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> “Venezuela will create a cryptocurrency,” backed by oil, gas, gold and diamond reserves, Maduro said I am not sure if that’s even possible, it doesn’t make m

> “Venezuela will create a cryptocurrency,” backed by oil, gas, gold and diamond reserves, Maduro said I am not sure if that’s even possible, it doesn’t make much sense. How do you link the currency to those reserves in a way that is any different to the current currency? That being said, a crypto which is relatively stable could be very useful for countries with runaway inflation or other issues with the state. Both for local use and liquidity across global markets.

keypusher 9y ago
This has been done already by projects like Tether (USDT). There is currently some... discussion as to whether they really have the assets to back it 1:1, but it does stay about even with the dollar on exchanges. Some coins also offer "price-stable" options such as BitShares.
drcode 9y ago
Technically it is totally possible to create a cryptocurrency that whose price is fixed relative to a basket of oil, gas and gold reserves... until the day comes the government decides that some baskets of fixed goods are more equal than other baskets.
- derefr 9y ago
  I'm unclear on how you can fix the price of a cryptocurrency. Saying how much you'll buy something back for doesn't set the price people will pay to buy it, because the issuer isn't the only player making the market—people can buy it from each-other, rather than from you, and they can pay whatever they like when they do so. Look at US treasury bonds: the US can adjust the interest rate on them, but it's the market (dealers holding auctions, etc.) that actually sets the price of them. If everything else is a bad investment (like during the 2007 recession), people will actually buy the likely-negative-yield treasury bonds at a premium, because they need to stick the money somewhere and everything else looks to have a worse NPV. As such, the market value of any security can exceed the value of its call option.
  - im3w1l 9y ago
    Maybe they are saying "We will do our best to control/manipulate the exchange rate rather than let it float" Sounds like a blast from the past.
  - repsilat 9y ago
    They can set the prices with a simple standing offer to buy and sell at a given rate. If the Venezuelan government will sell anyone one oilcoin for a barrel of oil, nobody would buy one for more. If the Venezuelan government will buy an oilcoin for one barrel of oil from anyone, nobody would sell one for less. They almost certainly won't be freely exchangeable to this degree, but there is no problem with price controls in theory.
    - mlevental 9y ago
      you're assuming no one would undercut or overbid them. exactly the point is there's no intrinsic reason to assume that
      - tlrobinson 9y ago
        Why would anyone sell an oilcoin to me for less than a barrel of oil when they could sell it to the government for more? (and vice versa)
  - drcode 9y ago
    If you want to fix the price of a currency between (for example) $0.95 and $1.05, you simply offer to sell to anyone at $1.05 and offer to buy from anyone at $0.95. As long as you don't go bankrupt, you can keep doing this and pretty much guarantee the price will never exceed that range even on other market, or people will simply arbitrage the excess away.
  - Grangar 9y ago
    Tether tries to do it by holding the total market cap USD in its own reserve (whether or not they actually have it is up to discussion). It's a disaster waiting to happen.
jmharvey 9y ago
> a crypto which is relatively stable could be very useful ... It seems like there's a fairly tight correlation between the value of a cryptocurrency and the effort required to mine it. (Which is what you'd expect -- if the price of BTC rises, more people mine it, and the per-block difficulty increases, and if the price falls, fewer people mine it, and the difficulty falls.) I wonder if we could create a more stable cryptocurrency by keeping the mining difficulty constant (or possibly tied to moore's law). It may be wildly "inflationary" in terms of the size of the monetary base, but it should be fairly stable in terms of real resources per unit of currency.
- einarvollset 9y ago
  Crypto assets do not actually require mining after launch I believe. You could pre-mine all the assets. I believe XRP (ripple) is an example
  - cryptodogemoon 9y ago
    The contending decentralized consensus algorithm is called Proof of Stake, and it works by giving you lottery tickets based on how much wealth you already have. PoS coin supplies should be avoided, as the production cost or input work is not worth the speculative asset produced. XRP is a case study in how they've created artificial scarcity and can flood the market with sell orders from their reserves. https://www.coindesk.com/ripple-jed-mccaleb-settle-suit-over-1-million-in-disputed-funds/ https://www.coindesk.com/ripple-jed-mccaleb-settle-suit-over...
    - repsilat 9y ago
      They could also just have a centralised service validating transactions. No need to mine, no need for stake. Not exactly a traditional cryptocurrency at that point, but in day-to-day use no different (and rather more attractive to political regimes like Maduro's.)
  - derefr 9y ago
    Also, Ethereum ERC20 tokens, which aren't cryptocurrencies per se, just numbers in a ledger whose updates get embedded within the cryptocurrency (ETH)'s blocks.
fjsolwmv 9y ago
I think the point is that it's a fiat currency but it's purely digital and and not paper cash, and transfers use a blockchain (?) instead of bankfiles. Unclear who controls the block chain though, I'd guess it's centralized. And the government can seize money at any time, Tether style, by invalidating public coin addresses it seems dirty.
k_lander 9y ago
MakerDAO has been working on a Stablecoin for the past 2 years and plans a release later this month.

