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Offline logicalgrackle

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The Bill: Perfectly Stable Value
« on: December 23, 2014, 08:31:41 AM »

BitShares gives us the ability create digital currencies pegged to any price. These digital currencies are called BitAssets, and they track traditional currencies and commodities, like dollars, yuan and gold. BitAssets can track anything with a price, though, so why track those? They have the most stable value available to mankind, but they’re really not all that stable. Gold fluctuates a lot. We think of dollars and yuan as stable, but we all know they lose a few percentage points of value each year to inflation. Today’s dollar is worth less than half of what it was worth thirty years ago.

What we really want is a perfectly stable store of value over time, but we don’t even have a good way of measuring value. To measure distance, we use the meter: one ten-millionth of the distance from the Equator to the North Pole. To measure mass, we use the gram: the mass of a milliliter of water. To measure value, let’s use the bill.

The bill is the purchasing power of one U.S. dollar on January 1, 2015 in Austin, Texas.

Read more: http://logicalgrackle.com/the-bill-perfectly-stable-value.html

Offline BTSdac

Re: The Bill: Perfectly Stable Value
« Reply #1 on: December 23, 2014, 09:19:41 AM »
bitusd track usd , bitcny track cny , these cannot increase value ,but there is interest supplied by system, and the most important thing is  BTS would increase value .
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BTS2.0 API :ws://139.196.37.179:8091
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Offline Frodo

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Re: The Bill: Perfectly Stable Value
« Reply #2 on: December 23, 2014, 09:59:50 AM »
It was already suggested to create bitCPI. Basically a bitAsset that tracks the CPI, which is a basket of consumer goods.

Baskets are as far as I know the only way to actually measure purchasing power. So it is pretty much the same as your idea.

Offline arhag

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Re: The Bill: Perfectly Stable Value
« Reply #3 on: December 23, 2014, 08:30:14 PM »
What we really want is a perfectly stable store of value over time, but we don’t even have a good way of measuring value. To measure distance, we use the meter: one ten-millionth of the distance from the Equator to the North Pole. To measure mass, we use the gram: the mass of a milliliter of water.

Just to be clear these aren't the current definitions of these fundamental units.

1 meter =  the length of the path travelled by light in vacuum during a time interval of 1/299,792,458 of a second
1 second = the duration of 9192631770 periods of the radiation corresponding to the transition between the two hyperfine levels of the ground state of the caesium 133 atom
1 g = 0.001 kg, where 1 kg = mass of the International Prototype of the Kilogram (which unlike the other two is a very stupid definition to still have IMHO)


The bill is the purchasing power of one U.S. dollar on January 1, 2015 in Austin, Texas.

This is a very vague definition (how do you define purchasing power exactly) when compared to the rigorous objective measures for meters and grams that were given. The problem is trying to make something so incredibly subjective (value) into an objective thing. Still, it doesn't have to be "perfect" to achieve the desired goal of having an asset that "keeps its value" (whatever that means precisely even though we all have a good sense of what we are all talking about) in most situations (not possible to do always though). For that a BitCPI could be very useful.

Offline logicalgrackle

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Re: The Bill: Perfectly Stable Value
« Reply #4 on: December 23, 2014, 09:11:40 PM »
The imprecise definitions of the meter and gram were used to illustrate their origins.

I agree that "purchasing power" is vague in the sense that its definition depends on how you measure it, but the concept itself is precise enough: it's what you can buy with a dollar. I think the flaws in the definition will become evident as we develop ways to measure it together, and we'll fix them. Step 1 is deciding what we want to measure, and if there's enough agreement on that, let's build some price feeds.

I find the term "BitCPI" difficult to reason about. The primary goal is creating an asset with a stable value, but a BitCPI might be interpreted as an asset with a value that tracks prices, which are similar, but different. I want to save in an asset with fixed value, but I want to make promises about future payments (loans and wages) in an asset that matches the price level. It doesn't matter that the bill is defined relative to Austin, Texas, or to the U.S. or to whatever the definition ends up being. It's a fixed amount of value that the whole world can use for savings. On the other hand, loans and wages would be better denominated in the local price level.
« Last Edit: December 23, 2014, 09:26:26 PM by logicalgrackle »

Offline fluxer555

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Re: The Bill: Perfectly Stable Value
« Reply #5 on: December 23, 2014, 09:58:02 PM »
How will we have price feeds whose price depends on the difference on what we can buy in Austin on January 1st for $1 and what we can buy with $1 in Austin now?

