BitShares Forum
Main => General Discussion => Topic started by: cob on December 12, 2014, 05:36:43 am
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What BitShares is doing with BitAssets is great. It's a way to avoid the crazy volatility present in the crypto world but the BitUSD only pegs to the USD, which is controlled by the FED. BitGold only pegs to Gold which like all commodities can be tampered with.
Are there any projects out there, or thinkers, philosophers, that have an idea how to get a stable measure of value. Something that's barely, if at all, volatile.
I say this because we could create a BitAsset that tracts just that.
Not that this is a priority of course, BitUSD is one hell of an leap forward from any other crypto out there, but it would be interesting to have a crypto that is stable AND free from the FED price controls and market manipulation of gold and silver.
I read an E.C.Riegel book a few weeks ago. He has an interesting approach to money. His approach is an anarchistic, volatility free, IOU approach that looks like it would be a perfect fit with blockchain technology. I have no idea how strong his theory is. I haven't really had the time to think it through and research it more in depth yet. Not with the PeerTracks project!
I'm wondering if there's anything insightful out there on the internet about this very subject.
What would make the perfect crypto unit of account?
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This is a great question. I think anything of value is necessarily influenced by human need/desire otherwise it wouldn't have value.
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What BitShares is doing with BitAssets is great. It's a way to avoid the crazy volatility present in the crypto world but the BitUSD only pegs to the USD, which is controlled by the FED. BitGold only pegs to Gold which like all commodities can be tampered with.
Are there any projects out there, or thinkers, philosophers, that have an idea how to get a stable measure of value. Something that's barely, if at all, volatile.
I say this because we could create a BitAsset that tracts just that.
Not that this is a priority of course, BitUSD is one hell of an leap forward from any other crypto out there, but it would be interesting to have a crypto that is stable AND free from the FED price controls and market manipulation of gold and silver.
I read an E.C.Riegel book a few weeks ago. He has an interesting approach to money. His approach is an anarchistic, volatility free, IOU approach that looks like it would be a perfect fit with blockchain technology. I have no idea how strong his theory is. I haven't really had the time to think it through and research it more in depth yet. Not with the PeerTracks project!
I'm wondering if there's anything insightful out there on the internet about this very subject.
What would make the perfect crypto unit of account?
Eventually, we should likely be able to grow into bitAssets that track the value of a basket of goods/currencies that ensure a highly stable token.
This would be the solution I think is best. However, it is my opinion that nothing is outside the control of those currently manipulating valuations. Why? Because the same people who control the monetary system are the ones who control most infrastructure. There is, of course, the BRICS Nations (Brazil, Russia, India, China, South Africa), also known as "the Eastern Block" who are actively dissolving connections between themselves and the Petro Dollar. They may be a good place to start, but then again, it is highly unlikely that the international cartels are not also behind the creation of this system.
International cartels are likely creating this division to set up a global war during which they will pull the strings of power on both sides. In this way, during the ensuing chaos they can grab even more power.
To answer your question though--a token that tracks the value of a basket of assets. Perhaps one that tracks the value of bitGold, bitSilver, bitUSD and bitYuan would be a good start. But what to call it?
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Like a bitAsset mutual fund?
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Like a bitAsset mutual fund?
Kind of. Only it wouldn't be centrally administered and might take the collective votes of all delegates (or all users) to add or subtract an asset from the pool of assets whose value are represented. In this way it could not be bought out and corrupted.
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Once the training wheels (price feeds) are off, like when BTS has $200 billion valuation or whatever, won't the BitShares blockchain itself be the "source of value" to which you are referring?
Does it matter if the dollar loses value or gold is manipulated? Governments and (centrallized) markets will collapse, but as long as some fungable source of exchange exists amongst people outside of BTS, than BTS will provide the service of allowing tranparent derivative creation (or whatever we are calling it).
Hell, if the BRICS alliance has anything to say about it, USD might not even be what ends up propelling BTS to the moon.
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Define the BitAsset's price (in BTS) as P(t). Define the price of USD (in BTS) as D(t). Define the price (in USD) of a pre-defined weighted basket of goods and services as B_n for natural number n. Let us say the price of that basket is reevaluated every month at time T_n = T_0 + n*(1 month), where T_0 is the time the first price for the basket was published on the blockchain (and the first time that people are allowed to short the BitAsset). Then the formula for P(t) can be given by:
P(t) = ((x)*B_{n-1} + (1-x)*B_{n-2}) * D(t) for T_{n-1} <= t < T_{n} for n >= 2
where x = (t - T_{n-1})/(T_{n} - T_{n-1})
and
P(t) = B_0 * D(t) for T_0 <= t < T_1
So, then the delegates need to provide and vote for a new basket price once a month. The blockchain takes the most recently approved basket price and counts that as the new official basket price B_n at time T_n. If a basket price was not provided, the blockchain takes the last official basket price as the new one. There is some lag time in this process. One month of trading activity needs to happen to generate the goods/services prices that will then be analyzed to get the next basket price, some time needs to pass until this data can be analyzed to get a new basket price for that month period, additional time has to pass before the delegates can agree to put that price into the blockchain and vote to approve it as the next official price, and then finally another month goes by for those changes to actually be reflected (in a linear manner) in the BitAsset price. However, since the basket price change is slow and the conversion from the USD basket price to the BTS basket price uses the fast (1 hour time scale) D(t), the lag should not have a significant effect on the purchasing power of the BitAsset. USD is price stable in the short-term, it is only in the long-term that it loses its value and that is corrected for using this basket price mechanism.
Finally, the delegates need some source from which they can actually get these basket prices. The sources for these prices (and in fact the definition of the weighted basket itself) can change over time to meet the goals of the price stable BitAsset. For now though, I think using something like the CPI from BLS as the source of these basket prices could work pretty well. If it later becomes necessary to switch to a different source or change the basket, there could be mechanisms to smoothly transition (and perhaps even get the majority approval of the change from the BitAsset holders through voting) while avoiding discontinuous jumps in the value of the BitAsset.
Now, in some distant future time when goods and services are priced in this BitAsset and we are in the saturation stage where there isn't any additional fiat currency to transition over to the BitAsset, I am having trouble imagining how this price stable BitAsset system could even work. It gets really confusing.
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The USD, Euro, and every other government(aka. banker) issued currency out there can be seen as having relative degrees of volatility as well. Heck, the whole idea of a rock solid store of value is only something human beings could dream up, since everywhere you look the universe is basically engaged in violently tearing itself apart. I do not believe that fiat currencies (ledger entries, including all blockchains) can be made into an arbitrary "store of value" as well as remove volitility without the violent cohersion, fraud, and subversion that the bankers' enforcement branch (government) are known for. Strip away the subterfuge, and fiat is nothing but a commodity backed by a "promise".
This is why bit assets are so ingenious. I3 has created a bridge between the existent world of commodities (including all national currencies) and the miracle of transparent ledger interaction. As long as something "stable" exists in the outside world, bitshares is useful. Arhag seems to have arrived at the same conclusion that I have: once we approach the endgame or "saturation stage", the logic begins to break down and its altogether unclear how things will proceed from there.....My guess is some sort of radical social transformation :D
EDIT: Not at all trying to throw water on the brainstorm, NPI, just pontificating on the (im)possibility of fiat holding any sort of value outside of being a tool for arbitration.
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Once the training wheels (price feeds) are off, like when BTS has $200 billion valuation or whatever, won't the BitShares blockchain itself be the "source of value" to which you are referring?
Does it matter if the dollar loses value or gold is manipulated? Governments and (centrallized) markets will collapse, but as long as some fungable source of exchange exists amongst people outside of BTS, than BTS will provide the service of allowing tranparent derivative creation (or whatever we are calling it).
Hell, if the BRICS alliance has anything to say about it, USD might not even be what ends up propelling BTS to the moon.
I believe bitUSD is BM's way of trying to help the dollar keep international traction (he is a patriot in my mind, so this likely is not too far from the mark). However, I sadly will tend to agree with you that USD will probably not be what takes us to the moon. I say sadly because I, too, love America (or what it was supposed to stand for). You may be right about the BRICS alliance, man...I believe they (and the cartels) have bought out almost all our politicians, too. Not a bad reason for bitshares VOTE. :)
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What BitShares is doing with BitAssets is great. It's a way to avoid the crazy volatility present in the crypto world but the BitUSD only pegs to the USD, which is controlled by the FED. BitGold only pegs to Gold which like all commodities can be tampered with.
Are there any projects out there, or thinkers, philosophers, that have an idea how to get a stable measure of value. Something that's barely, if at all, volatile.
I say this because we could create a BitAsset that tracts just that.
Not that this is a priority of course, BitUSD is one hell of an leap forward from any other crypto out there, but it would be interesting to have a crypto that is stable AND free from the FED price controls and market manipulation of gold and silver.
I read an E.C.Riegel book a few weeks ago. He has an interesting approach to money. His approach is an anarchistic, volatility free, IOU approach that looks like it would be a perfect fit with blockchain technology. I have no idea how strong his theory is. I haven't really had the time to think it through and research it more in depth yet. Not with the PeerTracks project!
I'm wondering if there's anything insightful out there on the internet about this very subject.
What would make the perfect crypto unit of account?
I am a Financial Scientist and a thinker. I am not an Economist.
You want something that can be determined either Federal Funds Rate Futures Contract or US Government T-Bills (Treasury Bills). Bytemaster Dan has already made a revaluation system in the bitUSD market by making it essentially a contractless contract because it expires at the end of the month. So look at the Futures market.
