I figured that the proposed trade would enter the public record; doesn’t it have to in order for MorpheusBank to see and sign it?
I also didn’t notice where MorpheusGold was ever convertible to gold. Clearly MorpheusBank cannot be guaranteed to have enough bitcoin to redeem all of the MorpheusGold to bitcoin if e.g. bitcoin tanks. MorpheusBank is being trusted with the total value of the gold represented by his coins (minus their bitcoin value) and can walk away at any time with that difference. MB has an incentive to sell as much MG as possible and then defect, and any transaction that appears to build trust is not evidence that MB does not intend to defect. (Since if MB was intending to defect, it would perform transactions to build trust)
All in all, I can’t tell the difference between MB and Currin Trading.
Whoa-what? If the demand for gold drives a price increase in gold, there is no ‘rebalancing’ possible to keep one’s ability to purchase gold constant without putting additional reserves into the bank. Likewise, if bitcoin tanks to the point where an ounce of gold can buy all ~21 million bitcoins, but MB has twenty ounces of MG outstanding, it becomes impossible to redeem them for bitcoin (and they were never redeemable for gold).
MB could theoretically avoid both cases by keeping a full reserve of gold, selling gold only as needed to get bitcoins; in the case where bitcoin becomes worthless, MB could effectively set the exchange rate of gold for bitcoin, since there would be no other sellers. If gold became more valuable but bitcoin remained a medium of exchange, MB could simply sell gold at the market rate for any currency convertible to bitcoin.
I figured that the proposed trade would enter the public record; doesn’t it have to in order for MorpheusBank to see and sign it?
I also didn’t notice where MorpheusGold was ever convertible to gold. Clearly MorpheusBank cannot be guaranteed to have enough bitcoin to redeem all of the MorpheusGold to bitcoin if e.g. bitcoin tanks. MorpheusBank is being trusted with the total value of the gold represented by his coins (minus their bitcoin value) and can walk away at any time with that difference. MB has an incentive to sell as much MG as possible and then defect, and any transaction that appears to build trust is not evidence that MB does not intend to defect. (Since if MB was intending to defect, it would perform transactions to build trust)
All in all, I can’t tell the difference between MB and Currin Trading.
MB should be engaging in continuous rebalancing to keep their ability to purchase gold constant.
Whoa-what? If the demand for gold drives a price increase in gold, there is no ‘rebalancing’ possible to keep one’s ability to purchase gold constant without putting additional reserves into the bank. Likewise, if bitcoin tanks to the point where an ounce of gold can buy all ~21 million bitcoins, but MB has twenty ounces of MG outstanding, it becomes impossible to redeem them for bitcoin (and they were never redeemable for gold).
MB could theoretically avoid both cases by keeping a full reserve of gold, selling gold only as needed to get bitcoins; in the case where bitcoin becomes worthless, MB could effectively set the exchange rate of gold for bitcoin, since there would be no other sellers. If gold became more valuable but bitcoin remained a medium of exchange, MB could simply sell gold at the market rate for any currency convertible to bitcoin.