Binding to some however defined external (and complex) property will increase complexity and induce/increase the possibility of failure regarded to design flaws.
What is "stable in value"? While btc crashed against the dollar, I saw no significant changes in the relation to ltc/ppc.
To get it "stable in value" against the dollar you need a market capitalization in dollar much bigger in relation to the availible speculation capital in dollar. And even then there could be hedging.
I don't mean stable against the dollar, I mean stable in itself, as if StableCoin was the national currency of StableCountry. This can be achieved if its money supply can be made to grow (or shrink) by its actual adoption and usage. It will be traded freely at exchanges for other currencies (or baskets of goods, BigMacs or whatever), but with the aim to be stable in exchange value (if the other currency is stable too). The problem of course is we have no economic metrics other than its blockchain (or whatever method is used as a distributed accounting database).
There's little connection between the transaction rate and the monetary velocity. I can move money between wallets or I can pay using a PayPal like service, thereby introducing false or hiding real transactions from the chain. This is not simply statistical noise because high worth speculators will abuse your mechanism on purpose to move the exchange rate. Nevermind that there's very little connection between the exchange rate and the monetary velocity.
To control the exchange rate you need to watch it directly, because it's influenced by external factors: fundamental supply and demand, economic cycles, trade deficits relative to the fiat world, speculators, etc.
The goal is to eliminate external dependencies and statistical noise and to come to faithful predictions about actual adoption and use by internal metrics alone, like amount and volume of transactions. Maybe more metrics can be found. Of course people move wallets around, but this should also even out in the long term. Transaction fees may be able to discourage all too much manipulation. They will have to be fixed to a reasonable level. The exchange rate is intended to be boring and not attract speculators.
Miners can control the money supply using a voting mechanism.
They simply write how much reward there should be for finding a block. Newcomers will most likely enter a high value, old miners most likely enter zero.
So the inflation automatically adjusts to the hashrate the newcomers are able to provide which should be correlated to economic growth,
This can be combined with a demurrage scheme where coins decay into nothing if the currency shrinks. (If the hashrate goes down for example)
Sounds interesting; I originally did not intend a voting mechanism, but if metrics cannot be discovered automatically, why not let money supply growth be voted upon somewhat democratically. I don't understand why old miners would vote for no new coins for themselves though.
i have a theory, and i know that im going to be attacked for this, that bitcoin is so volatile in part because its deflationary. Basically the mentality goes something like this. I should buy bitcoin because its deflationary so if it becomes widely adopted it should increase in value forever. Of course if this was the case everyone should just buy bitcoins and never work again. but then bitcoin wouldn't ever buy anything if that happened since nothing would be produced to be bought. So it both makes sense for the individual to buy bitcoins and horde them forever but it doesnt make sense for society as a group to do this. The net result of this is a series of speculative booms as everyone realizes they need to get on the train to infinity, but crashes when they becomes obviously over valued.
If this theory is accurate what i would do to address it is build in slow, steady, predictable inflation. This would have the added advantage of forcing inflationcoin users to use inflationcoin for what it is intended to be used for, trade, not a get rich quick scheme and not a savings account. After all we have gold coins that work wonderfully as savings vehicle but terribly as a media of exchange, there is no need to reinvent the wheel. Build a coin that compliments gold and doesn't attempt to replace it.
Yes, Bitcoin is an experiment, and the economics are part of that. I don't think deflation is bad per se, it doesn't create depressions. The problem is rather that it may continue to result in high volatility, even if Bitcoin has satisfied and occupied its maximum possible market share and adoption. Bubble and burst cycles if you will. Maybe people will get used to it and learn to make better predictions in the future, which will even things out. But we don't know. That's why it's an experiment.
StableCoin would be StableCoin and not "Inflatacoin" or "Deflatacoin" (Bitcoin), so it may gain acceptance with both merchants and buyers, and maybe also savers who just want to store the information of the value of their labor without speculation and risk.
