BitBay’s Dynamic Peg

A flexible stablecoin for the users, by the users
fernando
Aug 9 2018

There’s been a lot of talk surrounding stablecoins recently. 

New stablecoin ideas are popping up everywhere - all with an intention of holding the next key to mainstream cryptocurrency adoption. With a notoriously volatile market and investors desperately seeking secure storage of profits, it’s no wonder value protected coin projects are all the rage these days. 

However, with all of these ideas floating around, you might notice that many of them implicate a conventional method of price control. In other words, they’re backing the currency with an asset (or basket of assets) such as gold, petrol, fiat currency or another cryptocurrency. Unfortunately, these types of pegs haven’t always been successful, and have often led to catastrophic results upon failure. To ensure true stability and security for a currency, there is one fundamental that we at BitBay, believe should absolutely be adhered to.

That fundamental is decentralization.

When a currency is backed by an asset (collateralization), its stability becomes dependent on two things: the value of the asset(s) backing it, and trust in whoever is managing that collateral. This dependency opens the door to vulnerabilities such as manipulation, fractional reserve lending, and high inflation. 

In the end, who is actually counting that gold in the vault? Can they be trusted as well?

As it is known, with the collateralization of any currency, comes the need for a third-party custodian. When that custodian partakes the responsibility of managing a currency’s collateral, the entire system gains an element of centralization which is not easily removed. This centralization presents a critical vulnerability to both the security and functionality of any asset-backed currency. 

 

 

With BitBay’s dynamic and decentralized system of supply control, no collateral is needed to keep the price stable. A fair, blockchain-based user voting system creates 2 balances of BAY: liquid and frozen. The liquid balance will be easily spendable, while the frozen balance will have a healthy time delay. This allows the frozen coins to still be moved, albeit at a slower rate (1 month). 

 

***Note: This system of delayed frozen coins opens the door to a brand new secondary market of peer-to-peer investment vehicles, such as futures, bonds, lending, and much more. 

When the price crashes, you can vote to freeze a portion of the liquid BAY supply, which directly increases the price of everyone’s remaining liquid balance. If the price spikes, you can vote for part of the frozen supply to be liquidated, bringing the price of everyone’s liquid balance back to comfortable levels. With this method, every user will have an opportunity to influence direction BAY’s value through regulating the supply. 

Don’t have time to vote up or down for the price? No worries at all. 

With one simple mouse-click, you can have our automated algorithm vote for you! The algorithm favors healthy volumes, and will vote the price up or down to find that sweet spot (equilibrium price). Unlike many other stablecoins, this price point is not fixed. It’s flexible, allowing the price to slowly grow over time, making it lucrative for both investors and users alike. 

While BitBay’s dynamic peg might seem complex under the hood, it will be extremely easy for everyone to use. A stable price for BAY will create a thriving environment, and fuel adoption of BitBay’s double deposit escrow contracts and peer-to-peer marketplace. This is a truly revolutionary concept, that has never-before been implemented in society. 


Want to learn more about BitBay’s Dynamic Peg? 

Read the Dynamic Peg whitepaper here


Have questions? Need support? Want to chat with a BitBay team member?


Feel free to join our rapidly growing community of users on our forum.
 

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