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Re: Bot to operate a price bloc to stabilize price of BitCoins
The "continual funding" problem I'm talking about is a short-term one, not a long-term one. If you got $7M in donations, you'd be able to back at $1... Which won't have an appreciable effect on the market. If you get $30M, you'll have a credible backing at about 50% of market cap. It'll boost confidence a fair bit. Then the market trades up to $25. At that point, your backing has become essentially irrelevant again, but it's still way too early for BC to be considered a stable, established currency. So what do you do? Either your bot remains irrelevant, or you have to seek out more donations. And it'll take a whole lot of these cycles before BC becomes so established that it's no longer necessary.
I don't know, I think backing at $1.00 might be a good thing at this point. You're still wrong about the math ($21,000,000.00 is required to back BitCoin to 1$), however.
I'm actually just here to comment that someone else anonymously generated 5 BitCoins to this project Of course, that's only $25.00 USD today, since the market is so unstable.
Oh well..
What makes this system better than any of the others out there?
Is this thread primarily a technique to get your referral percentage from your broker?
What is the math your EA operates under?
Can we see the records for your BTC wallets to prove relative profitability?
How about exchange account history?
What are the mathematical conditions under which your EA results in a net loss?
If net total money is a zero-sum game, who absorbs the losses for your EA users profits?
How can you have any accuracy in predicting market behavior without use of technical indicators?
Is this thread primarily a technique to get your referral percentage from your broker?
What is the math your EA operates under?
Can we see the records for your BTC wallets to prove relative profitability?
How about exchange account history?
What are the mathematical conditions under which your EA results in a net loss?
If net total money is a zero-sum game, who absorbs the losses for your EA users profits?
How can you have any accuracy in predicting market behavior without use of technical indicators?
Re: Bot to operate a price bloc to stabilize price of BitCoins
Sounds interesting! Where are we going to get enough hands to simulate a market of thousands of people though?
We can each simulate a handful of people. Clearly me playing a single forex trader would be silly, since I could refuse to sell anything below an absurd price. I'd do it by playing perhaps three traders who are making reasonable, competitive moves.Ok, but that still doesn't remotely accurately synthesize market behavior. No one has a stranglehold on the price.
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This is not the way shopping works - The market tries to buy M&M's for the cheapest price they can reasonably get in a window of time short enough to satisfy their craving for chocolate candy.
Their price is sticky enough that we can assume that it'll stay constant over the amount of time we'd simulate (which would only be a few days). The goal of the buyers would be to start with USD and buy M&Ms through RC within 10% of the USD-equivalent. For this game, simulating them at a fixed USD value would work fine.No one is going to pay $10.00 local fiat to convert money into another format to buy M&Ms at a store that already accepts local fiat. Simulating them at a fixed value isn't fine, since the value of BitCoins isn't fixed.
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This is not the way the bot or the market works.
That's just the starting conditions. From there we'd trade it out to a few players until the market's functioning and those players have seeded your bot with enough RC to get it running.No, you miss my point. The market doesn't have one person with a monopoly on bid or ask prices. Not even close, actually. And the bot uses fiat, not Coins.
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Yes, that is correct. But the bot's goal is not to set a fixed floor price - it's to aggregate spare change from users into a democratically priced backing floor, regardless of what the price at the floor is.
At any given moment you'll have a fixed floor based on how much capital the bot has access to.Regardless, your model requires that people donate the full value of the floor, at whatever level. The problem is that if that floor is anywhere near the current trading price, the amount of donations required would be about the BTC market cap. That's asking for an awful lot of donations, and it's not something we can just do once: we'd have to do it on an ongoing basis to keep up if the BTC grows.
No, my model takes any amount of donations and uses them to determine the floor. The floor price is only fixed as long as no one in the market moves capital in or out of the bot. I'm not saying people should contribute a total of nearly the market cap for a theory - I'm saying that whatever fiat people put in to generate the floor will eventually cause the price to move towards that relatively stable value.
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You can make the ask price fluctuate wildly. If I suddenly decide to spend $90.00 on a Coin, I'm being a fool. If I suddenly decide to spend $50.00 on a Coin, I'm being a fool. If I decide to set my bid within +15% of the floor, you have no choice but to meet me around that range if you want to sell.
Nope. I can make the market price fluctuate wildly, even with rational buyers just trying to do commerce.Only if these rational buyers take your asks offers. Without your asks being met, no transfer of Coins occurs, meaning the market price doesn't ever change at your whim alone.
If I corner the BTC market,
A huge "if", I might add.
I can force it to $10 per coin by limiting supply. The M&M buyers will buy 0.2RC, purchase their M&Ms, the merchant will sell back to USD; and it can continue on in this fashion indefinitely until I release some more RC and let the price fall. Even if the forex guys get out of the market for a bit, the M&M buyers can't trade the price down to USD$0.1, because they need to hold some value in RC at least for a little while (since wiring money to the exchange is slow so people do it well ahead of time, transactions have to confirm, the merchant may not immediately dump the coins when he receives them, etc; figure it's a 3 day cycle at minimum.), and the next buyer still needs to get his transaction going. My three forex guys won't net any aggregate money doing this, though individuals may come out ahead or behind.
This whole paragraph is reliant on one person cornering the market - which is impossible. There's a possibility that a group of early miner/hoarders working in concert could effectively corner the market, but that is just the same theory as this bot working at the outside end of the ask instead of the outside end of the bid.
Now consider: This isn't a contrived scenario, because this exactly what's occurring in the BTC market right now. The majority of coins are buried somewhere and not moving.
The majority of coins are buried right now because that group of early miners/hoarders have yet to re-enter the market. Assuming they aren't part of some vast conspiracy and enter the market as individuals, when they enter the market to sell, increased availability means decreased prices compared to the market price when they decided to enter, since they must price competitively to make their sales.
A more likely scenario is that many of those BitCoins are being held until BitCoin becomes a currency and can be spent at real value.
The ones that are are circling around at high prices, mostly between forex guys, but a little bit to people who're buying high-value coins to complete their transactions.
There are no forex guys in the market right now - only speculators. They are circulating at high prices now because the market is artificially inflated by speculation.
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Sure, assuming the bot locked at a stable price of $1.00 apiece. In practice, the bot would actually end up not being sold to, and the market would move towards the stabilized floor price.
Sure, the market will settle out at some price... If it's above $1, your bot is irrelevant. If it starts to drift down, your bot will act as a floor, it'll buy up some of the excess, and the market will take over again. Unfortunately, if the market keeps wanting to drift down, you'll keep buying up more and more BTC/RC until you basically have lost most of your USD and are holding most of the BTC/RC. If the few remaining players at that stage decide they want out, they dump the remainder of their holdings in exchange for the remainder of your USD.You could sell all your Coins to me, but likely I would be unwilling to pay 1:1 for them when the rest of the market clearly values them at a lower price. Really, you would end up with no coins and maybe $20-30 USD, $60 tops.
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If I was the only buyer (very little demand for RevCoins) then I would be a fool to set the bid at $1.00 when I could easily set it at $0.10. Then you get $10.00, but I get all 100 Coins. What if I set my bid at $0.01? $0.001? What if the floor is set at $0.00001? What if buy 20 Coins at $1.00 and sell them at $0.75 to the rest of the market, lowering the speculative perceived value? Then when you lower your price below $0.75 for the remaining Coins (since you're trying to sell them), and I buy your Coins then?
Yes, we'd clearly have to simulate a few of each class of player, all competing, if it's going to be at all realistic. That's why I'm a little reluctant to actually do this. It'd require a whole lot of paper pushing. 
And more importantly with the correct number of players it wouldn't resemble your example in the slightest way. The market would compete and people would get a better price than the artificially high one you set your ask at.
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If they take prices near your wildly fluctuating ask price, yes. If they take prices near the bot's comparatively stable bid floor (at any value less than $1.00, for instance), then no.
They can't if I've forced the price up to $10.You can only force the price to any amount higher than the current high bid if you control all the BitCoins, and refuse to compromise to make a sale indefinitely. This is also not the way the free market works.
