Jump to content
Sign in to follow this  
drbubb

CRYPTO Coin Redesign Discussion thread

Recommended Posts

The CRYPTO Coin REDESIGN Discussion

 

s57h.jpg

 

At the request of one of our members (by private message), I am starting a Discussion thread on Crytpo-Coins, and how they might be designed to make a more stable and less speculative investment.

 

Here are the "problems" that need fixing (inspired by the message I received):

 

=========

 

I can see some flaws* in Bitcoins, which need correcting:

*The BIG DESIGN FLAWS I see in Bitcoins are:
==================

 

+ They are totally "fiat", or worse. There is no gold, or even any political backing for the coins. No government takes them in payment of taxes. (Germany taxes transactions in BTC, but does not accept tax payments in the form of BTC). With no backing, BTC prices can crash, and therefore they may not be a safe store of value.

 

+ Crypto coins PRICES move in too volatile a fashion, to make them a safe medium of transactional exchange, and they are less safe as a long term store of wealth than even fiat currencies (because of lack of backing.) After each wave of interest in the coins peaks and slows, prices crash. And Crypto Coin values are vulnerable to an even bigger crash. As some have said: "If I was interested in a pump-and-dump operation I would look to Crypto coins."

 

+ Until now all the big rises in prices have accrued to computer geeks who backed new currencies early, and to a few merchants who may have taken the coins and held them. Is that the best place to generate or create new wealth?

 

+ The governments of the world can kill demand for Crypto Coins by imposing taxes or other restrictive measures on the coins. When China banned them for transactions on Dec.5th, 2013, prices plummeted by 54% from US$1,242 to US$576

+ A rising amount of energy is "wasted" in mining the coins. As more computers become engaged in mining them, the equations which need solving become more complex - And more and more energy is engaged in a useless "mining activity". In effect, Bitcoins are created through wasting energy in useless mathematical equations. There must be a better way to distribute the new coins than giving them away to people who waste energy to gain the potential of "earning" free coins.

==================

 

(Note to those who want to JOIN the Discussion here:

My favorite Flying Creature is the: Admiral Byrd - with the 2nd word spelled differently)

 

LINK to here: http://tinyurl.com/Crypto-ReD

Share this post


Link to post
Share on other sites

*The BIG FLAWS I see in Bitcoins are:

+ A rising amount of energy is "wasted" in mining the coins. As more computers become engaged in mining them, the equations which need solving become more complex - And more and more energy is engaged in a useless "mining activity". In effect, Bitcoins are created through wasting energy in useless mathematical equations. There must be a better way

 

============

 

The Energy-wasting nature of Bitcoin mining has been recognized. Some have called it the "billion dollar energy tax."

 

Many of the "newer" generation of coins have tried to get around this problem, by not using energy-intensive calculations (proof of work) as the method of distributing new coins. And one such 2nd generation coin is the NXT Coin, which gives "green mining" as an advantage of the coin:

 

=

=

 

(NXT Coin was recently no.7 in MarketCap. At $0.054 and just under 1,000 Million Coins, it is worth $54 Million.)

 

They have also added on various innovations, allowing the coin's network to be used in creative new ways.

 

hffy.jpg

 

I have to wonder: What happens when a Coin dies?

Will all those who own it just lose all their money? I suppose so, since there is no backing. And once those holding the coin decide they no longer want to use it - perhaps government decisions will cause that, or if the code gets ir-repairably hacked, then the coins' value can drop to zero. No Central bank or other institution is going to jump up and save it from sliding all the way down.

Share this post


Link to post
Share on other sites

OTHER CRITIQUES

 

Here are the flaws discussed in the Wiki entry on Digital Currencies

 

Criticism

  • Many of these currencies have not yet seen widespread usage, and may not be easily used or exchanged. Banks generally do not offer services for them and sometimes refuse to offer services to virtual-currency companies.[18]
  • Some have expressed concern that cryptocurrencies are extremely risky due to their very high volatility[19][20] and potential for pump and dump schemes[21]
  • Regulators in several countries have warned against their use and some have taken concrete regulatory measures to dissuade users.[22]
  • The non-cryptocurrencies are all centralized, so could be shut down by a government at any time.[23]
  • The more anonymous a currency is, the more attractive it is to criminals, regardless of the intentions of its creators.[23]

===

> http://en.wikipedia.org/wiki/Digital_currency

Share this post


Link to post
Share on other sites
People have been speculating about a way to back Bitcoins by Gold - but there are problems with it

Does it make sense ?


(here's the Forbes article on the subject):


Today's Strange Bitcoin Idea, The Gold Backed Bitcoin


This particular idea rather has me scratching me head as I can see a small publicity value to this idea and no other practical one at all. The idea being to produce physical bitcoins that are partially gold. That sounds like a reasonable way of getting a bit of publicity but not much else. And I cannot for the life of me fathom what the use of them would be beyond that. It’s the island of Alderney that is suggesting this:


The tiny Channel Island of Alderney is launching an audacious bid to become the first jurisdiction to mint physical Bitcoins, amid a global race to capitalise on the booming virtual currency.


