Bitcoin-backed stablecoin that is primarily native to the Bitcoin blockchain.

[BenCodie]

If the community created a stablecoin that somehow was native to the Bitcoin ecosystem and had both peer to peer trading marketplaces and fiat on-ramps the effect of this would reduce the reliance on institutions/etfs and centralized exchanges who ultimately drain liquidity from the Bitcoin ecosystem by profiting from trades and enable Fiat > Stablecoin on the bitcoin blockchain > Decentralized exchange. Circumventing institutions and centralized exchanges would also enhance privacy.

With the ongoing development of decentralized exchanges that support the Bitcoin blockchain/are built for the Bitcoin blockchain, this could be a necessary tool to be able to reduce the negative impact that custodial services, institutions and centralized exchanges have on liquidity.

Solutions such as USDa already exist, as well as others as listed on chain.link...however nothing seems to be both fully native on the Bitcoin blockchain and decentralized.

Is a bitcoin-back stablecoin native exclusively to the Bitcoin blockchain possible? Do any projects exist that have either successfully created one or are aiming to create one? I believe this is key if decentralized exchanges were to thrive on the Bitcoin blockchain, and if the on-ramp issue/circumventing custodial services when moving from fiat to Bitcoin is to be a possibility.

The key questions that I believe are involved in the research/design process are:
- Would an existing stablecoin such as Tether (that is backed by real-world/traditional assets and Bitcoin) be the stablecoin that belongs on the Bitcoin blockchain?
- Would a new, completely bitcoin-backed stablecoin be the solution and if so, what would a safe incentive be for people to back the stablecoin, and how could the backing be transparent, liquid, safe and secure, whilst remaining decentralized and only using the Bitcoin blockchain?

Disclaimer: I am not developing this project however I am putting this thread here to be able to:
1. Create discussion around the topic.
2. Contribute to any research/design/development discussion.

Notes:
- I found two threads discussing similar topics however neither seem to address my question or seek to discuss the development of completely bitcoin-native and bitcoin-backed stablecoin [1] [2]
- I am aware this is in "brain dump" format at the moment and will come back to fix up formatting in the future, if the topic is of enough interest that gives me an incentive to do so.

Project TLDR: Build a stablecoin that is built on the Bitcoin network, that is backed completely by Bitcoin and does not rely on other chains, with the goal of being able to potentially  enable fiat on-ramps that bypass the use of centralized/custodial services, with the idea that from Fiat > Stablecoin will allow Stablecoin > Decentralized Exchange to purchase Bitcoin, which would ultimately create a completely decentralized Fiat > Bitcoin process.

To critics: Some may say "this is not needed" (based on the last two threads I read) however I hope that the Project TLDR will create a new perspective of how this may benefit decentralization and liquidity for Bitcoin. I am also not here to push this project onto the community, and mostly am looking to create discussion and if it's a good idea, see it/contribute to its development. Now that I've stated this there should be zero reason to get upset with the suggestion for no reason.

I am self-moderating this topic for the sake of cleanliness and to prevent derailing, and will put any comments that were deleted for transparency.

[WillyAp]

Well I think chances for a community created project are pretty slim.
Especially if born in a public forum.

You need a group of people with a similar wavelength and a plan.
Great many people overestimate their skill levels,

[markm]

I think so-called "stablecoins", at least when what they mean is "going downward forever in value just like fiat", are silly.

A far far better idea is simply to build super-strong buy-sides for bitcoin itself, so that basically it will never be able to go down in value except maybe momentarily and only a small amount, as all its trading-pairs will have ever-stronger buy-sides eager for any fool to "dump" their bitcoin onto the buy-offers.

Just keep putting the proceeds of your buy-offers back onto the sell-side and the proceeds of your sell offers back onto the sell-side.

It is actually trivially simple, the only gotcha ever since cryptocurrency was invented has been fly-by-night and "oops we got hacked" exchanges.

Build vast columns of buy offers all the way down and you will love "dumps", the deeper dumpers dump the price down the more coins you are getting cheaper and cheaper and cheaper.

Also build sell-side insanely higher than you ever imagine price will go, because too many times over the years I have built my column of sell offers three times higher than I ever imagined price would go only to wake up one day or night and find it had skyrocketed to three times that.