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What if I just waited for your price to approach the backed value, which is less than $1.00?
If I'm forcing the price high by limiting supply, the buyers will eventually buy at that price so they can complete their transactions. Sure, I'd love to hold out for $0.10 bitcoins to buy bitmunchies... But if I want my bitmunchies today, I have no choice but to pay $8.50/BTC. And I will, since it doesn't affect the cost to me, which remains the same in USD.The people trying to buy M&Ms still have the option to just buy in fiat. why would they jump through additional hoops and transaction fees to buy a grossly overpriced commodity and try to use that as a currency when they have a valid currency in their hands?
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Right now the majority of the problems with the idea come from the potential user base not understanding the concept or the execution because they'd rather jump to their own idea of the way it operates than read the incredibly detailed description in this thread.
Well, as best I understand it, you could provide something of a floor on the BTC, but it would require an unreasonably large investment: your bot would need a fund that's a majority of the market cap.This is what I mean about not understanding the theory. The bot doesn't require a fund of any amount - it just becomes a more powerful market force as that fund approaches the market cap. The market price will move towards the backing floor, and the closer the floor is to current the market price, the less distance it has to move.
I can't imagine that you're ever going to get that much donation, short of someone very rich doing a very nice thing.
Maybe, maybe not. I believe there's enough people willing to temporarily lock up a few cents of their money to stabilize BitCoin to currency behavior patterns for the sake of seeing it succeed.
Even then it'd become irrelevant if BTC is more widely adopted, since the price will go up (you really can't prevent that), and you'd need more donations unless your floor is to become an ever-diminshing fraction of the BTC's price.
Once BitCoin is adopted as a currency it gains real value outside of the backing fund, negating it's need for stabilization, and therefore freeing up the funds, should users wish to remove them. The purpose is to back the BitCoin until it becomes stable enough to be treated as a currency. Why does no one get this?
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We just did it right here on a public notepad. It turned out your theory was incorrect. But this was a very fun game! Let's play again some time!
I don't agree that my theory's wrong. I think it's clear that one of us misunderstands the other, and I do not concede that the error is on my side.
As this is just a theory, neither of us can know whether or not either one of us, or both of us, are wrong. However:
Your comprehension of my theory is incorrect.
Your examples rely on near-impossible or impossible situations.
Your examples fail to take into account basic facts like multiple participants co-existing in the market.
You assume a situation where one player has functional monopoly control of supply.
You neglect to provide any reason for converting fiat at a loss through an exchange to make a transaction.
You misunderstand the basic operation of the bot.
You misunderstand the concept of backing an asset.
You ignore entirely the concept of value history.
You ignore entirely the concept of speculative distortion of value.
You ignore entirely the concept of market liquidity.
You seem to believe that people are hard-up enough to buy Coins that they will buy them at any price, even if they have no concrete value as a currency, and have to buy them at a net loss to purchasing power.
As such, I not only do not concede that the error is on my side, but also believe it is likely on yours.
Re: Bot to operate a price bloc to stabilize price of BitCoins
It's a noble enough idea, IdeaMan, but it won't work. I don't think I can explain it better than others have already tried. So how about we play a game?
Oooo, I love games, gogogo!
We can pen & paper a small bitcoin economy with an exchange.
Sounds interesting! Where are we going to get enough hands to simulate a market of thousands of people though?
You play the bot, I play a forex trader, someone else plays the rest of the market which is trying to buy M&Ms for a price that's roughly equivalent to USD$2/pack.
This is not the way shopping works - The market tries to buy M&M's for the cheapest price they can reasonably get in a window of time short enough to satisfy their craving for chocolate candy. If there is no price cheap enough, shoppers spend too much or don't buy it. If the price is low, shoppers buy many and save them for later chocolate cravings. But no shopper ever goes to the store thinking, "I'll only buy M&M's if they're within 7% fluctuation range of $2.00" - they go thinking that they want M&M's, and expect them not to cost $2.75 today if they cost $1.49 yesterday.
I'll start with 100 RevCoins, you'll start with $100 USD. You try to hold a floor of $1/RC. We take turns issuing market orders.
This is not the way the bot or the market works. A better example would be if you and I were in the middle of running this example, and then 5000 other people came in and contributed $0.01 towards the goal of holding a floor at $0.50. In that example, I move my price to $0.51, since there's little point offering you twice what the market as a whole offers you in exchange for your Coins, but I still want to buy first. The bot pool may eventually surpass my offer and hit $0.52, but I can always move my bid.
In the end, I guarantee that:
You can prevent the price from going under $1, as long as you don't try to do anything else.
You can prevent the price from going under $1, as long as you don't try to do anything else.
Yes, that is correct. But the bot's goal is not to set a fixed floor price - it's to aggregate spare change from users into a democratically priced backing floor, regardless of what the price at the floor is.
I can make the price fluctuate wildly (several orders of magnitude).
You can make the ask price fluctuate wildly. If I suddenly decide to spend $90.00 on a Coin, I'm being a fool. If I suddenly decide to spend $50.00 on a Coin, I'm being a fool. If I decide to set my bid within +15% of the floor, you have no choice but to meet me around that range if you want to sell.
I will end up with all your USD.
Sure, assuming the bot locked at a stable price of $1.00 apiece. In practice, the bot would actually end up not being sold to, and the market would move towards the stabilized floor price. You could sell all your Coins to me, but likely I would be unwilling to pay 1:1 for them when the rest of the market clearly values them at a lower price. Really, you would end up with no coins and maybe $20-30 USD, $60 tops.
You probably won't even end up holding all the RevCoins unless you stick to a straight $1/RC exchange rate.
If I was the only buyer (very little demand for RevCoins) then I would be a fool to set the bid at $1.00 when I could easily set it at $0.10. Then you get $10.00, but I get all 100 Coins. What if I set my bid at $0.01? $0.001? What if the floor is set at $0.00001? What if buy 20 Coins at $1.00 and sell them at $0.75 to the rest of the market, lowering the speculative perceived value? Then when you lower your price below $0.75 for the remaining Coins (since you're trying to sell them), and I buy your Coins then?
Some M&M buyers will get screwed for a notable percentage of their money.
If they take prices near your wildly fluctuating ask price, yes. If they take prices near the bot's comparatively stable bid floor (at any value less than $1.00, for instance), then no.
I'm not sure I actually am up to really doing this
Me either, this would take forever if we intended for it to actually hit the floor the bot would set, but it would be faster than the BitCoin economy, since it's a smaller pool of players.
(it'd involve a few hundred trades to show you all the ways the market will slap you around and achieve all my goals above),
It would also require the bot to behave very differently, the market to behave very differently, and for you to be the only seller and for me the only person in the bot's pool, and for me to be foolish enough not to realize that while you have 100% of the supply, I have 100% of the demand. What if I just waited for your price to approach the backed value, which is less than $1.00?
but I'm hoping just thinking about how you'd approach it will make you think about where the problems are.
Right now the majority of the problems with the idea come from the potential user base not understanding the concept or the execution because they'd rather jump to their own idea of the way it operates than read the incredibly detailed description in this thread.
It's an exercise you should certainly try doing on your own notepad, though.
We just did it right here on a public notepad. It turned out your theory was incorrect. But this was a very fun game! Let's play again some time!
Re: Bot to operate a price bloc to stabilize price of BitCoins
What you are proposing is, in essence, a scalping bot.
A scalping bot tends to play around the range of the bid and the ask usually, and is designed to make a relatively large volume of trades as quickly as possible at a very slight profit margin. The theory is that over time a bot that is barely profitable will return tangible profits.