The three-mile long British crown dependency has been working on plans to issue physical Bitcoins in partnership with the UK’s Royal Mint since the summer, according to documents seen by the Financial Times.


It wants to launch itself as the first international centre for Bitcoin transactions by setting up a cluster of services that are compliant with anti-money laundering rules, including exchanges, payment services and a Bitcoin storage vault.


The special Bitcoin would be part of the Royal Mint’s commemorative collection, which includes limited edition coins and stamps that are normally bought by collectors. It would have a gold content – a figure of £500-worth has been proposed – so that holders could conceivably melt and sell the metal if the exchange value of the currency were to collapse.


Now in one sense even just the idea has worked. For the FT has run a whole page on the point and here I am at Forbes talking about it again. So, the word should be getting out and about that Alderney wants to set itself up as a hub for the legal and controlled trading in bitcoin. So in that one sense the job is done already, that gold bitcoin has done what I presume it was intended to do.


On the other hand I’m not really sure that I can understand who would ever want to have such a gold bitcoin. And more than that, I’m not sure how anyone could possibly go about creating one. For in order to create a physical bitcoin which also includes £500 worth of gold you need to have a crypto-bitcoin and you also need to have £500 worth of gold. And obviously, the value of the two things separately, the gold and the bitcoin, are going to be higher than the value of the two as a physical bitcoin. By exactly the amount of gold that is in the physical version in fact.


===


Share this post


Link to post
Share on other sites
Will HK Be...

Boomtown for Bitcoins? - SCMP : 1/4/2014

=======

A growing number of bitcoin enthusiasts and entrpreneurs believe that Hong Kong can become the the bitcoin capital for the world.


+ HK can keep Bitcoin clean, and encourage bitcoin businesses

+ Regulations can be established to deter money laundering

+ Bitcoin related start-ups increase if there was less grey area


But Fin'l Sec. John Tsang is reported to have said:

The bitcoin bull run could not last forever because there is "no support from the real economy"


Various traditional economists have trashed BTC's:

+ Paul Krugman

+ Alan Greenspan, who calls it "a bubble"


+ John Greenwood, who says Bitcoin "fails three ways":

1 / As payment mechanism for goods and services,

2 / As a stable store of value

3 / As a universal measurement (basis for accounting)


BTC prices crashed on Dec.5th, when China's Central Bank, PBOC:

+ said it was banning financial institutions from dealing in Bitcoins,

+ prices plummetted by xx% from US$1,242 to US$576

+ PBOC also halted new deposits coming into bitcoin exchanges


>MORE NOTES:

Neverthless, various HK Entrepreneurs are working on various efforts...


EFFORTS of HK Entrepreneurs

======

+ Li Ka Shing's venture co. Horizon Ventures has invested in BitPay

+ Aurelien Menant, left SocGen to set up Gatecoin, a new venture:

"HK is a trading hub, and will benefit greatly from digital currencies"

"Financial regulations here is one of the best in the world"


Although Bitcoins in circulation are limited to 21 Million,

Each coin can divided into 10 Million smaller units: "Satoshis"


Lawmakers in Washington have signalled that they will allow Bitcoins


Germany in August, allowed Berlin to start taxing Bitcoin transactions


(HK is also home to one of the world's largest Bitcoin Miners):


Share this post


Link to post
Share on other sites
"There's Nothing New about parallel Currencies" -says Bloomberg,


in an article where it calls Bitcoin "a high-tech dinosaur, soon to be extinct":




Copper-coins-007.jpg



EXCERPT : A History of Private Currencies (especially as "small change" for small transactions )



For centuries, rulers found it impossible to keep competing currencies out of circulation. This was particularly true of the sorts of coins that served as small change for the lower classes of society. According to monetary historian Eric Helleiner, merchants in England issued low-denomination coins made of copper, lead and tin from the 13th century onward. By the 17th century, approximately 3,000 different businesses in London alone issued “unauthorized” tokens.



The authorities turned a blind eye, largely because the crown wasn’t able to supply much-needed small change. Indeed, by 1787, only 8 percent of all the copper coins in circulation looked as though it came from the mint, though much of this was likely counterfeit. Similar conditions prevailed elsewhere. In Mexico, for example, Helleiner estimates that 2,000 shopkeepers in Mexico City issued their own coins in 1766.



Private currencies got a further boost during the industrial revolution, when British factory owners became desperate for small change to pay wages. As economic historian George Selgin documents in "Good Money," the nation’s industrialists minted their own cash in far greater quantities and at a cheaper price than the government itself could muster. The right to “make money” was most definitely not in the exclusive hands of the government at this time.



