Quote from: Deprived on August 29, 2011, 12:57:16 AM

Quote from: IdeaMan on August 29, 2011, 12:39:10 AM

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.

1) Individual users already have paid the costs to get their money into the exchanges.
2) Opportunity cost is distributed amongst all the users of the bot.

Quote from: Deprived on August 29, 2011, 12:57:16 AM

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.

1) This is the primary reason to use MtGox, since it is the most reputable exchange so far. If a better exchange with more volume and a better reputation were to exist, I would recommend that one.
2) If it were about to drop below the floor we set or spike above the ceiling, the amount of purchasing/selling power in either direction would already buy out or sell through every bid or ask in the way anyway, regardless of whether or not that floor or ceiling had been built there.

Quote from: Deprived on August 29, 2011, 12:57:16 AM

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.

This is the same risk every speculator already takes every day by not holding BTC, or by not selling BTC (floor/ceiling side) The only difference here is that the small percentage of money put up by individuals running the bot is actually working towards a goal, not just sitting inactive.

Quote from: Deprived on August 29, 2011, 12:57:16 AM

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.

1) The safeguards are meant to never be activated, they're meant to act as boundaries to the market price.
2) There's no way it could actually do that - the pool would set the lowest or highest possible prices. In order for someone to reach you at the bottom, they would have to have all of the BitCoins, and to reach you at the top, they would have to have enough fiat purchasing power to buy all of the BitCoins.

Quote from: Deprived on August 29, 2011, 12:57:16 AM

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.

As it stands BitCoin isn't used as a currency - it's used as a speculative commodity. Even a currency pegged to an arbitrary fiat value is better than an unstable currency. Over time, as the bot accumulates more purchasing power, the limits will move towards a narrower range, decreasing opportunity for speculation, and moving towards stability - in other words, it becomes more like a real currency.

We don't need to cement the price somewhere, we need to get it to move around less. Much less, if we want it to be a serious contender to the ruling fiat currencies. Right now BitCoin's greatest weakness is it's lack of purchasing power before being converted to a local currency. If BitCoin's price only fluctuated within a 1-dollar range week-to-week, we would at least be at the point where businesses could (almost) easily integrate BitCoin pricing into their storefronts.

If BitCoin could be (only temporarily, to facilitate it's transformation to a full-fledged currency in the public eye) used as an e-wallet to buy things online priced in USD, that would be a huge step towards John Q Public accepting it as a currency. That is still a lower barrier to entry than it has today (the barrier of being virtually unspendable), by the way. There's nothing to be done about the speed of transaction processing, unfortunately, that I can think of, short of using an external e-wallet service (which is fundamentally as "bad" to your point of view as anything I've suggested, only you actually have to relinquish control of your money).

There is no speculative upside, in fact, quite the opposite. Speculation requires volatility to be profitable. This system only removes volatility from the market, in other words, decreasing the profitability of speculative trading.

I'm not talking about trying to own every BitCoin for a few cents apiece. I'm not talking about selling huge quantities of BitCoins at exorbitant prices. I'm not talking about pegging the long-term value of the BitCoin to the USD (or any other fiat currency). I'm talking about setting up a distributed pool of fiat buying power and BitCoin selling power to limit the fluctuation in the market in order to facilitate becoming stable enough that businesses can begin to use it the way they currently use fiat currencies.

Once the price has stabilized then merchants have not only the ability, but also the motivation, to begin accepting it as a currency. This bot is only a stepping stone [it]towards[/i] that goal.

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