This bot plays only at the outside edges of the market depth graph and is designed to generate no trades (barring total market collapse). The theory is that over time contributions to the backing floor will allow BitCoin to move towards stabilization by actually backing the currency temporarily (through the bot's collective pool of various local fiats). A few days ago mtgox announced exchanges for 15 new currencies:
mtgoxEUR - Euro
mtgoxCAD - Canadian Dollar
mtgoxGBP - British Pound
mtgoxCHF - Swiss Francs
mtgoxRUB - Russian Rubles
mtgoxAUD - Australian Dollars
mtgoxSKK - Swedish Krona
mtgoxDKK - Danish Krona
mtgoxHKD - Hong Kong Dollars
mtgoxPLN - Polish Zloty
mtgoxCNY - Chinese Yuan
mtgoxSGD - Singapore Dollars
mtgoxTBH - Thai Baht
mtgoxNZD - New Zealand Dollars
mtgoxJPY - Japanese Yen
-and now every person on the internet with a mtgox account and some local fiat has the ability to use BitCoin as a currency and exchange it for local fiat as needed, and can support the idea of BitCoin by backing it with a tiny amount of fiat that adds to the bot's pooled backing power..
I don't see any problem at all with scalping: indeed, it will help the scalper fill his pockets with money, while decreasing volatility and providing liquidity
There's the moral question of milking wealth out of an economy from people who want to migrate to BitCoin because they don't want their financial system to be exploited, but we'll ignore that for now. It does nothing to decrease volatility in the BitCoin market, because almost all of the movement in the market is the direct result of speculation. The price varies at ludicrous speeds across wide ranges that a currency can not even pretend to sustain - strictly based on BitCoin's perception as a virtually worthless (in purchasing power before conversion to fiat) commodity to be speculated on for future (most commonly, short-term) gains. But it does provide liquidity.
However, to any would be donators: know that a lot of people are already operating bots like this, for free (or rather, they expect to earn money letting them trade).
No, but many people are running scalping bots, which do function that way.
Also, I find it ironic that OP proposes what is essentially speculation to end the problem of speculators.
Not quite. I support backing the asset with a distributed pool of fiat currency that would act as a guaranteed minimum price - the first guaranteed anything in the BitCoin economy. It is impossible to have stability in your structure if the ground hasn't even begun to solidify yet.
Seeing as currencies are traditionally issued by the state, the traditional process to speed adoption (passing a law across the jurisdiction of the currency that it is a legal currency that must be accepted) isn't available to BitCoin. This makes it an inhospitable environment to BitCoin as a currency - local fiat already covers most meatspace purchases, and there are some options online in most places. If BitCoin can't at least be used to buy things online, it will never be valuable in any real sense. Therefore it is on us to discover and implement best practices towards aiding it's adoption as a full-fledged currency and not just a commodity if we want it to have real value - and therefore pay off for our collective investment of time energy and money into it individually.
BitCoins have no real inherent value - they're just numbers. The only value they have now is speculative interest. Once they become a spendable unit of money, they gain real value that will last. If they don't gain real value, people will eventually start to sell off, causing the price to drop, since there's nothing that it's actually worth in trade without speculation value behind it.
Furthermore, speculation is a game of diminishing returns - mtgox charges fees, don't forget. The strategy is only profitable while BitCoin gains new investors or while current investors are willing to pour more money into a losing investment. Their profit comes from somewhere - other people. When some people stop wanting to spend money on BitCoin as a commodity, it will pay less out to those who are still willing to. Neither of those scenarios is sustainable - and both result in long-term crash and depreciation. With speculation mapping it's current path, BitCoin will more likely than not fail.
Make no mistake about it - this is a pass or fail class. If we goof off and treat it like a get-rich-quick Ponzi scheme, it will end up being one.
Hate to ruin everyone's fun, but watch the list of buy and sell orders on mtgox next time prices take a tumble. You will notice very large buy walls meant to prop up the price that magically get withdrawn the second before prices hit that limit and go through.
MTGox is already manipulating their market in an attempt to stabilize price beyond what the free market wants.
MTGox is already manipulating their market in an attempt to stabilize price beyond what the free market wants.
I'm not sure this is MtGox manipulating the market, but it certainly illustrates the issue of unbridled free market speculation being an unstable basis for determining value.
I like this idea. It's a system where the community of the commoner can chose to participate in the "speculation" and together become powerful enough to have their goals represented in the market. And what do they want? stability!
It's more accurately described as a co-op of contributed pocket change that becomes a backing fund over time.
Congratulations, you have created a tool to democratize speculation!
Not really, it's more of a tool to democratize the backing of a commodity into a currency. The tool that democratizes speculation is an exchange (like mtgox).
If this isn't the free market at work, I don't know what is.
Interesting point - this is very much the free market at work, just not in the disorganized way that it is now. Thanks for pointing that out.
Hedgers and shorters, quit whining and get a real job!
Agreed - if you're into BitCoin to make a quick buck, do yourself a favor and cash out before the rest of the speculators do. You'll save yourself the loss, and BitCoin will begin to become stable from those who stay to hold it long.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Someone has donated the first 0.05 BitCoins to the bounty. This is posted here for transparency, and to upset all the nay-sayers.
Whoever you are, thank you for getting the ball rolling!
Whoever you are, thank you for getting the ball rolling!
Status Update
As my tech guy has been swamped by a project with a hard dead-line of next Tuesday, getting the BBR fully operational will have to wait until next week. We've blocked out a full-day work session for Wednesday the seventh, so my hope is to have all the necessary infrastructure in place to launch on Thursday. In the meantime, we've secured the domain http://www.btcbusiness.net, installed Drupal 7, and put together a rough outline of the site. Obviously it still needs a lot of work, but its a start.
In the meantime, if you're interested in submitting an article for editorial review and possible publication once we get going, send an email to carbonpenguin (at) yahoo (dot) com with your piece in an attachment (preferably in OpenOffice format, though .doc will work). Further updates will be forthcoming as things progress
As my tech guy has been swamped by a project with a hard dead-line of next Tuesday, getting the BBR fully operational will have to wait until next week. We've blocked out a full-day work session for Wednesday the seventh, so my hope is to have all the necessary infrastructure in place to launch on Thursday. In the meantime, we've secured the domain http://www.btcbusiness.net, installed Drupal 7, and put together a rough outline of the site. Obviously it still needs a lot of work, but its a start.
In the meantime, if you're interested in submitting an article for editorial review and possible publication once we get going, send an email to carbonpenguin (at) yahoo (dot) com with your piece in an attachment (preferably in OpenOffice format, though .doc will work). Further updates will be forthcoming as things progress
Signed up, but got an email error. Thursday here we come!
Re: Bot to operate a price bloc to stabilize price of BitCoins
I think you mean if they steal it. Mtgox today became officially Verisign secured, so it's approximately as secure as any other site on the Internet.
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The investors are free to come and go as they please. They can set their bid prices at any point they wish. They aren't required to agree to anything.
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The investors are free to come and go as they please. They can set their bid prices at any point they wish. They aren't required to agree to anything.
Verisign secured as in they have an https/ssl certificate? Or is that some kind of third party penetration test?
http://en.wikipedia.org/wiki/Verisign
Read all about it. Google is the source of all worldly knowledge. The wikipedia page is just a primer on the topic.
Either way It doesn't mean a whole lot as many users are hacked on their end as well, and more sites like mybitcoin will popup and steal coins forever, it will never stop (until bitcoins are worthless).
Assuming those BitCoins never re-entered circulation, the price would go up. Assuming they re-entered circulation, the theft of them would have minimal long-term material effect on the price of BitCoin, or the value.
So WHEN not if, coins are stolen, an artificial price will maximiize their profits, instead of crashing the value like what should happen when a huge dump on the market occurs.
If someone stole all the BitCoins ever to be minted and sold them all the way to the lowest possible floor value, then yes. That would be quite a feat, however, since nearly 65% of them haven't been mined yet, and don't exist to be stolen. Furthermore, BitCoin isn't like cash - someone using those coins again leaves a record in the block chain that can be easily traced. I bet that over time we will see fewer and fewer BitCoin thefts as prosecution of it is far easier than prosecuting the theft of untraceable fiat cash.
The second quote makes no sense to me. If people are setting whatever prices they want, then you are describing the current system, not an "artificial wall value" system.
