In the last weeks I have thought a bit about value stability and have read some proposals which target a better “value stability” for cryptocoins, like Encoin and GEN. Now, here’s my own idea for this issue: “Proof of Confidence”. It would be far easier to implement than the other proposals, as it’s a very light variation of the “Proof of Stake” concept.
Actual cryptocoins are very volatile in price. I think the problem are the “boom-bust-cycles”: There are rally phases when many people buy coins and hoard them looking for fast profits. But when the rally ends, often there is a massive panic sell which drives the price down by 30 or more percent. (Some may think this is not a problem, but for a currency for everyday-use it is). PPC recently experienced this after the 0.0043 BTC all-time-high.
How can these boom-bust-cycles be avoided? My proposal would be that Proof-of-Stake income can only be earned by users who lock the coins for a certain time, e.g. 60 or 120 days. The lock should be impossible to be undone, so if there is a crash and you have locked the coins you can’t panic sell them. So it requires confidence in value stability.
This mechanism could prevent massive selling panics if many users make use of the “PoC” feature and lock their coins. Obviously there must be a strong incentive to lock the coins for the mechanism to be effective. So I am thinking of a dynamic PoS-“interest” rate based on difficulty which would be calculated considering the following parameters:
[ul][li]The time the coins are locked (more time -> higher interest rate, as a reward for more confidence)[/li]
[li]The total amount of locked coins (the fewer coins are locked, the higher is the “interest rate”. So if there are few coins locked there is more incentive and less 51%-PoS-attack risk)[/li]
[li]The PoW difficulty change (diff ascending - higher interest rate, diff descending - lower interest rate). This would increase the money supply a bit in boom phases and reduce supply pressure in bear markets.[/li][/ul]
In practice, for the user, this would work similarly to a time deposit.
I know this probably could only be implemented in an PPC fork, not in PPC itself. But my opinion is that we are in the initial phase of cryptocoins history and should experiment a lot. And value stability would be really a big thing, I think.
It would be cool to hear what you think about this proposal. Is it feasible? Would there be methods to “cheat” and pump-and-dump? Would 51%-attack be easier? Perhaps it was proposed by another person? If you have ideas for improving this concept, be welcome!
(Sorry for my bad English :D)