrative. And money will be spread into the economy. Yes, this would likely cause slight long-term inflation, but this is exactly what you are asking for. The wealthy are being punished for not moving money and killing the economy; and this new money will spread into the economy and avoid unnecessary suffering. It might inspire the wealthy to stop the shenanigans in the first place after a few economic power grabs fail.

It's a contradiction between encoin and decrits, but they don't work the same way. And there is a third option.

First of all, the energy usage is only one facet. The cost of hardware *does matter*. The human resource cost *does matter*. It doesn't matter what the mhash cost is in real terms is--as long as you can foster competition, people will find ways to do better, and this in turn must raise the difficulty to where the mhash cost is in line with whatever inertiacoin's (potentially original) coin cost is.

The original way I came up with to foster this competition was to algorithmically change the coin award at certain intervals. During these intervals, miners would be encouraged to lower their output, because if they don't, the difficulty is going to increase. However, more efficient machines would not really be bothered by this and would be able to profit handsomely during this interval. However, for whatever various reasons that could thunk up for this, more efficient machines may not want to or can not oblige, and this could cause a longer-term inflation of the crypto CPI.

I will walk you through what I am currently thinking Decrits will do:

1) It will algorithmically determine the number of coins to be created in the next Mint Block, as I call them.
1a) This number of coins is determined by a percentage of transaction volume over time. (note: for this to matter, transactions must be charged a percentage fee, which in Decrits is 0.01%)
1b) This figure will be difficult and costly to manipulate because it will require significantly increasing the transaction volume of the entire network over a period of a year or more while paying those fees.

2) A Mint Block cannot begin until enough money has been transacted to warrant it.
2a) This will be based on either a (large) percentage, equal to, or a (small) multiplier of the number of coins transacted since the last Mint Block.

3) Once enough money has been transacted, those who wish to create money will have to join a queue to begin the Mint Block.
3a) For the first 25% of the queue, 10% of the individual coin award (the amount each queuer will receive) must be supplied in the currently accepted difficulty with a 10% winning hash and an account number. (note: this can *always* be accomplished in 40-50 bytes because of the account ledger)
3b) For the rest, 5% of the award must be supplied. The most efficient are the most likely to start the next block, but we do not want to unnecessarily raise the difficulty if the majority of people are less efficient, so they get a slight bonus. (This will eventually lead to deflation if we do not account for it, and perhaps because of money supply manipulation.)
3c) Once 75% of the the block's worth has been queued, a minimum amount of time must pass before the queue will close. This figure will be based on some percentage of the the average time it has historically taken to create a Mint Block. (This means that magnitudes more powerful ASICs can not shut others out)
3d) If more than 100% have queued before the minimum amount of time has passed, a random selection of the queued minters will be made to complete the block.

4) Once the block begins, all minters are encouraged to mint at once because:
4a) The coin award is higher the faster you finish. Likely +10% for the top 25%, +5% for the next 25%, -5%, and -10%.
4b) Taking longer than an algorithmically determined amount of time (based on prior blocks) will result in penalties of at least 10% and perhaps more. (e.g. if everybody finished past this time, even the top 25% would still only receive -10% of the promised coin award.)
4c) At some point the block will close, and unminted coins are lost.

5) (Tentative) After the block is over, minters will be randomly assigned to groups (probably of 40) to determine the 10/5/-5/-10 payouts.
5a) This means that there will be groups where ASICs fight ASICs and GPUs fight GPUs (NB: obviously not all of them). This reduces the overall profitability potential of ASICs.


To avoid the p2pool-like data spam, the number of coins mined per queuer must be relatively high. I think the target length for each block will be around 5-10 days. This requires commitment from those minting. It will be annoying. And the fee to join the queue could be completely lost. 50% of those queued will make less than the award.

In addition to all of this, we must eschew mordorcoin and give money away for free. Now we know for damn sure that new money is needed with the difficulties associated with minting. The written decrits proposal proposes giving away 5x of this block of coins to transactions and 5x to existing accounts, both randomly (blocks of accounts will be stored together, and this will be the starting point for awarding free money to them because awarding every account is infeasible in a network of any reasonable size). This area can be nitpicked, but I have come up with some very solid solutions.

In addition to that, because network expansion could easily outpace the time constraints set on Mint Blocks, each successive Mint Block within a defined period will increase the tx/account award further. The second block in a row will award 6x to each. The third will award 7x. This may max out at 10 each, or maybe it could go on continuously (perhaps after 20x the difficulty could start increasing say 3% per block; with so much new money in circulation [especially to transactors], if this causes mild deflation it would likely not have any problems being counteracted). So even in the worst case scenario of everyone instantly switching to ASICs and intentionally not raising the difficulty, designing and producing those ASICs will never be profitable. Plus the inflation has to catch up and raise the average amount of transactions over an extended period, or the ASICs will simply run into a wall where they can not mint for extended periods.