If you dont like this, peg the value of a stock or mutual fund that does essentially this
SPDR Barclays Capital High Yield Bnd ETF (Has a 6.11% yield=dividend=interest_rate_per_year) ---- This security=stock=etf=pegged_to_bonds is good because it will cause hype because of the nature of the $550 Junk bond Oil Market
https://www.google.com/finance?q=NYSEARCA%3AJNK&ei=R5aKVKD9NO20iAKB8oDoDA
iShares Barclays 20+ Yr Treas.Bond (ETF) (Has a 2.76% yield=dividend=interest_rate_per_year) ---- This is a laddered ETF (essentially stock that tracks bonds) -- This is all essentially what Bytemaster is trying to do with his derivatives bitUSD market
https://www.google.com/finance?q=NYSEARCA%3ATLT&ei=R5aKVKD9NO20iAKB8oDoDA
Vanguard Total Bond Market ETF (Has a 2.52% yield=dividend=interest_rate_per_year)---- This is a bond mutual fund/etf --- ETFs are essentially low cost mutual funds that are mostly passively invested (not forever though they have begun to be actively investment vehicles I believe (meaning the managers who run it change stocks on intervals they desire))
https://www.google.com/finance?q=NYSEARCA%3ABND&ei=R5aKVKD9NO20iAKB8oDoDA
iShares Premium Money Market ETF (Has a 0.78% yield=dividend=interest_rate_per_year) ---- Riskless money 0.78% dividend yield (interest rate) yearly. This is pegged to the Bank of Canada Central Bank Interest Rate, (ie like the US Federal Funds Rate = Government Rate = Backed by the people of the country = Backed by the interest rate = http://futures.tradingcharts.com/chart/ZQ/ = Symbol ZQJ6)
https://www.google.com/finance?q=TSE%3ACMR&ei=sZeKVKitMtG1iAKnt4DoBw
Im way ahead of you guys in terms of implementation of these assets I know how to create a platform that takes into consideration a fully functioning derivatives market where the future end result would be bts_asset_backed_security_barclays_secured_loans_4_percent_expires_2022_December_25 . If you dont understand that you dont know how far ive thought.
As a note I put the underscores on purpose
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Let me try to prove that what the OP wants is impossible:
Something might have a stable value but it's price will still fluctuate with supply and demand. And those can be highly dependent on location, time and other factors.
For example the most valuable commodities are air and water. But because they're in over-supply on the surface of earth their price is mostly zero. Different though on a space station ...
Something with negligible value like gold might fetch a huge price because of over-demand. In over-supply it will plummet, ask Midas about that.
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Let me try to prove that what the OP wants is impossible:
Something might have a stable value but it's price will still fluctuate with supply and demand. And those can be highly dependent on location, time and other factors.
For example the most valuable commodities are air and water. But because they're in over-supply on the surface of earth their price is mostly zero. Different though on a space station ...
Something with negligible value like gold might fetch a huge price because of over-demand. In over-supply it will plummet, ask Midas about that.
Markus, it matters how much the fluctuation is.
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I wasn't too serious anyway. :)
I guess a weighted average of all commodities used in the global economy should do the job then.
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So, then the delegates need to provide and vote for a new basket price once a month.
How about creating a metaAsset from the bitAssets that we already have? For example, create a basket from bitUSD, bitEUR, bitCNY, bitGLD and bitOIL (once all of these have sufficient price feeds of course). The DAC can track the basket value by looking at the internal markets and create an artificial price feed for the basket.
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So, then the delegates need to provide and vote for a new basket price once a month.
How about creating a metaAsset from the bitAssets that we already have? For example, create a basket from bitUSD, bitEUR, bitCNY, bitGLD and bitOIL (once all of these have sufficient price feeds of course). The DAC can track the basket value by looking at the internal markets and create an artificial price feed for the basket.
You could do that if you think a basket consisting of only USD, EUR, CNY, GLD, and OIL is good enough. I think we would want a more sophisticated basket than just that however.
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Time.
Time is money.
Time is mostly stable.
bitTime ≠ $10?.. 8)
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bitHour, bitLBS, bitMile - all sounds fun :)
What OP is looking for is however per definition some kind of CPI/PPI basket of goods and services, with all its challenges...
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What OP is looking for is however per definition some kind of CPI/PPI basket of goods and services, with all its challenges...
Obviously so.. but I was semi-serious.
The measure that is not volatile, does not change over time. If you really want a base measure, then it has to be something unaffected by time.
The next nearest solution is the value of unit work - manpower cf horsepower cf CPU power.
However, I wonder absolute measures have limited value? The real value of a market at any one time is exactly the demand on it. If there is no demand, there is no value; and what value there is, is only relative to what others will offer in exchange. A basket of other values might not be on target.
So, it's well known market cap means nothing beyond a contributor to utility. If you sold the entire market, what sum total would that be.. and divide by total coins.
Market value is an illusion, not just for the market cap but also for offers on the market that might get pulled. Real value is about what you can sell one single coin for.. and perhaps a simple basket beats a complex one.
Getting an absolute measure in a relative world though I suspect is more what the OP wanted.. and time is that or otherwise work. The price of a McDonalds burger is the same idea.. base work unit. Perhaps in the world of crypto a measure of complexity would work?.. The cost of a math calculation??.. link to the BTC mining cost???
[1hr x CPU] worth of BTC mining, might be stable?
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I'm convinced that once USD tanks, BTS will end up as the least volatile asset and the world reserve currency. By then it would have a trillion+ market cap measured in 2014 USD.
If that doesn't happen I think bitLand might be a good solution. A market based around price feeds that follows the total valuation of all land in developed countries where it is possible to make such an estimate with high reliability. Of course maintaining such a price feed for bitLand would be a huge enterprise, but it would be worth it for the immense utility having a least volatile asset would give us.
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..I think bitLand might be a good solution.
erm.. because there's no volatility in land prices!?..
United States housing bubble: Land prices contributed much more to the price increases than did structures. (https://en.wikipedia.org/wiki/United_States_housing_bubble#Background)
I would expect the most volatile prices are the most valuable ones.. oil and rare earth and land and other forms of raw wealth. People projecting perception of value, is the source of volatility.. it's the cause of the pump and dump curves and of other bubbles.
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Time.
Time is money.
Time is mostly stable.
bitTime ≠ $10?.. 8)
If only there was a way to track a universal constant such as the speed of light and trade it as a bitasset...
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Time.
Time is money.
Time is mostly stable.
bitTime ≠ $10?.. 8)
If only there was a way to track a universal constant such as the speed of light and trade it as a bitasset...
That's why I suggested CPU.. Does Moore's law still hold?.. Speed of light is a constant in the same way as a number is a constant. The value - the cost - of doing 1 billion calculations.. or if you like c then 299792458 calculations. That doesn't need to be the fastest option available either.. could be a weighted average of what is available.
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http://www.forbes.com/sites/nathanlewis/2012/01/26/does-a-commodity-basket-standard-measure-up-to-gold/
Decent article.
For trade though USD is best current choice.
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..I think bitLand might be a good solution.
erm.. because there's no volatility in land prices!?..
United States housing bubble: Land prices contributed much more to the price increases than did structures. (https://en.wikipedia.org/wiki/United_States_housing_bubble#Background)
I would expect the most volatile prices are the most valuable ones.. oil and rare earth and land and other forms of raw wealth. People projecting perception of value, is the source of volatility.. it's the cause of the pump and dump curves and of other bubbles.
Well it's just speculation and isn't really that relevant or possible to predict at this point. But I'll try to explain my reasoning.
The price of land as we currently know it isn't really the price of owning land, it's more like the rent of land from the government that controls it, and it wildly fluctuates whenever the government decides to change that price (observed as changes in taxation/subsidies on resources from that land, or land tax itself). The reason why I think "bitland" would be stable is because ultimately the earth is the only resource from which all other resources are derived and in a situation without governments as we know them today, where you can actually properly own the land itself and thus all the resources contained therein, the prices of everything else will already indirectly be in land (since land is kinda the central bank of all resources).
I believe that the bitshares system itself will take over some of the roles that governments have today, such as being the sovereign of all land and as a result have BTS be a stake in that and thus what all other resources are priced in, but in case that doesn't happen I think a price feed following the aggregate price of sovereign ownership of all land under stable governance would be the most stable.
I bet there are economists out there who would be absolutely thrilled to work on a problem like this... Far out in the future when it becomes relevant.
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but you could make the same calculation against population more easily.
Divide total dollars by total population to see value of dollar. If total dollars changes, so does the value of a dollar.
You can do that with any item that is universal.. by assuming that it has universal value.. that's what the US dollar does by assuming base currency.
However, of what value is that unit land or single dollar?.. If we want a stable measure, then we need a sense of what that currency can buy.. what the value of it is.
I suppose what you are suggesting is the sum total of all land but again there was a bubble in housing because the value of that was pumped full of money from over leveraging derivatives. If the total money fluxes, so does your measure.. the only strong point is volume dampens volatility.. so, there's that.
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http://www.forbes.com/sites/nathanlewis/2012/01/26/does-a-commodity-basket-standard-measure-up-to-gold/
Decent article.
tl;dr: historically, it's always been gold. Commodity basket doesn't work, therefore gold it must be.
IMO the problem here is that there is no definition of value. And IMO there can't be such a thing a an absolute, stable measure of value (in the sense of the absolute, stable speed of light). Value is always subjective.
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IMO the problem here is that there is no definition of value. And IMO there can't be such a thing a an absolute, stable measure of value (in the sense of the absolute, stable speed of light). Value is always subjective.
but you can have a stable reference point.. so long as other items are available relative to that.
