...by Daniel Szego
"Simplicity is the ultimate sophistication."
Leonardo da Vinci

Wednesday, April 11, 2018

Notes on stable cryptocurrency

Designing a stable cryptocurrency is a pretty difficult thing, even if it is possible at all. One thing that might work if the cryptocurrency is "backed" by a digital asset for that we can estimate both the supply and the demand side. Such a digital asset might be for example storage or computation. Both for storage and for computation we can estimate the supply side, which is like the Moore's rule and probably we can estimate the demand as well based on industry trends or historical data. The only thing that we have to do is to design a cryptocurrecny with a certain monetary policy in a way that the monetary policy mimics somehow the price of the backed asset. Certainly, there might be a possibility for unexpected changes in supply or demand, like for instance the appearance of a brand new technology, so the possibility should be given for manually monetary policy adjusting.