Much of this currency consisted of coins made of copper, or occasionally silver, but by the nineteenth century private paper currencies became common as well. In Tokugawa Japan, for example, local lords issued their own paper notes, with 1,694 different kinds of currency in circulation by the 1860s. Likewise, in the U.S., state-chartered corporations -- banks, mostly -- issued a dizzying diversity of so-called “bank notes.” By the eve of the Civil War, at least 10,000 different kinds of notes competed with the coins issued by the U.S. Mint.



And this wasn’t the only evidence of the weakness of governments in monetary affairs. In most nations, foreign coins often circulated alongside official coins, sometimes supplanting them. The most famous of these interlopers, the Spanish peso or silver piece of eight, was the de facto currency in America. If you visited the U.S. and asked for a dollar in coin, in all likelihood you would get handed a Spanish piece of eight minted in a place like Potosi, Bolivia. Such coins remained legal tender in the country until the 1850s; in other countries, such as China, they served as a de facto currency into the 20th century.


. . .


Anyone who thinks that Bitcoin will triumph has to believe that it will succeed where earlier generations of private currencies failed -- that Bitcoin will, improbably, manage to overthrow more than century’s worth of accumulated state power, jealously guarded and ruthlessly enforced.


That’s a preposterous fantasy -- and a dangerous one, if you’re an investor.


===


Share this post


Link to post
Share on other sites

Volatility is a major flaw. Bitcoin is not a one way market, businesses aren't likely to want to hold large quantities when the value can fluctuate so dramatically. It's true you have the like of Richard Branson and others coming out saying they accept Bitcoins for Virgin Galactic, that's an obvious and easy route to free publicity and advertising for his brand - he's very good at using the media I that way. I'm sure as soon as they get Bitcoins they are converted to actual currency.

 

Why didn't the creators of Bitcoins include limits to price movement such as are present in many futures markets? There could be a trading halt if, for example, price moves 10% in one day.

 

One flaw that I have never heard discussed is that to have a currency that is truly intended as an efficient means of exchange there should be some form of mechanism to dissuade people from hoarding. People have a natural tendency to hoard resources and money is no exception.

 

I believe there should be some form of mechanism for those people/companies/investors who hold very large amounts whereby a small % is taken per year and redistributed. So for example if a holder had over a certain number of bitcoins, let's say 10000 averaged over a year, then a single digit % would be taken and redistributed to dissuade people from hoarding and encourage them to use it only as a means of exchange. There could be a tiered system so for every 10000 coins held the % would be slightly higher. Or it could be linked to the number of bitcoins in circulation to dissuade people from holding too much of the market.

 

The question of what happens to the redistributed Bitcoins is another matter but it could be redistributed to smaller holders perhaps.

 

My point here is that money takes on different meanings at different amounts. Eg people spend small amounts without thinking about it, larger amounts of money have a different meaning and are viewed differently, eg as savings or as an investment.

 

If something is truly to act as an efficient means of exchange there really should be a mechanism to push people towards spending rather than hoarding. Since hoarding a currency is in direct conflict with the function of a currency as a means of exchange. I have often thought about all the 'dormant' money lying in accounts worldwide and that if even some small % of that was caused to be spent in reaction to an anti-hoarding mechanism, how much of a boost would this provide to the world economy?

 

There must surely be a direct correlation between the rate that currency flows in an economy and the rate of economic development, as there is a correlation between data transfer rates over the internet and the development of the internet itself.

 

People are buying Bitcoins because they think the price will continue higher. If the price were suddenly fixed at a certain level how much would the open interest decline by? My guess is that 90% of the volume would disappear.

Share this post


Link to post
Share on other sites

Volatility is a major flaw....

 

One flaw that I have never heard discussed is that to have a currency that is truly intended as an efficient means of exchange there should be some form of mechanism to dissuade people from hoarding. People have a natural tendency to hoard resources and money is no exception.

 

I believe there should be some form of mechanism for those people/companies/investors who hold very large amounts whereby a small % is taken per year and redistributed. So for example if a holder had over a certain number of bitcoins, let's say 10000 averaged over a year, then a single digit % would be taken and redistributed to dissuade people from hoarding and encourage them to use it only as a means of exchange. There could be a tiered system so for every 10000 coins held the % would be slightly higher. Or it could be linked to the number of bitcoins in circulation to dissuade people from holding too much of the market.

 

The question of what happens to the redistributed Bitcoins is another matter but it could be redistributed to smaller holders perhaps.

 

My point here is that money takes on different meanings at different amounts. Eg people spend small amounts without thinking about it, larger amounts of money have a different meaning and are viewed differently, eg as savings or as an investment.

 

If something is truly to act as an efficient means of exchange there really should be a mechanism to push people towards spending rather than hoarding...

 

I agree with you about Volatility...

Accepting those big price swings, is not part of anyone's business plans -

It would put the profits of their real business at too much risk.