How 'bout it?

The 999 part is my addition and is what Decrits attempts, if I understand it correctly. But you need to be exceptionally careful who you give the new coins to. If random addresses then you have a guaranteed interest for simply holding money. People stop spending and start watch their accounts rise, deflation and instability ensues: the more you try to fight it by issuing new coins the more profitable it becomes to hold currency until the whole bubble pops violently as people crash the exchange market looking to "cash in". Familiar ?

New created money (except for what goes to miners) should go to a charity the user selects from a predetermined list. So If I have 100 inflationary coins and the yearly inflation is 2%, it's as if I had 100 stable coins and I'm forced to donate 2 coins per year to a charity. Inflation tax goes to the charity instead of the government. This makes me reluctant to hold coins and prevents deflationary expectations.

It's important for this stability thread to note that even 0% inflation (complete stability) is a counter productive goal. Sometimes a real 0% return is above what market has to offer, for example during a recession. If you try to guarantee a 0% risk free return, you kill trade because people prefer to hold money and wait for better times. Money are held, trade stops, better times never arrive and a 0% real return looks even better, reinforcing the crunch. So it's either inflationary and money, or it's Bitcoin - a speculative unstable commodity for the internet geek and closet anarchist.

Yay! The first ever post to get the point of the exercise! Woot!

It was just intended to an example starting point for discussion, not an ending point. I wanted the concept to be reasonably easy to grasp. And I wanted to make the limitations readily apparent so everyone could learn from the exercise and suggest improvements!


Did I write that? I don't remember being that insightful.



I did try to clearly point that out as a limitation. But curiously, back then when we looked at the jump from CPU to GPU and GPU to FPGA (no ASICs to analyze) what we noticed was that while hashes/sec took a huge jump, hashes/kwh didn't jump nearly as much as we expected. Koomey's law was pretty darn close.

Those quotes are both him. I'm still looking for the next step.

OK, I think I totally miss read what you intended.
Paraphrasing, You want to scale the reward as a function of difficulty. A 2X difficulty increase causes a 2x increase in block reward.


This was the starting point of both EnCoin, GEM. Dynamically It creates an InertiaCoin rather than a GrailCoin. It is also a MordorCoin. I was fine with finding an InertiaCoin but I wasn't satisfied with the amount of inertia it had. It tends to drift with processor efficiency improvements. It also drifts with changes in the cost of electricity.

This is a direct derivative of that InertiaCoin idea which attempts to increase inertia and decrease energy use. Nobody else understood it enough at the time to generate a decent discussion. I'll start a new thread if you want to discuss it now.

GEM is also a direct derivative, it was really just a second go at explaining the basic stabilization concept. GEM is a MordorCoin that also attempts to be a GrailCoin by controlling for changes in electricity cost and processor efficiency improvements.

I can see how something like the brick standard would work, since bricks are widely used and the central bank can convert money back to bricks. If money loses it's value you go to the Fed, take your bricks and build a home. So it's a good inflation hedge and technical advances to brick making won't be very dramatic. Approached from a public choice point of view it could be worthwhile because it massively cuts the rulers' freedom to fuck with the ruled; unlike other monetary policies which are optimal if only Jesus was head of the central bank.

But tie monetary policy to something like "Kommey normalized million SHA256 hashes" ? Which can jump a whole order of magnitude in price during a year or two ? And which are useless in themselves ? (and either way we won't have a way to transform a coin back to it's component hashes). That doesn't bode well on the stability front. It's rather sad if it's all we can do because it makes stability impractical, not a mere tradeoff.

Correct, there's no way to enforce 1kWh = 1 coin, this would have to account for the varying electric costs of different areas as well as the efficiencies of different cards, and there's no way to do that. Its not for the protocol to know its own electrical usage, its for the miners to decide what the cost is of producing them and if its profitable to sell.

I can follow the GED proposal, it's the straightforward way to do something like this. My take on it: the number of coins is unbound, and anyone can create new coins by performing a "certain amount" of computing work. This puts a clamp on deflation and speculative appreciation, the market can see at all times what is the maximum price a coin can command before it becomes profitable to mine and create more of them. For each mined coin you can randomly distribute 999 free coins, so that the whole scheme does not become a MordorCoin; mining is just a way to convey price information into the system, not the way most coins are born. That "certain amount" of computing work per coin is set to increase following Koomey's law, so that inflation doesn't takes hold because of future technical advances.