If you could buy a light bulb in dollar and BTS, then you would have a stable sense of the relative value of those dollar and BTS in terms of light bulbs. What you cannot do is suggest the value of the unit measure because a measure cannot measure itself. Such a relative measure then would help a sense of market direction, certain markets might be overheated and others cool.
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IMO the problem here is that there is no definition of value. And IMO there can't be such a thing a an absolute, stable measure of value (in the sense of the absolute, stable speed of light). Value is always subjective.
but you can have a stable reference point.. so long as other items are available relative to that.
If you could buy a light bulb in dollar and BTS, then you would have a stable sense of the relative value of those dollar and BTS in terms of light bulbs. What you cannot do is suggest the value of the unit measure because a measure cannot measure itself. Such a relative measure then would help a sense of market direction, certain markets might be overheated and others cool.
You cannot have a stable reference point because there is nothing that has stable value. The value of a light bulb for example is zero in the middle of a desert, just it can climb to silly heights shortly before they are taken from a market that was very much used to them (as recently seen in the EU).
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> .. then you would have a stable sense of the relative value of those dollar and BTS *in terms of light bulbs*.
So, you need to find something that does have value everywhere.. and is available to buy in the currencies you want to compare. No point then looking to the value of land just yet, when you cannot buy all land with BTS. Basket of crypto currencies in terms of their BTS value might work but if you want a sense of the BTS value too, then you need something available to all. Again 1 hour CPU of BTC mining seems accessible but I'm not sure that is stable enough. Until crypto currencies can buy something beyond just crypto currencies, perhaps all measures are relative and all value is an illusion..
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So, you need to find something that does have value everywhere.. and is available to buy in the currencies you want to compare.
Erm, yes. That's basically the question in the OP.
perhaps all measures are relative and all value is an illusion..
Exactly. (The illusion of value *is* a subjective value.)
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So, you need to find something that does have value everywhere.. and is available to buy in the currencies you want to compare.
Erm, yes. That's basically the question in the OP.
perhaps all measures are relative and all value is an illusion..
Exactly. (The illusion of value *is* a subjective value.)
most constant for the U.S. is the value of some stable basket of goods and services for an "average" family / "average" enterpreneur
- such basket has to be amended now and then for innovative products
- should include certain financial assets, commodities and real estate (as opposed to current measures used by FED)
for other countries, perhaps a somewhat different basket should be used...
so the least volatile index in terms of real value would be a weighted basket of world currencies, each adjusted for local inflation as defined per respective country's basket of goods and services.
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As people have mentioned once thee are lots of high volume bitassets an asset that tracks the average value of all of them, or just of the most stable ones, should be super stable.
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Cob, I see you're thinking about our Houston discussion :)
For others you can catch up on some stuff here http://stableproductivemoney.wordpress.com/2009/03/18/properties-of-token-money/, https://www.youtube.com/watch?v=XyWfUqEyIZc
Without reiterating everything, bitAssets are capable of tracking the relative value of a data feed. The best data feed would be internal to the DAC so no data manipulation can happen. The most stable crypto assets to back up and collateralize bitAssets would be IOUs which represent something real which is redeemable. IOUs are better capable to create a much more stable bitAsset because people trade the undelrying value of the IOU rather than a commodity-token such as BTS or BTC. The problem with IOUs is of course that both collataralizing tokens on both ends of the bitAsset can completely default, effectively creating inflation for the bitAsset in question.
Everybody is capable of providing value to the market through production (Riegel's idea: "We're all fountains of wealth") by extending our own credit and backing it up with future production at the future's exchange rate. You effectively get a dual currency system, exactly how money is noted in a ledger anyway: a Debit currency and a Credit currency. Those IOUs would be redeemable for your productive capacity.
By using your're IOU as the collateral for one side of the bitAsset you can create somebody else's IOU's as collateral for the bitAsset's other side. This way you create a bitAsset without practical counterparty risk which everybody accepts at par and which can be used for universal pricing and path finding across the value network (very similar to Ripple's XRP being the path-finding mechanism between gateways, but in this case it's a stable bitAsset with flexible money supply rather than a commodity token). Furthermore the counterparty collateralizing your IOU takes on risk but also reaps the benefits by having more buying power with you. So your collateralizers, or in other words -lenders- would in most cases be your immediate supply-chain (or market makers, i.e. Credit Rating Agency). Your "credit limit" would be equal to the total demand for your IOU (or in other words total demand for your future production), however the more IOUs you issue the more interest your supply chain will require from you for their larger risk. Hence you get a very liquid and true market-based credit market and access to cash flow.
The perfect bitAsset would be, as stated above, and internal price feed. If a lot of producers use this IOU system (as a kickstaerter it needs a minimum viable market, or in other words minimum viable liquidity) then you can use the point where the average total supply and demand curve of all IOUs in circulation meet as the univeral pathfinding point. In theory that point would be by definition perfectly stable as it mathematically represents the abstraction of all supply and demand of all relative values in the system. As such the -price- of money (i.e. Unit of Account) is not just decoupled from money itself as with bitAssets, it goes much further than that, it becomes a *universal non-cumulative* value unit.
Fascinatingly this special and unique bitAsset (I'm calling it Perpetual Coin (PC) for now) by definition has no counterparty risk as a whole, but statistically a certain percentage of it's underlying IOUs will default on both ends of the contract, as such it is as inflationary as the total failure rate of both ends of the bitAsset of the producers. However, because this is a DAC we can make sure that the price feed of the PC always matches the internal price point by including demurrage equal to this failure rate, effectively we're introducing entropy into the system which always matches the entropy of the underlying value market, something which never existed before. This way we stabilized PC as a Unit of Acocunt as a point in time, but not as a store of value. That's the next step.
Due to demurrage PC holders who want to store their value will want to invest their PC as a loan to above average producers. They in tern give you their PC IOUs for a future date, in which case you have again counterparty risk which at average should be smaller or equal to the demurrage/entropy rate of the PC as all these factors are in theory counter-cyclical and self-stabilizing to one another.
As such we have effectively splt money into its 3 core functions:
- Medium of Exchange - Producer IOU
- Unit of Account - Perpetual Coin (bitAsset)
- Store of Value - P2P Credit Perpetual Coin
I've got to write this down more clearly somewhere.
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Cob, I see you're thinking about our Houston discussion :)
For others you can catch up on some stuff here http://stableproductivemoney.wordpress.com/2009/03/18/properties-of-token-money/, https://www.youtube.com/watch?v=XyWfUqEyIZc
Without reiterating everything, bitAssets are capable of tracking the relative value of a data feed. The best data feed would be internal to the DAC so no data manipulation can happen. The most stable crypto assets to back up and collateralize bitAssets would be IOUs which represent something real which is redeemable. IOUs are better capable to create a much more stable bitAsset because people trade the undelrying value of the IOU rather than a commodity-token such as BTS or BTC. The problem with IOUs is of course that both collataralizing tokens on both ends of the bitAsset can completely default, effectively creating inflation for the bitAsset in question.
Everybody is capable of providing value to the market through production (Riegel's idea: "We're all fountains of wealth") by extending our own credit and backing it up with future production at the future's exchange rate. You effectively get a dual currency system, exactly how money is noted in a ledger anyway: a Debit currency and a Credit currency. Those IOUs would be redeemable for your productive capacity.
By using your're IOU as the collateral for one side of the bitAsset you can create somebody else's IOU's as collateral for the bitAsset's other side. This way you create a bitAsset without practical counterparty risk which everybody accepts at par and which can be used for universal pricing and path finding across the value network (very similar to Ripple's XRP being the path-finding mechanism between gateways, but in this case it's a stable bitAsset with flexible money supply rather than a commodity token). Furthermore the counterparty collateralizing your IOU takes on risk but also reaps the benefits by having more buying power with you. So your collateralizers, or in other words -lenders- would in most cases be your immediate supply-chain (or market makers, i.e. Credit Rating Agency). Your "credit limit" would be equal to the total demand for your IOU (or in other words total demand for your future production), however the more IOUs you issue the more interest your supply chain will require from you for their larger risk. Hence you get a very liquid and true market-based credit market and access to cash flow.
The perfect bitAsset would be, as stated above, and internal price feed. If a lot of producers use this IOU system (as a kickstaerter it needs a minimum viable market, or in other words minimum viable liquidity) then you can use the point where the average total supply and demand curve of all IOUs in circulation meet as the univeral pathfinding point. In theory that point would be by definition perfectly stable as it mathematically represents the abstraction of all supply and demand of all relative values in the system. As such the -price- of money (i.e. Unit of Account) is not just decoupled from money itself as with bitAssets, it goes much further than that, it becomes a *universal non-cumulative* value unit.
Fascinatingly this special and unique bitAsset (I'm calling it Perpetual Coin (PC) for now) by definition has no counterparty risk as a whole, but statistically a certain percentage of it's underlying IOUs will default on both ends of the contract, as such it is as inflationary as the total failure rate of both ends of the bitAsset of the producers. However, because this is a DAC we can make sure that the price feed of the PC always matches the internal price point by including demurrage equal to this failure rate, effectively we're introducing entropy into the system which always matches the entropy of the underlying value market, something which never existed before. This way we stabilized PC as a Unit of Acocunt as a point in time, but not as a store of value. That's the next step.
Due to demurrage PC holders who want to store their value will want to invest their PC as a loan to above average producers. They in tern give you their PC IOUs for a future date, in which case you have again counterparty risk which at average should be smaller or equal to the demurrage/entropy rate of the PC as all these factors are in theory counter-cyclical and self-stabilizing to one another.