With enough exchanges, and lets admit it bitcoin is on a lot of exchanges, profits are way higher than enough to see the fly by night exchanges and "oops we got hacked" exchanges as just a cost of doing business, a slight dent in total profits not an actual "loss". Especially since before very long every damn thing you have out on any exchanges anywhere is all pure profit to begin with, since long long ago already every fiat penny put in has been long long ago taken out multiplied gosh knows how many times...


-MarkM-

[BenCodie]

I think so-called "stablecoins", at least when what they mean is "going downward forever in value just like fiat", are silly.

The same concept applies to cash or digital banking money. The point of stablecoins are to bring the fiat concept on-chain - regardless of its value, it can benefit from being on-chain. Not to mention, while it's "going downward forever in value", it would only benefit Bitcoin to have a stablecoin backed by Bitcoin, on its own blockchain, to prove immutably that this is the case and to be able to measure the rate of such in the long term (especially if the stablecoin gains enough usage on the Bitcoin chain).

A far far better idea is simply to build super-strong buy-sides for bitcoin itself, so that basically it will never be able to go down in value except maybe momentarily and only a small amount, as all its trading-pairs will have ever-stronger buy-sides eager for any fool to "dump" their bitcoin onto the buy-offers.

Just keep putting the proceeds of your buy-offers back onto the sell-side and the proceeds of your sell offers back onto the sell-side.

It is actually trivially simple, the only gotcha ever since cryptocurrency was invented has been fly-by-night and "oops we got hacked" exchanges.

Build vast columns of buy offers all the way down and you will love "dumps", the deeper dumpers dump the price down the more coins you are getting cheaper and cheaper and cheaper.

Also build sell-side insanely higher than you ever imagine price will go, because too many times over the years I have built my column of sell offers three times higher than I ever imagined price would go only to wake up one day or night and find it had skyrocketed to three times that.

With enough exchanges, and lets admit it bitcoin is on a lot of exchanges, profits are way higher than enough to see the fly by night exchanges and "oops we got hacked" exchanges as just a cost of doing business, a slight dent in total profits not an actual "loss". Especially since before very long every damn thing you have out on any exchanges anywhere is all pure profit to begin with, since long long ago already every fiat penny put in has been long long ago taken out multiplied gosh knows how many times...

-MarkM-

It seems you've either wildly misunderstood the post and/or the value proposition here, since you've yapped a lot about a concept that only exists on centralized exchanges (a part of what a bitcoin-backed stablecoin would reduce usage of).

The point of backing the stablecoin with Bitcoin is to ensure the value being transferred via the stablecoin are not funny money, and are backed by something both of value and on-chain. The point of having a stablecoin on the bitcoin blockchain is to enable trade and value transfer of USD that is backed by Bitcoin.

Making buy orders has zero utility for someone unless they want to buy bitcoin or support its market. That is not the intended audience of a bitcoin-backed stablecoin. Besides, before you make a buy order, what must you do? Use a bank or similar traditional service to deposit onto the exchange, then make the buy order...and if you want to buy something valued in fiat, or trade with someone who is looking for fiat (despite its value crumbling in the long term), then you must move to either another chain or back to the banking system. There's no solution native to the bitcoin blockchain. 

TLDR - making a buy order does not serve any utility to anyone. You can't send a buy order, you can't trade with a buy order. You need a centralized exchange to make a buy order. The whole argument of "who needs a stablecoin just make a buy order" is a pretty irrelevant argument to what is being proposed in the OP.

[u0u]

If the community created a stablecoin that somehow was native to the Bitcoin ecosystem and had both peer to peer trading marketplaces and fiat on-ramps the effect of this would reduce the reliance on institutions/etfs and centralized exchanges who ultimately drain liquidity from the Bitcoin ecosystem by profiting from trades and enable Fiat > Stablecoin on the bitcoin blockchain > Decentralized exchange. Circumventing institutions and centralized exchanges would also enhance privacy.

With the ongoing development of decentralized exchanges that support the Bitcoin blockchain/are built for the Bitcoin blockchain, this could be a necessary tool to be able to reduce the negative impact that custodial services, institutions and centralized exchanges have on liquidity.

