From mboxrd@z Thu Jan 1 00:00:00 1970 Received: from sog-mx-1.v43.ch3.sourceforge.com ([172.29.43.191] helo=mx.sourceforge.net) by sfs-ml-2.v29.ch3.sourceforge.com with esmtp (Exim 4.76) (envelope-from ) id 1Vq8t8-0008J5-Lo for bitcoin-development@lists.sourceforge.net; Mon, 09 Dec 2013 22:01:14 +0000 Received-SPF: pass (sog-mx-1.v43.ch3.sourceforge.com: domain of gmail.com designates 209.85.212.178 as permitted sender) client-ip=209.85.212.178; envelope-from=ryacko@gmail.com; helo=mail-wi0-f178.google.com; Received: from mail-wi0-f178.google.com ([209.85.212.178]) by sog-mx-1.v43.ch3.sourceforge.com with esmtps (TLSv1:RC4-SHA:128) (Exim 4.76) id 1Vq8t7-00023c-FI for bitcoin-development@lists.sourceforge.net; Mon, 09 Dec 2013 22:01:14 +0000 Received: by mail-wi0-f178.google.com with SMTP id bz8so4357776wib.5 for ; Mon, 09 Dec 2013 14:01:07 -0800 (PST) MIME-Version: 1.0 X-Received: by 10.194.241.228 with SMTP id wl4mr18122081wjc.2.1386626467248; Mon, 09 Dec 2013 14:01:07 -0800 (PST) Sender: ryacko@gmail.com Received: by 10.194.156.194 with HTTP; Mon, 9 Dec 2013 14:01:07 -0800 (PST) Date: Mon, 9 Dec 2013 14:01:07 -0800 X-Google-Sender-Auth: JcWd7B-LfWFz_7cNZU_mpLSZHF8 Message-ID: From: Ryan Carboni To: bitcoin-development@lists.sourceforge.net Content-Type: multipart/alternative; boundary=089e01493c3204419a04ed212298 X-Spam-Score: -0.6 (/) X-Spam-Report: Spam Filtering performed by mx.sourceforge.net. See http://spamassassin.org/tag/ for more details. -1.5 SPF_CHECK_PASS SPF reports sender host as permitted sender for sender-domain 0.0 FREEMAIL_FROM Sender email is commonly abused enduser mail provider (ryacko[at]gmail.com) -0.0 SPF_PASS SPF: sender matches SPF record 1.0 HTML_MESSAGE BODY: HTML included in message -0.1 DKIM_VALID_AU Message has a valid DKIM or DK signature from author's domain 0.1 DKIM_SIGNED Message has a DKIM or DK signature, not necessarily valid -0.1 DKIM_VALID Message has at least one valid DKIM or DK signature X-Headers-End: 1Vq8t7-00023c-FI Subject: [Bitcoin-development] Monetary Authority for Bitcoin X-BeenThere: bitcoin-development@lists.sourceforge.net X-Mailman-Version: 2.1.9 Precedence: list List-Id: List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Mon, 09 Dec 2013 22:01:14 -0000 --089e01493c3204419a04ed212298 Content-Type: text/plain; charset=windows-1252 Content-Transfer-Encoding: quoted-printable This is no doubt probably a very controversial Bitcoin Improvement Proposal and is also a very rough draft of one. Bitcoin lacks a Central Bank. This is good and bad. A central bank benefits those with political connections. But Bitcoin lacks price stability, this generates menu costs, and incentivizes speculation. I propose the creation of a monetary authority for Bitcoin that sets block reward to a new mathematical formula. The velocity of the Bitcoins that are in circulation likely approaches 100,000x per year as compared to 1x - 4x for the USD. This in itself is not bad. But given that only 10% to 20% of Bitcoins are circulating, this means that the price of Bitcoin is decided largely through speculation. In fact the price of a Bitcoin is irrelevant to those who use Bitcoins as a currency because it appears the majority of coins being used are immediately being sold and repurchased in the exchanges for the sole purpose of buying goods. Unless Bitcoins can be used to purchase intermediate goods and have a closed economic ecosystem, Bitcoin will be too vulnerable to speculation and would not be a viable currency. But the development of a closed economic ecosystem is stymied by the uncertainty of Bitcoin prices and speculation. Fortunately the infrastructure for transacting Bitcoin has long been established, with many major exchanges. Nearly all major exchanges announce recent prices. At the point when a block is generated, the miner will also add the exchange price of bitcoin between various other currencies and crypto-currencies to the blockchain. The exchanges that are kept track of could be hard coded into Bitcoin or the miner could choose, how this works is not something I'm personally focused on. With every new block, the miner will compare the cumulative percentage change in the exchange price of Bitcoin over the previous 432 blocks. The standard deviation of the percentage change in exchange rates will be calculated. Outliers will be excluded, this is so that in case x-currency suffers from hyperinflation, the x-currency will be ignored. It is extremely unlikely for all the world=92s currencies to be suffering from hyperinflation caused by monetary expansion as opposed to a supply shock. Every 432 blocks the block reward will be reevaluated. For every 5% increase in the geometric mean of Bitcoin exchange rates in relation to the world=92s currencies would increase the block reward by 3%. A 5% decrease i= n the geometric mean of Bitcoin exchange rates will decrease the block reward by 3%. Changes in the exchange rates of less than 5% will not alter the block reward. The minimum block reward will be one Bitcoin. Why is this better then the current system? Very simple, we are still dependent on banks. Currently Bitcoin is poised to replace Visa and Paypal, not the Federal Reserve. Bitcoin will be less efficient then Visa and Paypal because it takes times to transfer money out of exchanges to one's bank account and vice versa. In order for Bitcoin to replace the US dollar, it needs to not be a more complex version of a debit card. It needs to have a closed economic ecosystem, where all transactions are done in Bitcoin (Consumer > Merchant > Wholesaler > Factory), and the only people who use the exchanges are merchants who need to and those who wish to gamble on Bitcoin. In order for Bitcoin to have widespread acceptance, it needs price stability. My proposal won't peg the Bitcoin to any one currency, but it would reduce month to month variability in relation to a basket of currencies and discourage views that it's speculative. Look at the current system, it's not healthy and it's not a currency. --089e01493c3204419a04ed212298 Content-Type: text/html; charset=windows-1252 Content-Transfer-Encoding: quoted-printable
This is no doubt probably a very controversial Bitcoin Imp= rovement Proposal and is also a very rough draft of one.