As such we have effectively splt money into its 3 core functions:
- Medium of Exchange - Producer IOU
- Unit of Account - Perpetual Coin (bitAsset)
- Store of Value - P2P Credit Perpetual Coin
I've got to write this down more clearly somewhere.
You went from currencies bitUSD, bitCNY now go to Bonds that pay a fixed coupon rate (yield/interest-rate). You can start with Government bonds as they have the biggest market, perhaps do European PIIGS bonds (excluding Greece as it may go bankrupt) but you will get a market.
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Cob, I see you're thinking about our Houston discussion :)
For others you can catch up on some stuff here http://stableproductivemoney.wordpress.com/2009/03/18/properties-of-token-money/, https://www.youtube.com/watch?v=XyWfUqEyIZc
Without reiterating everything, bitAssets are capable of tracking the relative value of a data feed. The best data feed would be internal to the DAC so no data manipulation can happen. The most stable crypto assets to back up and collateralize bitAssets would be IOUs which represent something real which is redeemable. IOUs are better capable to create a much more stable bitAsset because people trade the undelrying value of the IOU rather than a commodity-token such as BTS or BTC. The problem with IOUs is of course that both collataralizing tokens on both ends of the bitAsset can completely default, effectively creating inflation for the bitAsset in question.
Everybody is capable of providing value to the market through production (Riegel's idea: "We're all fountains of wealth") by extending our own credit and backing it up with future production at the future's exchange rate. You effectively get a dual currency system, exactly how money is noted in a ledger anyway: a Debit currency and a Credit currency. Those IOUs would be redeemable for your productive capacity.
Great read. I followed your posts after your comment about game theory results of credit money vs. commodity money from your Moonstone wallet thread.
Yes. Money does not create wealth. We all create wealth through our productive capacity.
By using your're IOU as the collateral for one side of the bitAsset you can create somebody else's IOU's as collateral for the bitAsset's other side. This way you create a bitAsset without practical counterparty risk which everybody accepts at par and which can be used for universal pricing and path finding across the value network (very similar to Ripple's XRP being the path-finding mechanism between gateways, but in this case it's a stable bitAsset with flexible money supply rather than a commodity token).
I am a follower of the Ripple/Stellar community precisely for the credit money characteristics (social credit) and LETS (local exchange trading system). The Ripple/Stellar system allows user generated IOUs in the same way you describe and XRP/STR is representative of the potentially stable 'bitAsset' intermediary without counterparty risk unless I'm missing something. FYI: I'm not a fan of the distribution mechanism of XRP, but am a fan of the tech. Stellar has a much better distribution mechanism, but not entirely sold on the organizational structure. Much prefer a DPOS/DAC model rather than a for-profit or non-profit corporation for issuing XRPs/STRs. I would have probably given away 90% of the coins for free and kept 10% + inflation for development.
Could this somehow fit in with the BitShares UIA model or do you need a separate bitCredit system?
Furthermore the counterparty collateralizing your IOU takes on risk but also reaps the benefits by having more buying power with you. So your collateralizers, or in other words -lenders- would in most cases be your immediate supply-chain (or market makers, i.e. Credit Rating Agency). Your "credit limit" would be equal to the total demand for your IOU (or in other words total demand for your future production), however the more IOUs you issue the more interest your supply chain will require from you for their larger risk. Hence you get a very liquid and true market-based credit market and access to cash flow.
The perfect bitAsset would be, as stated above, and internal price feed. If a lot of producers use this IOU system (as a kickstaerter it needs a minimum viable market, or in other words minimum viable liquidity) then you can use the point where the average total supply and demand curve of all IOUs in circulation meet as the univeral pathfinding point. In theory that point would be by definition perfectly stable as it mathematically represents the abstraction of all supply and demand of all relative values in the system. As such the -price- of money (i.e. Unit of Account) is not just decoupled from money itself as with bitAssets, it goes much further than that, it becomes a *universal non-cumulative* value unit.
The IOUs would be based on a specific delivery of XYZ good or service correct? This is the same model for the DigitalCoin & Ripple system. Your personal trust network or supply chain can better evaluate your 'credit rating'. The supply and demand of the specific IOUs as well as the risk is decentralized/distributed. The major failure in modern banking is that bad debt is centralized and effectively collectivized by government bailouts, guarantees, and money printing. Hence collective public debt grows to unmanageable levels beyond the level that would represent productive credits, and eventually can lead to currency collapse.
BTW after many years of study, my revelations of modern money mechanics via Austrian economics & money-as-debt literature were confirmed with the following Bank of England quarterly reports:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q101.pdf
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
After so many years of secrecy.... the BofE just spilled the beans on how modern banking works, and most economic professors don't understand this and it's not taught in most academic institutions. Essentially banks create money out of thin air via lending. They do not practice fractional reserve banking in the way most people think. Banks do not lend their reserves nor is there any money multiplier effect. All they do is create bank notes that represent the credit of people just as you described above with IOUs. However credit evaluation & credit money creation is not distributed and favors large financial institutions & governments & corporations and overtime can lead to systemic currency collapse when the default risk of the entire system becomes too high. It seems one efficiency with modern banking is that they don't have to deal with multiple IOUs. Everyone's IOUs are treated as equal and so no one has to deal with IOUs of fish vs IOUs of getting a hair cut. They all use the same bank notes. That may be why fiat 'credit money' can seem relatively stable and is similarly why a liquid credit money like US Federal Reserve notes may tend towards the stability of a *universal non-cumulative* value unit you described. However according to Mises regression theorem and subjective theory of value it seems you need a starting point of value whether it's a 'dollar' in 'grains' of silver or 'ozs' of gold. The US Federal Reserve note initially had gold backing as a starting reference point so without that I don't believe you ever could have a relevant unit of account.
Fascinatingly this special and unique bitAsset (I'm calling it Perpetual Coin (PC) for now) by definition has no counterparty risk as a whole, but statistically a certain percentage of it's underlying IOUs will default on both ends of the contract, as such it is as inflationary as the total failure rate of both ends of the bitAsset of the producers. However, because this is a DAC we can make sure that the price feed of the PC always matches the internal price point by including demurrage equal to this failure rate, effectively we're introducing entropy into the system which always matches the entropy of the underlying value market, something which never existed before. This way we stabilized PC as a Unit of Acocunt as a point in time, but not as a store of value. That's the next step.
Great stuff! Yes. Essentially the default risk of the entire system can be used as a price feed to stabilize the unit of account.
Due to demurrage PC holders who want to store their value will want to invest their PC as a loan to above average producers. They in tern give you their PC IOUs for a future date, in which case you have again counterparty risk which at average should be smaller or equal to the demurrage/entropy rate of the PC as all these factors are in theory counter-cyclical and self-stabilizing to one another.
As such we have effectively splt money into its 3 core functions:
- Medium of Exchange - Producer IOU
- Unit of Account - Perpetual Coin (bitAsset)
- Store of Value - P2P Credit Perpetual Coin
I've got to write this down more clearly somewhere.
Again great read. I like how you summarized the core functions. I think a lot of it is consistent with social credit/LETs systems, but I like the added dimension of using a DAC to account for demurrage. Have you had further thoughts on this? I've really been interested in distributed social credit money systems as well.
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Thanks for your kind words! This post is actually a bit outdated as I (and the Bitsapphire team) have simplified and extended the system considerably.
The IOUs would be based on a specific delivery of XYZ good or service correct? This is the same model for the DigitalCoin & Ripple system. Your personal trust network or supply chain can better evaluate your 'credit rating'. The supply and demand of the specific IOUs as well as the risk is decentralized/distributed. The major failure in modern banking is that bad debt is centralized and effectively collectivized by government bailouts, guarantees, and money printing. Hence collective public debt grows to unmanageable levels beyond the level that would represent productive credits, and eventually can lead to currency collapse.
The IOU represents the debt of the issuer in terms of an external unit of account (which in our model is the Perpetual Coin). It does not represent any good, service, hour, or anything of that sort that currently is in use with LETS.
Ripple has an in-build commodity money (XRP) which cannot function as a stable unit of account. It is the same as Bitcoin in this regard, or any commodity money. Our proposal creates a stable unit of account similar to bitAssets, but which track an internal ratio rather than some arbitrary commodity or basket of commodities. Rather, it tracks all goods and services on the market.
One of the major modifications to the system we've made so far is that the bitAsset (i.e. the perpetual coin) is not created as a CFD, but rather through simple contracted collateralization. In our current model any percentage of collateralization can happen. We calculated that at about 300% collateralization (all based on IOUs, nothing else) is the maximum statictically significant security that can be had.
We have also been able to form a very new and I think elegant definition of money and credit:
"Credit is a time-delayed split barter contract. Money is credit without counterparty risk." It's that simple really.
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What BitShares is doing with BitAssets is great. It's a way to avoid the crazy volatility present in the crypto world but the BitUSD only pegs to the USD, which is controlled by the FED. BitGold only pegs to Gold which like all commodities can be tampered with.
Are there any projects out there, or thinkers, philosophers, that have an idea how to get a stable measure of value. Something that's barely, if at all, volatile.
I say this because we could create a BitAsset that tracts just that.
Not that this is a priority of course, BitUSD is one hell of an leap forward from any other crypto out there, but it would be interesting to have a crypto that is stable AND free from the FED price controls and market manipulation of gold and silver.
I read an E.C.Riegel book a few weeks ago. He has an interesting approach to money. His approach is an anarchistic, volatility free, IOU approach that looks like it would be a perfect fit with blockchain technology. I have no idea how strong his theory is. I haven't really had the time to think it through and research it more in depth yet. Not with the PeerTracks project!
