The core function of this system is to split BitBay’s total supply into two (2) different tradeable assets:
Spendable (BAY) and Reserve (BAYR) .
The ratio (index rate) between these two assets is constantly in flux, due to the voting of stakers on the BitBay blockchain.
As a hard-coded rule, individual users cannot change their own personal ratio between Reserve (BAYR) and Spendable (BAY). The only way that this ratio can be changed is through the majority vote of ALL stakers on the BitBay network.
When the voting consensus is “deflate”, the total supply of Spendable (BAY) decreases and the total supply of Reserve (BAYR) increases .
When the voting consensus “inflate” the supply of Spendable (BAY) increases and the total supply of (BAYR) decreases .
This is the core concept of how the Dynamic Peg works. As the ratio of the total changes, it is reflected in each and every user’s wallet. It is a brand new form of decentralized form of governance and monetary policy.
Please note: This “peg index rate” or ratio change is not related to the mandatory 1-month timelock related to sending Reserve coins (BAYR).