Post
Topic
Board Bitcoin Discussion
Re: Bot to operate a price bloc to stabilize price of BitCoins
by
Deprived
on 29/08/2011, 00:57:16 UTC
2) The cost of generating the bot, since in greater than 99% of instances, the bot will never make a purchase or sale.  So, next to nothing.
OR pegging the BTC vs the US$ in a narrow range (what you talk about wanting to achieve).  I'm not seeing how either of those is desirable.

You're misunderstanding so many things.  But let's just address this one.

The cost of your proposal is FAR more than the development cost of the bot.

There's two very immediate costs:

1.  The cost of getting all the US$ onto the various exchanges.
2.  The opportunity cost of having all that money sitting around generating no income.

There's some obvious risks as well (which are costs):

1.  The risk one or more exchanges will get hacked/scam your deposits there.  Having millions of US$ given to exchanges definitely has a risk.
2.  The risk that BTC will devalue below your lower threshold leaving you holding the can.

Then there's also another risk:

The risk that BTC will increase significantly in value - meaning you've just lost out on profit you could have had were you holding BTC rather than inactive US$ parked on an exchange.

In essence your scheme relies on a bot network that deliberately makes a loss to almost certainly achieve nothing.  That's because you achieve nothing if either:

1.  Your safeguards are never activated - i.,e. the cash just sits there unused until either it's taken back our or stolen/scamed.
2.  There's a move in BTC value such that it overwhelms your protection - meaning you just cause a tiny blip in the graph direction in return for absorbing a significant loss.

Put simply your proposal is probably unworkable and defiinitely has no real value.  For it to work as you intend BTC would end up as being a currency backed at a fiixed minimum exchange-price by US$.  For it to be meaningful that rate has to be somewhere near the current traded price - meaning a US$ sum of similalr proprortion to the value of all BTC in existence has to be tied up.  You really don't see any problem with that?  Isn't that just turning BTC iinto a US$ e-wallet but with slower transaction processing, a higher barrier to entry and no guarantee that at any point the rug may be pulled away from under it?  With I guess a possible speculative upside - subsidized by those tieing funds up in US$ for no real benefit.