Quote from: cunicula on June 18, 2011, 09:05:17 PM

The value of bitcoin is inversely proportional to its velocity. If merchants are constantly exchanging BTC for USD after every transaction, the velocity will be high and BTC value will be low.

Quote from: cunicula on June 21, 2011, 06:49:02 AM

Money Supply * Velocity = Currency Price * Real Value of Transactions Per Unit Time

As you can see, velocity is directly proportional to price. Velocity is the rate at which transactions occur per unit time. Velocity will be high if businesses sell bitcoin as soon as they get it.

So which is it? Of course it's neither proportional nor inversely proportional, at best it's loosely correlated.

But your main proposal seems to have merit. Simply said, there would be several "built in" derivatives, denominated in Bitcoin, which could be traded at different prices.

I just believe the complexity could put people off, as it makes Bitcoin even more difficult to understand. Why buy a financial system, if you want a currency? After all the things gone wrong in the traditional financial system, it would increase suspicions.
Also keeping the money supply predictable will be difficult: If an option might expire worthless based on a future difficulty, will it count towards the final 21 million or not?