Ask HN: Can a cryptocurrency be made to have stable value?

1 points by Finnucane ↗ HN
I ask this as someone who doesn't follow the whole cryptocurrency thing very closely. But I get the sense that whatever ideological concerns drove their creation, the actual function of these things is not so much as money in the sense we use daily, but more as investment vehicles, like stocks or commodities. Tradable, but still held for their appreciation rather than having for normal everyday transactions.

So I wonder if it would be possible to make a cryptocurrency that would have a stable value relative to other real-world currencies. Let's say you made a coin, called it, say, quatloos, and decided that the value of the quatloo should be within 10 percent of the dollar. So it would have roughly the same purchasing power as a dollar, but still exist outside of the Federal Reserve system.

An article passed through here a few days back about the paper currency of Somalia, which has no central issuing authority. Money is added into the system as needed whenever it is profitable to do so--the regulating mechanism is the cost of manufacture, and the exchange rate against the dollar. In a system like Bitcoin, the cost of manufacture is ever increasing. For quatloos, it would have to be variably dependent on the exchange rate. (It wouldn't have to be dollars; it could be a basket of currencies or some other measure that resulted in reasonably stable purchasing power value.)

While there is, of course, a place in the economy for speculative investments, money as such functions better when the value doesn't change rapidly (consider the problems of severe deflation/inflation).

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