This point actually bears investigation. The system this bot creates is actually a hybrid of free market and artificial wall, falling closer to artificial wall in terms of application, but closer to free market in terms of user choice to participate. The purpose isn't to lock in a particular value, but rather to create a pooled backing of BitCoin which would help to move the price towards stability by creating a new indicator - approximate backing faith, let's call it, or ABF.
The current location of the ABF wall will act as a lower boundary to the market, since it cannot mathematically drop below that point, even though that point can move due to the amount of pooled purchasing power that determines the ABF wall being voluntary to participate in.
The longer ABF stays relatively stable, the more likely that the price moves towards the ABF wall.
As the price decreases towards the ABF wall, some players will back out of the bot, lowering the value of ABF, and therefore the price as measured in fiat. Others will leave the wall to buy BitCoins cheaply, raising the price away from the wall. Other still will back the wall more strongly to "brace for impact" as it were.
The stronger the ABF wall is, the more people are likely to bid near it than any other price point/range, regardless of whether or not they are using the bot. This adds non-bot users to the strength of ABF, and the closer they are to ABF, the more it strengthens it. If there's a $21,000,000.00 bid at $1.00 per BitCoin, it becomes silly to bid $1,000 at $2.00 per BitCoin unless you are trying to back a higher value than the ABF wall represents, trying to pay twice as much for your BitCoins, or speculating.
You're overstating the importance of bots. The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted. Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk. A human can manually set up unfair trades and scams and that sort of thing, just not as quickly. So really the bot isn't that important.
Tell me more about these unfair trades. Start with exactly what about a trade makes it unfair.
I'm no shady strategist so I bet I'm missing a lot simpler ideas and also, ones proposed above do not actually work out to a profit mathematically.
I do wonder why you are calling out a hero member as a shady strategist, but I haven't read all of kjj's posts, so he could be I guess.
One basic examples would be anything that involves posting offers then buying your own offers back after whatever you were trying to do was done. Also, making bots pretend to be multiple people to anyone watching just the anonymous stats.
One implementation of that would be let's say I operate some kind of company thing or whatever so I have 100,000 BTC sitting around. I actually have 14 BTC sitting around myself so no, this isn't me
this is hypothetical me lol. I want to make some money using that 100,000 so I use a bot to post a ton of very close to each other groups of 50 at a couple cents above the price. That prevents the price from going up for a few days and makes it appear, from the volume, that the price is really stable and not going to raise any time soon. That encourages buyers to pick up some of my BTC sell offers. As soon as 50% of the offers have succeeded or 2 days have passed, whichever happens first, that's 2 days at let's say $9.00 and quite a few people bought in at the new stabilized price since they know it's a safe time to buy when the price hasn't changed a lot lately.
Then I immediately change the sell offers at like $9.01 to $7 and drive the price down the toilet and sell off all my BTC for probably an $8.75 average on the way down since a higher number of trades would occur closer to the current price than farther away. So then the tail end of my sell off results in let's say a $7.50 price. Except here's the catch: my bot artificially delayed all the trade orders so they occur over several hours and it looks like a mass sell off, not just one guy offloading 50,000 coins instantly. Everyone panics and assumes the market is crashing and sells. Before people even have time to see the graphs, you wait for the price to bottom out from the additional sell offs then buy 100,000 coins back at a $6 ea average. Now you're back with your 100,000 coins which you sold for an average of $8.75 and bought back for $6 just by scaring the crap out people with your bot and faking a sell off after faking 2 days of price stability.
One implementation of that would be let's say I operate some kind of company thing or whatever so I have 100,000 BTC sitting around. I actually have 14 BTC sitting around myself so no, this isn't me
this is hypothetical me lol. I want to make some money using that 100,000 so I use a bot to post a ton of very close to each other groups of 50 at a couple cents above the price. That prevents the price from going up for a few days and makes it appear, from the volume, that the price is really stable and not going to raise any time soon. That encourages buyers to pick up some of my BTC sell offers. As soon as 50% of the offers have succeeded or 2 days have passed, whichever happens first, that's 2 days at let's say $9.00 and quite a few people bought in at the new stabilized price since they know it's a safe time to buy when the price hasn't changed a lot lately.Then I immediately change the sell offers at like $9.01 to $7 and drive the price down the toilet and sell off all my BTC for probably an $8.75 average on the way down since a higher number of trades would occur closer to the current price than farther away. So then the tail end of my sell off results in let's say a $7.50 price. Except here's the catch: my bot artificially delayed all the trade orders so they occur over several hours and it looks like a mass sell off, not just one guy offloading 50,000 coins instantly. Everyone panics and assumes the market is crashing and sells. Before people even have time to see the graphs, you wait for the price to bottom out from the additional sell offs then buy 100,000 coins back at a $6 ea average. Now you're back with your 100,000 coins which you sold for an average of $8.75 and bought back for $6 just by scaring the crap out people with your bot and faking a sell off after faking 2 days of price stability.
I love how people can claim I overstate the importance of bots, and then back it up with an example of how a bot caused a massive price shift for the benefit of the few at the expense of the many. Ideas like this are proof that the bot paradigm needs to be seriously addressed due to it's power.
I'm pretty sure that's what just happened a week or so ago by the way. It was in the low $11 range for a looooong time and then someone dumped off a TON of coins and then suddenly a gigantic buy offer came in to shoot it eventually to $8.50 where it sits now.
Maybe, it certainly seems like a possibility. I think probably a bot set an ask wall to get the bid to meet it, then sold into an average price, and the $8.50 cost is "market correction" or whatever the speculative equivalent of correction is.
Re: Bot to operate a price bloc to stabilize price of BitCoins
WARNING: This "IdeaMan" is either:
1) Scammer
or
2) Completely Unqualified Person
1) Scammer
or
2) Completely Unqualified Person
On a nice day, I might accept your second option, but since you have only your accusation, I'm not going to today. By no means am I a financial expert - just another guy on the forum with some ideas to share.
If you know anything about AI programming and/or how electronic markets in other currencies, stocks, bonds, commodities, ebay, etc. work, then you already know more than this guy than he does in his proposed field.
If my theory is incorrect, don't just state it, prove it. If you know more about AI programming in electronic markets than the average reader of this thread, why not share that information with the BitCoin community? Right here is a prime place to start. I'm more than happy to address any concerns you may have.
There are already plenty of people with bots.
Yup.
And plenty of people working on new bots.
Yup.
And no electronic market for a valuable good is "stable".
Citation needed. A good counterargument for me here would be if I could somehow prove that most accepted currencies maintain a relatively stable value in comparison to each other over time.
Counterpoint:
http://www.fxstreet.com/rates-charts/currency-charts/
And you probably stopped reading this thread long before you got to this post.
I almost stopped reading halfway through this post, but I'm committed to actually understanding any potential pitfalls this idea may have, so I took the time to read your opinion, even though you haven't backed it up in any way.
Btw I only read a little bit of what IdeaMan posted and I still want my 10 minutes back for taking the time to warn people to stay away! 
Well, at least you have a well-formed opinion justified by your understanding of the concept as you leapt to it fully formed in your mind, regardless of what I may have had to say about it. And at least you care enough about the community to warn them about a dangerous plot to steal a few cents from them by a nefarious mastermind huddled in the darkest corners of the web. And wish you could have saved yourself the 10 minutes by not doing it. Way to be a team player.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Can you explain why you'd want to create this artificial price stability in the first place?
To ease the adoption of BitCoin as a currency.
Shouldn't you want free market as a libertarian?
I'm not a libertarian. I still do want a free market, however I also want a market that's not prone to total catastrophic implosion, just a little bit more.
People already vote with their dollars now so if bitcoin fails, it fails.
If the success or failure of BitCoin don't matter to you, why are you in this thread, let alone on this forum?
What makes you think people will put up the money necessary to implement your scheme?
I assume people on this forum are (as a whole) more interested in BitCoin's success than not.
What assurance would they have that the money they put up would not be swallowed?
Their faith in the actual value of BitCoin, and their willingness to lose a few cents if they're wrong.
What happens if someone wants a refund on their investment?
They stop and remove any bids they placed at the recommendation of the bot.
