Rolling Peg

peggingDigital currencies are known for big fluctuations in value. At times as much as several hundred percent in just a few days. For investors, this may be exactly what they are hoping for, but for consumers and merchants that want the advantages that digital currencies can provide, volatility can destroy commerce within the marketplace.. Bitbay will therefore freeze and release coins to keep the price stable relative to US $! This completely eliminates volatility. Your funds will stay stable and grow!

The value of anything responds to the law of supply and demand. We can control supply to make it match demand solving one of the biggest problems facing the world economy. This is done by having a global supply rate that increases and decreases based on algorithms and voting. This makes a perfectly decentralized peg far superior to centralized pegs that can fail any moment such as Tether because it does not rely on trust or politics or trading tricks or market makers. Unlike other pegs there are no black swans and no weaknesses because there are no backers. Instead, the price simply moves because of the dynamic supply.

Fiat currencies show a long history of failed pegs. This is not because pegging in itself can not be done, but because of the huge consequences of maintaining a peg that is not matched by economic realities. The value of a currency directly affects unemployment rate, tax systems and so on. For Bay it is a little easier. We only need to consider stability, effect for consumers and merchants, and investor reactions. That said, we don’t aim to have a peg that stays at the same level forever. What we want to do is to take the big fluctuations out of  digital currency. This concept is known as a rolling peg. A rolling peg provides the short term stability that is needed to generate a thriving marketplace for commerce, yet still supports a free market for investor exchanges. This means the value of the coin can grow organically as it is meant to!

Our rolling peg is similar to a “crawling peg” in economics but with major advantages over fiat pegs. Users get two balances of liquid and reserve. When the market starts to crash we can curl into a ball like a hedgehog deflating the coin supply. This causes users funds to freeze and get set aside as reserve. The process is completely fair for all users and it does this based on when you received and sent your coins. This makes the amount of liquid coins you hold lower but increases the value of each coin. So if you have 200 coins at $1 and the coin deflates 50% and the price pushes to $2 per coin, then you still have $200 in coins. Meanwhile, your coins held in reserve are still valuable so when the volatility ends you can see them get released later. If the price goes too high too fast, pumpers are punished because we can inflate the supply and dropping the price.

No centralized entity is used to make these decisions. Instead that decision is made by the party that matters most. Our users! People can choose to vote towards a target price or they may choose to have everything automated.

This system is absolutely perfect for small economies, local tribes, new coins and people who don’t want to focus on price and instead focus on features. Merchants no longer have to fear losing value on their items. The dynamic supply is flexible meaning people may choose to back the currency at certain levels or they can let the free market take it in any direction.

Exchanges have to honor the system because it is hard coded. So our network will decline a withdraw if the exchange decided to violate the rules and oversell. This would be the same as them selling Bitcoins they don’t hold. Also we are collaborating with decentralized exchanges so users can trade without the concern of storing funds online.

We also give the options to buy and sell frozen coins by with “time lock”. So you can move frozen coins with a one month delay to an interested party. This is revolutionary because it creates a market for bonds, futures and loans swapping frozen for liquid coins without the need to trust your counter-party. Having more frozen coins gives you more control over the vote and the economy which is fair because you have a greater vested interest. You can also stake your frozen coins gaining interest and rewards serving as the perfect investment.