Bitcoin la= cks a Central Bank. This is good and bad. A central bank benefits those wit= h political connections. But Bitcoin lacks price stability, this generates = menu costs, and incentivizes speculation. I propose the creation of a monet= ary authority for Bitcoin that sets block reward to a new mathematical form= ula.


The veloc= ity of the Bitcoins that are in circulation likely approaches 100,000x per = year as compared to 1x - 4x for the USD. This in itself is not bad. But giv= en that only 10% to 20% of Bitcoins are circulating, this means that the pr= ice of Bitcoin is decided largely through speculation. In fact the price of= a Bitcoin is irrelevant to those who use Bitcoins as a currency because it= appears the majority of coins being used are immediately being sold and re= purchased in the exchanges for the sole purpose of buying goods.


Unless Bi= tcoins can be used to purchase intermediate goods and have a closed economi= c ecosystem, Bitcoin will be too vulnerable to speculation and would not be= a viable currency. But the development of a closed economic ecosystem is s= tymied by the uncertainty of Bitcoin prices and speculation.


Fortunate= ly the infrastructure for transacting Bitcoin has long been established, wi= th many major exchanges. Nearly all major exchanges announce recent prices.= At the point when a block is generated, the miner will also add the exchan= ge price of bitcoin between various other currencies and crypto-currencies = to the blockchain. The exchanges that are kept track of could be hard coded= into Bitcoin or the miner could choose, how this works is not something I&= #39;m personally focused on.


With ever= y new block, the miner will compare the cumulative percentage change in the= exchange price of Bitcoin over the previous 432 blocks. The standard devia= tion of the percentage change in exchange rates will be calculated. Outlier= s will be excluded, this is so that in case=A0x-currency suffers from hyper= inflation, the x-currency will be ignored. It is extremely unlikely for all= the world=92s currencies to be suffering from hyperinflation caused by mon= etary expansion as opposed to a supply shock.


Every 432= blocks the block reward will be reevaluated. For every 5% increase in the = geometric mean of Bitcoin exchange rates in relation to the world=92s curre= ncies would increase the block reward by 3%. A 5% decrease in the geometric= mean of Bitcoin exchange rates will decrease the block reward by 3%. Chang= es in the exchange rates of less than 5% will not alter the block reward.


The minim= um block reward will be one Bitcoin.




Why is this better then the current system? Very simpl= e, we are still dependent on banks. Currently Bitcoin is poised to replace = Visa and Paypal, not the Federal Reserve. Bitcoin will be less efficient th= en Visa and Paypal because it takes times to transfer money out of exchange= s to one's bank account and vice versa. In order for Bitcoin to replace= the US dollar, it needs to not be a more complex version of a debit card. = It needs to have a closed economic ecosystem, where all transactions are do= ne in Bitcoin (Consumer > Merchant > Wholesaler > Factory), and th= e only people who use the exchanges are merchants who need to and those who= wish to gamble on Bitcoin.=A0

In order for Bitcoin to have widespread acceptance, it = needs price stability. My proposal won't peg the Bitcoin to any one cur= rency, but it would reduce month to month variability in relation to a bask= et of currencies and discourage views that it's speculative.

Look at the current system, it's not healthy and it= 's not a currency.=A0
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