So let me get this straight:

-We create "Sumo" that has 1.05 the feed price of a basket of currencies
-Obviously there will be demand for this asset
-We need people to short it into existence, but the only reason to do that is to think that BTS will rise by greater than 5% per year vs the basket of currencies
-Since there is no reason to think bts will rise more than 10% each year since BTS isn't profitable and even BM has said increased network activity won't drive BTS market cap higher, no one will short it.
-We hope that a whale comes in and shorts a bunch of it?  Why would they do that?  Aside from the costs to enter the BTS ecosystem, they will be giving up 5% right off the bat.

Are we just hoping that speculators will see a whale investing in something and follow them?  Then we hope that enough people are coming into the system that the demand for BTS rises and outpaces the 5% premium on "sumo".  I have to be missing something because I can't see why anyone would ever short this product...

The theory is that if you start selling lots of dream coins you will need to buy lots of BTS to make them.  That will put buying pressure on the market which will cause the price to rise more than 5%.  Since you are leveraged 2x even a 5% gain would double your profits.  And the more coins you make the more the collateral in the earlier coins you made will be worth.

Thus the price of BTS becomes a more or less direct function of the demand for Dreamcoins.

I would think that in an environment where a whale was pouring capital into the system at an even modestly sustained rate there would be a WHOLE lot of piggybacking going on with other speculators riding the rising tide to introduce a Cambrean Explosion of products that diverse consumers would snap up.

That might get things in motion to where some sort of internal mechanism like you suggest could take over.  Essentially like a glider reaching an altitude where it doesn't need a whale tow plane any more.  From there on out an autopilot bot might ride the air currents indefinitely.

Quote from: Stan on June 21, 2016, 11:57:10 pm

The ideal formula would yield an asset that retains constant purchasing power against an honest CPI. 

Yes!

Quote

But we don't need to incur the risks of offering total "idealness" in a global economy where all major currencies are chronically inflating and can even be collapsed on purpose -- causing a hyperinflationary spike in any CPI referencing them.  All we need to do is be better than the best and we've got something attractive that a reliably appreciating BTS could provide to humanity.

Where did you get this number,  ? What if inflation on all fiat from your basket will happen to be +8.79% during next decade? Than your token will lose purchasing power, although slower than fiat in your basket, but pity anyway

To be a successful currency, you don't need to outrun inflation.  You just need to outrun the competition.

One of these could be my reason for picking 5%:

I picked because of its unique display characteristics in this forum - a hold-over from a distant pre-historic time which could live again.

When I got my first passbook savings account back in the 1960s that's what kind of interest was "normal" in a passbook savings account.

5% is enough better than what my mother can earn on her retirement accounts today to maybe get her attention (if she wasn't invested in BitShares instead).

5% is low enough that a steady rise in BTS of, say 10% annually, would start to be attractive to a hypothetical benevolent whale who might want to deploy a new currency with a hypothetical billion dollar annual revenue stream from some asset she owns.  That stream could automagically issue the Dreamcoin which I postulate would be snapped up by The Greatest Generation and The Baby Boomers if they could earn 5% backed by real BTS collateral.

All of the above.

None of the above.

As outlined in my original Whale Powered Assets article, I'm wondering if I could convince all the candidate benevolent whales out there that this would be a great thing to do with said hypothetical revenue stream because they could double their rate of return on that revenue stream by feeding it through the smartcoin issuing process thereby locking it up as leveraged collateral that is appreciating due to the steady consumption of available supply of BitShares.  And the older the smartcoins issued, the greater gain they would experience - which is the real incentive for said whale.  Excess collateral from older coins could be harvested and fed back into the generation stream. 

Viola!  A fully back currency paying 5% is born.  Surely there are marketeers who could sell something dirt simple like that.  No other speculators need participate except the whale (although some might start participating once they see the plan working.)

Your actual mileage may vary, but I'm looking for the right parameters and any other insights from this community's thinkers.  What breaks eventually?  When we run out of great-grandmas?

One problem might be that the whale would eventually wind up owning >51% of the supply, turning BTS into a privately controlled network.  The question is, would anybody care by that time?