 

It is interesting to see you write about the idea of forcing people to dishoard currency.

 

One way to do that is to create a currency with a NEGATIVE INTEREST RATE, so those who hold it expect to lose money every year,

and have a strong incentive to spend it, rather than hoarding it.

 

8vdp.jpg : Lietaer FX thread: Making Money work

 

Have you heard of Bernard Lietaer's TERRA Currency ? ...

 

Terra (The Trade Reference Currency, TRC) is the name of a possible "world currency". The concept was proposed by Belgian economist and expert on monetary systems Bernard A. Lietaer in 2001, based on a similar proposal from the 1930s.

 

The currency is meant to be based on a basket of the 9-12 most important commodities (according to their importance in world wide trade). Lietaer opines this would provide a currency that wouldn't suffer from inflation:

===

> source: http://en.wikipedia.org/wiki/Terra_%28currency%29

 

(And as Bernard has told me in a personal conversation, the Terra would have a negative interest rate because of the "carry cost" of holding the basket of commodities. Anyone who wants a full-hedged Terra currency transaction, could buy the basket of 9-12 currencies, and sell it short. The "negative interest rate" would be equal to the storage costs. And the availability of a store of commodities would provide a buffer stock against inflation. BTW, he agreed with me that the basket might look something like the CRB index.)

 

BTW, I think that the hoarding of Bitcoins is temporary.

Once the speculative mania peaks, there will be a price crash. And then there will be a big supply of currency for sale above the market price, and rallies (when they come) will be met with selling - as we are seeing in the Gold market at present. A more stable currency will arise when Bitcoins settle down into Range trading.

 

One of my CORE IDEAS for establishing a new Crypto is to add a market mechanism which will greatly encourage Range trading, by establishing a supply of Coins fro sale ABOVE the market, and establishing a Buying Pool BELOW the market price.

 

I will explain this mechanism more in a later post.

Share this post


Link to post
Share on other sites

MARKET CAPS - as Updated from time to time...

 

CRYPTO== : $Price= : Mkt-Cap = : 24h.rChg / Volume==
========= : (Feb 9th)
1. Bitcoin--- : $661.40 : $8,183 mn : - 3.92% / $32.41 mn
2. Ripples-- : $ 0.017- : $1,716 mn : - 3.58% / $ 49,487
3. Litecoin-- : $ 17.76 : $ 454.0 mn : - 2.74% / $ 5.64 mn
4. Peercoin- : $ 04.49 : $ 94.88 mn : - 5.13% / $775,141
5. Dogecoin : $ .0011 : $ 49.22 mn : - 2.17% / $798,094
6. NXT ------ : $ 0.046 : $ 46.23 mn : - 2.23% / $ 77,660
7. Mastercoin: $61.51 : $ 34.64 mn : - 1.52% / $ 05,285
8. Namecoin : $ 04.16 : $ 33.24 mn : - 2.81% / $624,836
9. Quarkcoin : $ 0.072 : $ 17.90 mn : - 5.69% / $ 97,363
10 Protoshs. : $ 10.21 : $ 14.74 mn : - 2.58% / $ 15,840
=========
Exceptions, trading higher:
17. YbCoin------- ($04.71: $4.81 mn) + 55.3%
22. Unobtainium ($12.23: $1.82 mn) + 48.4%
30. Particle------- ($.0016: $1.10 mn) +23.7%
==

Share this post


Link to post
Share on other sites

Charlie Lee,
Founder of Litecoin chats about the future of money and his role

=

=

Share this post


Link to post
Share on other sites

Bitcoin Is Broken—Here's a Simple Plan to Fix It

It doesn't work as a currency, but it could help build the financial architecture of web payments. Here's how.
Matthew O'Brien Feb 5 2014,

BitcoinDollars.jpg.jpg

Reuters

 

Nerds love Bitcoin, and they think you should too.

Actually, they think you will. They think it's the payments system, if not the currency, of the future. Something that will end Paypal, not the Fed. A way to send anything to anyone online for little to no fees. But mostly, they think Bitcoin is a technical marvel—because it is. Though that doesn't make it an economic marvel. At least not yet.

 

Netscape founder and venture capitalist Marc Andreessen is one of those nerds. He thinks Bitcoin is a game-changing technology on the scale of the PC and the Internet. In his telling, all were discounted as techie playthings, and all went on—or will go—to so fundamentally change how we live that we can't imagine life without them. There's something to that, but it's not enough on it's own. As I put it before, every big idea starts out sounding crazy, but not every crazy-sounding idea ends up being big. Some of them end up being ... Segway. That said, Bitcoin does hold a lot of promise, and it could change how we pay for things. But it's not there yet.

 

Here's why it could be big, why it isn't, and how it could in seven steps.

 

1. It's called the double-spending problem. Say I send you money online. You can't tell whether I've sent the exact same money to somebody else too. It's just too easy for me to copy the money's digital information, and use it more than once. Maybe I'm honest. But maybe I'm not, and I'm "paying" you with a dollar that's already been spent.

