Quote from: edmundedgar on April 16, 2013, 02:42:28 PM

Quote from: rayt5 on April 16, 2013, 02:26:32 PM

but I can't figure out how to measure BTC value in a decentralized way that could be captured in an algorithm.

Right, that's half the problem. If you could figure out a reliable way to capture the value of your coins you could hook up the money supply (in Bitcoin's case the block reward) to it, but that seems to be impossible (?) without some trusted authority somewhere.

The other half of the problem is that you probably need a way to actually take coins out of circulation if the value of your coins drops. This is particularly true if you've just taken away the upside to holding your coins by making a protocol that prints money to stop it appreciating.

And once we've done those two things, we seem to have reinvented the Central Bank. Which is why the best we could do as far as I can see is to still have multiple Central Banks, and the ability for the community to make a decentralized consensus decision to blacklist any that might misbehave.

I don't think it's worth doing if it can't be done on a P2P basis. I don't think anyone will use it if it has any centralized authority, and besides it creates a weakness that can be shut down or dismantled.

Personally I think it would be enough to just prevent the price from rising too quickly. Some way to preempt speculative bubbles by decreasing mining difficulty at the right time, then gradually increase the difficulty back to where it was, such that the net effect is that supply increases in sync with its increase in market capitalization, aka demand. But you're right, that doesn't solve the problem of decreases in demand. I don't think people would be willing to bear any demurrage or fees, but perhaps mining difficulty could be increased to very high or infinity in the event of inflation? This would temporarily cap the supply, which would raise the value, but it would be a lot slower than the other direction. Still, if it could be done I think it would work pretty well.

The problem is, how does one measure a currency's value (or change in value) without comparing it to anything else? Are there any measurable, intrinsic monetary indicators that correlate with a currency's value?