Author Topic: Vitalik on stable currencies and POS  (Read 14099 times)

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Offline Rune

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Re: Vitalik on stable currencies and POS
« Reply #60 on: December 30, 2014, 02:01:16 pm »
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A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.

Offline nomoreheroes7

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Re: Vitalik on stable currencies and POS
« Reply #61 on: December 30, 2014, 02:06:51 pm »
Quote
A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.

Yup, let's do this. Where do we start?

8)

Offline Rune

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Re: Vitalik on stable currencies and POS
« Reply #62 on: December 30, 2014, 02:32:37 pm »
Quote
A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.

Yup, let's do this. Where do we start?

8)

First we wait until ethereum is actually out and working. Then copy it if it seems valuable. Then hire their team and reward their shareholders if we feel confident in its future value.

Offline yellowecho

Re: Vitalik on stable currencies and POS
« Reply #63 on: December 30, 2014, 06:25:03 pm »
First we wait until ethereum is actually out and working. Then copy it if it seems valuable. Then hire their team and reward their shareholders if we feel confident in its future value.

I've heard the devs say in the past that developing a BitShares-tuned turing complete scripting language would likely be better method than simply copying it.

IMO the only thing BitShares needs to worry about regarding Ethereum is the network effect.  If it can gain users faster than BitShares can develop similar market-demanded functionality than it could be trouble... otherwise BitShares is golden  8)
« Last Edit: December 30, 2014, 06:28:48 pm by yellowecho »
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Offline bytemaster

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Offline Pheonike

Re: Vitalik on stable currencies and POS
« Reply #65 on: December 30, 2014, 07:33:54 pm »

Typo

"wealth transfer to miners which waist most of it in the mining process"



Offline bytemaster

Re: Vitalik on stable currencies and POS
« Reply #66 on: December 30, 2014, 07:35:15 pm »

Typo

"wealth transfer to miners which waist most of it in the mining process"

Fixed, thanks.
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Offline clayop

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Re: Vitalik on stable currencies and POS
« Reply #67 on: December 30, 2014, 07:38:00 pm »

Typo

"wealth transfer to miners which waist most of it in the mining process"

This reminds us "proof of waist" lol
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Offline jsidhu

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Offline vbuterin

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Re: Vitalik on stable currencies and POS
« Reply #69 on: December 30, 2014, 10:18:12 pm »
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/

Okay, so...

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It is also widely accepted among many crypto-currency fans that the FED has failed at their mandate because of persistent rise in prices resulting in the dollar losing 99% of its purchasing power since the FED was founded in 1913

Okay fine, create a currency pegged to the consumer price index.

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The goal of price stability at its heart is the same as Price Fixing and this is a well known economic fallacy that crypto-currencies should avoid.

The reason why price fixing is an economic fallacy is that in the real world you do not have a magic lever to increase the supply or demand for a product. If the natural market rent is $4000 and you set a legal rent ceiling at $2500, then due to decreasing supply and increasing demand you will have a shortage of rent, and there's nothing you can do to force extra supply to emerge at that price. However, this argument specifically does not apply for currencies. With currencies, you control the supply. Hence, assuming a simplified formula price ~= supply/demand, if you fix the price then all you need to do is constantly adjust supply to equal demand. Robert Sams' seignorage shares shows how to do this just fine.

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Governments around the world are constantly changing how they calculate the basket and what items are included. They will do things like exclude food and energy along with stocks and real estate. John Williams maintains a website called “Shadow Government Statistics”

Ahh, shadowstats. I think it gets pretty nicely debunked here: http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/

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The idea that any currency could exist and maintain stable purchasing power through a nuclear war is insane.

Agree. But I don't see why such a high threshold needs to be a requirement.

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From the perspective of someone holding a coin, positive and negative interest rate changes are identical to price volatility.

The key difference is that positive and negative interest in SchellingDollar exists in small quantities and only for as long as needed until traders reallocate their holdings to make profit via arbitrage. One can literally set a maximum and minimum interest rate of +/-10% annually, and the scheme would still work fine. The reason why this is possible is that the stable coin is a zero-total-supply asset, and so any level of cash holding preferences is compatible with any price level; in a finite supply asset, on the other hand, price is proportional to cash holding preferences.

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Any approach that provides unlimited liquidity at a fixed price is vulnerable to market manipulation attacks.

Sure, so if those kinds of attacks prove to be a problem, then provide liquidity on an increasing fee schedule. No big deal. Or we could just go back to Robert Sams' auctioning approach.

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Predictable vs Stable... It seems to me that what people really want from a “stable” crypto-currency is reduced volatility.

Well yes, that's exactly what I mean by "stable" and why I think stability is useful to people. What else did you think I meant?

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If we think about the “ideal money” it would be widely accepted with 0% growth in supply.