Solutions such as USDa already exist, as well as others as listed on chain.link...however nothing seems to be both fully native on the Bitcoin blockchain and decentralized.

Is a bitcoin-back stablecoin native exclusively to the Bitcoin blockchain possible? Do any projects exist that have either successfully created one or are aiming to create one? I believe this is key if decentralized exchanges were to thrive on the Bitcoin blockchain, and if the on-ramp issue/circumventing custodial services when moving from fiat to Bitcoin is to be a possibility.

The key questions that I believe are involved in the research/design process are:
- Would an existing stablecoin such as Tether (that is backed by real-world/traditional assets and Bitcoin) be the stablecoin that belongs on the Bitcoin blockchain?
- Would a new, completely bitcoin-backed stablecoin be the solution and if so, what would a safe incentive be for people to back the stablecoin, and how could the backing be transparent, liquid, safe and secure, whilst remaining decentralized and only using the Bitcoin blockchain?

Disclaimer: I am not developing this project however I am putting this thread here to be able to:
1. Create discussion around the topic.
2. Contribute to any research/design/development discussion.

Notes:
- I found two threads discussing similar topics however neither seem to address my question or seek to discuss the development of completely bitcoin-native and bitcoin-backed stablecoin [1] [2]
- I am aware this is in "brain dump" format at the moment and will come back to fix up formatting in the future, if the topic is of enough interest that gives me an incentive to do so.

Project TLDR: Build a stablecoin that is built on the Bitcoin network, that is backed completely by Bitcoin and does not rely on other chains, with the goal of being able to potentially  enable fiat on-ramps that bypass the use of centralized/custodial services, with the idea that from Fiat > Stablecoin will allow Stablecoin > Decentralized Exchange to purchase Bitcoin, which would ultimately create a completely decentralized Fiat > Bitcoin process.

To critics: Some may say "this is not needed" (based on the last two threads I read) however I hope that the Project TLDR will create a new perspective of how this may benefit decentralization and liquidity for Bitcoin. I am also not here to push this project onto the community, and mostly am looking to create discussion and if it's a good idea, see it/contribute to its development. Now that I've stated this there should be zero reason to get upset with the suggestion for no reason.

I am self-moderating this topic for the sake of cleanliness and to prevent derailing, and will put any comments that were deleted for transparency.

Technical limitations,
user incentives don't exist,
volatility kills the peg,
death spiral risk,
fiat onramps always involve centralization...

[markm]

It seems you've either wildly misunderstood the post and/or the value proposition here, since you've yapped a lot about a concept that only exists on centralized exchanges (a part of what a bitcoin-backed stablecoin would reduce usage of).

The point of backing the stablecoin with Bitcoin is to ensure the value being transferred via the stablecoin are not funny money, and are backed by something both of value and on-chain. The point of having a stablecoin on the bitcoin blockchain is to enable trade and value transfer of USD that is backed by Bitcoin.

Making buy orders has zero utility for someone unless they want to buy bitcoin or support its market. That is not the intended audience of a bitcoin-backed stablecoin. Besides, before you make a buy order, what must you do? Use a bank or similar traditional service to deposit onto the exchange, then make the buy order...and if you want to buy something valued in fiat, or trade with someone who is looking for fiat (despite its value crumbling in the long term), then you must move to either another chain or back to the banking system. There's no solution native to the bitcoin blockchain.  

TLDR - making a buy order does not serve any utility to anyone. You can't send a buy order, you can't trade with a buy order. You need a centralized exchange to make a buy order. The whole argument of "who needs a stablecoin just make a buy order" is a pretty irrelevant argument to what is being proposed in the OP.

I don't think I misunderstood, but was maybe addressing the issue at a higher scale or larger picture kind of view.

But in case I do misunderstand, let me state what I think the actually useful utility of so called stablecoins seems to me to be, which is largely to function as something to buy with your bitcoin in advance of any decline in bitcoin's "discovered by means of spot markets" price, so that bitcoin can be free to go down in such price without all its erstwhile holders' portfolios going down in value along with it.

For bitcoin in that statement one can substitute other cryptos but this projects section is not an altcoin projects section so that might not be relevant to many/most readers in this section.