Quote from: fav on June 20, 2016, 06:32:39 am

just do it, we can talk later

On a permission-less ledger like BitShares, we don't need to talk at all

There is one general issue I am having when people promise a +5%apr. Not that is sounds fishy and people are going to think its a pyramid scheme - that doesn't need to be the case after all.
The problems I am having result in the 'exponential' behavior of a promise. The value (depending on how you define value) rises by 5% per year gives an equation of 1.05^time which is clearly linear and, as exponentials do, 'escalates quickly'.
There needs to be a very good reasons to think that
a) there is enough backing for that claim
b) the backing is used to buy BTS so that it grows > 5% per year. Otherwise shorters lose out.

Assuming there was a big company that does this and keeps these promises, then shorting would be a
no-brainer for everyone that has BTS, because "the other company is making it happend for you" and takes
care of the 5%+ increase in BTS value each year. They may very well be willing to do so because of the
advantages that come with BTS and bitDREAM:
* permission-less ledger
* ultra-fast
* scalable
* collateralized stable tokens
* global order books
* 24/7 trading

If some company that has the money to do this AND is trusted to keep the promises, then BTS will go through the roof (not an investment advise!)

Good points.

Each coin would be the functional equivalent of a 5% CD, so not hard for consumers to understand - especially retired folks who were counting on being able to earn something like that in order to retire.
 
Is there ever any concern that a 5% CD doubles in value every 14 years?
Why isn't there more concern that the USD has fallen to 2% of its purchasing power 100 years ago?

One difference is that, if it was paying interest we'd have to calculate how long a coin had been held to pay the interest and it would be taxed as ordinary income.

If it just appreciates at a fixed rate, it doesn't matter where you get on and off the elevator, you get the same gain in altitude.  And that is taxed as capital gains which is often a much lower rate in many countries.

Nice thought experiment, but I think the original model, were shorters paid interest to longs in bitUSD or bitEUR was much better. This should be reintroduced in my opinion... as an alternative at least to the current interest-free bitUSD... perhaps the bondmarket as well.

I understand the logic behind this... but people would not like to see such experiments and they might not understand it, as the whole project is already called an experiment...

Certainly it would not be called an experiment by the time it was presented to the General Public.

At that point, it would all be boiled down to a menu of smart coins with various defined behaviors.
The average consumer would be presented with a simple list of coins they could buy:

bitUSD tracks the value of the US dollar.
bitGold tracks the spot price of gold.
bitSumo appreciates against a basket of currencies by 5%.

You buy these coins like you buy any CD and hold them as investments.
They each can be explained in about as much text as a product on Amazon.



They could certainly be explained as a 5% CD.  The only difference is the black swan protection against any single currency suddenly collapsing - a real probable scenario in the next few years.

I'm not sure there is any difference between what we are saying other than how it is explained.  My proposal is simply implemented by publishing the price feed formula as a function of other price feeds. 

How is what you are saying different and why would it be better?

There is nothing that says that a MPA price feed has to be attached to a real currency or commodity is there?

What would happen if we postulated a fictional currency with a desirable price feed behavior defined by well specified equation as a function of time instead of pegging it 1:1 to some market feed?  Why not peg it to grow 1.05 to 1 annually and offset the reference currency's historic inflation rate or something?

Thought experiment:

Define an imaginary "Sumo" to have a value equal to the perhaps weighted Sum (USD, CNY, EUR) + 5% per year.  Now its price feed relative to that basket is defined in advance for as far into the future as the reference currencies exist.  Or perhaps the "Maxo" is defined as the price feed of the strongest SDR currency at any given time .

We could create a "bitSumo" or "bitMaxo" that would behave like that fictitious "dreamcoin" currency and, viola, now we have a currency that will always outperform a specified basket or the best fiat currency by 5%.

Just dial the equation into Xeroc's bot to keep your favorite artificial currency collateral topped off to its completely predictable performance relative to the price feeds of it's poor, hapless, fiatic competitors.

Why track poorly behaving fiats and commodities when you can dream up you own ideal coin behavior?

I'd like to see the discussion separate the affordability/priority issues from the underlying best approach.

If Ken has a whale sponsor with deep, um, blubber, what is the best thing to build for the ecosystem?