BitBay’s Smart Contracts

The virtual “Handshake” of the 21st century
fernando
Oct 23 2018

When you first hear the word “BitBay”, your mind might naturally conjure up images of the very successful online marketplace….eBay. However, it would be short-sighted to write off BitBay’s groundbreaking new technology as simply “another eBay, but with Bitcoin”. 

Surprisingly for many, the origin of BitBay’s name doesn’t stem from eBay at all. It is derived from the olden days when a majority of global trade and commerce took place in the safety of harbors and bays, and goods were transported via shipping routes. Combine these types of bays (places where commerce occurs) with the concept of Bitcoin, the technology that introduced peer-to-peer value transfer worldwide, and you get BitBay. 

In other words, BitBay isn’t just an online marketplace that uses cryptocurrency. It’s a giant multi-level ecosystem, which is based around a whole new method of forming agreements. It also offers a secure and private place to make those agreements. 

Those who live in today’s society might not remember, but there was a time.... long ago when a firm handshake and steady eye contact could hold two strangers to their word. It was a simple and reliable symbol of trust. At some point, third parties came into the picture, as a means of moderating and ensuring both of those two strangers to fulfill their obligations with each other. 

While this system of middleman enforcement has worked, it is by no means perfect. Removing the “handshake and eye contact”, and outsourcing it to a third party came at a great financial and relational cost. Third-party arbitration requires fees from both sides to enforce the agreement, and both sides have to still trust that middleman to honor their word. It ultimately introduced a complicated and expensive element into even the simplest of transactions.

This is why BitBay exists. Over the last decade, our society has quickly shifted into an era of almost completely digital interactions. The original method of trust - a handshake without third-parties - has become a thing of the past. It’s simply impossible to shake someone’s hand and look them in the eye through the internet. We need a system that represents transactional trust on a peer-to-peer level, in a completely virtual medium. And we need it fast. 

If you look past all of its bells and whistles, BitBay essentially consists of 3 main features. They are: 
 

“Unbreakable” Smart Contracts 
Decentralized Markets
Dynamic Currency Peg
(We’ll discuss all of these in depth below) 

When combined together, these 3 features create something VERY special: A virtual medium to create strictly peer-to-peer agreements, either public or private, using a neutral and reliable cryptocurrency to enforce the deal. 

No third-parties needed. No fees. No volatility. A firm handshake on the internet, backed with financial incentives. No eye contact needed.

This trifecta holds some MASSIVE implications for business as we know it. First, let’s take a look at each of these 3 main features of BitBay:
 

“Unbreakable” Smart Contracts

When you first hear the term “Unbreakable Smart Contracts” you might think, “Impossible! Any contract can be broken!”... and you’d be right. There’s no contract in the world that can’t be broken. 

However, there are contracts that strongly incentivize both sides to complete the deal. We’re talking basic-level game theory here. This is what BitBay has managed to elegantly accomplish with a technique called “Double Deposit Escrow (DDE)”. DDE is a means of an agreement, where both parties place collateral into a joint account, owned by nobody but themselves. If the terms of the contract are not upheld, both parties must come to a new agreement before it expires, otherwise, their deposits will be locked in their joint account forever. This essentially acts as a virtual “handshake”, backed by financial value. With DDE, you can “put your money where your mouth is”, and show the other person that you’re serious about honoring your side of the deal. 

***You can also use ANY currency as a means of payment, with BAY solely acting as collateral. 

 

What if somebody tries to cheat regardless, or there is another dispute of some sort? 


This is a very common question, and it’s where BitBay’s DDE truly shines. In ANY dispute scenario, there are only 3 options:

  1. Both parties mutually agree to cancel the contract and receive deposits back.
  2. Both parties mutually agree to extend the contracts time limit... creating time to resolve the dispute.
  3. Let the contract expire. Both deposits are permanently locked in the joint account (essentially destroyed), and each user’s reputation score suffers, making their deposit requirements even higher for future transactions.

This is the magic of double deposit escrow. All of a sudden, it’s in the users’ best interest to work together and find a solution or restructure the terms of the agreement. 

 

What if a bad actor intentionally blows up a deal to harm users or the system itself? 