What sources will we use to determine how much value $1 has depending on location?

Is it possible to distill what 'value' means to its most basic terms, which are universal and apply to all contexts??
« Last Edit: December 23, 2014, 09:59:53 PM by fluxer555 »
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Offline logicalgrackle

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Re: The Bill: Perfectly Stable Value
« Reply #6 on: December 23, 2014, 11:24:14 PM »
Good question. The value of the bill only depends on how much $1 buys in one place at one point in time. From there, I suspect we can use commonly collected sets of data to translate that to current values. No one has to keep measuring what a dollar buys in Austin. It's just a reference point.

One way of calculating the value of a bill is by extrapolating from January 1 dollars to dollars at a given point in time using price indexes, like the government's Consumer Price Index, or the Billion Prices Project's index. This will give a precise value of a bill as long as the dollar changes in value slowly.

The dollar may not always change in value slowly. For those scenarios, we need to maintain alternative measures of the value of a bill. One way to do that might be to convert January 1 dollars to January 1 francs, inflate that value using price indexes in Switzerland, then adjust by changes in relative purchasing power to arrive at a value. My economics isn't strong enough to be certain that such a conversion would be sound, but I think it would be.

We would calculate the value of the bill using various methods and data sources, collect input on the validity of our methods, then adjust them until there's a consensus to base a market on. Economists have been comparing past values of money for quite some time. They're good at it. There's just never been a need for a well-defined, broadly accepted reference point for value. Now that we could use such a value to create a fungible currency with that value, it's time to establish one.

Let's build the bill.
« Last Edit: December 23, 2014, 11:25:51 PM by logicalgrackle »

Offline fluxer555

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Re: The Bill: Perfectly Stable Value
« Reply #7 on: December 23, 2014, 11:31:00 PM »
It sounds like turing-complete scripting would be very useful for defining price feeds for bitAssets directly on the blockchain...
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Offline starspirit

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Re: The Bill: Perfectly Stable Value
« Reply #8 on: January 06, 2015, 11:12:17 PM »
Nobody truly understands this basic thing called money, but for what its worth, here is my view.

The premise that a perfect monetary unit should remain constant relative to any particular commodity or basket in not well-founded in (esp Austrian) economics. All prices are floating, including money in terms of other goods, as the demand for money shifts with society's needs for liquidity and consumption patterns. There is also no impermeable anchor of value, as the mix of commodities or products/services within an economy is constantly changing, as are technologies and economic participants over generations, that does not allow any valid quantification of the relative value of any good between distant points in time. Any form of CPI is useless as such an anchor, and often open to distortion.

As an example of a complication, imagine you tied the value of a monetary unit to a basket of consumption goods. Then there is a productivity breakthrough with the promise of a preferred mix of goods in the future versus now. Naturally the price of consumption goods should fall, and capital goods rise, as money flows toward less consumption and greater investment for the future. The statement that money has in any way changed value does not make sense, only the price structure in the economy has changed to incentivise resource movement. Inflating the supply of the currency to compensate for the fall in consumer CPI would add no benefit whatsoever, and potentially lead to gross distortions throughout the structure of prices in the economy and result in mal-investment.

Currency becomes money (the most stable source of value) when its total supply is forcibly stable and it is the most marketable and widely acceptable commodity in the economy. The focus should be on conferring the right qualities on money, not in deliberately tying its value to something. Savers will be happier knowing they always own X% of the currency, for whatever that buys in the current economy, rather than knowing they can afford the same basket of obsolete consumer goods they might have wanted 10 years ago, even though their wants are completely different now.

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Offline logicalgrackle

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Re: The Bill: Perfectly Stable Value
« Reply #10 on: January 07, 2015, 02:27:01 AM »
While I disagree, I regret bringing this up in the first place. It's a distraction, and even if the concept of a statistically stable contract for difference were useful, it wouldn't be useful any time soon. People who seek stability today should hold dollars. If you want stability while the dollar collapses, you want BitGold. Beyond that isn't worth discussing yet. Today's BitAssets are all we need for now. Let's make them more useful.

http://logicalgrackle.com/bitgold-preserves-wealth.html

 

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