Relevant stylized facts about bitcoin: Fluctuations, first ...
Rebasing, new money, old money, the stable value, and value fluctuations.
Hello all. I have seen several people comparing ampleforth to bitconnect, so here is the simplified formula: (Oracle Price – Target Price) / 10 supply change every 24 hours. Now so long as the price fluctuations are under this amount, we never run the risk of dropping into negative territory. Now, look at the chart. What are our fluctuations? The biggest fluctuation was the 13 july 2020, from 3.46 to 1.86. Now, is this due only to the rebase? No. If you look up on the days before that, we had a massive run up. This looks like a normal market pattern cycle that got burst. But did hodlers lose? No. The marketcap just keeps going up. So, what could cause the price to dip below $1? Well, if we reached $1, and the marketcap stagnated, then a whale *COULD* crash the market. However, there are several things to consider here. First, when we reach a stagnated market value, ampleforth will have taken a strong competitive edge against tether and usdc. That means its volume will be absolutely massive. Second, it requires more money to crash an asset than it requires to jack an asset's prices up. Psychology lesson. Most people are bad traders because they treat risk and reward differently. They hold losing positions hoping the losing position will come back, and they hesitate to take winning positions if there is a chance of loss. This risk adverse mentality has an application here. Also, the lower number of say .90 is a numerically lower number than say 1.15. And trading lesson... the spot price of an asset is determined by active traders. Not by actual hodlers. Traders are necessarily reactionary. We cannot see the future. And when the price fluctuates, non market participants tend to become active market participants. This is why small price moves can spark feagreed runs. At ampleforth's target price of $1, it is going to be difficult for any one trader to crash the market, and we will NOT see price drops to .5 as a normal occurrence. If we do, there is an arbitrage that traders like me WILL do if it happens. Basically since we know that below $1 the rebase is a negative event, we will do the opposite of current actions with trading. The current trading strategy that eliminates risk while at the same time maximizes returns is to jump in with tether 5 minutes before rebase, and jump out and crash the market with the new 10% supply. Under $1, the strategy would be to buy and jump in. Right before rebase, traders sell, and then buy back in after rebase. People who are saying ampleforth is a bad investment are probably wrong. There are reasons it won't crash sub $1 when it has lots of users, and there are ways the market can remedy the situation. Now.. the ampleforth rich list IS disturbing. Just like satoshi nakamoto holding 10% of bitcoin is disturbing. However, they are a respectable crypto company, and they have plans for at least coinbase and binance, and I do not see them flash dumping on the market. That isn't to say they might sell. I am saying that if they do sell, they will do it in a nice respectful manner that does not crash the market, and doesn't cause lots of slippage for them.
MCS | What is the Dual Price Mechanism in Perpetual Contracts?
\This post has been written by Hedgehog, an MCS influencer and one of Korea's famous cryptocurrency key opinion leaders.* https://preview.redd.it/twb3l1k289n51.png?width=1024&format=png&auto=webp&s=c8fe8cbb2c1c6190a70ea84be51392109d745d4b #Be_a_Trader! Greetings from MCS, the derivatives trading platform where traders ALWAYS come first. As a cryptocurrency perpetual contract trader, you may have seen the index price and the mark price at least once while trading. It seems that many traders are confused about the differences between the index price and the mark price, so I will explain these two prices and the dual price mechanism used in perpetual contracts.
🎯 What is the Dual Price Mechanism?
The dual price mechanism consists of the mark price and the last traded price. This mechanism protects traders from damages caused by market manipulation, lack of liquidity, or differences in spot prices and futures prices. It also provides a fair trading environment for all traders on MCS, and is used to minimize the price gap between spot prices and the perpetual contract prices. In order to fully understand the concept of mark price, you first need to know the concept of index price.
🎯 Index Price
You can think of the index price as a spot price. The MCS cryptocurrency derivatives exchange refers to a total of 7 exchanges to calculate the BTC/USDT index price, and the exchanges are Binance, Bitfinex, Huobi Global, OKEX, Bittrex Global, HitBTC, and Poloniex. So basically, the index price of the MCS BTC/USDT perpetual contract is the average price of the same cryptocurrency pair's prices on the aforementioned 7 global exchanges.
🎯 Mark Price
The mark price is the price reflecting the status at-the-moment of the MCS exchange to the index price. The mark price is also known as the fair price in some exchanges. The formula for calculating the mark price is "Index Price * (1 + Funding Basis)", and the formula for calculating the funding basis is "Current Funding Ratio * Time Remaining Until Funding Settlement / Funding Interval". Since the calculated mark price represents a more accurate perpetual contract price, the MCS cryptocurrency derivatives exchange uses this mark price as a measure to trigger the liquidation.
