Preamble
On January the 8th 2018 coinmarketcap decided to remove Korean exchanges from their price calculation. This "removed" $50 billion from the total market cap caused fall in virtually all coins and panic ensued.
When I looked into the drop and figured out what had happened i posted this tweet.
Introduction
Removing bad actors from the true price calculations is not necessarily a bad thing but the ability for a centralised entity to make this decision an executed it based on its whims without any warning certainly is. Imagine if the owners of coinmarketcap had decided to short a number of these coins before they made this move, this could be a very profitable exploit.
Solution
What (I feel) is required a decentralised way to generate the true price of each coin and have some sort of voting mechanism which uses consensus to decide what coins to include.
How do we achieve this?
A very simple first approach and I encourage the community to expand on this idea is as follows.
An initial price calculator is created based on the current best model we have which is coinmarketcap and well call this "trueprice1"
- Each address in the bitcoin network (or any coin preferred) which has a positive balance is allowed to vote on what exchanges is to be included in the price. Of course, we could make it just a positive balance or you have to prove you own the address before you can vote.
- Once you have the ability to vote you give a plus/minus on each exchange.
- All exchanges in the minus are ignored in the calculation. All exchanges in the positive are included. I know this is the part that requires the most work and this stupidly simple method at present.
- Anyone can create a new price and select what exchanges that they prefer for the calculation of the true price. Once this is created the users can vote on the exchanges, the same model is used to exclude/include exchanges.
I don't feel we have to build this as a blockchain solution, with its own coin, ICO and all the fun that comes from that this could be done with a NoSQL database and a webserver, could be wrong on this, however.
Additional features
As well as the above we can use all the "Coin prices" to create an aggregate price of the price calculations which may or may not lead to a better true price, we will have to test it first.
We can fix the price and remove the unit bias. As you may or may not know a lot of people are not happy with the price being calculated on market cap as a lot of coins these days have the unlimited market cap. I built a simple page to show the calculation of prices based on different models which can be done here.
Conclusion
I am happy to build out whatever consensus the community comes up with (fully open sourced) to stop things links this from happening again.