Blockchain’s First Econometric Oracle: The MonetaryCoin Series
How I learned to stop worrying and love the Oracle
An econometric oracle is a computer program that securely moves economic data from the outside world into the blockchain. It can help a cryptocurrency tie information from the slow moving market for goods and services to the hyperactive market for tokens. This connection makes for lower long run volatility and greater day-to-day usability of a currency.
The MonetaryCoin Series makes use of a secure econometric oracle to help determine the number of coins available to mine in a given period. The oracle in this case is a Bloomberg terminal that conveniently re-transmits publicly verifiable data from central banks. This arrangement should ideally lower long run volatility and improve usability.
The econometric oracle is reminiscent of the doomsday machine from Stanley Kubric’s Cold War satire, Dr. Strangelove (1964). The doomsday machine is an underground nuclear device irreversibly programmed to detonate and wipe out all life on earth. It’s an ingenious, if terrifying, deterrent, with one small problem. Dr. Strangelove explains in the video below:
Though hardly world ending — the MonetaryCoin oracle does answer two critical questions with stark certainty: how many coins can be issued to forge and under what circumstances. Harness data reported by central banks, apply a simple mathematical formula, execute the formula with cryptographically secure machine instructions, and you have synthesized the essential quality of central bank credibility; restraint. But, like the doomsday machine, a disciplined process only works if people know about it.
See the list of oracles below for each pending MonetaryCoin.
Why not just cap the number of coins forever like BitCoin? As a medium of exchange money like instruments should probably not require the use of scientific notation to transact. It’s a surmountable problem for bitcoin, the grandfather of all cryptocurrency (i.e. mm Btc), but new coins may wish to avoid asking stakeholders to forever suffer a nuisance unheard of in daily consumer fiat transactions.
How it works
Why link the supply of new coins to mine to the rate of economic growth? A bigger engine needs more oil than a smaller engine, and a so it goes with money in an economy. You must grow your way into justifying more coins in the MonetaryCoin series.
The number of monetary coins is initially capped at 1% of M2 and once they are distributed (a process that takes two years), the oracle switches on and operates the following formula: coins in circulation x % GDP growth = new coins available to mine in the period.
As mentioned above, for the first two years of life a MonetaryCoin undergoes ‘distribution’ and the oracle remains dormant. Why? First we have to get 1% of M2 into circulation and that takes time. If you want to know why it’s important that a currency in the MonetaryCoin series take time to initially distribute, check out this link to Milkshakes an Mining Rigs: MonetaryCoin and Proof-of-Stake. Most countries have billions (or trillions) of units of currency in circulation, and so even a percentage of a percentage of such large figures often results in a number still in the billions.
With proof of stake mining, one must first have coins before one can forge. For this reason, 10% of the 1% of M2 is auctioned to the public over six months. During the first six months a min-auction is conducted every 23 hours to facilitate distribution.
How it does not work
Many other approaches are cognitively easy but are not the MonetaryCoin series approach. Misnomers include: when GDP goes up, the coin goes up, or when GDP goes up the number of coins immediately goes up — or my personal favorite — in a recession you loose coins. The CAP on the number of coins increases when the GDP grows.
An oracle tied to a formula lends a predictable discipline to the process of generating coins. It can help crypto avail itself of benefits previously available only to fiat currencies by tying the slow moving market for goods and services to the hyperactive market for crypto. Want more coins to mine? Let’s be sure GDP grew first. Monetary policy credibility is on offer thanks to blockchain and a handy bit of token design. Let’s let people know about it.
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For more information on the MonetaryCoin series please be sure to visit www.monetarycoin.org. Want to know what happens when GDP turns negative? Check out the whitepaper for the answers to this and other exciting questions.