This is where the reputation system comes into play. As you complete more transactions, your reputation score increases, which in turn, lowers your required deposit amount. The riskier reputation of both malicious (and new) users, requires them to put in a higher deposit. 

So the more you cheat, the more you pay. 
The less you cheat, the less you pay. 

When someone doesn’t play by the rules, the game becomes increasingly expensive to play.
 

Decentralized Markets

BitBay’s decentralized markets provide a place for users to use these DDE contracts - without any third-party involvement. Today, the most popular online marketplaces are centralized, which subjects users to expensive fees, ineffective dispute resolution, government regulation, breaches of privacy, and security holes. These types of marketplaces also prevent a large chunk of the population (those without bank accounts) from contributing to the global economy. There are currently over 2 BILLION people without access to banking in the world. Without a bank account, these people can’t simply “hop onto Amazon” and order some food. 

BitBay eliminates every single one of these problems with its decentralized markets. Its open-source software is hosted on its users’ computers, it’s free to use, cannot be regulated, and can allow ANYONE to buy and sell goods or services all over the planet.
 

Dynamic Currency Peg

The dynamic peg is a key component to the stability of BitBay’s ecosystem. In order for BAY to be used as a valuable and reliable deposit for these DDE contracts, there must be a mechanism to limit price volatility. 

However, this mechanism is very different from most other “stablecoins” you will hear about. BitBay’s Dynamic Peg is purely decentralized, and there is no fiat or asset backing to force an exact price. In fact, there is no “fixed price” either. This allows the system to avoid common problems which ultimately break traditional pegged currencies over time. 

“How can it be stable if nothing is backing it and the price can move??” 

The real question is... “What determines the price of anything?” 

When it all boils down, the market itself ultimately determines the price. People, as market participants, essentially “vote” on the price of goods and services every day through their purchasing power. When you go to the store to buy a gallon of milk, you’re voting in agreement of the price it is listed at. When you trade a dollar for anything, you’re expressing your opinion on how much that dollar is worth for the good/service purchased.

For a hypothetical example of this, imagine that the store listed some milk at $100 USD per quart. Next to the price tag, there is a message saying that the price of this milk is “Backed by the full faith of the Grocery Store”... in other words... “We promise that this regular milk is worth $100 USD per quart. But is it really? 

Would you vote in agreement by purchasing the milk at this price? 

Probably not. The price of $100 USD per quart would not last, because nobody would vote in agreement with their purchase. They would buy orange juice instead. 

This exactly why BitBay’s Dynamic Peg uses a voting system to help determine the price of BAY. The currency’s stability comes from the users themselves and is a direct reflection of the community’s demand. Through a democratic system of voting and algorithm, the total supply of BAY “freezes and unfreezes”. If the price starts to crash, the system freezes coins to soften the blow. If it is pumping, users can liquidate coins to bring the price back to earth. A capped daily range of 1-3% per voting sessions is in place, ensuring that it doesn’t move too quickly. With 7 voting sessions per day, the price has plenty of room to breathe.

The flexibility of this decentralized system allows the price to adapt naturally to demand of the currency, without it being fixed to a specific number. 
 

BitBay’s Mission

There are heaps of problems and complications engrained in modern-day business. And at the end of the day, every single one of these problems revolves around TRUST. The sole purpose of BitBay is to disrupt these third-party traditional mechanisms with a public, free, open-source tool that ANYONE on the planet can use daily - securely and privately. 

We believe everyone should have access to global trade. 

The beauty of this platform is that it can be used in every application. BitBay can be used in any situation where money or value changes hands. It can run in the background of even the most centralized organizations, providing a layer of decentralization to those who so desperately seek it. Think Craigslist, but with BitBay’s contracts running “under the hood”, ensuring that every transaction is secure. 

As the fundamental elements of BitBay near completion, the time to focus on adoption is here. With a web-based marketplace expected to release later this year, BitBay will finally be accessible to people without computers. Anyone with the simplest smartphone will be able to buy or sell anything, create auctions and reverse auctions, hire employees, find a new job, barter, or create any sort of agreement imaginable. 

All peer-to-peer, with a powerful virtual handshake backing the deal.

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