I'm wondering if there's anything insightful out there on the internet about this very subject.
What would make the perfect crypto unit of account?
The human population. This could be represented as a coin which has a value of the total amount of humans on record. It should go up or down in predictable ways.
Or perhaps the formula for the total amount of storage space of the Internet itself. The value will increase each year at a predictable rate.
Or electricity usage. Make an asset around electricity demand and you'll get something extremely stable but which always increases.
I would say since we don't have electricoin we'll have to invent some energy assets. The other stuff would be too experimental.
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Thanks for your kind words! This post is actually a bit outdated as I (and the Bitsapphire team) have simplified and extended the system considerably.
The IOUs would be based on a specific delivery of XYZ good or service correct? This is the same model for the DigitalCoin & Ripple system. Your personal trust network or supply chain can better evaluate your 'credit rating'. The supply and demand of the specific IOUs as well as the risk is decentralized/distributed. The major failure in modern banking is that bad debt is centralized and effectively collectivized by government bailouts, guarantees, and money printing. Hence collective public debt grows to unmanageable levels beyond the level that would represent productive credits, and eventually can lead to currency collapse.
The IOU represents the debt of the issuer in terms of an external unit of account (which in our model is the Perpetual Coin). It does not represent any good, service, hour, or anything of that sort that currently is in use with LETS.
Ripple has an in-build commodity money (XRP) which cannot function as a stable unit of account. It is the same as Bitcoin in this regard, or any commodity money. Our proposal creates a stable unit of account similar to bitAssets, but which track an internal ratio rather than some arbitrary commodity or basket of commodities. Rather, it tracks all goods and services on the market.
One of the major modifications to the system we've made so far is that the bitAsset (i.e. the perpetual coin) is not created as a CFD, but rather through simple contracted collateralization. In our current model any percentage of collateralization can happen. We calculated that at about 300% collateralization (all based on IOUs, nothing else) is the maximum statictically significant security that can be had.
We have also been able to form a very new and I think elegant definition of money and credit:
"Credit is a time-delayed split barter contract. Money is credit without counterparty risk." It's that simple really.
Interesting. Look forward to seeing how it works.
Yeah from what I recall XRP is the intermediary asset without counterparty risk between user-issued IOUs that have counterparty risk so it seems to have a somewhat similar function, but your perpetual coin idea doesn't involve IOUs of anything specific like dollars/gold/time... Interesting. Just like Bitcoin & Bitshares and other blockchains can be seen as a global ledger or DACs that can satisfy subjective value theory/Mises regression theorem because it is a piece of something tangible (ie. ledger or company) I can see how a perpetual coin DAC can be similar, but wouldn't the value depend on how useful it is and wouldn't adoption increase value just like Bitcoin/Bitshares and wouldn't that make value unstable? What makes Bitshares much easier to value is because it can be seen a stream of dividend payments from transaction fees.
I like your elegant definition of money. I like simple and it does make sense when using 'credit' & 'exchange' as the main reference point. The 'store of value/commodity/asset' aspect that is typically associated with 'money' can be put in a different category because that is not necessary for exchange whereas the narrow definition you have confines the definition to the 'exchange' aspect of money. A broader definition may include the 'wealth/asset/store of a value' aspect of money. If you build a boat and I build a house and we exchange the net 'wealth' in the world is increased by a boat + house and so wealth is not a zero-sum game (in case you include Mother Earth than it is zero-sum..lol).... Exchange & credit and a narrow definition of money is a zero-sum game. Anyways...fun to think about. Look forward to your progress.
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Or electricity usage. Make an asset around electricity demand and you'll get something extremely stable but which always increases.
Electricity is probably the commodity with the most volatile price. It can jump to 100 times its average price within minutes and can also become negative at times. It is also highly location dependent. The reasons for this are that long distance transport is expensive and inflexible and that it can not be stored economically.
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The human population. This could be represented as a coin which has a value of the total amount of humans on record. It should go up or down in predictable ways.
Or perhaps the formula for the total amount of storage space of the Internet itself. The value will increase each year at a predictable rate.
Or electricity usage. Make an asset around electricity demand and you'll get something extremely stable but which always increases.
I would say since we don't have electricoin we'll have to invent some energy assets. The other stuff would be too experimental.
I always liked the idea of using human population for any free coin distribution or inflation rate, but I wonder how accurate the numbers are.. I guess estimates are probably good enough...
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So, then the delegates need to provide and vote for a new basket price once a month.
How about creating a metaAsset from the bitAssets that we already have? For example, create a basket from bitUSD, bitEUR, bitCNY, bitGLD and bitOIL (once all of these have sufficient price feeds of course). The DAC can track the basket value by looking at the internal markets and create an artificial price feed for the basket.
You could do that if you think a basket consisting of only USD, EUR, CNY, GLD, and OIL is good enough. I think we would want a more sophisticated basket than just that however.
We should focus on the ISO currencies first then think about baskets... for example the USD index is probably the most common basket and it is usually used for risk management in a portfolio.. not to trade in and out usually. Stick to ISO and a standard and that will bring more people in.
Sorry for the old bump.
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Thanks for your kind words! This post is actually a bit outdated as I (and the Bitsapphire team) have simplified and extended the system considerably.
The IOUs would be based on a specific delivery of XYZ good or service correct? This is the same model for the DigitalCoin & Ripple system. Your personal trust network or supply chain can better evaluate your 'credit rating'. The supply and demand of the specific IOUs as well as the risk is decentralized/distributed. The major failure in modern banking is that bad debt is centralized and effectively collectivized by government bailouts, guarantees, and money printing. Hence collective public debt grows to unmanageable levels beyond the level that would represent productive credits, and eventually can lead to currency collapse.
The IOU represents the debt of the issuer in terms of an external unit of account (which in our model is the Perpetual Coin). It does not represent any good, service, hour, or anything of that sort that currently is in use with LETS.
Ripple has an in-build commodity money (XRP) which cannot function as a stable unit of account. It is the same as Bitcoin in this regard, or any commodity money. Our proposal creates a stable unit of account similar to bitAssets, but which track an internal ratio rather than some arbitrary commodity or basket of commodities. Rather, it tracks all goods and services on the market.
One of the major modifications to the system we've made so far is that the bitAsset (i.e. the perpetual coin) is not created as a CFD, but rather through simple contracted collateralization. In our current model any percentage of collateralization can happen. We calculated that at about 300% collateralization (all based on IOUs, nothing else) is the maximum statictically significant security that can be had.
We have also been able to form a very new and I think elegant definition of money and credit:
"Credit is a time-delayed split barter contract. Money is credit without counterparty risk." It's that simple really.
Interesting. Look forward to seeing how it works.
Yeah from what I recall XRP is the intermediary asset without counterparty risk between user-issued IOUs that have counterparty risk so it seems to have a somewhat similar function, but your perpetual coin idea doesn't involve IOUs of anything specific like dollars/gold/time... Interesting. Just like Bitcoin & Bitshares and other blockchains can be seen as a global ledger or DACs that can satisfy subjective value theory/Mises regression theorem because it is a piece of something tangible (ie. ledger or company) I can see how a perpetual coin DAC can be similar, but wouldn't the value depend on how useful it is and wouldn't adoption increase value just like Bitcoin/Bitshares and wouldn't that make value unstable? What makes Bitshares much easier to value is because it can be seen a stream of dividend payments from transaction fees.
I like your elegant definition of money. I like simple and it does make sense when using 'credit' & 'exchange' as the main reference point. The 'store of value/commodity/asset' aspect that is typically associated with 'money' can be put in a different category because that is not necessary for exchange whereas the narrow definition you have confines the definition to the 'exchange' aspect of money. A broader definition may include the 'wealth/asset/store of a value' aspect of money. If you build a boat and I build a house and we exchange the net 'wealth' in the world is increased by a boat + house and so wealth is not a zero-sum game (in case you include Mother Earth than it is zero-sum..lol).... Exchange & credit and a narrow definition of money is a zero-sum game. Anyways...fun to think about. Look forward to your progress.
Store of Value happens through Money, not credit (by our definition). Because money has no single counterparty, meaning it is backed by everybody (or everybody participating in the credit creation process), you can "store" value in it. However, by definition the default rate of all credit creation participants is the debasement rate of Money (=counterparty-less credit). This results in either inflation or as in our proposal demurrage. We believe that this is mathematically the basis of the inflation tendency in all moneys (excluding market order books and first degree positive feedback loops of inflation itself).
Credit always happens before Money, as otherwise that money would not have existed in the first place.
The Perpetual Coin could not have a changing value because it only represents the median exchange value (i.e. ratio) between all Credit Coins on the system. This ratio is generated within the blockchain and therefore requires no external data feed such as USD or EUR, etc. It is a Unit of Account composed of the exchange value of all goods and services being traded on the system. This means you don't need to create an external data feed for an arbitrary basket of goods and services anymore, it is generated anyways by the Blockchain as a natural byproduct.
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Thanks for your kind words! This post is actually a bit outdated as I (and the Bitsapphire team) have simplified and extended the system considerably.
The IOUs would be based on a specific delivery of XYZ good or service correct? This is the same model for the DigitalCoin & Ripple system. Your personal trust network or supply chain can better evaluate your 'credit rating'. The supply and demand of the specific IOUs as well as the risk is decentralized/distributed. The major failure in modern banking is that bad debt is centralized and effectively collectivized by government bailouts, guarantees, and money printing. Hence collective public debt grows to unmanageable levels beyond the level that would represent productive credits, and eventually can lead to currency collapse.
