Price Manipulation with Unregulated Currencies


#1

I got an e-mail this morning about the new RAHA app (looks decent!), but also have some significant questions about the viability of an independent currency.

Price Manipulation Article:

Isn’t the USD (along with nearly all other developed nation’s currencies) already digitalized and achieve relatively stable value? Shouldn’t the governments handle UBI to prevent independent parties from exploiting market vulnerabilities? To me this still smells like a Ponzi scheme…


#2

Unfortunately, governments move really slowly in general and not every country has a stable enough government that would support a UBI. In an ideal world, I definitely think governments would handle this. The reality is, those most in need often have governments least able or motivated to help.

This is a really interesting article about price manipulation that will become more relevant as we approach being on an exchange and something we will have to figure out before then. We know that there’s a ton of thinking to do in this space, which is one of the reasons why we’re not putting Raha on an exchange immediately. We appreciate your bringing up your concerns early to start the conversations though. We would love to hear ideas as they come up from the community as well.

I read up on the paper on how the fraudulent trades were committed. To my understanding, the exchange, Mt. Gox, was hacked and had security weaknesses that led to it processing manipulated duplicate records in the case of Markus that made it so that users were never paid. Raha transactions and balances are tied to your identity and much more transparent than Bitcoin, so it will be much harder to conduct suspicious trades without being flagged by the network.

The other concern was of price manipulation: quickly buying to drive up the price and then selling on the other side. One significant difference is that unlike Bitcoin, Raha is distributed equally to all members at the same rate. No one has exponentially greater Raha than another user from its genesis. (In contrast, apparently for Bitcoin, 1% own 55%!)

Still it might be possible for a single user to have acquire significantly more Raha, and drive up the price by purchasing a ton, and then selling them. The Raha Parliament is a kind of governing body and could take actions to deter this sort of behavior. It could also cooperate with existing regulatory bodies.

To avoid it being like a Ponzi scheme:

  • Joining Raha is free
  • The referral bonus of 60R will be decreased over time
  • Founders are not disproportionately incentivized; we mint our Raha through the same means as normal users – referral bonuses and weekly minting. Eventually the member-controlled Raha Parliament will be able to transparently create Mint grants for 20% of the total Raha supply.
  • We’re testing out the concept while not tied to an exchange, so we can’t swap Raha for dollars until we find product-market fit and significant adoption
  • We will put in place a delegative democratic voting system where, if the Raha users decide we are unsuitable to lead this, we can be voted out
  • More details at https://raha.app/what-is-raha/.

If you have more suggestions, feel free to suggest!

(Also I’m moving this to the Raha category – we accidentally disabled access to that originally)


#3

Just echoing that the dollar is a really stable currency thanks to active management through monetary policy. If market forces (including price manipulation) try to push the price of the dollar in one direction, the Fed will step in and push in the opposite direction. Monetary policy acts as a counterbalancing force.

I agree with everyone that basic income is ideally implemented by a government. But absent the possibility of a government implementation, alternatives are worth exploring.

With respect to exchanges, it’s not really possible for the Raha team to control whether an exchange adds Raha. There’s nothing stopping me from trading $10 to my friend for 100 Raha. And if you have enough people doing that kind of thing and there’s a way of efficiently matching buyers and sellers, then you have an exchange.

So “We’re not putting it on an exchange” does not sufficiently address this criticism. If Raha gets popular, there will be exchanges for it.


#4

Unfortunately, governments move really slowly in general and not every country has a stable enough government that would support a UBI. In an ideal world, I definitely think governments would handle this. The reality is, those most in need often have governments least able or motivated to help.

By providing initial access and Raha referral bonuses (in the top-down ponzi-scheme-like pyramid referral structure this is) to privileged Americans does not seem like a direct path or good way to provide UBI to those in undeveloped nations if they are the intended end user, as aforementioned statement appears to suggest.

Who here knows someone in a 3rd world country with access to a mobile phone? A more effective way to help 3rd world countries is by running for office or directly donating your time and money to those in need; through Peace Corps, for example.

why we’re not putting Raha on an exchange immediately
The other concern was of price manipulation: quickly buying to drive up the price and then selling on the other side. One significant difference is that unlike Bitcoin, Raha is distributed equally to all members at the same rate. No one has exponentially greater Raha than another user from its genesis. (In contrast, apparently for Bitcoin, 1% own 55%!)

I agree with @spunchy 's response to this statement. Also, it is not equally distributing currency to everyone if you normalize it by the time spent minting Raha. The business model fundamentally favors those who adopt the service sooner and use the app more often.

Still it might be possible for a single user to have acquire significantly more Raha, and drive up the price by purchasing a ton, and then selling them. The Raha Parliament is a kind of governing body and could take actions to deter this sort of behavior. It could also cooperate with existing regulatory bodies.
We already have many currencies that work well with regulatory bodies.

To avoid it being like a Ponzi scheme:

Joining Raha is free
The referral bonus of 60R will be decreased over time

This fundamentally favors the founders and early adopters. The statement is materially false.

Founders are not disproportionately incentivized;
Materially false.

we mint our Raha through the same means as normal users – referral bonuses and weekly minting.
Besides that early adopters have early access.

Eventually the member-controlled Raha Parliament will be able to transparently create Mint grants for 20% of the total Raha supply.
We’re testing out the concept while not tied to an exchange, so we can’t swap Raha for dollars until we find product-market fit and significant adoption
We will put in place a delegative democratic voting system where, if the Raha users decide we are unsuitable to lead this, we can be voted out
More details at https://raha.app/what-is-raha/ 1.
If you have more suggestions, feel free to suggest!

It’s worth questioning whether the colorful pictures, innocent looking cartoon characters, and comments suggesting “Raha is helping those in need” are all playing to people’s psychological vulnerabilities to get people to “feel” right about Raha.

Playing to people’s psychological vulnerabilities is the fundamental mechanism that the social media/tech industry has taken advantage of for the greater part of a decade. Once the public is more aware, hopefully people will generally become more critical thinkers and see who’s just trying to capitalize off of them. Also, the Raha app anti-selling capitalism is an oxymoron. Just admit it; Raha is trying to get rich off other people’s psychological vulnerabilities…please advise.

Also, lengthy responses to simple questions can sometimes mean the problem isn’t well understood, or to provide a distraction from the lack of understanding and/or lack of definition of the problem trying to be solved. Not everybody in the world thinks critically and unfortunately this can be taken advantage of… tragically in some cases, by those who are highly privileged.


#5

I think Steve is right that the referral bonuses are not strictly necessary. If the basic income ends up being worth anything, that should be enough incentive for people to join.

He also makes a good point about mobile phones. Not everyone has access to the same technology and not everyone will be able to run a smart phone application. It would be nice if people could receive their basic income without having to log into anything. Asking people to actively claim/mint their Raha might stand in the way of low-tech participation.

As to the question of what’s the most effective way to help people, I think that’s debatable. Participating in politics and donating time/money can certainly make a difference. But if someone figures out how to implement a basic income, that has the potential to make an impact orders of magnitude larger. I guess it comes down to whether you believe they have a shot at succeeding.

It’s not my impression that the intention of the Raha team is to get rich off people’s vulnerabilities. I don’t 100% agree with the way they’re going about implementing basic income, but I believe that their honest goal is to help people.


#6