What's in it for them in the first place, if they put money up towards this?
Long-term stability.
Also, couldn't someone easily create schemes to drain money from this system since they'd know how it works?
Yes, if they had enough BitCoins to sell through the entire market and reach that very low price, and were willing to sell all their BitCoins at said very low price.
And why would outsiders want to participate in such a system?
Because they would like to see BitCoin succeed in the long term.
Are you anti-speculation?
I have nothing against speculation in a commodity that has a proven history of stable of value - but speculation in the BitCoin market contributes to it's failure at this point, largely because the market is dominated by speculators.
Is that why you want to create fake price stability?
I want to create real stability - this is a stepping stone towards that endpoint. By getting the BitCoin community as a whole to stake the value of BitCoin, it becomes actually valuable.
To overcome the price swings that contribute to peoples' reticence to doing commerce in BTC?
This is, again, a means to an end. Price stability results in merchant adoption results in increased actual value results in increased stability, rinse, repeat.
Re: Bot to operate a price bloc to stabilize price of BitCoins
This isn't going to work the way you think it would work.
It might not - but it's worth trying at least. There has never been a contender to become a real new currency since the advent of digital trading. BitCoin may not take center stage. But I'd like to see it do so.
Although the idea is non-evil, it will never happen.
Thanks for realizing it's non-evil, please explain why it will never happen.
If you create a "non free market" situation where a giant lump of cash is keeping the price fixed... Then you are giving hackers / theives a huge amount of money once they steal it.
I think you mean if they steal it. Mtgox today became officially Verisign secured, so it's approximately as secure as any other site on the Internet.
They can sell it all at once, and your "investors" or whoever put in the 21$million is the one going to lose a ton of money. Why would any investor agree to such a situation?
The investors are free to come and go as they please. They can set their bid prices at any point they wish. They aren't required to agree to anything.
And even worse is if suddenly noone likes this block chain anymore, they can all cashout and your investors are stuck again with worthlessness instead of their $21million.
Why hasn't this happened already? If it was that easy to create a new block chain and have it accepted by the BitCoin network, this scam would have already happened countless times.
In fact it would make the most sense for everyone to just cash out and start a new block chain without the $21million blocker on it. Everyone wins except the guys who put up the $21 million.
If only it was that easy, yes.
Sure is fun to tell other people to put up a bunch of money for one of your own silly ideas isn't it? Too bad it has no basis in reality.
There's no factual basis for financially backing a currency in the history of finance.
It has no basis in reality.
And please note the difference between tell someone, and ask someone.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Only speculators want the market to stay volatile.
Sorry man, you got this one wrong. It appears that you want to abolish speculation (in an admittedly speculative market, but that's another story). Well let me tell you that funnily enough, they do want it to stay volatile, but they also stabilize it with their trades.I don't want to abolish speculation - I just think that the amount of speculation we have is damaging to BitCoin as a whole. This is a spurious argument - speculation is just people pulling out random numbers and pricing it for profit when possible. Nothing about randomness lends itself to stability.
Speculators cause stability in the market
No, they are the primary cause of instability in the market. If every speculator valued BitCoins at or around the same price, that would be the exception to this rule.
If they weren't there, who on earth would ever buy a plummeting commodity or asset?
Or cause it to plummet? For that matter, how could it plummet if it had a stable value? Therefore it must not have a stable value, and the spikes and free falls are the result of speculation in the market - some speculator buys or sells many BitCoins at once, the price (being the only indicator of value) shifts dramatically, and the market shifts suddenly to match the new price. This is not the way a currency behaves, and it is the reason Bitoin hasn't been accepted as a currency, and will not be accepted as a currency for the foreseeable future.
Without speculators it would drop to zero.
This statement is correct - because the value of BitCoin is primarily determined by speculation interest, not actual value.
Or the opposite, how would you ever get a rally in a downward spiral if it wasn't for short covering?
And why would we need one if speculation didn't result in a downward spiral? In the instance of a stable currency, small shifts are met by immediate response in the free market - that's because the value is stable regardless of the price, and a shift to benefit a FOREX trader will be taken advantage of immediately.
So don't blame speculators so easily. Yes, they make a lot of money with volatility, but have in mind that they also risk their pants too.
I don't blame them easily, I blame them logically. The ridiculously high current price of BitCoin is a function of speculation alone. That inflated perception of value (not actual value) is where most people stand to lose money - the speculation risk. So basically the speculators are taking on risk for no logical reason except to assume the value will go up - which it only will actually do in the long term if the speculation stops and the BitCoin becomes a real currency.
See as an example the recent short selling ban by several European governments, imposed on the Stock Exchanges. The result of such moves in the past has always without exception been a stock market dropping more rapidly than before the ban. Why? Because speculators are not allowed to participate in price discovery. Greek stock exchange is down 16% since then, and it was falling at 5-8% per month before.
I should probably explain that commodities and stocks are not currencies. They behave in different ways, most notably in the amount of value they represent. Commodities and stocks are more volatile than currencies traditionally. In the example of BitCoin, it is more volatile than almost any stock or commodity that exists. That is not the behavior of a currency. Using non-currency examples proves nothing except that you do not understand the word "currency" and the implications the definition of that word holds for BitCoin.
If you don't believe me, check the indexes of the exchanges that banned short selling 2 weeks ago, and compare them to the indexes in 2 months time (end of October). Or check the recent history in the NYSE (2008 autumn).
You may be correct about the Stock Exchanges in Europe. But compare the market movement in the currency space over the same time (or almost any other time), and you'll find they stay mostly flat. This is why people care about the value of the USD falling dramatically - it's not supposed to do that, it's a currency.
It might seem counter-intuitive but this is the case.
It seems counterintuitive because it's incorrect. Your logic uses flawed assumptions - like BitCoin "is a stock", or "isn't meant to be a currency".
And I'm putting this here, because I had the same delusions as you present above, about speculation, before I finally understood what's going on in money markets.
One of us is clearly confusing commodities and stocks with currencies and laboring under the delusion that all financial assets do or are meant to perform the same way. The only reason I can think of to make this argument is that you are a speculator, but I suppose you could just be wrong about it.
Hope it helps.
No, not really.
Re: Bot to operate a price bloc to stabilize price of BitCoins
What is the problem you are trying to solve?
To stabilize the value of the BitCoin versus other currencies and goods/services
Any "instability" isn't a problem. It's the solution to finding the right level.
Instability prevents merchants from adopting BitCoin, thereby preventing it from becoming a currency. This is a problem, unless you're a speculator.
The problem would be price stability.
Price stability is only a problem to speculators.
If you don't believe me you're welcome to try and stabilize it in either direction. Be prepared to lose a lot of dough though.
I am actually trying to if you haven't noticed. Thanks for the words of encouragement. How exactly will we lose a lot of money if no one puts in more than a few cents?
Maybe you've heard of central banks? The FX market? They try to do that in FX all the time. Can you name even one that has succeeded?
Central banks have not been successful, ever, in the history of mankind. They never successfully created a stable enough store of wealth that it was used as a currency. They have never created anything that was ever used as a currency except for every currency accepted by the mainstream market.
The foreign exchange market never shows evidence of any two currencies tending to hold relatively stable values versus each other. It never shows price fluctuations of an order of magnitude less than BitCoin shows routinely. It never reports data about currencies being stable, they're always jumping willy-nilly all over the graph, doing exactly nothing predictable, because that's what all currencies do.
Let me throw out a blanket statement here, no matter how much I hate them as a rule:
Only speculators want the market to stay volatile.
Anyone who wants it to be a currency, wants the value to be stable, as this is a prerequisite for use as a currency. If you didn't already realize this, I understand. Many people in the BitCoin economy are new to the ideas underlying economics. But it is bad for a currency to fluctuate wildly - price instability makes it tougher for people to use it as an actual gauge of value, which is what currency is supposed to represent.
Either decide you're a speculator, and that you want the volatility for your personal profit margins, or decide you want BitCoin to succeed as a currency and help find ways to stabilize it.