The IOU represents the debt of the issuer in terms of an external unit of account (which in our model is the Perpetual Coin). It does not represent any good, service, hour, or anything of that sort that currently is in use with LETS.
Ripple has an in-build commodity money (XRP) which cannot function as a stable unit of account. It is the same as Bitcoin in this regard, or any commodity money. Our proposal creates a stable unit of account similar to bitAssets, but which track an internal ratio rather than some arbitrary commodity or basket of commodities. Rather, it tracks all goods and services on the market.
One of the major modifications to the system we've made so far is that the bitAsset (i.e. the perpetual coin) is not created as a CFD, but rather through simple contracted collateralization. In our current model any percentage of collateralization can happen. We calculated that at about 300% collateralization (all based on IOUs, nothing else) is the maximum statictically significant security that can be had.
We have also been able to form a very new and I think elegant definition of money and credit:
"Credit is a time-delayed split barter contract. Money is credit without counterparty risk." It's that simple really.
Interesting. Look forward to seeing how it works.
Yeah from what I recall XRP is the intermediary asset without counterparty risk between user-issued IOUs that have counterparty risk so it seems to have a somewhat similar function, but your perpetual coin idea doesn't involve IOUs of anything specific like dollars/gold/time... Interesting. Just like Bitcoin & Bitshares and other blockchains can be seen as a global ledger or DACs that can satisfy subjective value theory/Mises regression theorem because it is a piece of something tangible (ie. ledger or company) I can see how a perpetual coin DAC can be similar, but wouldn't the value depend on how useful it is and wouldn't adoption increase value just like Bitcoin/Bitshares and wouldn't that make value unstable? What makes Bitshares much easier to value is because it can be seen a stream of dividend payments from transaction fees.
I like your elegant definition of money. I like simple and it does make sense when using 'credit' & 'exchange' as the main reference point. The 'store of value/commodity/asset' aspect that is typically associated with 'money' can be put in a different category because that is not necessary for exchange whereas the narrow definition you have confines the definition to the 'exchange' aspect of money. A broader definition may include the 'wealth/asset/store of a value' aspect of money. If you build a boat and I build a house and we exchange the net 'wealth' in the world is increased by a boat + house and so wealth is not a zero-sum game (in case you include Mother Earth than it is zero-sum..lol).... Exchange & credit and a narrow definition of money is a zero-sum game. Anyways...fun to think about. Look forward to your progress.
Store of Value happens through Money, not credit (by our definition). Because money has no single counterparty, meaning it is backed by everybody (or everybody participating in the credit creation process), you can "store" value in it. However, by definition the default rate of all credit creation participants is the debasement rate of Money (=counterparty-less credit). This results in either inflation or as in our proposal demurrage. We believe that this is mathematically the basis of the inflation tendency in all moneys (excluding market order books and first degree positive feedback loops of inflation itself).
Credit always happens before Money, as otherwise that money would not have existed in the first place.
The Perpetual Coin could not have a changing value because it only represents the median exchange value (i.e. ratio) between all Credit Coins on the system. This ratio is generated within the blockchain and therefore requires no external data feed such as USD or EUR, etc. It is a Unit of Account composed of the exchange value of all goods and services being traded on the system. This means you don't need to create an external data feed for an arbitrary basket of goods and services anymore, it is generated anyways by the Blockchain as a natural byproduct.
Interesting connection with inflation and default rates. That theory could fit in well with modern banking since we are on a credit money system and inflation may be a result of default rates more so than increases in base money supply. The Fed has increased base money supply to the tune of $4 trillion, but it seems to have limited effect on both inflation (at least so far) and credit money supply. We are in a credit bubble (consumer/mortgage/corporate), but the largest amount of bad debt is government/sovereign debt. Most countries are like Greece. In any case the current credit money system seems like it's coming to an end.
I've been thinking about gold standard stability in the US between 1880 - 1913. The inflation rate was 1.6% per year which is extremely low. It could be that the default rates were much lower because eventually something real like gold backed the elastic credit money system so the entire credit expansion system was limited with higher quality debt. Back then no one could create money the way you were able to this decade based on no verified income and no down payment. Credit money during the gold standard could not fund massive government programs with the idea that governments would always so easily be able to confiscate people's wealth via taxation.
Here are some thoughts:
Is the value of the the gold standard really just that it was a reference point for each person to easily compare the subjective value of other goods/services they could exchange for? The IOUs of all goods/services within the entire set of credit/debit exchange needed a common asset to reference. Hence the reference asset can be anything, whether a grain of rice, gold, BTC, BTS. Every other asset would just fluctuate around that reference asset. It would be preferable if the reference asset was chosen that was common to the people. It may not be that people compared the metal value of gold or silver to other goods & services, but it was that a certain weight & fineness represented some amount of grain seeds. It would be easy for the average person to compare their labor or other assets against grain seeds because it could represent X number of meals. Hence a pound sterling was legally defined as 5,400 grains of 92.5% fine silver, and a grain was legally defined "as the weight of a grain seed from the middle of an ear of barley"
http://jpkoning.blogspot.com/2012/12/a-history-of-pound-sterlings-medium-of.html
So the value attached to gold/silver was more about the amount of grains it represented. Although the # of grains attached to a certain weight/fineness of gold/silver was set by government decree, the free market value of gold/silver vs grains may not have fluctuated that far off from the official decree. Let's say the metal value of pound sterling could have fluctuated between 4000 - 7000 grains depending on the supply/demand of silver & grains, but for the sake of price stability the monarchy may have decided on 5,400.
The US dollar was derived from the Spanish dollar that was based on the 16th century Joachimsthalers that weighed 451 Troy grains ( 29.2g) of silver. "Troy grains were nominally based on the mass of a single seed of a cereal."
http://en.wikipedia.org/wiki/Spanish_dollar
So today's seemingly stable US dollar is based on credit money, but the credit money has a past with a link to silver & further back grains. Does that reference & history help keep the stability of the current dollar? If I got a haircut for a dollar backed by gold in 1880, it would be hard for me to think it was worth that much more in 1885. Overtime because of inflation (or default rates of credit money) a haircut costs much more now. However the reference point has always been past experience more so than a comprehensive study of comparing the money value of all goods & services. (Mises ponders this when he discusses credit money and his regression theory in his Theory of Money and Credit.)
The entire set of credit/debit exchange includes a time component as well since some credit is short-term and others are much longer (30yrs for a mortgage). Of course a mortgage loan is ultimately an exchange of the labor/material to build a house in return for an equivalent 'value' of goods and services the borrower can provide in return over a presumably long time period. The entire volume of credit/debit exchange is elastic and ever-changing continuously just as the average maturity of credit in the entire system. All credit is created and then destroyed precisely when an exchange is complete. (Money & credit is unnecessary if you live in autarky of course.) The reference point of credit could be anything, but it was grains/gold/silver for a very long time.
You can use any other reference point such as BTC, but even a global ledger should have a common real world object as a unit of account should it not? Sea shells, clams & beads with early native americans were not just ledger systems without a referenced asset, but each shell or bead must have represented 'something'... whether labor time,an ounce of meat or flint etc. People just trusted the ledger or accounting system, but that did not represent the unit of account in itself. Talley sticks were also used as a ledger at various times in history. In medieval England the tally cuts represented pounds of grain:
"The manner of cutting is as follows. At the top of the tally a cut is made, the thickness of the palm of the hand, to represent a thousand pounds; then a hundred pounds by a cut the breadth of a thumb; twenty pounds, the breadth of the little finger; a single pound, the width of a swollen barleycorn; a shilling rather narrower; then a penny is marked by a single cut without removing any wood."
http://en.wikipedia.org/wiki/Tally_stick
Does credit money just need a reference asset as a peg so people can easily compare and subjectively assign relative value?
A redemption mechanism allows people who are skeptical to leave the entire credit/debit exchange system (rightly so when it's modern banks giving credit to unworthy borrowers and governments), but it's not really necessary to have a real amount of gold or grain. It's just a reference point. The credit is always based on value people create so that would not be limited by constraints of supply in any commodity. We create wealth. Gold & grains are real world reference points and nothing more.
Hence if you create a system like your Perpetual Coin or Grignon's version (or even BTC), does it not face difficulty in having a real world reference, if anything just to help adoption? Grains may seem a bit awkward in this modern age, but it's probably an easier one for me to use as a reference. After watching that Grignon video again with credit coin/perpetual coin, it still seems to me everyone will still be confused about what subjective value to place on any credit coin or perpetual coin compared to any other good/service they can provide. Otherwise it would be like comparing 100ABCs vs 10,000XYZs vs 1,000,000 Credit Coins to 1000 Perpetual Coins to an apple and pair of shoes. I can easily compare the apple to the shoes, but the others I would immediately have difficulty with. If anything a real world reference just makes adoption easier.
The second point is any system, who creates the credits? Right now we have centralized banking institutions who monopolize credit creation and do an extremely poor job of it. A lot of loans go to unqualified borrowers. A lot of loans go to wasteful and unnecessary governments. On the other hand qualified borrowers and good projects have a harder time receiving credit. Our current system also creates systemic risks because credit creation is highly centralized and when bad credit bubbles go bust, everyone goes down. A purely decentralized system would have a 1:1 relationship where if a borrower is unable to pay, the one creditor loses out. The lone creditor must calculate the risk. You can have any M:N relationship with credit (M debtors/N creditors), but the N creditors would collectively have to evaluate and manage credit risk. Hence at least default risk would be isolated. A decentralized system such as bitShares UIA's or other altcoin LETs systems could work well. However I still think decentralized credit should be backed by assets such as gold/grain/land/company shares or anything more easily recognizable to the average person. It would be up to each issuer. We wouldn't see Annie, Bob, or XYZ company credits floating around, rather there would be Annie's apple credits and Bob's orange credits and XYZ smartphone credits or just Annie/Bob/XYZ gold credits.