 

2. That's where financial institutions come in. They sit in the middle of every online transaction, and confirm that, yes, this money hasn't been spent before. These intermediaries add trust to the system, but this trust doesn't come cheap: They typically charge 2.5 percent per transaction.

 

3. Bitcoin's genius is it confirms transactions with a decentralized network of people who don't charge fees instead of financial institutions that do. Who are these people doing something for nothing? Well, they're Bitcoin miners, and they're not actually working for free—they're getting paid with new bitcoins.

 

For the uninitiated, Bitcoin is a virtual currency with a strictly limited supply that only grows at a slow, preset rate. Basically digital gold. And like actual gold, the only way to get new bitcoins is to "mine" them—but by solving computationally-taxing math problems, not with a pick and pan. In this case, though, the invisible hand is plenty easy to see. Solving these math problems doesn't just win new bitcoins for individual miners. It verifies all Bitcoin transactions for the entire network.

 

4. So why do people bother mining for bitcoins? Well, the question answers itself: because it's profitable, and they expect it to be even more so if Bitcoin keeps going up in value. This last point is critical. Bitcoin mining has become incredibly competitive the last few years—just look at the supercomputer fortresses in Iceland that use geothermal power and Arctic air for cooling—and that competition drives down margins. That means miners are really counting on Bitcoin to continue its journey to infinity and beyond, to keep rising forever.

 

5. When the price of money goes up, the price of everything else goes down. It's called deflation, and it's death for an economy. People put off buying things when they'll cost less tomorrow than today. Companies put off investing when their customers put off buying. And people who borrowed money are stuck trying to pay debts that don't change with wages that do—and have fallen.

 

But Bitcoin's deflationary bias is a feature, not a bug. It's why miners want to mine, and why there are no transaction fees. In other words, Bitcoin can't work as a technology without deflation. The question is whether Bitcoin can work as a currency with it.

 

Probably not. At least not when there's this much deflation. You can just how much there's been in the chart below from Peter Coy. It shows how much prices would have had to fall in 2013 if they'd been set in bitcoins instead of dollars.

===

 

> http://www.theatlantic.com/business/archive/2014/02/bitcoin-is-broken-heres-a-simple-plan-to-fix-it/283624/

Share this post


Link to post
Share on other sites

6. It's called Gresham's Law, and it's a simple idea: Bad money drives out the good. It dates back to when rulers would literally debase their currencies by reducing the amount of precious metals in coins, but kept the face values the same. (That's how inflation used to work). The government, of course, would try to collect all the old coins to burn them down, and make new ones. But it couldn't always, and this would create a two-tiered money system. There were old coins with more silver and gold, and new coins with less. So people would hoard the old, more valuable coins, and spend the new, less valuable ones.

 

It's the same with bitcoins and dollars. Why spend a currency that might go up in value ten or a hundred times—or more!—when you can spend one that won't? People don't. The only time people do use bitcoins is when they can't use dollars (or euros or yuan)—when they want to do something illegal. Things like buying drugs, gambling online, and evading capital controls. Indeed, 60 percent of all Bitcoin activity happens on the gambling site Satoshi Dice.

 

Other than that, people just hold on to their bitcoins; 64 percent are in accounts that have never been used. Which makes sense, if you think of Bitcoin as a dotcom stock instead of as a currency. It's not like people would use Facebook stock to buy things if they could do that instead of using dollars.

 

7. Bitcoin would be a clear step forward as a payments system if people actually used it to pay for things. But they don't. The people who have bitcoins don't use them, and the people who don't have them don't want them. Indeed, a new survey from The Street finds that 79 percent of people have never used a cryptocurrency, and never want to.

 

But there's an easy fix. Just ask yourself why sellers are so happy to accept Bitcoin. It's not just that there are no fees. It's that merchants can instantly turn their bitcoins into dollars thanks to startups like Bitpay. Sure, that means paying a fee, but it's lower than what they'd have to pay the credit card companies—and it means they don't have to worry about Bitcoin's incredibly volatile value.

 

Bitcoin needs the same thing for buyers. It needs a company that can immediately turn a buyer's dollars into bitcoins and then immediately turn a seller's bitcoins back into dollars—all for a lower fee than traditional intermediaries charge. You wouldn't have to worry about buyers not being willing to spend their bitcoins, because it wouldn't be their bitcoins. Nobody would even realize they were using bitcoins: buyers would pay with dollars and sellers would get dollars back. In other words, Bitcoin would stop trying to be a currency and start being a financial architecture. Of course, it would take a lot of bitcoins to make this work, but it would work if you had them.

 

Bitcon's killer app is a Bitcoin monopoly.