🎯 Last Traded Price
The last traded price is the market price of a pair (like BTC/USDT) on the MCS exchange. In short, it refers to the most recent price of the actual trade on MCS. If you have understood the concepts of each of the above terms, this question will pop up in your head: "so, why do we need a dual pricing mechanism?" Let me answer that question with an example.
🎯 Why Use The Dual Price Mechanism
[Example] The mark price and the last traded price are at similar levels of 10,000 USDT and 10,001 USDT, respectively. At this time, Bob wants to enter a short position with 100x leverage using his entire Bitcoin inventory on MCS. At that moment, the last traded price suddenly drops to 5,000 USDT causing the rapid fluctuation in price. Nevertheless, the mark price remains at 10,000 USDT. In this situation, if the last traded price was used as a measure of liquidation, most of the long-positions with leverage would have been liquidated. Therefore, in order to prevent unfair liquidation like the case above, MCS applies the dual price mechanism. I am a Bitcoin margin trader, Hedgehog. Thank you for reading this post. 🔸 MCS Official Website : https://mycoinstory.com 🔸 MCS Telegram : https://t.me/mycoinstory_en Traders ALWAYS come first on MCS. Thank you. MCS Official Twitter (EN):https://twitter.com/mycoinstory_mcs MCS Official Facebook:https://www.facebook.com/MyCoinStory.official
BitOffer Institute: How Do I Earn My Money back after Bitcoin Plunged?
https://preview.redd.it/mikoittpren41.png?width=1630&format=png&auto=webp&s=3200f70c811edae1fd7d5b1e4e2eec83cfb7bbcd Influenced by COVID-19, the Bitcoin price plunged by $5,000 within 2 weeks. As it dropped from $9,000 to $3,800, it created the worst daily decline in 7 years. While the market liquidated almost all the longs positions, it triggered a chain reaction that the market had panic emotions surrounded, and the Bitcoin price was frustrated. Besides, the worldwide stock markets all experienced a huge decline, and even the gold market was not able to be immune from it. After the multiple declines, the assets of global investors shrank. The decline told us a simple sense that the market is full of risks. Even you held Bitcoins in your pocket, it once lost more than 50% value in the short-term, let alone the Bitcoin futures contracts. If you used to trade standard contracts on Huobi Global or BitMEX, whether you opened positions or not, the value of your account would lose as the token price dropped. Overall, in this case, the market usually liquidates the longs and shorts at the same time while you leverage your trading. When the market fluctuates, closing orders on Huobi Global and OKEx was disabled due to the system lag was serious. At last, all you can do is to pray and wait for the liquidation to your positions since it is obvious that the risk of futures trading is extremely high. When the situations get serious and extreme like what we experienced last week, futures trading is definitely not fit to trade because whether you belong to the longs or shorts, with a highly additional leverage on your futures contracts, your positions are likely to be liquidated after the market fluctuates. To become the winners on the market, it seems that options trading grabs a victory in the battle between futures trading and itself. The most significant feature of the options trading is that it has an inherent 2,000 times leverage, but it does not have any risk of being forced into liquidation. The investors who trade Bitcoin Options do not have to pay attention to the market all the time. With the feature above, the mentality will be hard to be influenced, so that it will be much easier to make correct choices and strategies. https://preview.redd.it/o8ib7n0sren41.png?width=783&format=png&auto=webp&s=016f39d284881c8d90ef0f1c4f9fb43a27822e9a How Do I Earn My Money back with a Low-budget after Bitcoin plunged? After the decline, most investors are considering the same question: How do I earn my money back with the rest of the funds? COVID-19 influence on the global market still exists. In other words, market fluctuation will be presented again. In this case, Bitcoin Options becomes a unique choice. Bitcoin Options launched by BitOffer requests 0 fees, 0 margins, and no exercise, and supports the time length in 7-days, 1-day, 12-hours, 4-hours, 1-hour, 5-mins and 2-mins. What is Bitcoin Options? Bitcoin Options is a prediction of the movement of Bitcoins in the future. Essentially, it operates like the spot trading, but it allows the investors to buy call or put: Call when the investors expect the market to be bullish, Put when the investors expect the market to be bearish. Its profit formula is the same as that of the spot trading: Within the Options contract period, the investors would earn the price spread if the investors choose the correct direction. In short, BitOffer Bitcoin Options allows the investors to use a small budget to bet the change of the Bitcoins in the future and earn a considerable profit. Takes the market last week as the example, the Bitcoin price plunged by $5,000, if you bought a 7-days