Yet Another Safecoin Divisibility Idea
In the simplest words, coins with an address starting with
111 are worth half as much as coins starting with
1111 and twice as much as coins starting with
- 50.0% of coins start with
10XXso are relatively ‘low’ value
- 25.0% of coins start with
110Xso are slightly more valuable
- 12.5% of coins start with
1110so are slightly more valuable again
The ‘rarer’ the address space the more valuable the coin.
So the number of consistent leading bits (either 0 or 1) determines the denomination of the coin.
A rough analogy:
- 1 leading bit = 0.1c
- 3 leading bits ~ 1c
- 7 leading bits ~ 10c
- 10 leading bits ~ $1
- 13 leading bits ~ $10
- 17 leading bits ~ $100
- 30 leading bits ~ $1M
- 64 leading bits ~ too much!!
How much value does a wallet hold?
Before denominations it was simply ‘5 safecoin’.
After denominations it becomes more complex. 5 safecoins could be 5 ‘units’ of value, or 20, or 100, depending on the denomination of each of the safecoins in the wallet.
Similarly, a wallet with 1 safecoin may hold more value than a wallet with 1000 safecoin, depending on the denominations in each wallets.
The network should be able to easily look after all this automatically for the user.
Conversion between denominations can be initiated by the user. Got too many low denomination coins? Convert them to a higher denomination. Need to pay for something cheap? Change a higher denomination coin to multiple lower ones. The network should be able to make this work automatically.
If the distribution of denominations is becoming problematic (eg one particular denomination is becoming nearly fully utilized), the network may provide incentives to convert to other denominations and balance the distribution of coins.
It may also be possible to reduce the use of many small denomination coins by making it expensive to convert to them.
The amount of resource provided can be directly related to the denomination of the coin being claimed.
Farmers can claim a low denomination coin with very little work, or claim a large denomination coin with a lot of work.
The network may incentivise ‘waiting’ to farm a higher value coin (thus reducing transaction load on the network) by accepting slightly less work for more valuable denominations than the normal conversion rate. But the incentive structure needs to be carefully thought out, this may encourage unwanted farming practices.
Trading / Exchanges
The price of a safecoin now becomes measured by some ‘standard denomination’, eg the price in USD is the price to buy a coin with 5 leading bits.
I’m not sure how easy / hard it is to work out the market cap with this scheme but it should be simple enough I guess.
Price × total coins in circulation
Price × total denomination in circulation
Total Issued Coins
Like market cap, the total issued coins and denominations could be easily calculated. But it’s more complex than simply ‘the number of coins with owners’.
The ‘standard denomination’ used to price safecoin would probably need a name other than safecoin, since safecoin is currently used to refer to the coin at an address. Whatever the case, there’s some language barriers to investigate.
Merchants / spending
Hopefully the network can totally look after denominations and the user just sees ‘value’ come and go from their wallet. Ideally they shouldn’t even be aware of denominations, and can just send and receive value as needed.
How do we talk about divisibility in this case? What’s the smallest unit? What’s the ‘standard’ denomination to use? I think there’s a need for some simple mathematics to determine the most usable parameters for this.
This is a very fresh idea in my mind and I just wanted to put it out for critique a-la ‘release early release often’.
Related: Yet Another Coin Idea