So what I was addressing was the part where bitcoin is thereby free to go down in value. Spot market discovered value as shown on aggregation sites such as CoinMarketCap and CoinGecko seems typically to amount to how tall is the column of buy offers.

Thus, a project or marketmaker or even just a general determination among the community that is really serious about keeping the buy-side strong enough to absorb any and all "dumps" ought to be able to eventually absorb whatever dumper-whales have left in their bags to dump, making it harder and harder and harder over time to dump the price down significantly, and less and less significantly over time.

This likely won't work for unlimited-minting coins but again, this is not an altcoin projects section. There is only so much bitcoin in existence, and in order to it to even have reached the kinds of prices we have historically seen its supporters must have gather huge amounts of the various buy-side assets so should be ever more able to uphold the prices though I suppose in principle there could well exist sabateurs on the buy side that like malicious dumpers are determined to drive prices down from time to time since traders do tend to profit from volatility so likely some of them do do things to deliberately cause swings in price as large as they are able to.

This building a strng buy-side has been played out over and over again with IXCoin and I0Coin but got sabotaged every previous time by fly by night / "we got hacked" exchanges so we had to start over again over and over again but it has always been working up until the venue pulled the rug by flying by night or claiming to get hacked or even just by de-listing the coin.

So I definitely am not suggesting it be done via centralised exchanges / custodial exchanges.

The proof of concept trials using IXCoin and I0Coin used bitcoin as the buy-side and showed every time that it is a profitable strategy and that as well as earning profits of the buy-side it also accumulated ever more of the sell-side asset year after year after year.

It was a profitable enough venture that the flying by night and claiming to be hacked exchanges running away with the entire buy-side as well as the sell-side was simply a cost of doing business, a dent in the potential profits, overall not a loss, the venture overall was and is and continues to be profitable, all its buy offers and sell offers still out in the world are all long long long ago now just a part of all the profit made all those years (over a decade), so it definitely seems to be an empirically viable strategy.

So, why not do it with BTC/FIAT pairs instead of pairs like BTC/IXC and BTC/I0C ?

Well presumably because fiat is unlimited-minting.

They can print any arbitrary quantity they want to to endlessly dump and dump and dump.

So making a "stable coin" that endless goes down and down and down in real value just like fiat does seems a pointless "lost cause".

That one basically cannot build a strong buy-side to support the value of fiat seems to be the fundamental problem.

Fiat dumpers will just print it and print it and print it dumping endlessly until people cannot carry enough of it in a wheelbarrow to buy a loaf of bread.

A lot of governments have been talking for a long time now about minting their own "central bank cryptocurrencies" so that kind of crap pathetic pretendedly-stable cryptocoin is coming anyway.

You idea to base a stable value on bitcoin itself makes a lot of sense, what does not make sense it any kind of pretense that fiat is stable.

In the Galactic Milieu we strive toward some kind of stability by calculating coin values from "treasuries", so that if worse goes to worst the "treasuries" could in principle be broken open and their contents disbursed to the holder of the coin whose "treasury" it is.

That seems to have been a good enough idea that Facebook seemed to like it, they just had a hard time doing it because they tried to do it in real life rather than play-testing it within a game to see how well such an approach might work.

Part of the problem you seem to be attempting to address is the horrible state of the spot markets.

The Milieu basically had to abandon the idea of relying upon enough players actively and efficiently doing arbitrage and market-making on spot markets to make "efficient" spot markets by just directly calculating value per coin by dividing the to value of each coin's "official treasury" as recognised and accounted by the game by the number minted of the coin to arrive at value per coin.

The relative value of all such coins and assets are relatively stable if massive inputs to or withdrawals from the "treasuries" do not happen so seemingly it is somewhat necessary to curtail any attempts by the players to make massive changes to the "treasuries" over short periods of time.


-MarkM-

[Ucy]

I think the secret to this is to build a a decentralized auxiliary Bitcoin and stablecoin network (more like lightning network but with transparent, immutable  transaction data) for exchange of bitcoins and both physical & virtual stablecoins.. The network will function abit like LocalBitcoin but for switching and exchanging of bitcoins and stablecoins.