Share this post


Link to post
Share on other sites

I'm showing my age - I've never heard of these things. I'm not even sure I really understand these crypto-currencies either

 

http://www.silverdoctors.com/forget-the-yuan-or-bitcoin-will-this-be-the-new-world-reserve-currency/

 

Forget the Yuan or Bitcoin, Will This Be the New World Reserve Currency?

 

KlickEx is pleased to announce the development of a new asset-backed and algorithmic crypto-currency for institutional and retail use. A stable, international risk-free asset is a key foundation for efficient financial markets, and KlickEx’s award winning interbank payment network has an exemplary track record in stability, and efficiency. Having eradicated the significant systematic deficiencies of Bitcoin, then bridged the portfolio limitations of the IMF’s SDR, the new base asset is a proactive response to recent negative public sentiment towards banking in general, and recent global events including The GFC, Euro-Crisis, BASEL II, III, and fiscal & political instability in Prime currencies

 

Yeah.

I am speaking to some folks who are now working on Coin designs like this

Share this post


Link to post
Share on other sites

 

 

Bitcon's killer app is a Bitcoin monopoly.

 

This is a big problem for newcomers. I contacted the people at feathercoin after visiting their website to query what the advantages were with their currency over others, they contacted me back to explain how to buy the currency and completely ignored the part where I asked about advantages. I have to say that if the people who created it can't market it then frankly it is doomed. It makes me wonder whether they are teeing it up for some sort of pump and dump.

Share this post


Link to post
Share on other sites

 

I agree with you about Volatility...

Accepting those big price swings, is not part of anyone's business plans -

It would put the profits of their real business at too much risk.

 

It is interesting to see you write about the idea of forcing people to dishoard currency.

 

One way to do that is to create a currency with a NEGATIVE INTEREST RATE, so those who hold it expect to lose money every year,

and have a strong incentive to spend it, rather than hoarding it.

 

8vdp.jpg : Lietaer FX thread: Making Money work

 

Have you heard of Bernard Lietaer's TERRA Currency ? ...

 

Terra (The Trade Reference Currency, TRC) is the name of a possible "world currency". The concept was proposed by Belgian economist and expert on monetary systems Bernard A. Lietaer in 2001, based on a similar proposal from the 1930s.

 

The currency is meant to be based on a basket of the 9-12 most important commodities (according to their importance in world wide trade). Lietaer opines this would provide a currency that wouldn't suffer from inflation:

===

> source: http://en.wikipedia.org/wiki/Terra_%28currency%29

 

(And as Bernard has told me in a personal conversation, the Terra would have a negative interest rate because of the "carry cost" of holding the basket of commodities. Anyone who wants a full-hedged Terra currency transaction, could buy the basket of 9-12 currencies, and sell it short. The "negative interest rate" would be equal to the storage costs. And the availability of a store of commodities would provide a buffer stock against inflation. BTW, he agreed with me that the basket might look something like the CRB index.)

 

 

 

 

The problem with currencies with a negative interest rate is that in order for them to work all the other currencies would also need to have a negative interest rate since if they don't then people will naturally opt for the one with the higher yield, (or at least no loss of capital). In some ways its arguable that currencies already have a defacto negative interest rate via the ever insidious inflation, and that is likely a key factor in the current popularity of bitcoin.

 

If we take this one step further, ie we say a key factor in Bitcoins popularity is that it cannot be debased and that the monetary base will only grow at a pre-determined rate, then one way to potentially usurp bitcoin would be to create a new currency that had a positive interest rate.

 

Quite how that would work in practice is another matter.

Share this post


Link to post
Share on other sites

At the request of one of our members (by private message), I am starting a Discussion thread on Crytpo-Coins, and how they might be designed to make a more stable and less speculative investment.

 

 

What I would consider to be a healthy interest rate would be something like this;

 

Interest_zps6c09e7be.png

 

So there is a clear incentive to accumulate, to build initial interest in the currency, but a declining interest rate curve in order to try and dissuade people from cornering too much of the market. Of course you would also need to make it cumbersome to open multiple accounts otherwise people could spread their funds accross many accounts to avoid the drop in interest rate felt by the larger holders.

 

In fact you could even have the curve turn slightly negative at higher amounts to push the characteristics towards the 'currency utility' angle of the spectrum and away from the 'speculative vehicle' end. (To discourage hoarding)

 

Perhaps even some sort of limited reward for using the currency. Maintenance of an interest rate or some other feature, again though difficult to predict that it would be used as intended and not just simply transferred back and forth between family members in order to retain some benefit or other.

Share this post


Link to post
Share on other sites

...all the other currencies would also need to have a negative interest rate since if they don't

then people will naturally opt for the one with the higher yield, (or at least no loss of capital)...

 

That's a good point.

 

Though people may hold The Terra (BL's currency) as a way of protecting against a rise in commodity prices.

If the rise in commodities is faster that the return on yield on Fiat bonds, there would be some appetite

Share this post


Link to post
Share on other sites

Why my support for AUR / Auroracoins ?

