Quote from: JohnDoe on September 26, 2011, 10:28:53 PM

How? I don't see how this is possible.

Well, it might not be. But just in case it is, I'm going to write down my logic. Maybe we can all bash on it and see where the logic takes us.

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The whole concept is based upon Arbitrage. The instantaneous buying and selling of something in different markets. In this case, we want to buy ENC in the "electrical market" using dollars and sell them in the ENC marketplace for dollars. (Your currency may vary) The tendency toward a fixed value is based upon the self-interest of the participating humans. They only participate if it seems profitable. If it appears unprofitable the humans do nothing.

So specifically, if a human thinks he can generate excess ENC for less dollars of electricity than the dollars he can IMMEDIATELY sell the ENC for, he begins mining. If he thinks it will cost more dollars of electricity than the ENC are worth, he stops mining. It's an intellectual gamble like in any financial marketplace. You have to put your dollars at risk to play.

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For the sake of discussion I'm going to propose a hybrid system that's like bitcoin, except that instead of using mining to add the next transaction block to the chain, it adds the block through consensus. 100% of the existing nodes decide that all transactions in that block are valid. Then they lock that block into the chain forever. There is also no standard 50 BTC award. Transaction accounting is NOT rewarded. For this discussion, just pretend I can prove that it's a secure process.

So in my version of the ENC system, mining is a completely optional process to that of transaction accounting. Mining DOES NOT secure transaction accounting.

The process works like I've discussed in this thread.

1) Every transaction has a X% tax that is destroyed. This provides a baseline tendency that reduces the ENC supply. Transaction are grouped into 10 min blocks like with bitcoin.

2) Mining is optional and can be run by anyone at any time. Mining generates new ENC transactions through a proof-of-work concept similar to bitcoin. The main differences more complicated ENC generation rules, and the process for varying the proof-of-work's difficulty.

Mining takes place in the 10 minute interval after the previous (consensus created) transaction block. The proof-of-work can be solved at increasing difficulty levels, leading to increasing rewards.

The transaction generation rules are as follows:

If the miner solves the proof-of-work at the (current+0) difficulty level, the transaction must contain:
a) Tax reimbursements for every transaction in the prior transaction block, paid back to those from which the tax was taken.
b) ZERO additional reward for the miner.

If the miner solves the proof-of-work at the (current+1) difficulty level, the transaction must contain:
a) Tax reimbursements for every transaction in the prior transaction block, paid back to those from which the tax was taken.
b) (Total Tax)/2 as reward for the miner.

If the miner solves the proof-of-work at the (current+2) difficulty level, the transaction must contain:
a) Tax reimbursements for every transaction in the prior transaction block, paid back to those from which the tax was taken.
b) (Total Tax)*2 as reward for the miner.

Mining is a competitive process. Whoever generates the proof-of-work transaction with the highest difficult in the 10 minute window wins. If there is more than one at the highest difficulty, the first wins.

Difficult is algorithmically adjusted for the next 10 minute period based upon the results of the previous.

If ZERO mining transactions were submitted, the current difficulty is adjusted (-1).
If a current+0 transaction wins, the current difficulty remains unchanged (0).
If a current+1 transaction wins, the current difficulty is adjusted (+1).
If a current+2 transaction wins, the current difficulty is adjusted (+2).

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As far as I can tell this tends to cause the following dynamics.

If the current difficulty causes higher electrical cost than the dollar value of ENC, there is minimal incentive to try and add new ENC coins to the system. As such the Tax will be lost, tending to slightly inflate the dollar value of ENC. The difficulty will also be reduced, tending to slightly lower the electrical cost of ENC.

If the current difficulty causes near equivalent electrical cost to the dollar value of ENC, anyone with a transaction in the prior block, has interest in mining for their tax reimbursement. This means the appropriate monetary action was to do nothing. (No tax penalties)

If the current difficulty causes less electrical cost than the dollar value of ENC, then there is a momentary arbitrage opportunity. No tax will be lost. New ENC will be added tending to slightly deflate the dollar value of ENC. The difficulty will also be increased, tending to slightly increase the electrical cost of ENC.

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I think those rules tend toward some wandering equilibrium measured against the cost of electricity. I'm not totally sure of the exact function.

What does anyone else think?