I think you'll find most economists would disagree on you on that point. Particularly non-Austrian economists

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In my opinion, gold and silver, should be physical money and a crypto-currency should attempt to peg to gold and silver. In this way we can free all of society from the centralized control of fiat currency issuers and keep inflation limited to what gold and silver miners can produce.

Please dear god no, gold is an environmental tragedy that uses proof-of-waste for its supply expansion algorithm. I would rather have BTS be the universal money than subsidize gold's price a single dollar more.

Also, as a final comment, all of the attacks against the US government in that post are irrelevant. Neither bitassets nor schellingdollar nor any other proposed mechanism is (1) controlled by any kind of Fed, (2) necessarily needs to be imbued with the explicit goal of 2-4% inflation, as opposed to a non-inflationary strategy like CPI pegging or heck even shadowstats pegging, and (3) has profits somehow leaking into a shadowy financial elite - everyone can own shares/volcoins and take part in any profits that the scheme may end up generating. It is wrong to extend criticism of existing centralized monetary policy into criticism of the very concept of monetary policy at all.

Offline arhag

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Re: Vitalik on stable currencies and POS
« Reply #70 on: December 31, 2014, 12:04:20 am »
+5% to many of the points in Vitalik's post above.

And although I am interested in a BitCPI, I still am not at all confident about it as a long term solution (when everything is priced in BitCPI). Perhaps it is just the ideal bridge currency necessary until the saturation stage at which point BTS itself (or the volcoin to use SchellingDollar nomenclature, even though at that point I don't think it would really be volatile) could be the universal money. Vitalik, what are your thoughts on how a price stable currency could work (or maybe not work) at the limits of worldwide adoption (particularly when goods/services worldwide are priced in the BitAsset or stablecoin)?

I think BitUSD and even more so BitCPI are great during the growth stage of BitShares, but perhaps something different must eventually be done. My guess is that BTS itself eventually becomes the low volatility (at that future point) currency that everyone uses. It would still inflate and deflate according to global economic conditions, but would happen over large enough time scales that everyone would find it acceptable to use as a currency. BitAssets would still exist for speculating on commodities and other assets, but would not be used to create the supply of the world reserve currency.

Another possibility is a BitCPI (with a initial collateral and margin call limit close to 100% allowing for large leverage) that has a built in 5% inflation in its definition, but also has yield with a cap of up to 10% per year. This could create a "stable" asset that has +/- 5% p.a. value change flexibility to allow for the necessary amount of inflation/deflation so that the underlying BTS can still support its value even in the saturation stage. Still not 100% sure how the price feeds would work, but perhaps using the one-hour moving average from the internal exchange modified up/down over time by price measurements entering the blockchain could work well. I think I prefer the solution in the previous paragraph more.

Offline nz

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Re: Vitalik on stable currencies and POS
« Reply #71 on: December 31, 2014, 12:11:11 am »

Typo

"wealth transfer to miners which waist most of it in the mining process"

This reminds us "proof of waist" lol
I can vouch for proof my waist as mine expanded a few extra inches over christmas.  :-\
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Offline logicalgrackle

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Re: Vitalik on stable currencies and POS
« Reply #72 on: December 31, 2014, 04:56:01 am »
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/

The argument against pegging to a stable value seems to be that the statistics to determine stable value aren't widely agreed upon, so such a pegged asset would fail to attract a market. This is clearly false. Economists broadly agree that the government's methodology for calculating inflation are sound. Some disagree, but they make political objections, not objections that are backed by reasoned arguments in academic papers.

But it doesn't matter. Either of us could be wrong. The only way to find out is to build the price feed, launch the asset, and see if people use it. I plan on doing this, and I hope people join me to help refine the methodologies for building a feed that credibly prices stable value over time.

Offline jsidhu

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Re: Vitalik on stable currencies and POS
« Reply #73 on: December 31, 2014, 05:34:45 am »
If seignorage is fixing price and adjusting supply inflation I dont see it working.. It creates incentive to  dry up M2.. And will end up in a feedback cycle where the currency will lose "trust" the most important thing in a market instrument. Its like peercoin with lower rewards once hashrate drops.. However creates the wrong incentive.

Infact dynamically adjusting supply based on stats is doomed for failure.. The most important thing is confidence and predicability brings about confidence. If we know that there will be x amount of inflation per year and it will increase or decrease if i vote for this developer or lack thereof then its an easier to understand system that will result in supply demand equlibrium resulting in what I call a "happy consensus".. In other words ask 10 guys.. Synical, laidback, nerds whatever which one will pass the test when asked what do you think about the inflation strategy for x currency? I think the non statistical approach will place higher on the spectrum of what people actually want and are happy with.

Todays shadow stats are a great example of why stats dont work in reasoning monetary base inflation. Regardless of if they are warranted, I mean the fact that they exist and so many people believe in them.
« Last Edit: December 31, 2014, 05:39:21 am by jsidhu »
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Offline bytemaster

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