Solution for maintaining transaction value between bitcoin senders & receivers to create stability



Now, everyone may have noticed that people are using the Bitcoin system to speculate.

The purpose for Bitcoin: To securely move financial value from one point on the planet to another with no errors.  though what people are doing is quite amazing! very interesting.

now the sandbox elements of bitcoin currently being exploited by the financial sector is fine, the price of bitcoins should not affect our customers as long as an agreed upon price is set between sender and receiver.

Bitcoin was originally meant to work under traditional banks infrastructure as a sub-layer of security; the price would have been fixed and outside speculators ability to destabilize would be non-existent.

I.E. Bitcoins value would have followed a controlled growth pattern, exhibiting signs of both inflationary and deflationary characteristics depending on Global transaction volume; this would have set the value of each BTC

e.g.: if I wish to send money to my mom, I set the price to (Fair-market-value)(this is the set price for transmission so it does not affect the people using Bitcoin as a speculative commodity, it should be fair market value so you don't spend an eternity waiting for your order to go through) someone buys my currency and exchanges it into bitcoins, I then in turn tell my mom at what price I bought the bitcoins, she receives the  bitcoins goes to the exchange and demands a sell order at the same price. That way no value is lost during the transmission due to the speculators and the transaction fees should be paid to avoid being victim to speculators... otherwise your going to lose your shirt in the transmission if the transmission takes more than an hour.

the market cap of Bitcoin should reflect how much money is being transfered by the system and not as in traditional markets; the measure of value... its just the value of the volume of transactions.

hope you like my solution it is deceptively simple, it solves more than one problem if you realize it



I wrote that on another post, it solves the stability problem too,   though I must say it starts something... interesting, once the stability is created, how do we scale the bitcoin market for larger and larger transactions? Because at a cap of 2 billion... it does not scale to worldwide demand, to accommodate the entire world market the value of bitcoin would have to be $200,000 USD/BTC and 10 times that to handle all world wide transactions... if the market gained that consensus right now... it would be a disaster for bitcoin. someone would start hashing with a supercomputer, maybe several, destroying the p2p network, it would be brutal.

how does it relate to market prices for bitcoin adoption? the stability is caused because people are entering the same value twice at the exchanges within 1 hour, the more people start using it as it was intended as a medium of exchange to transfer money across the planet means the transactions in the millions would outnumber the speculators.  The people who just want to move their money around would stabilize the system, because they do not want instability, inherently they want to feel secure that their money is not going to fluctuate wildly in the space of 1 hour.

now to the scale problem... if the price of bitcoin is not at the right point at the right time it will hobble the system introducing lag between fiat to BTC conversions and vice-versa. So we have stabilized the Bitcoin market, now we have to grow the price of BTC in a controlled manner. The miners set the minimum price, their costs determine the price growth... so if the market reached that 200,000 USD/BTC point  the BTC4000 +/- coins produced each day would create a market liquidity of  $800,000,000 USD/ Day... now you see why the bitcoins have to be halved every few years?

so what determines the cost of operations to the miners? the difficulty;  If more miners get on the system the difficulty increases slashing their revenue, hence they must sell their bitcoins at a higher price or hold on to them until the market is able to afford the liquidity. so we have a problem, we need miners to verify the transactions, so we have to keep their number stable,

now here is the second effect of my solution people aware of the instability begin to add their transaction fees to accelerate their transaction to avoid falling victim to speculators. The revenue from these Fees creates incentive to continue mining when the bitcoins they are introducing into the market are not needed. but if people do not add the fees what motivation do they have to continue.

 So a two prong approach was created to control the market value through the miners, if both of the above criteria are not met, then the network can safely get rid of excess hashing power because the miners have no motivation to remain.

the fees increase as urgency increases, i'm sure people want their transaction done now... not tomorrow, so they pay.

Increases in lag time to include each transaction in the next block motivates higher transaction fees, higher transaction fees equal more miners to lower the lag.

now, something I have noticed; since the price is not set by the banks it is set by supply and demand, this means that the price of BTC can increase slowly because some people may try to buy at $100 then the recipient buys at $101 if the market accepts it they just payed their transaction fee back and they can repeat it too, ... this will undoubtedly have an incremental effect on the price of BTC. What will happen because of this? I do not know and can only speculate, sorry.

Bitcoin is a whole different animal; It only likes to be treated in a certain way.

But then again I could be wrong, you may want to poke holes in my logic, we have to figure this thing out somehow.