Update, 2-12-2014:
I realized that all my links have been replaced by the message "Suspicious link removed" because they were all shortlinks (for aesthetic purposes). I have sense changed them all to long links.

That is the core point that I wanted to float. Now for your specific points:

Quote from: pletharoe on February 10, 2014, 12:40:37 PM

I think that the only way to peg a currency to another one is through a legal framework. Since cryptocurrencies don't fall under any one country's control it is impossible to peg them to anything else.

...

I suggest that you look into the new Auroracoin. That is a good effort at making crypto more widespread.

I think it might be illegal to have a pegged P2P currency, however, I believe it is far from technically impossible. Other posters talk about services that currently fix the value of their online currencies.

I checked out Auroracoin, and it looks interesting. Though it seems to be unrelated to the original subject at hand.

Quote from: remssik on February 10, 2014, 12:55:27 PM

The closest we have at the moment is stuff like Payeer, PerfectMoney, EgoPay, OKpay, that kind of stuff. Their fees are high and it's not P2P. The problem with pegging is that someone has to back it up.

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This is why PerfectMoney and the like charge fees, because they pretty much have to keep all dollars from currency exchange in a big stockpile.

Thank you for this helpful list of online currencies. But as you say they aren't P2P and thus kind of defeat the purpose. Furthermore, their fees also leave their currencies with something to be desired.

However, I disagree that the only way to peg the value of an online currency is a big stockpile of money. See my proposition at the beginning of this post.

Quote from: actudoran on February 10, 2014, 12:57:20 PM

On the other hand I think it would be safe to assume that current fiat inflation brings about an upward trend for bullion in general; that being said, we often forget that the rate of appreciation a particular thing is not a function of economics !!!! Supply and demand is only an effect and not a cause ... Everyone should get the fact that Kensian[sic] economics is dead

Just to be upfront about this now: I am absolutely a Keynesian; it's absolutely not dead (http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=1&em), a discussion for another time.

It is unlikely that bullion appreciation is a sign of fiat currency inflation. If you look at any measure of inflation outside of bullion alone there is no sign of inflation that bullion appreciation might suggest. Consider CPA, cost of living increase, median or mean wage increases. Consider numbers collected by the government or by non-governmental organizations. By any reasonable data-driven analysis bullion's massive appreciation is not a result of fiat currency inflation. It is far more likely that the price of bullion has simply risen a lot, as many financial things do from time to time. It could even be a bullion bubble, after all there was a bullion bubble that grew and burst already (http://www.google.com/imgres?safe=off&sa=X&hl=en&biw=1366&bih=679&tbm=isch&tbnid=QEM9gqyYdTKlaM:&imgrefurl=http://seekingalpha.com/article/256917-riding-the-second-gold-bubble&docid=3yb2AlBObawVxM&imgurl=http://static.seekingalpha.com/uploads/2011/3/7/520519-129951866516192-UltraLong_origin.jpg&w=933&h=586&ei=xuv5Ut68Mcnj2wW0wYGgAg&zoom=1).

Quote from: asfbhero on February 10, 2014, 08:16:34 PM

In my opinion bitcoin IS the ideal currency, all currencies float, all corporations that do deals internationally have hedging departments to deal with currency exchange risk, so movement isn't a deal breaker by any means. Bitcoin is truly revolutionary, and new, and while volatile it is INCREDIBLY robust, look how it handled the panic today, the moment the market learned the Mt Gox was lying when they said the protocol was flawed buyers rushed right back in. Once bitcoin has a few more years to ... finish with large investors coming in. I mean when wall street gets involved (Winklevoss ETF among others) the buying pressure is going to be enormous.

The more moving parts in a business, the more cost of doing business, the higher the entry cost into the market, the higher the prices for the consumer. I see no reason why instability in the value of a currency could be considered not a bad thing.

Furthermore, is see no reason why the Mt Gox panic and recovery should be considered evidence that BitCoin is "robust." The 2010 Flash Crash (http://en.wikipedia.org/wiki/2010_Flash_Crash) wasn't evidence of the "robustness" of the US system, and the Mt Gox story isn't evidence of BitCoin being "robust."

Finally, there is no reason that wall street will make the currency a better currency. More investors (aka speculators) is bad for stability and bad for BitCoin as a medium of exchange. Speculators increase instability. There is no reason to look forward to wall street investment.