put options contract, you would directly earn $5,000 with a budget which is less than $200. The rate of return was more than 2,500%. When the market was experiencing a serious decline, it dropped by $1,500 in an hour. If you bought a 1-hour put options contract with a budget of $20, you would directly earn $1,500, and the rate of return would reach 7,500%. https://preview.redd.it/2btm09ltren41.png?width=1000&format=png&auto=webp&s=23463d973c95387b0a8b155be05eb79ad7503bf7 How do I trade Bitcoin Options? For example, the Bitcoin price now is $10,000, and you hold the view that the Bitcoin price will rise in an hour, then you buy a 1-hour call options contract with $20. After then, the Bitcoin price rises by $1,000 in an hour, you will earn $1,000 as profit when the contract settled, which means that you will earn a 50 times payoff as a return. If the Bitcoin price drops in an hour, you would only lose the premium $20 that you buy the options contract. It is obvious that Bitcoin Options owns the advantage of “Unlimited profit buy limited loss”. Compared with futures trading, if you predict the wrong direction of the Bitcoin market and do not stop loss in time, it might cause your positions to be liquidated and lose money. Thus, Bitcoin Options fits almost all investors. Click here to start knowing BitOffer Bitcoin Options: https://www.bitoffer.com
The Hash War is Exposing the Fraud of Exchange BTC Pricing
Unless you've been living under a rock these last couple weeks, you've probably been REKT by the decline in price across the board. Why is this happening? This is happening because the entire community was scammed! Yes, you read that write, I, thethrowaccount21 am accusing unnamed individuals of SCAMMING the entire community! What was the scam? The scam was allowing something completely stupid like average exchange price of btc to represent the entire value of the market. The victims? All of us 'alt-coin' holders. To be fair, this was most likely a historical artifact as Bitcoin was supposed to be the ONLY crypto. However, it is clear that nefarious actors have taken advantage of this blunder of history to maximum effect, giving them undue power over the entire market. What the hell am I talking about? You see, what this hash war is exposing is the FRAUD OF PRICING ALTCOINS IN BTC. Yes everyone knew that already, but until now we didn't really know that. We had never seen merely two individuals arbitrarily destroy nearly $100 BILLION USD IN VALUE BEFORE OVERNIGHT. That is why this is happening, Jihan and CSW are selling BTC to support either BCH or BSV. Whether Jihan has started yet is immaterial, the fact is its these two who have been able to do this. And they were able to do this because exchanges price alts in BTC. This gives BTC the power to destroy the entire cryptocurrency market without actually directly touching any one market!! It also gives whales the ability to game the price since liquidity in markets is so low. Any whale or govt who wants to destroy alts then just has to destroy BTC. How do we get around this then? I'm not one to complain about a problem without offering you solutions at the same time! The reason this happens is simply because exchanges price alts in BTC. They do this because they don't want to have a bazillion trading pairs. Understandable. However. we don't have to use that. If we advocate and push to trade coins by their fair value instead, then we will be able to decouple from BTC years or maybe even decades before the necessary liquidity arrives! If we start trading by fair value, or even just some combination of fair value and price, as a way to have a sanity check on price fluctuations, then we will ELIMINATE the speculative volatility that comes with price valuation. Note that fair value is not immune to volatility, as PIVX's, Dash's and BCH's fair value charts clearly show. There is definitely still volatility there. But there is no BTC-based, avg. exchange price-caused volatility. Look at the data. It clearly shows that not only are fair values not affected by this price move as I pointed out yesterday, but also that individual fair values do not affect other coin's fair values! This means we can move to a system that evaluates coins based on their fair value instead of avg. spot price. Fair value is much better than price because instead of using one easily gameable metric, i.e. average exchange price of BTC, it uses 4 intrinsic fair values that are independent of exchange price and independent from BTC's price. These are the two properties necessary to have an honest view of the cryptospace. Fair value uses a coin's:
Total Discounted Supply
and combines them in a mathematical formula to arrive at a 'price' independent of the exchanges. If we move to this valuation system, or maybe some hybrid, the next time there's a bear market IT WILL BE A REAL BEAR MARKET and not some rich billionaires screwing with your money! Thanks for reading. P.S.: Finally remember, they can't kill Bitcoin, they can only make you think its dead. Fair value gives you peace of mind by showing you what they didn't want you to see.
