How to Make the Ideal Cryptocurrency

in crypto •  8 months ago

The ideas and work of John Nash are textbook material in Game Theory and used in various branches of science such as economics, biology etc. One of his lifelong efforts was to promulgate "Ideal Money".

The simple definition of John Nash's Ideal Money is money that is stable over long periods of time.

Much has been said about the enthusiasm of cryptocurrency evangelists to do away with the "inflationary fiat" currencies. But are cryptos 'ideal'?

Clearly not. Bitcoin is extremely volatile and compared to any basket of goods, in general it fluctuates so widely to be practically unusable. Is this a systemic problem with Bitcoin? We try to attempt to answer this question.

There are four key aspects to a cryptocurrency and the associated blockchain:

  1. Mining
  2. Utility
  3. Transactions (incl. Transaction cost)
  4. Price (of Coin)

A cursory look shows that these four factors do not influence each other much in the case of the Bitcoin blockchain model. Mining of Bitcoin is unchanged relative to utility or demand which determines price. This is quite contrary to what we would observe in case we were mining for copper, gold or even producing wheat. Production, distribution and price are all closely related.

Several economists including Nash, Selgin have proposed the linking of the price of a currency to a CPI type index, or to productivity linked to GDP etc.

What does this have to do with cryptocurrency and blockchain? It is research at the state of the art to see how the production, utility and price of cryptocurrencies can be made stable relative to each other by creating a "stablecoin".

Take for example, the just released currency like DAI/MKR (http://makerdao.com) or the work-in-progress Basecoin (now called Basis), which through a process of mining and burning of tokens seek to stabilize with a peg such as the USD or the CPI.

I am designing a protocol called Haggl that will have inflation targeting built-in to the blockchain with respect to a basket of products that are available for e-commerce in the Internet.

If you like, please ask me for a whitepaper.

Instead of doing a big bang ICO or try to raise millions from VCs, I decided to raise small funds using Steemit!

So, can you please help me raise 100K USD for the effort by simply liking this post and resteeming it!!

Cheers
Raskal

@dan @fyrstikken @acidyo

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