Original Post:
https://bitflate.org/post/2021/11/27/including-bitflate-in-the-conversation-for-pegging-the-USD-to-BTC.htmlBitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.First off, one might think how can you compare such a relatively unheard-of small market cap project (as of November 2021) to the feat bitcoin could provide strengthening the USD — let alone given it’s a Bitcoin software fork. It seems like a ridiculous ‘pipe dream’.
The mentation is largely derived from psychology and probabilistic reasoning for businesses and nation-states to adopt bitcoin on a monetary policy level.
Bitcoin has been an anchor for cryptocurrency; serving as the most popular store of value. Deemed the ‘father’ of cryptocurrency it ushered in various approaches to perfecting digital equity and money.
Though we’ve now reached a point where we’re somewhat building circular use-cases with each coin.
Network & transaction efficiency have shown that it doesn’t change the desire to use cryptocurrencies as actual currency. Coins are often only ‘spent’ if it’s necessary for access to their offered service(s). Volatility and desire for an ROI often supersede a coin’s intended use-case.
Bitcoin advocates have compelling reasoning for why bitcoin should be pegged to the dollar. It’d take bitcoin out of its investment bubble and plausibly, immensely ‘strengthen’ the dollar. This would be extremely useful for mitigating inflation if it negated the second-order effects of issuance — allowing for greater magnitudes of yearly issuance. While these are compelling inferences there’s some practical reasoning for why it’d be illogical.
Since bitcoin can be infinitely divisible the assessment that there won’t be any to go around decades or centuries down the road isn’t valid. What this means is the continuation of uneven distribution is limitless.
Achieving relative fairness for future generations would be impossible. The world isn’t fair so while that reasoning alone doesn’t substantiate an effective counterargument it may hint at a future possibility.
Say in 2200 how will society feel about the individuals, families, institutions, and companies that are fortunate to adopt bitcoin in the early years? Will the disparity in wealth be so great it causes a revolt to the extent of pursuing an ‘unpegging’ of BTC to the USD?
The next concern, the world’s heavily reliant on leveraging debt and credit to operate. When all bitcoin is mined the asset will likely be purely deflationary. If true, financial institutions in the U.S. might be hesitant or unable to issue long-term loans (i.e. mortgages) with a fixed APY or APR in their country’s unit of account; assuming those who take loans, for the most part, still earn and make payments in USD.
While there could be precautionary measures taken, bitcoin’s susceptibility to phases of hyperbolic growth could inadvertently bring about volatility to the USD — perhaps even temporarily causing deflationary periods. If price stability is desired, institutions could end up favoring other fiat currencies in times of uncertainty (such as the COVID-19 pandemic). The ascertainment that at a certain market cap/price milestone BTC price volatility will meaningfully and lastingly subside is flawed based on the expectation “bigger players” will incrementally onboard.
For bitcoin to be pegged to the USD it has to make sense for how the world functions and the future.
In my view, mixing Bitflate with bitcoin into sidechains (hybrid coins) addresses the aforementioned issues for bitcoin to be more appealable as a solution to annealing the USD — prolonging the dollar’s tenure as the global reserve asset.
Bitflate is unique in that it conflates ‘inflation’ and ‘issuance’. While they’re commonly misconstrued as the same thing and very much aren’t, they’re related as bitcoin is with scarcity and deflation. On assets whose supply is precisely calculable, the cause-effect with supply and money-value is more closely correlated.
Bitflate, with a 7% yearly increase of its supply, effectuates a dynamic where it’s liable to be utilized as a medium of exchange. This contrasts with bitcoins biggest strength and flaw — absolute scarcity.
If nation-states pursued the path of hybrid coins, they’d have less of an ability to perpetuate mass market manipulation than with bitcoin alone; potentially avoiding catastrophic negative sentiment that’d occur.
The expected compulsion to not hold onto Bitflate over time would cause bitcoin to be more susceptible to undergoing transactions outside the investment markets. Collectively through the years, this could cause a much greater range of distribution that’d otherwise happen.
Moreover, hybrid coins would be better suited to serve a world so heavily reliant on debt and credit by providing financial institutions a more viable framework for lending in bitcoin.
Ultimately, the Fed would have increased flexibility in its ‘toolbox’ incorporating Bitflate alongside bitcoin. To compel overall economic spending they could change the ratio of the sidechain mix to include more Bitflates and vice-versa when tapering is necessary.
“The principle of inflation targeting is based on the belief that long-term economic growth is best achieved by maintaining price stability, and price stability is achieved by controlling inflation” [1].
Given the need for inflation to maintain a functioning economy, it’s worth considering the appeal Bitflate has to offer.
Bitflate is a cryptocurrency with constant inflation of 7% per year. Its goal is to be a Medium of Exchange.