Low supply Tokens and why they are good for investment
What is it we remember from a basic economics course? The price of an asset on the market is determined by supply and demand. https://imgur.com/a/LEVBL With growth in demand and reduction in supply, the price of the underlying asset begins growing steadily, while a reduction in demand and an increase in supply give rise to a rapid drop in the underlying asset’s price. It is also worth mentioning terms such as inflation, an excessive increase in the amount of paper money circulating in the country, which causes it to depreciate. If we apply this term to crypto-economics, it will go like this; an excessive increase in the turnover of tokens on the market will inevitably lead to depreciation. Quite simply, the formula for success is, understandably, a low supply of coins with higher demand = higher price. Case Studies on High and Low Supply: Why is it that the price of gold is so high? It’s a scarce commodity. Now, let’s take a look at successful ICO projects that have a very low supply of tokens on the market. Zcoin (XZC) began with 21 million Zcoins. They launched in September 2016 and employ the Zerocoin protocol for enabling private transactions. Let’s see what happened to the price in the long-term: https://imgur.com/a/aSXe8 With a good product, a strong team and a very limited supply, the price of XZC increased from $0.36 in October 2016, to $40.89 in December 2017, providing a great opportunity for investors to increase their investment 113 times in a little over a year. That is very outstanding growth indeed, and limited supply was one of the key factors behind this performance. Skycoin is another good example. The project is designed to implement Satoshi’s original vision, and also fix the problems with Bitcoin. Skycoin launched with a total of 25 million tokens in April 2017. The price started at $0.83 per token, now it is trading at around $15 per token, so we can observe a consistent growth in token value over the last eight months. Of course, we are providing information about successful projects that have a low supply. They definitely have unique technology solutions and solid teams, but having a very limited supply is of utmost importance in pushing a token’s value up over the long-term. Let’s look at projects that have a very high token supply; what do we see here? QASH and GXShare, the first with a total supply of 1 billion tokens, and the latter with a total supply of 100 million. In both scenarios the price fluctuates within a narrow range, without any hint of a strong uptrend. These ICO’s problems could also be in the core idea, or the team’s experience and professionalism, but the inflation factor can’t be rejected. AIGANG (AIX) in Simple Terms: First, let’s look at what a AIX token is. It is a utility token that has a limited offer of 17 million tokens (one of the lowest supplies on the ICO market). Aigang (AIX) is a relatively new coin that just hit Kucoin this week. As an insurance professional I enjoyed reading through and analyzing their whitepapewebsite and would like to share my thoughts. I’m not an expert by any definition, but I have experience working in numerous roles within the Canadian property & casualty insurance industry. I’ve worked in sales (to public), underwriting, business admin, and business development (marketing to brokers). I thought it may help some of you to understand AIX’ offering better to have someone with insurance experience break down their proposal. It’s not my goal to shill the coin. Website: https://aigang.network/ (proof of concept is available) Current Market Cap: $40-60M estimated Summary of Intent: To quickly summarize the AIX product, we can use their whitepaper title: “Autonomous insurance network – fully automated insurance for IoT devices and a platform for insurance innovation built around data.” Essentially, AIX seeks to utilize IoT devices that collect data (ie. phones, cameras, drones, smart homes, wearables, etc.) to gather insurance calculations and drive automated insurance products built on smart contracts. This platform would be available for use by insurers and manufacturers. The goal is to build a DAO structure and harness predictive functions. For a more detailed review of this material, please consult the whitepaper. There is an entire section dedicated to Predictive Markets but I’ll let you DYOR on that topic. What I’d like to address are some of the potential products and solutions mentioned in the whitepaper. What Can We Conclude From This Article? That with a very limited supply of AIX tokens, there is consistent growth in AIGANG platform users and traders and a systematic AIX token buyback and burn mechanism. Obviously, there is an advantage to buying large quantities of tokens in the early stages of development. Where can we Buy Aigang (AIX): Aigang Started to trade on Kucoin 3 days ago. Other than that people can also look on Bancor network and Etherdelta decentralized Exchange. https://imgur.com/a/AXcdj
One interesting set of ideas in the "stablecoin" area has to do with systems that do not try to perfectly provide price stability, but which do try to at least marginally improve conditions in this regard over the "Bitcoin/ether baseline". Stablecoins targeting perfect dollar parity (or euro parity, CNY parity, SDR parity, or some kind of decentralized CPI parity) have been criticized for (i) relying on a source of outside information on the value of the target in question, and hence either being centralized or being vulnerable to manipulation, (ii) being unable to handle large, sudden and permanent decreases in demand (or generally market shocks), and (iii) being vulnerable to "speculative attacks" where attackers short the currency in very large volumes, eventually breaking the peg and profiting from the massive resulting fall in price and. (i) and (iii) are possibly both quite solvable even in the perfect parity setting, and (ii) can be mitigated with high collateral requirements; however, for those who are uncomfortable with the reliability or the capital lockup costs of such models, and for those who want some profit potential but with a risk profile closer to a large company stock than to a cryptocurrency there is an opportunity for a "coin" that takes a middle path. Option 1: the PoW-based stabler coin This is based on the "bounded difficulty estimator" technique from here, and incorporates a concept of one-way monetary policy. One simple set of rules is as follows:
