Pegging the buying power of 1$@2014, not 1$ itself

[Sabreiib]

I’ve read hayek’s book–Denationalized of money. He said the private companies(issue banks) care much about their own currecny’s stable value, ie buying power.

If we maintain 1 Nubits @ 1.2$ in 2016 because inflation of USD is 20% at that time, people would say"Yes, Nubits is real stable currecny not the corrrupt FIAT." And this is not only fit the theory of multiple currencies but also a good advertisment. This can be achieved by motions passed by shareholders. Our system is much more flexible than bitcoin and interact with the real world.

[JordanLee]

There has been quite a bit of discussion about offering a separate currency (using the same network) that is inflation adjusted. The difficulty is measuring inflation.

[Sabreiib]

offering a separate currency

Measuring inflation is the task of economists and they’ve been done quite some work. Shareholders will reference those data and make decision about how much inflation will be compensated in order to compete with our competitors.

[desrever]

I’m listening

[Ben]

Best thing to do would be to start to develop a set of requirements for what an “inflation resistant” or “inflation adaptive” crypto asset would do.

• What would holders receive in the future when they sold the asset?

• How would the protocol adjust the value?

• What data inputs are required, and what validations need to be in place?

• What occurs during deflationary periods?

• What is the “today” value of a unit purchased during a period of inflation, but held until “today” (when deflation is at work)?

[Sabreiib]

Ben, I think our present Nu system is good enough to provide an “inflation/deflation resistant” crypto asset. There will be quite some competitors after Nubits project launch, they are our imitators and these systems including Nubits constitute a free competition private currency market, which was fully demonstrated in Hayek’s book.

If we don’t provide such crypto asset, our competitors will do that. So Nushare holders must vote and pass motions where the inflation rate is chosen. We don’t need to calculate academic/economists inflation rate, just the market(most of our users/customers) believes. If we choose a wrong rate(too high or too low), our Nushare price will drop because the free market doesn’t like it and that is to say our product has a quality issue.

We achieve this simply by pegging Nubits to 1.1USD, 1.24USD etc, and even 0.9USD if deflation occurs, via a motion supported by the majority of Nushare holders. And Liquid providers (LPC) will implement it.

Just pegging 1 USD is not good enough for people who are worried about FIAT inflation.----not very good quality of our product. Only when we overcome the inflation/deflation, will the crypto volatility come into an end.

Nubits can be more stable than USD, isn’t this attractive for the public?

[JordanLee]

This is how we would implement an inflation adjusted currency:

1. Someone would advance a motion proposing the character and code we will use to define the currency, as well as its marketing name. They will also propose the use of a particular source and methodology for measuring inflation/deflation.
2. If passed, the dev team would need to make some minor changes to the code to include the currency.
3. Supply would be introduced the same way as NuBits, and on a monthly basis custodians would adjust the peg by configuring NuBot with the adjustment indicated by the economic data source chosen by shareholders in the original motion. This could be a downward adjustment in the unusual case of deflation.

We anticipate that shareholders will begin using a data feed of their choice to configure their vote rather than manually configuring it as they do today. This will be particularly important with multiple currencies because each currency will require a different management of currency supply to match the demand of the currency in question. Because the management of multiple currencies through manual shareholder configuration of voting is impractical, I strongly support waiting to create additional currencies until there is a diversity of stable data feeds offering voting guidance to shareholders.

[Sabreiib]

Good point, Jordan. I’ll dig into that book to find a good way to calculate inflation automatically. I remember Hayek talked quite some on this topic.

BTW, why not use NuUSD for USD, NuCNY for CNY and NuGBP for GBP? And keep Nubits as the name for the long waited “good money”, which is more stable than bad FIAT money?

I suggest we temporarily peg Nubits to 1USD but keep possibility of inflation/deflation resistant in case of we find a good way to set inflation rate in future. After all, we have 1-2 years to do so.

[Chronos]

I suggest we temporarily peg Nubits to 1USD but keep possibility of inflation/deflation resistant in case of we find a good way to set inflation rate in future.

Idea: all NBT could be instantly “converted” to inflation-resistant NBT at a single point in time, carefully planned in the future. Valuation would remain stable at the point of conversion, and then move as inflation begins to take its toll.

