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Taking this a step further, when using it as a pure transport medium, the cryptocurrency itself doesn't matter. It could be Bitcoin, Litecoin, Dogecoin, 2304293

by jarin 12y ago

Taking this a step further, when using it as a pure transport medium, the cryptocurrency itself doesn't matter. It could be Bitcoin, Litecoin, Dogecoin, 2304293f20983uf2089j2f3coin, or whatever, as long as it's liquid enough to convert back and forth. What we really need is a gateway system that will intelligently convert between your local currency -> the cryptocurrency with the best liquidity/exchange rate -> the destination currency. Interestingly, I could see this leading to automatically generated cryptocurrencies, as various popular cryptocurrencies fall below liquidity, transaction time, and/or exchange rate thresholds. Over time, I'd expect to see some interesting competition and arbitrage between cryptocurrencies going on behind the scenes, all computer controlled.

nawitus 12y ago
This "gateway system" is the foreign exchange market (or equivalent, if they choose not to adopt bitcoin).
Taek 12y ago
I see the future of cryptocurrency as being a bunch of behind-the-scenes transactions where the currency you are using isn't relevant at all, because everything will be hyper-liquid. You pick you favorite currency (or portfolio) as a store-of-value, and then if you need to trade with other people, your client and portfolio negotiates with their client and portfolio to arrange an acceptable exchange. Then you use a decentralized network of exchanges to restore any ratios you want to maintain. This allows people to create their own currency and enforce it's particular use, backing it explicitly. For example, you could crate 'SoylentCoin', which can be cashed in for 1 month of Soylent shipped by a certain date. You sell it for some price that keeps you in business, but then the market is free to trade it at-will and you can hit more efficient price points for your product. Sometimes you might find that your product is worth a lot more than you are selling it for. Or in a decentralized example, you could do proof-of-resource sale that sells coins directly transferable to a type of resource. In example of disk storage, you provide storage to the network in return for disk-coins. To get the storage, you need to buy disk-coins. This isolates the disk-coin price to the supply and demand of disk storage precisely. Anyone can participate, and upon buying or selling the disk-coin, they can immediately convert to or from whatever portfolio of coins they personally maintain.
- Natanael_L 12y ago
  Most of those examples lead to counterparty risk, unfortunately, where there must by some direct trust in the issuer on some level.
krschultz 12y ago
I agree with this completely. BTC is proving out the idea, but the total market cap is only $8 billion. What stops Goldman Sachs from seeding a cryptocurrency tomorrow with a market cap that massively eclipses BTC? The big IBanks are sloshing billions and billions of dollars around all the time. There is this assumption that BitCoin is so big that it is the winner, but it is "so big" relative to a bunch of people that aren't in the world financial system today.
- embolalia 12y ago
  The thing that stops them is the lack of a reason to start them. Why would Goldman throw that much money at a new system, rather than using the existing one? Bitcoin has an existing user and development base; it's proven, whether it's at full scale or not. Goldman does not have a guarantee that their hypothetical coin will gain any acceptance outside their walls. And Goldman would have to ask themselves that same question - "If we can create a successful coin overnight, why can't BoA or Chase?" If Goldman can do it, their competitors can, so that $8 billion they apparently have sitting around with no better investments to make is better spent on getting an early hold on Bitcoin. And, of course, this all assumes that big banks are forward thinking enough to see coins as worthwhile, and that they have the kind of developer power in a new and obscure area to outperform 5 years of FOSS development before anyone else beats them to it.
  - kaonashi 12y ago
    > Why would Goldman throw that much money at a new system, rather than using the existing one Why would Apple create their own app store, when they could just use existing ones?
joelhaus 12y ago
Correct. You could also solve the "unit of account" and "store of value" problem by pegging your crypto-currency to the USD, 1:1 exchange. Then you get the advantage of the decentralized transport network and the stability of the dollar (or any other preferred real world currency). It's tends to not be a popular opinion around here (there are probably a few with vested interests), but Bitcoin as a currency is fatally flawed. It's supply is structured so that Bitcoin perpetually increases in value, thereby perpetually slowing down the velocity of Bitcoin transactions.
- brg444 12y ago
  Doing what you suggested would very much destroy any value existing in BTC. The USD is not actually a reference in terms of store of value. It's deflationary property is a feature, not a flaw.
  - joelhaus 12y ago
    Not proposing doing anything to Bitcoin, it's an idea for controlling the supply of a new crypto-currency. | It's deflationary property is a feature, not a flaw. I studied this while getting my economics degree. Methinks you are missing some important behavioral dynamics related to interest rate interactions with consumption and investment. Here's a lesson from the fed: http://www.philadelphiafed.org/education/teachers/resources/fed-today/Functions_and_Characteristics_of_Money_Lesson.pdf http://www.philadelphiafed.org/education/teachers/resources/...
jedunnigan 12y ago
It's funny, the article basically perfectly describes Ripple in its gateway section. It gets a lot of heat for the XRP business but in reality it's a very clever system that opens up a lot of possibility. It just needs more gateways at this point.

by jarin 12y ago

nawitus 12y ago

This "gateway system" is the foreign exchange market (or equivalent, if they choose not to adopt bitcoin).