Normally, X coins are issued per year (where X may be decreasing according to some schedule)
If the difficulty grows by more than 2x in some time period (say, six months), then increase the issuance by a factor to compensate for the excess (eg. if difficulty grows by 5x in six months, increase issuance by 2.5x)
To see why this works, let us work through an example. Suppose that the price and difficulty rise suddenly by a factor of 2, and then by another factor of 2. As a result, issuance should increase by 2x. However, this itself depresses price, so the equilibrium would be for issuance to increase by ~1.41x and price by ~1.41x (where difficulty would still increase 2x). You may worry about a cascade effect where increasing issuance leads to runaway growing inflation, but the fact that price expectations decrease if such a cascade starts occurring effectively prevents it from happening in the first place. While allowing for both steady growth and technological improvement, this algorithm creates a cap on the upside of a cryptocurrency, preventing its price from going "to the moon" too quickly as if price rises too far then difficulty will rise too, forcing the compensator to kick in. Now, it might seem like this is a strictly undesirable formula to have: it takes away the upside, but if adoption decreases, it does nothing to take away the downside. However, this is not in fact true. The reason is that whereas sudden price rises are due to the expectation of large increases in adoption (it's always expectation, not actual adoption; adoption is predictable in advance far enough that price rises are almost never directly caused by people buying coins for personal use en masse), sudden price drops are quite often due to that expectation being taken away. However, if expectations of greatly increased adoption only increase price moderately, then reduced expectations of adoption should also decrease price only moderately. The above is a fairly strict approach to price control, taking away ~50% of potential gains (and hence hopefully close to ~50% of potential losses). But there is also a more moderate approach:
X coins are issued per year (where X may be decreasing according to some schedule)
Every time difficulty hits a new 2**k value for the first time, release an additional Y coins
This may be appealing to some cryptocurrency enthusiasts because it retains the property that it has a fixed supply cap (as the annual issuance schedule can have a finite sum just like bitcoin, and the second issuance component is effectively capped at ~30 * Y if parameters are set appropriately, as the difference between an appropriate initial difficulty and a "world domination" scenario is likely well under a factor of a billion). It also works well with a Zcash-style "delayed founder premine" scenario as the founders' share can be designed ONLY as a share of the Y component, effectively giving the founders a superlinear interest in the currency succeeding, where if it does not succeed enough to trigger issuance bursts their returns are effectively zero. Option 2: the Seignorage Shares-based stabler coin Now, suppose that we are doing proof of stake (or an asset on top of another PoW blockchain) and so we do not have access to mining as either a way of measuring price increases or as a distribution model. Suppose that the problem of measuring price in a decentralized way is solved. We can use Seignorage Shares as a distribution model, but without sticking to any kind of absolute peg. Instead, what we can do is have some number of "coins" up for auction evenly across all price levels (ie. there are 10000 coins to be sold for $1.00 worth of shares per coin, 10000 coins to be sold for $1.01 worth of shares per coin, etc), and have a market where coins can be sold back - if all of the coins from $0 to $1.25 have been sold, then there would be an opportunity to sell back 10000 coins at $1.25, 10000 coins at $1.24, etc. Note that this is essentially a revenue-neutral market maker; we can also charge a spread (say, a 0.5% fee on selling coins back to the system for shares) and thereby make the scheme profitable. This kind of scheme is harder to financially exploit, as (i) it does not try to maintain an absolute peg, instead maintaining a "pressure" toward price stability that we can expect to take away roughly ~50% of a cryptocurrency's price volatility, (ii) has a compelling mathematical argument for why it would not "break", and (iii) creates a role for speculators who are willing to protect the currency by buying it up on the cheap during an attack and profit from this. Option 3: the self-rebalancing portfolio coin This approach is inspired by collateralized debt obligations, and tries to get price stability in a different way. Essentially, we break up a volatile asset with prior price P into pieces A and B, where if the asset has a posterior price P', then we target price(A) = min(P', P / 2) and price(B) = max(0, P' - P / 2). Essentially, A is the "bottom slice" and B is the "top slice". We enforce this using the following scheme:
Every epoch (say, 1 epoch = 1 hour), we record the prior price, P.
Anyone at any time can convert 1 unit of the underlying asset into 1 A + 1 B, and anyone can convert back.
At the end of the epoch, suppose that the new price is P', where price(A) / P' = x and price(B) / P' = y according to the formulas above (where x + y = 1). Multiply A-holders' holdings by x * 2 and B-holders' holdings by y * 2. Rinse and repeat.