Quote from: asfbhero on February 10, 2014, 08:32:07 PM

What's with all the desire to PEG to the dollar? ...

When placed against the USD or other fiats, BTC is also better in terms of transactions, better in terms of inability to counterfeit. USD is inflated away just like all fiats, so bitcoin wins again. ...

As stated before, stability of value of a currency is highly important for the viability of that currency. Pegging the value of the currency creates stability of value. Without reasonable stability of value, BitCoin cannot function as a viable currency (see http://www.theatlantic.com/business/archive/2013/12/why-bitcoin-will-never-be-a-currency-in-2-charts/282364/ for another argument on similar grounds).

Fiat currency is not "inflated away." Inflation is not at a high level, and a low level of inflation is good because it prevents deflation and it gives people motivation to spend their money and thus help the economy.

Quote from: donut on February 10, 2014, 10:41:47 PM

It's being worked on: https://en.wikipedia.org/wiki/MintChip

Not sure yet if MintChip answers my question, but it is definitely interesting and worth looking at closer. Thanks for the heads-up!

Quote from: keithers on February 11, 2014, 12:20:07 AM

the intrinsic value of a US dollar fluctuates vs. all the other world's currencies by the day/hour/minute. So even if it was pegged to the dollar, it still would fluctuate in value. There isn't really a feasible way to peg it to an exact dollar value, otherwise it would just be sending money...or pretty much paypal..

Of course the dollar fluctuates in value. That's the point of a floating currency. But consider this, on Jan 1, 2014 the USD changed 0.15% of its value against the Euro with no big intra-day fluctuation while BitCoin lost 4.2% of its value in three hours. That's not even a remarkable single-day price change for BitCoin. A tiny blip of a day on the radar that I chose purely because it was a day of non-significance for BitCoin as a financial instrument.

The reason a pegged currency would not be the same as paypal is because the value would still fluctuate, but the system would gravitate toward a pegged exchange rate (or relative exchange rate against a basket of currencies).

Finally, the biggest point being brought up is the biggest point that I have a problem with.

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Prices will only stabilize once adoption is more widespread.

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gold is an unregulated comodity[sic] too ... so could the BTC be in a different form

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Once bitcoin has a few more years to gain wider adoption, a longer track record, and finish with large investors coming in.

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BTc will become more stable once it is more openly traded ....

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It will be more stable when the market cap altogether is much bigger, and then news positive or negative will have a smaller effect on the overall value of 1 btc.

There is a belief in the BitCoin community that a large market cap or widespread adoption and becoming more like gold will magically bring stability to the value of the currency, but there is no data to support this. After reading these responses I realized that I should have linked the first post to the original forum (https://bitcointalk.org/index.php?topic=458083.new#new). Here is the jist of why a larger market cap/wider adoption probably won't bring stability:

Let us assume that gold is a currency in the world, similar to BitCoin, only with much wider adoption and a much longer history. The gold market cap according to the guy on the previous forum's source...

Quote from: hendo420 on January 21, 2014, 05:32:26 AM

http://www.numbersleuth.org/worlds-gold/

...is $8.5 trillion. To better understand the enormity of this number, the market cap of US dollars in circulation is $1.2 trillion (http://www.federalreserve.gov/faqs/currency_12773.htm). Thus, the current value of all the gold in the world (aka market cap) is about 7x the value of all the US dollars in the world.

This being said, the value of gold has had an annual inflation rate of 8% per annum over the past 5 years while it has simultaneously had a deflation rate of 23% over the past year (http://goldprice.org/gold-price-history.html). And this does not begin to amount to the historical instability of the price of gold since it was untied from currencies during the Great Depression.

Compare this to the US dollar (http://www.usinflationcalculator.com/inflation/historical-inflation-rates/). Its worst years of inflation were when it was tied to gold, as were its worst years of deflation. Since the end WWII there have been exactly 5 years of 10% inflation or more, and in the current era of post-Stagflation American Macroeconomics we have seen zero years of inflation breaking 6%. Furthermore, we have seen one deflationary year since 1950 when deflation reached 0.4% in 2009.

The dollar is far more stable than gold while gold is more widely used and gold's market cap is far larger.

There is no reason to believe that wide BitCoin use or a large BitCoin market cap will make it more stable.

Thanks for reading.

sophyphreak

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