Anyways just curious to know your thoughts.
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To merivercap's points, I've thought about this a bit, and don't have any answers, but here are some of my current views.
I'm coming to think the utility of an incorruptible and widely accessible ledger (the block-chain) is a new commodity on which money can wholly be based. Though it can be argued that block-chains can be forked and reproduced ad-infinitum, the limiting factor in their production is the energy, time and labour required to secure a network, which are limited resources. This is true whether the security is more energy-based (e.g. PoW) or time and labour-based (e.g. DPoS). As a result the network effect means that these resources will tend to centralise around a subset of the most useful block-chains, significantly enhancing their utility and security, and underpinning the value of the tokens attached to those block-chain ledgers. Such ledger robustness was not possible in Mises' day, but if it is indeed a useful commodity, might it still be consistent with his money regression theory?
If the above is valid, the current challenge for crypto-money at this point is merely building enough critical mass for this value to become manifest. I did originally think that backing crypto-money with a commonplace commodity (even a digital one) might help initial adoption, eventually allowing such a crypto-money to gain early dominance, and eventually be able to release its backing and float freely on its value as a pure transaction ledger. This is much what fiat money did when it left the gold standard, as most of the value of gold (the underlying money) by that point was already merely its support of a transactional system rather than its physical applications. This allowed fiat to leave the gold standard without breaking down, although the lack of sufficient monetary discipline since then has seen ongoing long term decline in the value of these units.
I still think its possible for a crypto backed by a tangible well-accepted commodity to gain faster acceptance and surpass bitcoin. But I no longer think that is a necessary condition for crypto-money to eventually be accepted. I am now leaning to the view that the longer bitcoin survives (and other cryptos) without compromise of the block-chain, regardless of everything else, the more such crypto-ledgers will gain wider acceptance of their intrinsic value in society. Wider acceptance will improve stability over time, because the good which is most widely accepted and exchangeable for all other goods in the economy (i.e.money) becomes the least volatile. This is more intuition than proof.
In the end I think the least volatile measure of value is money itself, when it reaches the point of economic dominance. Attempting to anchor the value of this to any other unit would merely cause liquidity to vanish at certain points when its demand relative to those goods changes. There are times when the demand to hold money, like everything else, can change according to people's needs, and only floating money can accommodate this. So there may be some short term adoption gain from anchoring, but I don't think its viable in the long term.
Our concepts of money seem to evolve more quickly nowadays, so my view is also open to change over time.
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To merivercap's points, I've thought about this a bit, and don't have any answers, but here are some of my current views.
I'm coming to think the utility of an incorruptible and widely accessible ledger (the block-chain) is a new commodity on which money can wholly be based. Though it can be argued that block-chains can be forked and reproduced ad-infinitum, the limiting factor in their production is the energy, time and labour required to secure a network, which are limited resources. This is true whether the security is more energy-based (e.g. PoW) or time and labour-based (e.g. DPoS). As a result the network effect means that these resources will tend to centralise around a subset of the most useful block-chains, significantly enhancing their utility and security, and underpinning the value of the tokens attached to those block-chain ledgers. Such ledger robustness was not possible in Mises' day, but if it is indeed a useful commodity, might it still be consistent with his money regression theory?
I agree with your sentiments. The blockchain/global ledger is a digital commodity. You can also consider it a DAC or a payment system. The network effect is important. Mises would probably agree and after competing in a free market of all commodities & digital commodities the dominant blockchain may eventually be used as the primary form of money in time.
If the above is valid, the current challenge for crypto-money at this point is merely building enough critical mass for this value to become manifest. I did originally think that backing crypto-money with a commonplace commodity (even a digital one) might help initial adoption, eventually allowing such a crypto-money to gain early dominance, and eventually be able to release its backing and float freely on its value as a pure transaction ledger. This is much what fiat money did when it left the gold standard, as most of the value of gold (the underlying money) by that point was already merely its support of a transactional system rather than its physical applications. This allowed fiat to leave the gold standard without breaking down, although the lack of sufficient monetary discipline since then has seen ongoing long term decline in the value of these units.
Yes. I think it could still be important to build critical mass. I'm excited about bitUSD & bitGold because it is a natural bridge from our current system.
BTW Mises was addressing the point about fiat and credit money with his regression theory. He stated bank credit money (or fiat money) could not come into existence as a money because it did not first originate with exchange value with other commodities. However because most often fiat money first begins with gold backing, it retains its monetary use value.
I still think its possible for a crypto backed by a tangible well-accepted commodity to gain faster acceptance and surpass bitcoin. But I no longer think that is a necessary condition for crypto-money to eventually be accepted. I am now leaning to the view that the longer bitcoin survives (and other cryptos) without compromise of the block-chain, regardless of everything else, the more such crypto-ledgers will gain wider acceptance of their intrinsic value in society. Wider acceptance will improve stability over time, because the good which is most widely accepted and exchangeable for all other goods in the economy (i.e.money) becomes the least volatile. This is more intuition than proof.
In the end I think the least volatile measure of value is money itself, when it reaches the point of economic dominance. Attempting to anchor the value of this to any other unit would merely cause liquidity to vanish at certain points when its demand relative to those goods changes. There are times when the demand to hold money, like everything else, can change according to people's needs, and only floating money can accommodate this. So there may be some short term adoption gain from anchoring, but I don't think its viable in the long term.
Our concepts of money seem to evolve more quickly nowadays, so my view is also open to change over time.
I agree with your intuition that the most widely accepted good used as money will become the least volatile, but credit money is the dominant money of today compared to commodity money and I'm interested to know how credit money plays out in the cryptoworld because I think it will be important. I'm intrigued with bitSapphire's theories because a lot of it aligns with my thinking, but I don't quite understand the mechanisms yet.
And yeah my views on how money works has definitely evolved over a long period of time and probably will continue to....
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Thanks for comments merivercap. I agree that debt and credit needs to be integrated into future money systems, and needs more consideration.
The IOU represents the debt of the issuer in terms of an external unit of account (which in our model is the Perpetual Coin). It does not represent any good, service, hour, or anything of that sort that currently is in use with LETS.
Ripple has an in-build commodity money (XRP) which cannot function as a stable unit of account. It is the same as Bitcoin in this regard, or any commodity money. Our proposal creates a stable unit of account similar to bitAssets, but which track an internal ratio rather than some arbitrary commodity or basket of commodities. Rather, it tracks all goods and services on the market.
Following the discussion between bit sapphire and merivercap, I'm interested how such a system might theoretically work.
First, I'm not sure how this is different to the modern fiat system, where a dollar also represents a value of goods or services owed you by the community, and a dollar owed is the converse obligation. bitsapphire, could you clarify the key difference? I'd like to understand your proposed mechanisms better.
Why I raise this is that there are clear flaws with the current fiat system (merivercap raised some of these):
- Newly created money is fungible with existing money and so immediately affects the quality and value of all existing money.
- New borrowers have temporary purchasing power advantage in being able to buy before economic prices adjust.
- Banks monopolise the money creation process, requiring centralised authority to administer.
- Credit risk becomes centralised and therefore systemic, requiring back-stops and guarantees (e.g. TBTFs).
- The existence of back-stops means issuers (the banking sector) are incentivised to maximise issuance irrespective of the productive quality underlying the debts.
- This leads to an ever more fragile cycle of crisis and greater back-stops.
Why wouldn't a more robust system, that fulfils the same split-barter functionality, be to have self-liquidating borrowing and lending markets, as well as potentially bill of exchange markets (exchangeable issuer-based IOUs), using a fixed supply token for settlement? In this way I think the value of the fixed supply token cannot be compromised directly by new debt issuance.
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Apropos, what do you think of this idea? https://bitsharestalk.org/index.php?topic=14762.msg191489#msg191489
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The USD, Euro, and every other government(aka. banker) issued currency out there can be seen as having relative degrees of volatility as well. Heck, the whole idea of a rock solid store of value is only something human beings could dream up, since everywhere you look the universe is basically engaged in violently tearing itself apart. I do not believe that fiat currencies (ledger entries, including all blockchains) can be made into an arbitrary "store of value" as well as remove volitility without the violent cohersion, fraud, and subversion that the bankers' enforcement branch (government) are known for. Strip away the subterfuge, and fiat is nothing but a commodity backed by a "promise".
This is why bit assets are so ingenious. I3 has created a bridge between the existent world of commodities (including all national currencies) and the miracle of transparent ledger interaction. As long as something "stable" exists in the outside world, bitshares is useful. Arhag seems to have arrived at the same conclusion that I have: once we approach the endgame or "saturation stage", the logic begins to break down and its altogether unclear how things will proceed from there.....My guess is some sort of radical social transformation :D
EDIT: Not at all trying to throw water on the brainstorm, NPI, just pontificating on the (im)possibility of fiat holding any sort of value outside of being a tool for arbitration.
i like your thinking.
i think jim rickards may have a good point though, the next fiat bailout will be the IMF bailing out the US, EU etc with their SDRs. Ultimately gold should prevail, governments may just be able to kick the can a few more inches though. this is why i like bitgold personally.