This is straightforward and easy to understand, but as I said, it's less than good. Moore's or Koomey's laws are valid on the long run average, but technical advances come in powerful waves, for example the jump from GPU to ASIC mining will dramatically increase the Bitcoin mining efficiency in the next few months. For GED it would trigger rapid inflation. Or some years pass without major advancement in mining chips, then Kommey correction slowly creeps in and it makes coins hard to mine with existing gear, low supply on the market, thus short term deflation. The GED market would jump like a yoyo on the news that a new mining chip was planned or has failed.

Both of you are alluding that you made the next step:

So how do you move from hashes/coin which is a direct extension of Bitcoin, to something like 1KWh=coin without relying on external information ? And additionally :


It is to me an apparent contradiction: either you have external information or you have a distributed algorithm that can compute it's own energy use. There doesn't seem to exist another way to reliably move from hashes to KWh. Something as generic as Moore's or Kommey's laws can't provide stability in the short run.

Not a zero coin value, the baseline of the coin value is determined by the cost of its production. In such a system there is no such thing as 'over-production', as miners have no incentive to sell coins for less than it cost them to make, thereby restricting supply and applying upwards pressure.

Also price as a product of hash rate (cost does matter):

Impaler this is a really awesome post. I'm sorry I didn't reply to it sooner. Actually the first time I read it I didn't completely understand your concepts. I had to read up on Freicoin and Demurrage to get the right context.


Exactly!


I'm still wrapping my head around the "futures" concept too. But in this case, if I was a speculator predicting deflation, I would want to...
"Buy the OPTION to purchase someone else's coins in the future at TODAY's prices. So I could sell those coins at the FUTURE price along with my own."

An option purchase = skin-in-the-game. A speculator gambles a small amount of money in advance. Against the chance for a leveraged profit in the future.


Every time I try to make the system work using coins only, I run into the "frozen" money too.
In the above situation, to guarantee the seller still owns the coins when an option is executed, the optioned coins must be frozen until the option expires. That make perfect sense.

But, how do I guarantee the seller gets paid at option execution time? He can't be paid in coins. The point of exercising the option was to immediately sell as many coins as possible. I see 2 possibilities:
1. Either the seller gets paid in FIAT now. Or since this is intended to be StableCoin...
2. Once the coin prices returns to the target, the speculator re-buys coins using FIAT and pays with COINS.
In both of these cases the system needs to be able to guarantee FIAT payment. That seems unacceptable.

Now that I think about it, I see a third possibility... but I need to think it through.

I started a new directory thread so we can hopefully capture more newcomers interested in a stable valued currency. I'd also like it to serve as an index to all the ideas happening in other thread.

Everyone, please link your cool shit here.
https://bitcointalksearch.org/topic/m.1877951

It's the pimp'n my cool thoughts thread. ;-)

After lightly reviewing some of the discussion on this, I will admit I was fairly dense to the point you were making about encoin being a mordor currency. Thanks Bubbles for the nickname though. However, after I did get you fleshing it out, I was against it because it created avenues for a monopoly over the money supply and/or a monopoly over the profit of an expanding economy. Shortly after you stopped posting again, I posted the very initial idea behind decrits here, which was my first thought experiment to eliminate those problems. The gist is to make other people money for your hard work mining. Sounds awful at first, but the people mining are only making money because there is demand for the currency, not because they are mining. This wealth must be spread out or I strongly believe you will find yourself with another bitcoin.


Thank you for getting to the point of asking me the question rather than making a judgment. Unfortunately, an answer that will tie it all together requires me to again organize my thoughts. At least I've had a lot of practice. The Decrits proposal was focused on the major technical aspects to get the idea across of how you could create "InertiaCoin", as Red has called it. Even at the beginning of that thread I assumed I could solve certain problems that I knew were present. And I conceded that there are probably some that can't be programmatically fixed. It just isn't knowable. But that does not mean there is not a solution...

It's hard trying to combine the technical and the economical into one thing, and it's hard to explain one without the other. It's even more difficult to explain if I haven't filled in the gaps on how to get from point A to point C either. But I have a knack for finding B. At this point I am, often in a too aggressive manner (personality defect, what can I say), trying to get people to test me on Decrits like Red did with encoin.

My point is, briefly explaining it will only raise more questions, questions that are more suited for that thread. In short, I believe it would achieve a value that would be more stable than the goods and commodities it is valued against. It would very effectively prevent manipulation of the money supply. It would prevent excessive periods of deflation and/or "credit crises". It would prevent banks from being able to control the network. I know that doesn't explain much, but that is a huge change in philosophy from the encoin proposals, and I have designed with them in mind.

There are tradeoffs. The potential volatility from the issues you raise has to be weighed against the disadvantages of relying on external information.

By the way, the idea of pegging a currency to the price of a particular thing (rather than a broad index) has a respectable economics pedigree: http://marketmonetarist.com/2013/01/09/the-last-brick-rip-james-m-buchanan/
(h/t George Selgin: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2000118 )