 

> I have edited the AUR thread, to make it easier to read : http://www.greenenergyinvestors.com/index.php?showtopic=18840

 

You seem rather taken by this Crypto, why?

It's unusual to see you so effusive, particularly when historically you have been quite disparaging to the concept and reality of the hoi polloi aquiring money for free (mind you - I'm certainly no fan of handouts either).

 

This is a brand new Crypto, just launched

 

Very unusually, they have "pre-mined" half of the coins, in order to "Airdrop" them to all 330,000 citizens of Iceland. The Bitcoin geeks are saying this will not work, I think it may be an "inspired" idea - though I cannot yet say for certain. Only time will tell.

 

I have been studying Cryptos recently, as you can see and hear from:

 

+ Geologic's Youtube channel, with various interviews :

+ The GEI thread on Redesigning Cryptos :

 

I want to understand better what works, and what does not work, in marketing new Cryptocoins.

 

I am very aware of the FLAWS of Bitcoins:

 


I can see some flaws* in Bitcoins, which need correcting:

*The BIG DESIGN FLAWS I see in Bitcoins are:
==================

 

+ They are totally "fiat", or worse. There is no gold, or even any political backing for the coins. No government takes them in payment of taxes. (Germany taxes transactions in BTC, but does not accept tax payments in the form of BTC). With no backing, BTC prices can crash, and therefore they may not be a safe store of value.

 

+ Crypto coins PRICES move in too volatile a fashion, to make them a safe medium of transactional exchange, and they are less safe as a long term store of wealth than even fiat currencies (because of lack of backing.) After each wave of interest in the coins peaks and slows, prices crash. And Crypto Coin values are vulnerable to an even bigger crash. As some have said: "If I was interested in a pump-and-dump operation I would look to Crypto coins."

 

+ Until now all the big rises in prices have accrued to computer geeks who backed new currencies early, and to a few merchants who may have taken the coins and held them. Is that the best place to generate or create new wealth?

 

+ The governments of the world can kill demand for Crypto Coins by imposing taxes or other restrictive measures on the coins. When China banned them for transactions on Dec.5th, 2013, prices plummeted by 54% from US$1,242 to US$576

+ A rising amount of energy is "wasted" in mining the coins. As more computers become engaged in mining them, the equations which need solving become more complex - And more and more energy is engaged in a useless "mining activity". In effect, Bitcoins are created through wasting energy in useless mathematical equations. There must be a better way to distribute the new coins than giving them away to people who waste energy to gain the potential of "earning" free coins.

==================

 

(Note to those who want to JOIN the Discussion here:

My favorite Flying Creature is the: Admiral Byrd - with the 2nd word spelled differently)

 

LINK to here: http://tinyurl.com/Crypto-ReD

 

... I reckon that the pre-mining of AUR helps to correct, or minimize, two of the major flaws :

i.e. the excessive waste of energy, and the doling out of capital gains narrowly to computer geeks.

 

I want to see how the AUR airdrop and subsequent market development goes, and maybe be a part of it.

Whether AUR proves a great success, or not, we can all learn something from the experiment.

 

Eventually, I may want to get involved in the launch of a new and better Crypto. But if I do, I will want to do so, on a much expanded knowledge base. Getting involved early in AUR's. And helping a bit in the promotion of the new coin, may be an important part of that enhanced learning process. (I am convinced that there could be a big opportunity here, or in the near future involving AUR's.)

 

I hope that you and other GEI members will join in that learning process, and maybe participate in the entrepreneurial opportunities, as they arrive. That is the main reason that I had encouraged people last week to download the Free Wallet, and get the Free AUR 0.25 coin. But whether you did that or not, the coins are still cheap, and will probably get cheaper after the airdrop. So it is not too late to buy a coin or two, or even less, to experiment with this Crypto and using it.

Share this post


Link to post
Share on other sites

I hope that you and other GEI members will join in that learning process, and maybe participate in the entrepreneurial opportunities, as they arrive. That is the main reason that I had encouraged people last week to download the Free Wallet, and get the Free AUR 0.25 coin. But whether you did that or not, the coins are still cheap, and will probably get cheaper after the airdrop. So it is not too late to buy a coin or two, or even less, to experiment with this Crypto and using it.

It is an interesting area with huge growth potential, with such a new area there is surely still time to create one with far fewer flaws and a killer app USP.

 

Another problem with Cryptos I see is that other than via centralised exchanges crypto currencies are not exchangeable with each other. So a few months down the line once I have my Scotcoins I may be able to use them in outlets that accept Scotcoins but not in outlets that currently accept only Bitcoins. That is a loss in functionality compared to my AMEX card, which I can use with vendors who sell products for British pounds, as easily as others who sell products denominated in Euros or US Dollars...