You're overstating the importance of bots. The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted. Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk. A human can manually set up unfair trades and scams and that sort of thing, just not as quickly. So really the bot isn't that important.
I may be overstating the importance of bots. It's possible. But this entire thread is about a bot that may have attacked the dominant exchange, so they're at least very important in the security sense.
I guess if your scheme involves 1000 trades, you'd have to use a bot but other than that, people are going to try and exploit the exchange with or without bots.
There are plenty of other strategies that could only be executed by bot in the current environment, like stop-loss order bots.
But nobody is explaining why a bot script would grab random values from a list and use them in buy orders. That's no strategy. It was obviously an attempt to crash the exchange. This makes sense if you think about it. Someone just sold off enough BTC to drop it from $11 to around $8 and then suddenly a few days later, there's a massive trade volume attack. It was supposed to crash so everyone gets scared and sells off their BTC on mtgox. Then when it hits like $5, the guy who originally sold off the massive amount of BTC buys it again for a lower price and waits for the price to normalize a week or two later. Seems like the most logical explanation to me.
This could be an actual attack on mtgox, absolutely. That doesn't mean that it is an attack on mtgox.
By the way, this was no price scheme. This person easily lost 10x their money in fees. That was like 1000+ cycles of their BTC.
In order to know this you would have to know how many BitCoins they had, how much fiat they had, what fee rate they were paying, and that it was in fact one bot and not the cross-section of multiple unrelated bots.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Interesting please put the wall at 10 $
This requires 210 million USD pledged by people using this fund (called "bot" by the OP).No one pledges, pays, donates, gifts, or otherwise spends anything. They get an estimate floor price that they then have the option of adding power to by letting the bot calculate an arbitrary amount in to the floor and suggesting a new floor value.
Why should it be written in PHP in the first place? You could write it in any language you can program in... actually few people have a working PHP installation on their home PC, so it might get difficult for them to use.
I chose PHP because it is relatively human readable and has a low barrier to entry so that other people can more easily understand and modify the code. It is freely available on all major OSes and integrates easily with web services. Seeing as the web browser and the BitCoin client are the two places most people interact with BitCoin, it seemed like a natural fit to me. PHP's relative ease of server setup makes it simple for a small price bloc to set up together independent of my price bloc, thereby making the code more useful to the BitCoin public. The option to install a PHP server on a computer to take commands from a remote mobile device through a standard browser is a nice feature too, but not necessary, or even exclusive to PHP. Obviously there are security concerns dealing with mobile access as well, but the PHP option gives you convenient access to the mtgox APIs. Any security chain is only as strong as its weakest link, and mtgox already has access through PHP APIs. For the sake of simplicity for users learning the mtgox API, why convolute the process by making the community learn another language to understand the bot? There could be better options here I suppose, and theoretically it could be written in any language as long as the code was well-commented. There are no shortage of cross-platfrom web-savvy languages. Which would you write it in? PHP is just a place to start the discussion, really.
About this part:
False. It requires individuals to tell a server how much they intend to put towards backing the BitCoin, and then to listen to the server's recommendation on a price. Because the bot is open source, different people will likely change the math to alter the level of the backing in their particular pool, or to a level they feel is more correct than the server, be it lower or higher. This organic process helps to set the actual floor.How is this different from:
Quote
Quote
2) It requires people to publicly tell a lot of people how much buying power in fiat they have and pledge to use to back Bitcoin.
False. It requires individuals to tell a server how much they intend to put towards backing the BitCoin, and then to listen to the server's recommendation on a price. Because the bot is open source, different people will likely change the math to alter the level of the backing in their particular pool, or to a level they feel is more correct than the server, be it lower or higher. This organic process helps to set the actual floor.
Quote
Individuals tell a server how much they intend to pay for a Bitcoin, and then listen to the server if there was someone who wanted to sell at this price. Because the server accepts bids + offers, people will likely set their individual prices or - if they think current offers are too high (or low), choose to bid less or more. This organic process helps to establish an actual exchange rate.
?Anyways, telling a server how much money you want to put towards Bitcoin backing IS making it public, or at least making this sensitive information available to the owner of that server.
The first paragraph says the user must listen to the server and agree to place their bid, while the second paragraph says they would have take a sell order at the bid the price the server recommended if someone sold to it. The first paragraph also discusses the user altering the math of the bot, not just modifying the result of the output directly (which they can also still do).
Lets try this again:
1) The bot has no control. The human always has the option to turn the bot off.
2) The bot has no money. The human can only use or ignore a suggestion from the bot.
3) The bot is open source. The human can change the bot's behavior at any time.
4) All bids and asks are already publicly viewable.
5) The only time bids execute at the floor price is in the event of near-total collapse of the market.
The sensitive information is that a few hundred or thousand or whatever individuals placed bids for less than a quarter around the same price. This information will already be easily publicly visible on mtgox, mtgoxlive, and bitcoincharts in the section labeled "Market Depth". All the sensitive data that can be revealed by the bot, all the complex modeling at the bottom of the spectrum that can't be exploited, is already publicly available to anyone with a desktop calculator and a web browser.
What you want to achieve is to have dozens/hundreds/thousands to put a few dollars towards Bitcoin backing and from that to calculate a safe floor.
This won't work as I already said, as this floor is likely far too low to have any effect (would you pay 1000 BTC for a simple book, just because that's the "floor value"?!) - and fractional reserving only works for banks because they control the money, you don't.
In reality your floor might exist but will be irrelevant then (as it is many magnitudes below trade prices) - OR it can crumble, as everyone can remove funds from the floor at will, if the price gets close.
This won't work as I already said, as this floor is likely far too low to have any effect (would you pay 1000 BTC for a simple book, just because that's the "floor value"?!) - and fractional reserving only works for banks because they control the money, you don't.
In reality your floor might exist but will be irrelevant then (as it is many magnitudes below trade prices) - OR it can crumble, as everyone can remove funds from the floor at will, if the price gets close.
What I actually want is in the long term for millions to back BitCoin with a few cents. Initially the floor's value would be very low because the currency's current market price is entirely unbacked speculation. I'm not talking about nonsensical fractional backing, or central backing, I'm talking about distributed full backing and the process to bring that to the economic landscape democratically. And yes, that still means that anyone using the bot and it's recommendations has the option to back out of the floor at any time and stop backing BitCoin if they decide it no longer has the value they are backing it with.
About exploits:
As you control the server (or someone else controls it...) anyone controlling that server can send out bogus data to the owners of this bot.
As you control the server (or someone else controls it...) anyone controlling that server can send out bogus data to the owners of this bot.
Which can then be double-checked automatically vs. market depth for accuracy. And of course anyone can use the open-source bot and an off-the-rack PHP install to set up their own price bloc and their own server for free, disproving the server as a sole weak point to be attacked and the theory that I have control over the server and could use it to manipulate price.
If I now took control of the server and told it, that there are 210 million USD in reserves in total pledged, the bot would recommend to (or even automatically do) trade BTC at a price of at least 10 USD/peice (maybe even nearly 30 USD/BTC, if you take into account that only ~1/3 has been mined yet).
So suddenly 21 million people who were never going to join the one evil bot pool now have, they have each contributed $30.00 and magically the now closed-source bot exploits them, setting the floor at $30.00 against the user's wills in a way they can't verify versus market depth because the bot is written using an ancient voodoo hex, and me selling every Bitcoin ever minted at ridiculous mustache-twirling profit levels, even though I never had them to sell. The bot has mysteriously gained the power to compel people's minds in this example, the market behavior of the entire world has changed, and the ownership of all the BitCoins has been transferred to me to sell off for a quick profit. Of course, not a single word of that makes sense or fits in with even a half of one of the facts. Especially me with a mustache.
You have a single point of failure in this system and you seem to control it by design. This makes you suspicious, an attack target and a potential scammer.
I suppose the best solution here is to set up a distributed mirror of the server, or make sure anyone can modify the source and run their own variant of the bot/server. Thankfully, that already exists in the design document.
Also how would you verify the amount of money that people claim to have without actually getting access to it? I might just happen to have a few billion USD sitting on my MtGox account right now... 