Taek 12y ago

I see the future of cryptocurrency as being a bunch of behind-the-scenes transactions where the currency you are using isn't relevant at all, because everything will be hyper-liquid. You pick you favorite currency (or portfolio) as a store-of-value, and then if you need to trade with other people, your client and portfolio negotiates with their client and portfolio to arrange an acceptable exchange. Then you use a decentralized network of exchanges to restore any ratios you want to maintain. This allows people to create their own currency and enforce it's particular use, backing it explicitly. For example, you could crate 'SoylentCoin', which can be cashed in for 1 month of Soylent shipped by a certain date. You sell it for some price that keeps you in business, but then the market is free to trade it at-will and you can hit more efficient price points for your product. Sometimes you might find that your product is worth a lot more than you are selling it for. Or in a decentralized example, you could do proof-of-resource sale that sells coins directly transferable to a type of resource. In example of disk storage, you provide storage to the network in return for disk-coins. To get the storage, you need to buy disk-coins. This isolates the disk-coin price to the supply and demand of disk storage precisely. Anyone can participate, and upon buying or selling the disk-coin, they can immediately convert to or from whatever portfolio of coins they personally maintain.

Natanael_L 12y ago
Most of those examples lead to counterparty risk, unfortunately, where there must by some direct trust in the issuer on some level.

krschultz 12y ago

I agree with this completely. BTC is proving out the idea, but the total market cap is only $8 billion. What stops Goldman Sachs from seeding a cryptocurrency tomorrow with a market cap that massively eclipses BTC? The big IBanks are sloshing billions and billions of dollars around all the time. There is this assumption that BitCoin is so big that it is the winner, but it is "so big" relative to a bunch of people that aren't in the world financial system today.

embolalia 12y ago
The thing that stops them is the lack of a reason to start them. Why would Goldman throw that much money at a new system, rather than using the existing one? Bitcoin has an existing user and development base; it's proven, whether it's at full scale or not. Goldman does not have a guarantee that their hypothetical coin will gain any acceptance outside their walls. And Goldman would have to ask themselves that same question - "If we can create a successful coin overnight, why can't BoA or Chase?" If Goldman can do it, their competitors can, so that $8 billion they apparently have sitting around with no better investments to make is better spent on getting an early hold on Bitcoin. And, of course, this all assumes that big banks are forward thinking enough to see coins as worthwhile, and that they have the kind of developer power in a new and obscure area to outperform 5 years of FOSS development before anyone else beats them to it.
- kaonashi 12y ago
  > Why would Goldman throw that much money at a new system, rather than using the existing one Why would Apple create their own app store, when they could just use existing ones?

joelhaus 12y ago

Correct. You could also solve the "unit of account" and "store of value" problem by pegging your crypto-currency to the USD, 1:1 exchange. Then you get the advantage of the decentralized transport network and the stability of the dollar (or any other preferred real world currency). It's tends to not be a popular opinion around here (there are probably a few with vested interests), but Bitcoin as a currency is fatally flawed. It's supply is structured so that Bitcoin perpetually increases in value, thereby perpetually slowing down the velocity of Bitcoin transactions.

brg444 12y ago
Doing what you suggested would very much destroy any value existing in BTC. The USD is not actually a reference in terms of store of value. It's deflationary property is a feature, not a flaw.
- joelhaus 12y ago
  Not proposing doing anything to Bitcoin, it's an idea for controlling the supply of a new crypto-currency. | It's deflationary property is a feature, not a flaw. I studied this while getting my economics degree. Methinks you are missing some important behavioral dynamics related to interest rate interactions with consumption and investment. Here's a lesson from the fed: http://www.philadelphiafed.org/education/teachers/resources/fed-today/Functions_and_Characteristics_of_Money_Lesson.pdf http://www.philadelphiafed.org/education/teachers/resources/...

jedunnigan 12y ago

It's funny, the article basically perfectly describes Ripple in its gateway section. It gets a lot of heat for the XRP business but in reality it's a very clever system that opens up a lot of possibility. It just needs more gateways at this point.