How it'll work:
To use the auxiliary network, users will need to send their bitcoins to some kind of smart-contract/multi-sig account controlled by all participants... they will probably run it as node for verifying and approving every transaction.
Once coin is sent to the account, an equivalent amount in form of wrapped Bitcoin or stablecoin is printed for the owner on the auxiliary network, which is probably going to be a Blockchain. The wrapped coins can be used for many kinds of transactions on the auxiliary network. And participants on the auxiliary network can use physical fiat like USD to buy Bitcoin from other participants on thesame physical location, and vise versa.
By the way, every printed USD on the auxiliary network has to be backed by physical USD & Bitcoin. That's, if you own $20 on the network, it has to be backed by equivalent amount of physical USD, and also bitcoin that's slightly higher than the backed USD for the sake of volatile.
A participant can for example sell his USD on the network and receive the physical equivalent physically before releasing the USD to the buyer on the auxiliary network. This works best on local level like localbitcoin or paxful

[WillyAp]

I don't think I misunderstood, but was maybe addressing the issue at a higher scale or larger picture kind of view.

But in case I do misunderstand, let me state what I think the actually useful utility of so called stablecoins seems to me to be, which is largely to function as something to buy with your bitcoin in advance of any decline in bitcoin's "discovered by means of spot markets" price, so that bitcoin can be free to go down in such price without all its erstwhile holders' portfolios going down in value along with it.

I think the only people seeing an advantage are the ones living or dealing in currencies other than the so called 1st world FIAT currencies.
It make no sense for a US currency holder going into a stable coin resembling the $. Both suffer from inflation. Both exist in a world where growth is the principle of the economy.

Some interesting facts about stable coins: https://www.coingecko.com/research/publications/stablecoins-statistics   

[r_victory]

Is the proposal to create only a stablecoin on the Bitcoin blockchain, or also a stablecoin backed by Bitcoin? Stablecoins are usually backed by physical reserves, with the dollar being the most common. If it is backed by Bitcoin, how can the stability of the currency be guaranteed with Bitcoin's high volatility?

[BenCodie]

It seems you've either wildly misunderstood the post and/or the value proposition here, since you've yapped a lot about a concept that only exists on centralized exchanges (a part of what a bitcoin-backed stablecoin would reduce usage of).

The point of backing the stablecoin with Bitcoin is to ensure the value being transferred via the stablecoin are not funny money, and are backed by something both of value and on-chain. The point of having a stablecoin on the bitcoin blockchain is to enable trade and value transfer of USD that is backed by Bitcoin.

Making buy orders has zero utility for someone unless they want to buy bitcoin or support its market. That is not the intended audience of a bitcoin-backed stablecoin. Besides, before you make a buy order, what must you do? Use a bank or similar traditional service to deposit onto the exchange, then make the buy order...and if you want to buy something valued in fiat, or trade with someone who is looking for fiat (despite its value crumbling in the long term), then you must move to either another chain or back to the banking system. There's no solution native to the bitcoin blockchain. 

TLDR - making a buy order does not serve any utility to anyone. You can't send a buy order, you can't trade with a buy order. You need a centralized exchange to make a buy order. The whole argument of "who needs a stablecoin just make a buy order" is a pretty irrelevant argument to what is being proposed in the OP.

I don't think I misunderstood, but was maybe addressing the issue at a higher scale or larger picture kind of view.

But in case I do misunderstand, let me state what I think the actually useful utility of so called stablecoins seems to me to be, which is largely to function as something to buy with your bitcoin in advance of any decline in bitcoin's "discovered by means of spot markets" price, so that bitcoin can be free to go down in such price without all its erstwhile holders' portfolios going down in value along with it.

For bitcoin in that statement one can substitute other cryptos but this projects section is not an altcoin projects section so that might not be relevant to many/most readers in this section.
....

You idea to base a stable value on bitcoin itself makes a lot of sense, what does not make sense it any kind of pretense that fiat is stable.