Read the market depth graph. Maybe design the bot to calculate directly from the JSON of market depth data instead from a PHP server and just reinforce the lowest current floor without a recommendation from a server. Of course this gives some big player who is already sitting at the lowest price wall a bunch of free weight in the market, and give him the ability to manipulate the bot pool instead of having the distribution of the backing be democratic, and really describes something more akin to following the low floor than setting an actual backed value.
Of course, if you had a few billion USD and were in the BitCoin market, you could just set a hard floor yourself well above the current bid or ask and stabilize the market instantly. So why haven't you?
On a side note: http://blockexplorer.com/address/19CCVDxm53WZuyGvNr4ZaVFgn1kYha4dC1 shows 0 BTC as of now - do you not even trust your own idea as you don't set a bounty yourself but just want the money of others for that simple idea of yours (called currency backing...)?
Seeing as it is looking more and more like I'm going to write the bot myself, I don't see a need to clutter the block chain by donating BitCoins from one of my wallets to another. Since no one else has even voiced an interest in writing the bot, it seems deceptive to put money into the donation wallet to artificially inflate the donation value. I encourage everyone here not to donate until someone at least shows interest in writing the bot and you feel they deserve to be paid for their work (besides me).
The bounty is for a programmer that wants to write the bot and earn BTC, and for people who agree with the idea to pay that programmer for his work. The 1% fee out of the bounty is to reward me for the idea of the bot, otherwise known as my work. It may even be considered dishonest for me to contribute to the pool, since I could just do so anonymously and then take the whole pool once it was donated to, or contribute to the pool for the purposes of getting the 1% to be worth more net, knowing full well that I control the donation wallet and could easily just pay myself back out that money if the bounty never picked up to a point where someone tried to earn it.
At no point have I claimed that I donated to the bot's pool, only discussed the ideas behind the bot on this thread. At no point have I said anything about not believing in this system, and in fact I have expressed and logically defended it over and over already.
You may feel this represents a lack of trust in my own idea (which I've already spent hours and hours writing about in this thread). I would think my trust in the concept is apparent by the fact that I'm here as a proponent of the idea. Please don't transfer your lack of trust in me to me by proxy.
Psychologists call that "transference".
Re: Bot to operate a price bloc to stabilize price of BitCoins
Interesting please put the wall at 10 $
That isn't the way it works. No one "sets" the price of the wall. Users of the bot dedicate small amounts of money to it and it is set automatically by mathematical analysis of the market prices and the total value of the money running in all combined instances of the bot that report back to the server. Re-read the thread and ask any questions you like.
Re: Bot to operate a price bloc to stabilize price of BitCoins
It is an attempt to game the system in that it represents an attempt to use meta-game information to manipulate the playing field - to make it more level to all players.
How is the free market not level? If someone wants to protect against price volatility in a longer time frame, they hedge against it. As a general concept, if I have 100 shares of company X and I dont want to lose money on the share value, then I short 100 shares of company X...duh.
The payment processors are not going to help you out here...another fact of who is really a community member rather than a quick buck con artist. If you really wanted to help out, we have to figure out something that moves against bitcoin. I know one of the exchanges was going to put in short-selling, but I never heard anything past that.
You sound well-informed and thoroughly educated on the topic. Let's begin.
The free market isn't level because more than 80% of the wealth in the market is silent. That's a massive (chaotic) unknown waiting to go off.
No hedges against BitCoin currently exist that adequately cover the volatile spread of BitCoin's potential losses as an investment.
Short-selling is a speculative strategy and does nothing for the net value of BtCoin as a currency.
Payment processors are just as likely to be honest or dishonest as the entities they do business with.
There is no indicator as to whether or not payment processors would help with this idea - none of them have weighed in on it.
Nothing moves against BitCoin, it is too volatile - nearly random, in fact.
CampBX was discussing short-selling and margin trading, but to my knowledge those haven't materialized yet.
Now you know at least this much.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Why does this forum attract so many scammers?
Please illustrate the part where this is a scam. Start with the point where people show a loss, and end with the point where I profit from that loss. Be sure to show your work, including the part where I lie or manipulate people to achieve that end.
Some helpful points to consider might be the total transparency of this theory, the result that I am attempting to achieve, and the actual word I have used in the thread.
If you're going to make an accusation that someone is a scammer, be prepared to prove it.
In cases where you accuse someone of being a scammer who is not, be prepared to fail to prove it.
It also may help to read the thread and know what you're actually talking about.
All I need to know is you want people's money,
you have no trust verification
No one has asked for any, and I'm new here. What would you like to see? and you could have access to it.
I don't even know which trust verification systems are in place in the BitCoin ecosystem. That being said, I'd love to be a part of them - trusted systems only increase overall stability.If you arent a scammer, you would seek to prove the system of trust, you would not assume people will trust in such a system.
Or I would provide them with transparency and logic to earn their trust.I dont need to prove anything,
except the things you claim are true.you need to prove it cant be scammed.
No system is unbreakable. Anyone who tells you otherwise is trying to scam you through that system....then we can talk.
We're talking right now. But only one of us is listening.You use the same logic all the other scammers have done.
The logic that stabilizing the price makes for a better currency?...such as mybitcoin.com.
They might have taken those BitCoins, let's see what the investigation says before jumping to conclusions....no, I couldnt prove it was a scam, but guess what?
It still might not be? They may have actually been hacked - there have been digital attacks against Bitcoin for the last 2 months with increasing regularity. Is it so hard to believe that a high-profile target was underprepared for that eventuality? People are quick to scream "witch" and start to burn each other alive, but bad at looking for answers before they start the fire. You display obvious signs of confirmation bias, which there is no known cure for. You continue to ignore any of the questions I ask, like how I could possibly be a scammer when I am explicitly NOT asking for anyone's money and demanding a transparent open source bot for a bounty. You act as though your assumption of the truth must be the truth, because you have nothing but your feelings to go on.
I can't tell you to trust me... and I wouldn't It's pointless to ask someone to trust you. I'm just asking you to read the thread before you comment. But jumping to conclusions and name-calling and mud-throwing does nothing for the good of BitCoin as a whole, this thread, or you personally. You can keep trolling if you like, I'll keep thinking.
If you hadn't noticed, the thread isn't about a person, it's about a theoretical bot. Discuss the pros and cons of the bot, or of the underlying idea behind it. Make it stronger or tear down it's weak points. But first read the rest of the discussion before you weigh in. Then keep it on topic. If you think the bot points to me being a scammer, show me, and everyone else, how it would do that. I may not see the way it can be exploited, but if it's pointed out to me I'll help to fix that design flaw.
That's the reason we open up ideas to discussion - to expound upon and improve them. If I wanted to call people names I would go on the MTV forums, Star Trek discussion boards, YouTube comments, or FARK.com, or any of a number of other sites populated with people who expect and enjoy that kind of thing. If you just want to do those things, I would suggest you try those environs - they're a more natural fit for that type of communication.
If you want to discuss BitCoin, there's probably far fewer places better than this board, though. Those of us who wish to have real discussions about it have nothing to gain from users who contribute nothing of value to the forum. either contribute something of value or go hang out on FARK.
So again, how am I a scammer? The burden of proof lies on the accuser. Failure to provide adequate proof for this point just means you're spamming invalid accusations about users you can't even be bothered to read.
Re: Bot to operate a price bloc to stabilize price of BitCoins
Currently, there are NOT millions of Bitcoin users out there, if you take a look at the simultaneous online nodes statistics and/or client download statistics. Also nice "if everyone in ... would ..." ideas don't work - if they would even KNOW of Bitcoin, the price would soar much higher and your "stable" ~3/BTC would be like my offer of 21 EUR in comparison and a return to a rate of 3/BTC would be seen as "crash" + "failure".
Therefore we can assume the floor set initially will be much lower than the actual traded price, thereby setting a bottom boundary - exactly what the bot purports to do.
I don't set up such a company, because Tradehill is currently doing the same - and being under the jurisdiction of Chile I figure it might be easier for them than me under EU law.