keypusher 9y ago

This has been done already by projects like Tether (USDT). There is currently some... discussion as to whether they really have the assets to back it 1:1, but it does stay about even with the dollar on exchanges. Some coins also offer "price-stable" options such as BitShares.

drcode 9y ago

Technically it is totally possible to create a cryptocurrency that whose price is fixed relative to a basket of oil, gas and gold reserves... until the day comes the government decides that some baskets of fixed goods are more equal than other baskets.

derefr 9y ago
I'm unclear on how you can fix the price of a cryptocurrency. Saying how much you'll buy something back for doesn't set the price people will pay to buy it, because the issuer isn't the only player making the market—people can buy it from each-other, rather than from you, and they can pay whatever they like when they do so. Look at US treasury bonds: the US can adjust the interest rate on them, but it's the market (dealers holding auctions, etc.) that actually sets the price of them. If everything else is a bad investment (like during the 2007 recession), people will actually buy the likely-negative-yield treasury bonds at a premium, because they need to stick the money somewhere and everything else looks to have a worse NPV. As such, the market value of any security can exceed the value of its call option.
- im3w1l 9y ago
  Maybe they are saying "We will do our best to control/manipulate the exchange rate rather than let it float" Sounds like a blast from the past.
- repsilat 9y ago
  They can set the prices with a simple standing offer to buy and sell at a given rate. If the Venezuelan government will sell anyone one oilcoin for a barrel of oil, nobody would buy one for more. If the Venezuelan government will buy an oilcoin for one barrel of oil from anyone, nobody would sell one for less. They almost certainly won't be freely exchangeable to this degree, but there is no problem with price controls in theory.
  - mlevental 9y ago
    you're assuming no one would undercut or overbid them. exactly the point is there's no intrinsic reason to assume that
    - tlrobinson 9y ago
      Why would anyone sell an oilcoin to me for less than a barrel of oil when they could sell it to the government for more? (and vice versa)
- drcode 9y ago
  If you want to fix the price of a currency between (for example) $0.95 and $1.05, you simply offer to sell to anyone at $1.05 and offer to buy from anyone at $0.95. As long as you don't go bankrupt, you can keep doing this and pretty much guarantee the price will never exceed that range even on other market, or people will simply arbitrage the excess away.
- Grangar 9y ago
  Tether tries to do it by holding the total market cap USD in its own reserve (whether or not they actually have it is up to discussion). It's a disaster waiting to happen.

jmharvey 9y ago

> a crypto which is relatively stable could be very useful ... It seems like there's a fairly tight correlation between the value of a cryptocurrency and the effort required to mine it. (Which is what you'd expect -- if the price of BTC rises, more people mine it, and the per-block difficulty increases, and if the price falls, fewer people mine it, and the difficulty falls.) I wonder if we could create a more stable cryptocurrency by keeping the mining difficulty constant (or possibly tied to moore's law). It may be wildly "inflationary" in terms of the size of the monetary base, but it should be fairly stable in terms of real resources per unit of currency.

einarvollset 9y ago
Crypto assets do not actually require mining after launch I believe. You could pre-mine all the assets. I believe XRP (ripple) is an example
- cryptodogemoon 9y ago
  The contending decentralized consensus algorithm is called Proof of Stake, and it works by giving you lottery tickets based on how much wealth you already have. PoS coin supplies should be avoided, as the production cost or input work is not worth the speculative asset produced. XRP is a case study in how they've created artificial scarcity and can flood the market with sell orders from their reserves. https://www.coindesk.com/ripple-jed-mccaleb-settle-suit-over-1-million-in-disputed-funds/ https://www.coindesk.com/ripple-jed-mccaleb-settle-suit-over...
  - repsilat 9y ago
    They could also just have a centralised service validating transactions. No need to mine, no need for stake. Not exactly a traditional cryptocurrency at that point, but in day-to-day use no different (and rather more attractive to political regimes like Maduro's.)
- derefr 9y ago
  Also, Ethereum ERC20 tokens, which aren't cryptocurrencies per se, just numbers in a ledger whose updates get embedded within the cryptocurrency (ETH)'s blocks.

fjsolwmv 9y ago

I think the point is that it's a fiat currency but it's purely digital and and not paper cash, and transfers use a blockchain (?) instead of bankfiles. Unclear who controls the block chain though, I'd guess it's centralized. And the government can seize money at any time, Tether style, by invalidating public coin addresses it seems dirty.

k_lander 9y ago

MakerDAO has been working on a Stablecoin for the past 2 years and plans a release later this month.