The last step can be viewed as the protocol automatically making an operation where (i) A and B holders' holdings are settled in terms of the underlying asset (A holders should get x and B holders should get y), (ii) these holdings of the underlying asset are immediately re-split into A and B, and (iii) those who held A automatically sell their B to those who held B at fair market price and vice versa. Unless the underlying asset drops by more than a factor of 2 during an epoch, this ensures purchasing power stability for A holders; if we want to convert this into a token with price stability (ie. users don't see changes in the quantity of their holdings), we can create a simple DAO that holds A, and whose shares represent a constant share of its (fluctuating) A holdings. Alternatively, we can pretend to do this, instead baking this functionality into the underlying contract by making the convertibility rate be 1 asset = x A + y B where x and y change as needed; this may actually be simplest to implement, because there is no need to loop through balances and increment all of them proportionately when you can instead just separately store the proportionality constant. If the underlying asset does drop by more than a factor of 2, then A holders do suffer to some extent, but this is ok; the point was never to provide a perfect guarantee, only an approximate one. The scheme can be generalized to an arbitrary number of tranches tranches; eg. one can even do something like a five-tranche scheme with A = 0-33%, B = 33-67%, C = 67-100%, D = 100-200%, E = 200%+. IMO it would be interesting to implement some of these on top of ethereum (eg. one can easily make the A/B scheme above on top of ether itself), although it's also important to come up with the tooling to make these systems liquid enough for practical usage, including decentralized exchange dapps, market makers, etc; I'd like to be able to purchase some "bottom-tranche ether" and hold it as a stablecoin just as easily as I can move between ether and bitcoin themselves. Coming up with a reasonably trustworthy decentralized oracle is also important; I quite like the recent proposal by Edmund Edgar though we should probably try a few different ones.
A decentralized Peer-review-registering exchange system for dispensaries?
I got almost no response on the first post I made earlier, regarding this decentralized Peer-review exchange system for companies, so I'll give it a try with a more catchy title. I have also edited it quite a bit after some rethinking. Try to give it a read. Today I came up with the idea of an exchange, based on decentralized Peer-review-registration of companies. Think about it for a second. It will take only one credible company to get together with you guys to work out the initial plan and be the first self-registered company. Then they will just have to accept another company and give them "access" to a frozen shareholder-DNS-coin wallet, encoded into itself so to speak (cause it also has to be the exchange), that can't be deposited, withdrawed or traded, in order for the new company to be a part of the exchange. It has to be based on mutual trust, like some sort of decentralized association. To begin with, it will of course be centralized, as there can be only one creator - just like with Bitcoin and Satoshi. He owned it before release, but now it's ours - as it's p2p based, it's practically decentralized when there's more than one owner. This, I imagine, can be done by setting up an additional 100% premined shareholder-coin with DNS function, and make the DNS the exchange and lock the coins into itself within the exchange. Furthermore making it self-regulating, automatically dividing the coins among the number of peer-review-registered companies, but on locked wallets on the site that no one can ever touch, so that it can and will only be used as a tool for dividing the ownership/rights/ability to use the exchange after the peer-reviewed-registration. The shareholder-coins will even break the law of supply and demand, cause there's nothing to speculate in, not even for the first company - they can never cash them out. It shall only remain as some sort of a frozen share, coded into the website. So it's literally nothing worth, other than the proof of positive peer-review and therefore ability to use the exchange. It needs to be automatically able to divide itself by the number of companies registered. So if two becomes three, then the two that before owned 50% each, will now own 33,33% each, as well as the new company will, and when a fourth company comes along they all own a share of 25% of the DNS-coins and so forth. And for price stability so that PotCoin becomes more attractive for new companies, you could allow only a xx.x % of the actual market cap or coins circulating the exchange to be exchanged by the same user every xx minutes/hours/days, automatically adjusted to the companies individual turnovers etc. in order to prevent huge sell-offs or buy-ins which will result in great fluctuations. I'm no mathemathical genius, nor am I genius of any other kind. But this seems pretty logical to me. There has to be a not too intricate formula that can deal with this. That will be a great way to bring the voices of PotCoin together and form a strong alliance of Potcoin-accepting companies. It might also be a wake-up call for some banks to start accepting money from the exchange. Their turnovers will of course be different from one another, and that's why I suggest some sort of equation that might include factors such as individual flexible turnover percentages and furthermore give them trading periods - some companies then trade during odd hours and others during even hours, so that big companies can't make big sell-offs and hurt small companies. Remember, a such exchange is not meant for speculation, but only for making a safe environment for the coin, so the companies that use them has a narrow space where they can