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Hey Starspirit & Bitsapphire,
Just following up on my comments about unit of account and reference points of value. I was thinking about Bitcoin the other day and came to realize that Bitcoin does in fact have a discrete unit of account or reference point. It's actually the computational time required to mine/hash a new block. (Roughly 10 minutes of computational time). The computational time in the 'proof of work' process is the 'unit of account' that can be a reference point to judge all goods & services against. Fascinating to think about.
'Satoshi Nakamato' aka 'Wei Dai' aka 'Nick Szabo'...aka the inventor with a beautiful mind really carefully thought this one out. It was many years in the making. If you read 'Wei Dai's' b-money txt: http://www.weidai.com/bmoney.txt, you can see the inventor originally was trying to link the cost of a standard basket of commodities with the computing cost of a proof of work system. That would be a reference point or unit of account, but you would need an external input with a standard basket of commodities. I think one of the key decision points was when the inventor found a way to algorithmically change the difficulty so that the avg computing time would not change and that's when he pretty much decided to unleash the Kraken.
If you read 'Nick Szabo', his explanation of what took Bitcoin so long to happen:
http://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html
And 'Nick' also describes unforgeable costliness & bit gold:
http://diyhpl.us/~bryan/papers2/bitcoin/unforgeablecostliness.html
He describes time-wage rates vs piece-wage rates here in: Measure of Sacrifice (time): http://szabo.best.vwh.net/synch.html
And he mentions 'time' again here in: Antiques, time, gold, and bit gold: http://unenumerated.blogspot.com/2005/10/antiques-time-gold-and-bit-gold.html
It seems using computational time as a unit-of-account was one of the economic foundations of Bitcoin. I do wonder if rather than time some other unit of account that takes into consideration the quantity/quality of output might be preferable because as an Austrian I do like emphasizing an end-result rather than time. For example you can measure the # of puzzles and difficulty level of puzzles solved per unit time. (This system would be much harder to implement, but it's just an analogy)
If you see the comments of 'Nick Szabo' on his 2011 'Bitcoin: What Took Ye So Long' post a few years after Bitcoin launched he suggests some other methods to determine unit of account and actually questions the decision to automatically adjust the difficulty level (which effectively makes the unit of account computational time). I'm wondering if it's just the inventor providing clues of ways to improve his own invention and experiment after a few years of observation? It seems 'Nick' promoted some ideas on the comments sections for suggestions to improve Bitcoin as well as for future projects including smart contract implementation & proof-of-stake.
Anyways computational time as a proxy for unit of account might work out for Bitcoin, but I think if someone is going to try out another POW system they would try out something that would consider quantity&quality.
BTW pretty much everything 'Nick Szabo' writes are the underpinnings of Bitcoin's design as well as the block chain revolution. Note: The blog starts to get weird from about 2012 on. The reading becomes very un-'Nick Szabo'-like. Even weirder 'Nick Szabo' starts a twitter account in 2014 and starts consistently tweeting? Very strange for an intellectual. Hope he's ok.
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BTW the idea that the unforgeable costliness of the Bitcoin POW can be used as a unit of account does not necessarily make it have value. Bitcoin, from a typical Austrian economist point of view, must show value first as a global ledger/payment system/digital commodity before the computational time unit of account can be used.
Over time if the demand and value of Bitcoin is there, the computational time 'unit of account' can be the reference point when the actual value of an Bitcoin is used more for it's exchange value, rather than it's subjective use value (as a payment system/ledger/collectible etc.)
For example gold is first used as jewelry or for industrial use, but over time because of its other qualities (divisibility, durability, relative portability, fungibility) it became the primary commodity for exchange and its monetary value became dominant over it's subjective use-value.
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Hey Starspirit & Bitsapphire,
Just following up on my comments about unit of account and reference points of value. I was thinking about Bitcoin the other day and came to realize that Bitcoin does in fact have a discrete unit of account or reference point. It's actually the computational time required to mine/hash a new block. (Roughly 10 minutes of computational time). The computational time in the 'proof of work' process is the 'unit of account' that can be a reference point to judge all goods & services against. Fascinating to think about.
I used to think money required something to back it, but now my view is that money is the unit of account. Its value derives from the integrity of the monetary system, and how much confidence people can have that the ledger system as an effective and fair way to record where goods and services have been provided and are owed in society. Gold did not need anything to back it, apart from durability and scarcity, but that's what provided the integrity in the system. Now I think the block-chain technology can achieve the same function. So I'm not sure we need to identify an underlying unit of account anymore to call something money. Not sure though.
The security provided by PoW might add value to a crypto-money, but the cost of production (as in any industry) has no direct influence on the demand for or valuation of the money, so I don't see this cost as a unit of account to compare the price of goods and services. I still think the value of the money itself does that. Perhaps I'm misunderstanding what you mean though.
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Create a dac with one delegate for each country. Each delegate pays hundreds if not hundreds of thousands of folks to submit data points via app interface. How much gas cost, beef, electricity, a hair cut, their tax bill, babysitter, dentist whatever. Each data point gets paid for with a micro payment in a bitAsset, say bitGold for the sake of argument.
The data points are plugged into a clever database that analyzes/averages/whatever and spits out two things: a value for the store of value/currency token (same principles as BTS, transaction fees pay delegates) and data feeds/metrics which can be purchased (other source of income).
This dac would serve humanity incredibly well by providing unbiased raw data on economic activity as well as a store of value that would continuously adjust to maintain constant purchasing power.
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Hey Starspirit & Bitsapphire,
Just following up on my comments about unit of account and reference points of value. I was thinking about Bitcoin the other day and came to realize that Bitcoin does in fact have a discrete unit of account or reference point. It's actually the computational time required to mine/hash a new block. (Roughly 10 minutes of computational time). The computational time in the 'proof of work' process is the 'unit of account' that can be a reference point to judge all goods & services against. Fascinating to think about.
I used to think money required something to back it, but now my view is that money is the unit of account. Its value derives from the integrity of the monetary system, and how much confidence people can have that the ledger system as an effective and fair way to record where goods and services have been provided and are owed in society. Gold did not need anything to back it, apart from durability and scarcity, but that's what provided the integrity in the system. Now I think the block-chain technology can achieve the same function. So I'm not sure we need to identify an underlying unit of account anymore to call something money. Not sure though.
The security provided by PoW might add value to a crypto-money, but the cost of production (as in any industry) has no direct influence on the demand for or valuation of the money, so I don't see this cost as a unit of account to compare the price of goods and services. I still think the value of the money itself does that. Perhaps I'm misunderstanding what you mean though.
I agree commodity money (digital or real) doesn't need anything to back it. Money has a unit of account based on a piece of itself in anyway you want to slice it (Bitcoin/satoshi or silver/dollar/sterling/shekel/drachma), but I was mainly referring to a real world reference point to compare the 'slice' of money to for the average person to subjectively compare its value. BTW the grains in my previous posts refer to grains of silver/gold so it didn't refer to the # or barley/wheat grains. I may have confused the ideas earlier. So a grain of silver in medieval times would be worth maybe a certain # of grains of barley ....let's say 1,000 grains for example. 1 troy oz of the silver Spanish dollar coin (451 grains) would be let's say would be roughly equal to 451,000 grains of barley. The silver/gold/grain price would fluctuate of course... A grain of gold would be worth roughly 16x a silver grain (based on the free-market ratio which I've heard was generally around 16:1 a very long time ago) In the agrarian countryside, the reference point of grains was a good one. However, in cities and towns with more service-related occupations, 'Nick Szabo' describes how accounting for time & sacrifice, time-wage rates, & clocks improved the economy and working relationships: http://szabo.best.vwh.net/synch.html
BTW read this paragraph gave me a chuckle:
"The most valuable property of the bell tower time was not its accuracy, but its fairness. Even if it broadcast the wrong time, it broadcast the same wrong time to everybody. An employer, even if he was colluding with the Church to bias the sometimes subjective ringing of the canonical hours, couldn’t tell his favorite employees that it was time to go home, while making other employees work extra, and pretend that it was the same time. (In contrast, on our computer networks such “Byzantine” attacks are possible, without advanced safeguards, when “broadcasting” time or other information)." :P
To your second point about cost, I agree and I mentioned that from an Austrian point of view value is the primary driving factor. However 'Nick Szabo' addresses this as well in all his other writings on 'Origins of Money', collectibles, sacrifice&time, unforgeable costliness etc. (You should read all his stuff.) So craftsmen in antiquity would not really make anything of immediate functional value in creating beads of money. So why would they sacrifice so much time and effort making beads when every day would have been about survival from an evolutionary standpoint? 'Nick Szabo' would call this unforgeable costliness and another way that a money can originate and he cites many examples. Even Adam Smith brought up the Cost of Production Theory of Value. From a logical Austrian perspective you can dismiss that theory, however from a human standpoint there seems to be a perception of value primarily based on cost & sacrifice. 'Nick Szabo' discusses how people value collectibles oftentimes for it's unforgeable costliness like for example an intricately weaved Native American basket. It's a human instinct. So Bitcoin is exactly that experiment. The use of Bitcoin for it's immediate functional use as money is clearly lacking, but the potential future use as money seems to be growing. The promise and capability of being a global secure ledger, the unforgeable costliness of mining, the network effect etc seems to be driving Bitcoin to be accepted as such in a fascinating real world experiment.
The human reference point of computing time for a Bitcoin block or Satoshi would be its relative value to human time. So 10 minutes of computing time would fluctuate around X hours of human time, just as a grain of silver would fluctuate around X amount of barley grains. Whether the inventor designed Bitcoin to have computing time as a point of reference or he just needed to have a way to control inflation over time using automatically-adjusting difficulty I'm not sure. It's probably by design if you read 'Nick Szabo'. Anyways it's just interesting to ponder.