Therefore Tradehill is willing to take on the risk. It could pay off for them, or the early adopters could put them underwater at a moment's notice. Hopefully it'll work out - this business is excellent for the ecosystem.
Also:
How/why does it hurt a currency if it is being exchanged for another currency at various prices or even if it is a meta-currency (like SDRs http://en.wikipedia.org/wiki/Special_Drawing_Rights)?
If you are not holding that money and the system is voluntary, you have the exact same thing as you already have on MtGox: People have a pile of USD in their account and when they think the price is right, they buy BTC. All you would do is to say: "As there are 21 million USD on MtGox right now that I know of, it does not make sense to set offers below 1 USD!". I still don't see how this would stabilize anything, if you cannot even remotely approach the current prices.
How/why does it hurt a currency if it is being exchanged for another currency at various prices or even if it is a meta-currency (like SDRs http://en.wikipedia.org/wiki/Special_Drawing_Rights)?
If you are not holding that money and the system is voluntary, you have the exact same thing as you already have on MtGox: People have a pile of USD in their account and when they think the price is right, they buy BTC. All you would do is to say: "As there are 21 million USD on MtGox right now that I know of, it does not make sense to set offers below 1 USD!". I still don't see how this would stabilize anything, if you cannot even remotely approach the current prices.
To approach current prices would require a far greater amount of money than this bot needs to set a floor. The more money is used by instances of the bot, the higher the value of the floor. As you said, it won't get to $10.00 per BitCoin the moment it's released - and that's a good thing. A sudden spike in demand only serves to artificially inflate the value to an unrealistically high level - where BitCoin's price currently sits compared to its purchasing power or backing (actual value). Hence, the floor would be unlikely to sit near the current price, as the current price has little to support it beyond speculation interest.
Most central banks DO have reserve requirements (http://en.wikipedia.org/wiki/Reserve_requirement) but it again only works because they are central. You're free to try it out with an alternate chain. If you let people come and go at will, your "backing" is also completely unstable so there's no trust in it.
Most central banks have nowhere near the amount of wealth backing their currencies as they claim the total amount of currency in circulation is worth. This is an inherent weakness of fiat currencies as a whole. They are backed by primarily words. Anything less than complete backing is merely a psychological measure to engender trust to the asset. Similarly, this bot is meant to set a minimum price, to help BitCoin users know a minimum real value of their BitCoins - just like the real total value of the gold in Fort Knox is equivalent to the actual backing of the USD, but not to the actual value of every USD printed.
In the scenario you described, you have successfully devaluated BTC into nothingness, even though your bot was correctly working someone could still play pump + dump. To me this sounds like a complete failure of this bot.
My scenario also requires that everyone in the world simultaneously loses all faith in BitCoin except for one person running the bot - a highly unlikely situation. This situation doesn't describe a failure of the bot - it describes a total meltdown of the market. I chose it as it is the most extreme situation in which operating the bot could ever result in real asset risk to the user. Did the bot fail in the instance of total market collapse? Yes. Was the bot the source of the failure? No. Did every other thing in the BitCoin market also fail before the bot did? Yes. Did the bot fail to set a stable floor? Yes.
I concede the point than in the instance of total market failure, when someone sells every BitCoin into the floor, the bot will probably not work to force BitCoin to hold a price as people leave the fund and sell their BitCoins into the floor. In the case of 100% market collapse, the bot only slows the end game by a few minutes, giving the people in the fund a chance to get out and minimize their losses.
For a backing to work EVERYONE who trades fiat for BTC needs to put the same amount of fiat into the fund as well (I buy 10 BTC @ 10 USD --> I pay 100 USD to the seller + 100 USD to the fund to keep the value up).
For full backing to work, yes. For fractional backing, like we see in other currencies, no. Otherwise it wouldn't work in other currencies. Of course, really, all backing is full backing. We just pretend that the amount backed means more, and call it fractional backing. Because the chance of actually needing to back the entire currency is slim to none.
Then over time the fund will become large enough to really back Bitcoin.
With even $0.01 in it, the fund backs BitCoin, just not very strongly. Over time as(summing) the fund accumulates users, the backing becomes more powerful. Then the price of BitCoin stabilizes compared to an actual value it takes on. The bot is simply meant to speed the process along and make market collapse less likely in the mean time.
If you only pay in a lower amount of fiat into the fund than you trade, you have a fractional reserve and risk that amount you overpay (If you trade 10 BTC@10 USD and pay 80USD to the fund, over time the fund will only grow to a maximum of 80% of the then current trade price).
If only my goal were to lock in the current price, your math would matter. I'm not trying to set a permanent price - I'm trying to guide the price range to a stable one.
All in all your bot's a nice idea and all, but it has 3 shortcomings:
1) It won't work for ceilings (no BTC will be traded above x USD) as the amount of USD is unknown (depending of the money amount you take into account) or so high, that you will need far over 20 million BTC in that fund to bring it down to current sub-100 USD levels.
1) It won't work for ceilings (no BTC will be traded above x USD) as the amount of USD is unknown (depending of the money amount you take into account) or so high, that you will need far over 20 million BTC in that fund to bring it down to current sub-100 USD levels.
The math for setting the ceiling is tougher, certainly. I've been looking at a few theories of how to aim the ceiling, I should have something usable, or at least discussable, in a day or so. While there is a finite (though ever-changing and unpredictable) number of USD in circulation, there is no way to know how much of that is in the BitCoin market.
2) It requires people to publicly tell a lot of people how much buying power in fiat they have and pledge to use to back Bitcoin.
False. It requires individuals to tell a server how much they intend to put towards backing the BitCoin, and then to listen to the server's recommendation on a price. Because the bot is open source, different people will likely change the math to alter the level of the backing in their particular pool, or to a level they feel is more correct than the server, be it lower or higher. This organic process helps to set the actual floor.
3) It is voluntary, so panics + dumps can still occur (floors will most likely be magnitudes below current values and your system only works if noone needs their fiat money for anything else but backing Bitcoin. Ever.). You even gave an example in your last post.
The bot is a band-aid, not a panacea. Until the market stabilizes (and even afterwards) some strategies like pump-and-dump can still affect the market. I stand by the concept that the best thing for BitCoin stability is real purchasing power set in the form of merchant prices. The bot is voluntary explicitly by design for the reason of democratization of the floor price - which makes the floor a far more useful indicator of minimum real value. This means the floor can easily slip away - should people lose faith in BitCoin en masse. This is to protect the assets of the people that compose the floor. Why would I require them to stay in a tanking market? Furthermore, why would I do it if someone required it of me? People will stay voluntarily because they want to support the market, or leave because they don't want to. Just like people who aren't using the bot.
The panic/dump example I gave was a worst-case scenario: the complete simultaneous evacuation of the entire BitCoin economy. Nothing can protect BitCoin from sudden absolute devaluation except a huge backing fund, first of all. Secondly, the chances of total simultaneous abandonment of BitCoin actually happening are slim, and if it did, the chances of any one particular individual being the last one running the bot are even slimmer. Thirdly, this final running instance of the bot could have as little as $0.01 running on it - as little or as much as the owner of that contribution to the pool chooses to let the bot use.
So, that is to say that in the case of total BitCoin implosion, one person running the bot may be left with a few cents of net loss as a result of their decision to run the bot. But until the time that the entire BitCoin economy up and dies, the bot (or variants of it) sets a minimum value, as determined by the free market with voluntarily ceded shared buying power that is only pseudo-contributed to a backing fund (never leaving the hands of the person running the bot until the entire BitCoin economy collapses suddenly on itself while they're sleeping), to help stabilize the value for the long term, thereby stepping away from total BitCoin disintegration.
Anyways, I still haven't seen a single line of code yet! If it is such a great idea, just do it, don't listen to me and argue with me - prove me wrong!
I'm not a php coder, but if no one else does it, I may have to learn php eventually just to get this project off the ground. While the coding part is boring to me compared to the theory, I still see the bot as a necessary step towards stability, so how boring learning php is may not matter.