concentrate their exchanging POT for USD - albeit they have to be a bit more patient, but it's not like they can't cash out to pay their bills or anything, it's just a more regulated market - a self-regulated market. If an unfair banker can do it, a fair code can also. Bitcoin has proven that. It won't affect the amount of goods or services that the customers can buy, cause if all the turnovers of the companies rise, the DNS-market will self-adjust and the companies will be able to sell more in accordance with their exchange-level, the system will put them on higher levels. I imagine some sort of a level-system (a mathematic equation) that automatically categorizes companies and equalizes itself all the time, leaving room for a certain predetermined margin between buys and sells, without retarding the overall trade too much, but just making it more stable. But also can it balance the market out by simply matching one big company vs. a lot of small companies, constantly. Because all the small companies are much less likely to sell out. And not only that. A company will only be allowed to sell a certain percentage of their turnover within a certain timeframe, and bigger companies need to have a lower sell-percentage, cause they have more money. The exchange will work like a public bank - And a "bankrun" i.e. collapse, is almost impossible, and in case of it happening, it will be a slow one. Imagine if you could smoothen out the market fluctutations so it looks more like the MA instead of what the candles look like - earthquakes. And those earthquakes are scary for companies of all kinds, even with a fast exchangeability. PotCoin will most likely end up on a neverending, smooth uptrend, because as more people see the idea and set up new exchanges, they will push the market capital slowly but steadily. But since it is Peer-reviewed the companies that start adopting the system most likely won't allow big whales (in comparison to themselves) to come and flood the market to begin with. So the price regulation might not even be necessary in the first place - they will most likely auto-categorize themselves. I think all companies will find their matching exchanges. And I can easily see a whole cooperating system of exchanges, dividing companies into the sections where they belong, in regard of size and if they have too much turnover for the smaller exchanges, then their funds will slowly be transferred to an exchange with bigger companies, matching them. Much like sports leagues and poker rooms. And all that has to be able to level itself, so that the multiple exchanges are working like one big exchange. The prices will have to be regulated by a single DNS-coin system, so no matter what, the coins on all exchanges will be worth more or less the same. It's sort of a fluctuation-brake. The best I can think of. And it's much, much more than that. I see a huge potential here. Not only for PotCoin, but for all coins. It will also decrease the competition between the already existing cryptocurrencies. They will have each one of their communities to grow and evolve, regardless of other coins. A company has to slowly adopt PotCoins or any other coin in this manner, as it by the rules can't just buy a big amount on the exchanges, so this is the key to a successful worldwide cryptocurrency adoption. It wil take time to implement, but I can only see it happen in the long run.
Maxcoin Fundamentals -- Concept of Difficulty, Difficulty Retargeting & The Kimoto Gravity Well
Dear friends. Below a full article that explains what the Kimoto Gravity Well is and the mathematics involved. TL;DR -- "Difficulty is a measure of how difficult it is to find a new block compared to the easiest it can ever be. Originally its calculated by averaging the time it took to mine blocks during a 2 week period. Due to the influx of ASIC miners and "pool-hopping", mining difficulty can fluctuate dangerously killing or seriously harming the coin (It happened to Terracoin, Frathercoin, Megacoin and Anoncoin). KWG means that difficulty is adjusted after every single block that is mined on the network. It also determines the number of blocks which contribute to the evaluation of the new difficulty. It gives fewer blocks for high hashrate changes and is therefore more adaptive." What Is a Mining Difficulty Readjustment Algorithm, Anyway? To understand what the Gravity Well algorithm is and what it does, you first need to understand what a "mining difficulty readjustment algorithm" is and why is it important for all current cryptocurrencies based off of the original Bitcoin source code. First, let's pull a few important definitions from the Bitcoin wiki: Difficulty Difficulty is a measure of how difficult it is to find a new block compared to the easiest it can ever be. Difficulty Readjustment (for Bitcoin) The difficulty is adjusted every 2016 blocks based on the time it took to find the previous 2016 blocks. At the desired rate of one block each 10 minutes, 2016 blocks would take exactly two weeks to find. If the previous 2016 blocks took more than two weeks to find, the difficulty is reduced. If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time over or under two weeks the previous 2016 blocks took to find. So basically, the "difficulty" of a coin determines how hard it is for miners to find and mint blocks of that coin. The more miners there are mining a coin, the faster blocks will be found and at the end of this difficulty readjustment period (approximately every two weeks for Bitcoin), the difficulty will change accordingly so that the number of coins minted will follow the intended distribution curve. This has worked well for Bitcoin (so far) because of it's extremely slow adoption rate in the early days and now because of the sheer number of miners on the network. However, this method of difficulty readjustment is flawed for new altcoins entering the market today for a number of reasons which I will discuss below. The