In the Galactic Milieu we strive toward some kind of stability by calculating coin values from "treasuries", so that if worse goes to worst the "treasuries" could in principle be broken open and their contents disbursed to the holder of the coin whose "treasury" it is.[/b]

I completely agree that there is not sense in calling fiat "stable" I am just using common terminology - stablecoin = stable only in the sense that the coin will always equal $1. That doesn't mean its purchasing power will retain, nor that it will retain against Bitcoin. As specified below, right now someone needs to use a separate entity/platform or blockchain to navigate between Bitcoin and "stablecoins" - Some do this when the market feels/is overbought, though the process of doing it is both timely, and involves using third parties/services which charge fees and generally aren't favorable to use. An over-collateralized bitcoin-backed stablecoin would resolve this. You would know that the stablecoin's value is collateralized with Bitcoin, and if it was built properly as a protocol, it would reduce/remove the chance of it being inflated/infinitely minted, and the treasury would be adequately secured by the Bitcoin network/using BItcoin technology (to prevent tampering with "the treasury" (which I refer to as the "over-collateralization" in this post).

You are right that this is not an altcoin project board, however, it is a project that would ideally be built using Bitcoin technology and using the Bitcoin blockchain, that is why it's relevant here.

I think the secret to this is to build a a decentralized auxiliary Bitcoin and stablecoin network (more like lightning network but with transparent, immutable  transaction data) for exchange of bitcoins and both physical & virtual stablecoins.. The network will function abit like LocalBitcoin but for switching and exchanging of bitcoins and stablecoins.

How it'll work:
To use the auxiliary network, users will need to send their bitcoins to some kind of smart-contract/multi-sig account controlled by all participants... they will probably run it as node for verifying and approving every transaction.
Once coin is sent to the account, an equivalent amount in form of wrapped Bitcoin or stablecoin is printed for the owner on the auxiliary network, which is probably going to be a Blockchain. The wrapped coins can be used for many kinds of transactions on the auxiliary network. And participants on the auxiliary network can use physical fiat like USD to buy Bitcoin from other participants on thesame physical location, and vise versa.
By the way, every printed USD on the auxiliary network has to be backed by physical USD & Bitcoin. That's, if you own $20 on the network, it has to be backed by equivalent amount of physical USD, and also bitcoin that's slightly higher than the backed USD for the sake of volatile.
A participant can for example sell his USD on the network and receive the physical equivalent physically before releasing the USD to the buyer on the auxiliary network. This works best on local level like localbitcoin or paxful

An auxiliary network makes sense. Bitcoin DeFi and staking protocols are doing exactly this. Though, the supply doesn't have to be backed by physical USD as well as Bitcoin, the supply could just be over-collateralized with Bitcoin.

I don't think I misunderstood, but was maybe addressing the issue at a higher scale or larger picture kind of view.

But in case I do misunderstand, let me state what I think the actually useful utility of so called stablecoins seems to me to be, which is largely to function as something to buy with your bitcoin in advance of any decline in bitcoin's "discovered by means of spot markets" price, so that bitcoin can be free to go down in such price without all its erstwhile holders' portfolios going down in value along with it.

I think the only people seeing an advantage are the ones living or dealing in currencies other than the so called 1st world FIAT currencies.
It make no sense for a US currency holder going into a stable coin resembling the $. Both suffer from inflation. Both exist in a world where growth is the principle of the economy.

Some interesting facts about stable coins: https://www.coingecko.com/research/publications/stablecoins-statistics   

Absolutely there is no point in holding the stablecoin as a form of reserve or for long-term holdings. The point is to be able to move in and out of Bitcoin and stablecoins without using a centralized exchange and without having to move to another blockchain network. For those who are able to identify periods where Bitcoin is temporarily overbought, using a stablecoin native to Bitcoin would allow them to instantly move to stablecoins, wait until the market corrects, and re-enter Bitcoin without having to use any other service or blockchain. That's the main point.

Is the proposal to create only a stablecoin on the Bitcoin blockchain, or also a stablecoin backed by Bitcoin? Stablecoins are usually backed by physical reserves, with the dollar being the most common. If it is backed by Bitcoin, how can the stability of the currency be guaranteed with Bitcoin's high volatility?

The title of the thread: Bitcoin-backed stablecoin that is primarily native to the Bitcoin blockchain.

