I’ve spoken against techniques that would bias the price of safecoin. My main concern was that the proposed methods might become complicated and hence would make it difficult for people to understand and hence trust the monetary system. If such a system was simple and autonomous then perhaps it would pass my test…so here’s my thought - although I don’t know if it could be applicable to safecoin given we are so far down track already.
Problem - big fish come into the market and buy then sell (the classic pump and dump). They profit off of this (often) by buying and playing on people’s hope and then selling and playing on people’s fear. It’s really a terrible scam - it works well in small speculative markets - you may have heard the old saying “Buy the rumor, sell the news.”
- DAC’s (decentralized AUTONOMOUS code/corporations/entities) are set-up from the beginning and given a large percentage of safecoin.
- a market mechanism is created for creating dirivitive contracts (put and call options). The DAC’s are open-source programs that then use the safecoin they have to create, buy, and sell these contracts, hedging both sides of the value of safecoin.
This would make it very hard for any large fish to move the price without paying a hefty cost. particularly if the DAC’s were given a network trading edge (they are inbuilt into the network and hence can act faster than other traders) - just as the wall-street high speed traders have. This mechanism, I think, would cause market manipulators to avoid safecoin like the plague - it would be a money-losing proposition.
Obviously there are some big difficulties in creating such a mechnism and it would have to be well tested. So I don’t know about the viability, but thought I’d throw it in the ring.
EDIT: I forgot to add the high-speed trading method of manipulation in my ‘problem’ section. but did mention it in the solution. To clarify, I think such DAC’s could solve both pump and dumps and high-speed trading manipulations. Perhaps @dirvine can speak with Max Keiser about this (I think he was on his show once). I believe Max knows a lot about how high-speed traders manipulate the market. He might be able to advise on the viability of such a counter scheme.
EDIT2: Additional proposal to use the money held in escrow for farmers as the money used by the DACs. As the economy grows (money paid out to farmers) less and less stabilization will be needed, so this is a win-win scenario.
EDIT3: I’ve realized that I’ve not accounting for the recycled money in the second edit above – so I’ll amend the proposal to say that I’m not referring to recycled money - paid back to the network. I’ll repropose that the DAC’s have access to an amount equivalent to the initial amount allocated to farmers and as money is paid out to farmers, the funds accessible to DAC’s is equal to that initial amount minus the amount paid out, but not including any amounts paid back in via recycling. By the time the DAC fund reaches zero, the farmer fund will still be cashed up via the recycling mechanism. And I would hope the network would be big enough to fend for itself by then given the size of the initial pool.