Quote from: hugolp on September 27, 2011, 12:17:32 PM

What exchange rate do you use? Bitcoin to dollars? Bitcoin to euros? Bitcoin to pounds? Bitcoin to rembini? A basket of all the previous ones? Who decides if the index of the baskets need to change because the fundamental economic situation has changed (the euro has gone down, the dollar has lost reserve estatus, etc...).

The idea is to pin it only temporarily until it is established well enough to stand on its own merits. To that end a USD+EUR basket is adequate, but honestly, the specific basket doesn't matter: ANY reserve currency is a couple orders of magnitude more stable than Bitcoin has been.

The strength of pinning will be adjusted as the number of coins in circulation increases. For example, it will aggressively pin until the market cap is $1B; become gradually more conservative with adjustments from there; tapering down to zero pinning once the coin supply reaches $1T. After that it gets to float.

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And then where do you get the data from? MtGox? TradeHill? Others? Combination? What happens if some of those companies goes down?

Miners may use any source they wish for their quotes. Blocks that do not have a reasonable quote will not be accepted by the other miners, and are therefore orphaned.

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Who is going to trust in a currency that needs constant changes and agreements to work?

Take a look at any fiat currency. People trust them pretty well even when central banks are fooling around with them.

Who's going to trust Bitcoin when it can't hold value within an order of magnitude for 6 months at a time?

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What happens if the miners dont agree? How do you deal with the uncertainty?

The same way as when miners don't agree on a transaction: each faction mines the hell out of whichever version of the truth they believe in; whoever has more hashrate wins. There can also be auditing by the network: invalid quotes are not relayed, the same as invalid transactions are not relayed.

Edit: It is also possible to adapt the monetary policy (for instance, changing the basket weighting) by extending this technique to create a "decentral bank", but it's more complicated. I'm planning to write that whole idea up in another post after it cooks in my mind a bit longer.