The backing of the stablecoin does not mean the value of the stablecoin differentiates from $1. An over-collateralized stablecoin would look like, for example, $12,000,000 in Bitcoin locked in the protocol to enable $10,000,000 of stablecoins to circulate in supply. The reason it would be backed by Bitcoin is because Bitcoin is arguably a better form of collateral than fiat, and, the collateral can always be 1) secured by the bitcoin network and 2) transparently verifiable on the Bitcoin blockchain.


Thank you all for your feedback so far as this has helped me to understand the third party perspective of both general understanding of the idea as well as perceived drawbacks. I am making notes to draft somewhat of a blueprint, to demonstrate that this could theoretically work and to get feedback from a technical engineering perspective.

[markm]

I am still hoping that a lot of this demand might be addressable using coins like IXCoin and I0Coin, which are merged-mined alongside bitcoin.

Maybe it would help to have a smart-contract capability included too so that my strategy of basically building huge columns of buy and sell offers, with the buy side at least twice as dense as the sell side (and a lot lot lot more dense close to the lowest possible prices) can be automated to help inspire confidence that it is indeed the case that buying from the sell side tends, hopefully mostly, to directly result in strengthening of the buy side.

Take a look at IXCoin and I0Coin on FreiExchange to see what I mean; I build the buy side a statoshi of price at a time, much stronger than the sell side, albeit I have still from time to time allowed myself to be lured upward too precariously by massive-pump style buys from buyers who just buy the price way up without bothering to fill in the buy-side underneath themselves to keep the buy side strongly climbing up toward the high prices they often come along and try to drive the price up to.

I have done this with IXCoin and I0Coin over and over again almost single-handedly, occassionally with one main partner helping but mostly just me and the occassional random passer-by who helps for a while.

In the past what scuttled it was fly by night / we-got-hacked exchanges, so nowadays as well as building on the centralised FreiExchange I also build on the HORIZON and Stellar platforms in hopes that they will protect my buy-side asset better against fly by night and we got hacked events.

A smart contract applying that same simple tactic should obtain the same result, which over and over again has been making takehome profits while building up the price of the sell side asset (the IXC or I0C in these cases) and also building a larger and larger bag of the sell side that likely even the great-grand-heirs will never need to dig up to put back on the market because the money is made on the ongoing trading not on the accumulated bags of excess sell-side asset, which bags could simply be buried in concrete under one's swimming-pool were it not that it can likely be put to even better use by locking it into "treasuries" used to compute the value of other assets so over the years and decades an ever-growing number of assets can achieve a nice kind of relative-stability while still all growing in value as more and more of all of them gets locked into more and more "treasuries" that, again, likely the great-grandheirs of them all need never bother to dig back up to put them on markets...

Coincidentally to this discussion it has historically typically been about the time the price reached a dollar or so per coin that the fly by night or we got hacked would happen. Hmmm...


-MarkM-

[cogsmachine]

It seems you seek a self-reinforcing economic system where each component amplifies the other’s value, ensuring the ecosystem’s growth and sustainability.  Bitcoin behaves then as the escrowed asset that pegs the stable with a globally recognized value. Say 1a smart contract based AI data pipeline operation across the network is worth 1,000 sats, i.e., its value is directly tied to BTC’s market price,  the pegging ensures that stablecoin has real economic worth, preventing speculative bubbles within the token layer.

Is this what you want?  Do you want to see a demo?

[markm]

Bitcoin being the largest of them all is of course the hardest one to build a "treasury" for that even comes close to the spot market's so-called market cap for the coin.

That does of course make it ultimately the very nicest end-goal "treasury based asset" but for practical purposes for likely another decade or more that end-goal still appears far enough away to put off directly working toward it yet-a-whiles.

Bitcoin is however widely-enough "liquid" enough to make a very good buy-side asset so before worrying about building it an actual "treasury", making its own value per unit computable from a "treasury" (by dividing the total value of its "treasury" by its total number of units minted), it seems an ideal asset from which to construct the "buy sides", the buy-offers orderbooks, that serve as the slush-fund assets from which the "spot market prices" of things often/typically get computed.

In the Galactic Milieu with well over a decade of operating our "proof of concept" of these ideas we are realising that when a civilisation, Corp, clan, guild, whatever (group/entity) launches a "treasury-based asset" it is probably advisable to start by putting only about a third, rather than a half, of its assets into its "treasury" from which to calculate its value per unit, rather than the half we had initially been thinking.