Share this post


Link to post
Share on other sites

I think of Auroracoin and the-proposed Scotcoin as "local currencies", like the Ithaca Hours*.

 

If the local community, or local state accepts them, they can be successful.

 

They are intended to be "transactional", but perhaps not truly a store of value, and they may lose value over time, if they lose confidence, or become "over-issued". But that is all in the future. Right now they are attracting more interest.

 

Of course, I may be wrong. If one of these currencies attracts global interest, as the AUR has done, they can shoot up in value... at least for a while. But the big jump in supply on March 25th, when the airdrop happens may change that. Suddenly, many Icelanders will have a little "windfall" they want to cash.

 

x

 

=== ===

*Ithaca hours:

xx

Share this post


Link to post
Share on other sites

A piece from Ben Hunt which he expects to be controversial.

 

 

 

http://www.salientpartners.com/epsilontheory/post/2015/02/17/the-effete-rebellion-of-bitcoin

 

 

 

Like gold, Bitcoin is neither a currency nor a store of value. Bitcoin is the cautious expression of a rebellious identity.

 

 

 

As for the blockchain technology that underpins Bitcoin and is trumpeted as both an Important Thing and the Next Big Thing in every venture capital conference of the past two years, it’s a modern twist on the “technology” of the letter of credit.

 

 

 

Bitcoin’s greatest attribute – its independence from every manner of organized social control – is also its fatal flaw. Bitcoin is a bearer bond.

 

 

 

And because Bitcoin is hated by governments, it’s all on you to maintain the security of your private key. There is no insurance here, either directly through deposit insurance or indirectly through a blanket bond required of federally regulated banks. There is no “forgot your password?” button to push here, no regulatory or enforcement agency that will vouchsafe a service provider.

For some, the constant liability risk generated by the abstraction principle is – as Butch Cassidy said – a small price to pay for beauty. But for anyone with a serious amount of money who’s not in a criminal enterprise, this is an intolerably risky legal no-man’s land.
Dr Ben Hunt is responsible for identifying and mitigating investment-related and other types of risks on behalf of Salient, a $21.6 billion asset manager based in Houston, Texas.

Share this post


Link to post
Share on other sites

Interesting.

 

BTC has definitely fallen out of favor.

I'm not sure what dynamics will save if from falling further

Share this post


Link to post
Share on other sites

Then there is this new venture https://www.cryptofacilities.com/derivatives/helpfaq with people from Goldman Sachs and similar.

 

 

 

CryptoFacilities.com is a marketplace where buyer and seller meet to trade bitcoin risk. As a broker, we administrate this marketplace by calculating profit and loss, collecting collateral and exchanging payments between our clients. To avoid concentration of risk and conflicts of interest, we solely bring together buyer and seller and do not act as central counterparty. All payments on CryptoFacilities.com are handled in bitcoin.

Our Forward is a simple derivative that allows you to lock in the USD value of your bitcoins or to build a leveraged long or short position on the bitcoin price. You can trade in and out of it in seconds or you can maintain a long-term position for up to 9 months. Your profit or loss is calculated in USD-terms and is automatically converted into bitcoin at the time you close your position.

To trade the forward, you need to post us collateral in bitcoin. We have developed a highly sophisticated, real-time margining system that is tailored to the volatile nature of bitcoin. It continuously monitors portfolio risk and escalates collateral shortfalls based on a tiered approach. Our margin rules incentivize market participants to post sufficient collateral at all times and are chosen such that credit events are very unlikely and can be handled in an orderly manner.

We continuously calculate portfolio values based on a marking-to-model method which is based on our proprietary bitcoin price indices, referencing the most liquid spot exchanges in the bitcoin ecosystem. This approach assures that our market is manipulation-resistant and that large price moves cannot trigger self-reinforcing margin calls.

Share this post


Link to post
Share on other sites

To trade the forward, you need to post us collateral in bitcoin. We have developed a highly sophisticated, real-time margining system that is tailored to the volatile nature of bitcoin. It continuously monitors portfolio risk and escalates collateral shortfalls based on a tiered approach

 

This can be dangerous in such a volatile market.

When others know where you stops are, expect them to "run" them from time to time

Share this post


Link to post
Share on other sites

Innovation from Max Keiser ?

=

 

Ack! Can Bitcoin save Greece? That's a 'well duh!' https://www.youtube.com/watch?v=3s7UVY5yv7Y

 

 

Keiser Report: Can Bitcoin save Greece?

 

Published on Feb 26, 2015

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the impossible demand from the Greek voters that both austerity ends and that they remain in the euro as currently arranged. They also look at a parallel ‘future-tax’ crypto currency as a possible answer to Greece’s problems. In the second half, Max interviews Liam Halligan, editor-at-large at BNE.eu and columnist at the Telegraph, about the latest on the unpayable debt crisis in Greece. Liam suggests a Grexit will happen but that Greece won’t be the first European nation to leave the euro.

=

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×