History of the Gravity Well Mining Difficulty Readjustment Algorithm When some alternative crypto's like Megacoin were first launched, they used a more traditional difficulty readjustment algorithm based off of Bitcoin's original proposal. In the case of Megacoin, the difficulty was set to retarget every 22.5 minutes based on the same algorithm as Bitcoin, however, the developers later modified the source code to implement Kimoto Gravity retargetting because, by this time, some SHA-256 coins had already felt the pain of difficulty readjustment problems due to the influx of ASIC miners and an activity known as "pool-hopping". If you are familiar with cryptocurrency mining at all, you may already know that in most cases, solo mining is usually impossible without extremely powerful hardware due to the large number of people now aware of cryptocurrencies and willing to mine for them. Most miners mine through pools, which provide proportional payouts of coins based on the amount of hashing power you provide to the network. This mitigates some of the risk of mining in that you receive a steady stream of coins based on your network hashing rate, so even small-time miners can still earn their share of the pie. However, as pool mining became more popular and more altcoins arrived on the market, services known as "multipools" began to appear. These were special pools that allowed miners to automatically switch to the "most profitable" coin to mine based on the current exchange rates. However, these new multipools introduced some new problems to the cryptocurrency landscape, one of those being major difficulty readjustment woes. As some altcoins began to rise in price several months after its inception, it started to become a target for these multipools. What happens when this occurs is that suddenly the You-Name-It-Coin network gets barraged by an influx of new (and very powerful) miners. This causes the block confirmation time to plummet and subsequently causes the difficulty to skyrocket at the next difficulty readjustment. When this occurs, the mining profitability also drops due to the higher difficulty which then in turn causes all of the multipool miners to leave the network in search of the next most profitable coin. What remains is an extremely high difficulty and only the "core" group of a certain altocin's miners left to deal with the aftermath. In extreme cases, the difficulty may be so high in proportion to the number of miners left that the entire network grinds to a halt. This has happened in the past to Terracoin and Feathercoin, among others. The only solution if this occurs is to hard fork the coin in an attempt to readjust the difficulty (or change the difficulty readjustment algorithm) or simply grind out the mining at an extremely slow pace (during which time the coin is basically unusable) until enough blocks are found to make it to the next difficulty readjustment. The more blocks required until the next difficulty readjustment, the longer this period of unusability will be, and in some cases could mean the death of the coin completely unless drastic measures are taken. When this happened to Megacoin for example, Kimoto decided to come up with a better way to perform difficulty readjustment, and the result is the Kimoto Gravity Well (which is now also used as the difficulty readjustment algorithm for Megacoin, Maxcoin, Anoncoin among others). Gravity Well: Explained Now that you know how the Gravity Well came to be, let's take a look at what exactly it does and how it works. At the most basic level, Kimoto has changed how difficulty readjustment works so that the difficulty is adjusted after every single block that is mined on the network. The formula for the Kimoto Gravity Well (KGW) is the following KGW = 1 + (0.7084 * (PastBlocksMass/144)-1.228) The goal is to have a more adaptive way of adjusting the difficulty instead of just averaging the last 2016 blocks like bitcoin. This is needed because of multipools which might switch the coin they are mining, and a sudden change in hashrate can occur (both increasing or decreasing). Especially when a multipool switches away you get stuck too long with a too high difficulty. The algo loops backwards through the blocks, starting from the current one. The PastBlocksMass is just the number of blocks, so it starts at one and increases in each loop. In each loop an adjustment factor is computed, which is the target block time divided by the actual block time, in a cumulative fashion, so at loop 10 we would have the 25 minutes target time divided by the time it actually took to compute the last ten blocks. When the hashrate increases, we get shorter times and an adjustment factor greater than one and vice versa. The loop ends whenever the average adjustment factor is larger than the kimoto-value, or smaller than 1/kimoto-value. Summary: the Kimoto gravity well algo has a fancy name and determines the number of blocks which contribute to the evaluation of the new difficulty. It gives fewer blocks for high hashrate changes and is therefore more adaptive. More details on the math's involved and a practical example can be found here :: https://bitcoin.stackexchange.com/questions/21730/how-does-the-kimoto-gravity-well-regulate-difficulty NOTE:: The two original post that inspired this article were focused solely on Megacoin. I made some small modifications to them so the post can be applied to any cryptocurrency on the market. Below the references. Original Post 1 (History & Background) --- https://forum.megacoin.co.nz/index.php?topic=893.0 Oroginal Post 2 (Mathematics & practical example) -- https://bitcoin.stackexchange.com/questions/21730/how-does-the-kimoto-gravity-well-regulate-difficulty Original Release note of the Kimoto Gravity Well -- https://bitcointalk.org/index.php?topic=240861.msg3040291#msg3040291 We have to know very well the fundamentals of what we love. Have a great day
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