Or, during a 30-day window, users could “convert” their NBT into inflation-resistant-NBT. Those that did not would keep the old USD-pegged currency.

Just a couple thoughts.

[Sabreiib]

I guess we can kill two birds with just one stone: Nubits.

One stone: Nubits, price controling by LPC
Bird A: cryptocurrency volatility, short-term fluctuation, the reason why cryptos called “NOT money”.
Bird B: FIAT inflation, long-term fluctuation,the reason why FIAT called “bad money”.

In the first step, we’ll manage to eliminate the crypto volatility and in the second step(perhaps one year later), we resolve the FIAT cancer. Tell the pubilic that our Nubits is always stable with actual buying power at any time they buy/sell Nubits, thus holding Nubits is safer than holding FIAT.

I’ve checked “denationalized of money”, it says in chartper XI.

It seems that in future we can develope a addon to monitor the mass goods USD price. For example, the oil ,corn, beef… Just like Jordan said, a data feed.

I strongly support waiting to create additional currencies until there is a diversity of stable data feeds offering voting guidance to shareholders.

My opinion is that even a partially inflation resistent currency is still better than those without it at all.

[Sabreiib]

Choice in Currency

"Choice in Currency: A Way to Stop Inflation "

This article blowed my mind on inflation.

[desrever]

the more I think about it the more it make sense. Are there any other assets (not crypto) that are pegged to USD of 2014 taking inflation rates into account?

[Sabreiib]

We have the exact chance to launch the first good money in human history which is neither inflation nor deflation. And turn the tide from “bad money drives out good” to “good money drives out bad” as Hayek predicted.

[crypto_coiner]

I was about to start a new post enquiring about the danger of pegging onto 1 USD and not 1Unit of purchasing power, but it is already covered. Pleased.
Also, if we need to peg onto say 1.2 USD, that is also within reach, as I can see.

Very encouraging.

[jonza]

This proposal is effectively asking the Nubits community to accept gradually increasing valuations of NBT against USD over time (assuming the more usual state of inflation, not deflation). The question is why would the community continue to have confidence that the peg can hold at higher and higher price levels over time? If indeed this could be done, in theory we could just as easily establish a currency that rises exactly 10% in value against USD every single year, or any arbitrarily high percentage we choose. That would give stability and accelerating purchasing power.

I think the reality that prevents us doing this in practice is this. Assuming that custodians hold at least some funds in reserve to support the buy walls (call it X% reserving, with X<=100), these reserves would need to keep increasing with both the supply of the coin as well as (now) the increasing price for the coin (or put another way, the increasing market cap of the coin) to provide confidence that the buy walls that support the peg will not ever be overwhelmed. Any sense in the market that these are insufficient will result in a demand shock that will be self-fulfilling in overwhelming the buy walls. So the challenge is how is this to be achieved?

[Chronos]

I think it might be achievable with a NBT burn mechanism that allows holders of NBT to destroy them in exchange for newly-minted NuShares. In this way, excess NBT supply would dilute shareholder value, but would not harm the peg.

This is, of course, an untested theory.

[mhps]

The question is why would the community continue to have confidence that the peg can hold at higher and higher price levels over time?

Right. If a version of nubits can track CPI that is determined by a basket of commodity, the version has to be backed by a reserve that consists of the basket of commodity. It’s hard enough to come up with a decentralized way to hold a USD reserve, it will be quite a lot harder to do it with commodities.Maybe a cryptoETF based on nubits can do that. Now you heard of it from me first

[jonza]

Chronos, exchanging NuShares for NBT to destroy is an interesting approach, and I think should work as long as the NuShares are valued well enough relative to the amount of NBT for sale. It could be challenged if the market cap of NuShares is substantially less than the NBT for sale. In that case no amount of NuShares would seem acceptable in exchange as it represents a haircut (and as the greater the number, there is simply more dilution) and sellers would instead take a discount to the peg selling on the market.

[Sabreiib]

If Nubits outpaces CPI, ie 1NBT=1.3$ in 2015, it is unfair to NBT borrowers; If CPI outpaces NuBits, ie 1NBT=1$ in 2015, it’s unfair to NBT lenders.

A good money is neither deflation nor inflation.

In future we can support 1NBT=1.02$ in 2015(given 2% CPI) from our profit. So our profit model is critical.