That is because it seems helpful to think of the buy-side, the huge columns of buy offers built up in its trading-pairs on its various trading-venues, separately from all the rest of its "slush funds".

So instead of put half into "treasury" and half into "slush funds" then build buy-sides everywhere with the "slush funds" we nowadays suggest rather to put one third into "treasury", one third directly into "buy side offers" and one third into whatever "slush funds" one maintains as war-chests for one's various other methods of generating income from which to continue to bolster one's buy-side order-books.

This recognises that despite the massive inefficiency and irrationality of spot markets they remain a very widely used "price discovery" mechanism influential enough in enough entity's thinking and calculating that a balanced approach seems called for between treasury-based calculated value and spot market prices based "price discovery", whereby one hopefully refrains or is actively prevented from adding to one's "treasury" without first building one's spot market price at least up near one's treasury-based calculated value and also seriously works on or is actively required to work on building one's treasury-based calculated value per unit (what some might refer to or think of as one's "intrinsic value") at least up near one's spot market price.

In the Milieu of course since we use tokens in the treasuries we have an additional layer of padding underlying even the treasuries themselves, in the "200% reserve" policy whereby we only mint tokens representing half of the actual on their own blockchain coins we have, so that the other half of the actual on the blockchain coins can be used to "redeem" or "bail out" or "buy back" all the tokens while still leaving the tokens "backed" by (representing) a full actual on the blockchain coin.

So for example if the Ixians wanted to put one bitcoin into IXCoin's "treasury" the Milieu would need to have two actual on the blockchain bitcoins, one potentially super-frozen "forever" (as long as a use case for tokenising bitcoins exists at least) for one bitcoin-token to represent and another more-liquid one available to "buy back" the token without having to un-freeze the "tokenised" one the token "represents". Hence sometimes referring to the policy as a "200% reserve" policy to distinguish it from the more commonly-known from traditional banking term "fractional reserve".


-MarkM-

[d5000]

First, I don't think the idea to be impossible nor completely impractical. And for me personally it could be interesting. The main problem would be probably to deal with the transaction fee swings, so it would be a good idea to make that token 2nd layer compatible, e.g. with a Lightning implementation (similar to OmniBOLT), or designing it directly around a sidechain mechanism (see below!).

You have mentioned it already, but the idea would probably include overcollateralization in some way. Basically what BitShares created in 2014 already (but sorta failed, although it held USD parity quite for a long time) and then Dai improved on.

The simplest idea is to re-create Dai on Bitcoin, with a mechanism based on at least three different (OP_RETURN based) tokens: one pegged to Bitcoin (ideally via a 2 way peg, although such a peg would be expensive fee-wise without 2nd layers, but maybe a 1-way peg is enough which is trivial to implement via proof-of-burn), but with more advanced smart contracting capability. Basically what Counterparty envisioned in 2015-17 but never finished. And the other one (or various ones) pegged to fiat currencies. The smart contracting token would be needed to manage automatic Bitcoin payouts, which are necessary because tokens will be liquidated when the collateral isn't worth enough anymore (i.e. after a heavy Bitcoin dump). The third token would be needed to manage the DAO, based on the way MakerDAO works. (Edited, forgot the DAO token)

Some other ideas:

- use a technology like RGB or Taproot Assets to be able to move the rules of the token off-chain. It's a topic I would like to delve into more in the future, but currently I've only superficial knowledge.
- a multisig federation managing the Bitcoin "treasury" on the mainchain cointaining the collaterals, but with an incentive mechanism on a sidechain (second layer). It could be working in a similar way as a sidechain like the Threshold Network (tBTC), i.e. the "treasury" is managed by staking nodes on the second layer, and they are incentived to play by the rules because otherwise they lose a security deposit on the 2nd layer. (Note that tBTC isn't working on a dedicated sidechain but instead on several existing alt-chains including Ethereum).

Solutions such as USDa already exist, as well as others as listed on chain.link...however nothing seems to be both fully native on the Bitcoin blockchain and decentralized.

Funny, I had stumbled upon this list when answering another thread recently. But you're completely correct: currently Tether's legacy Bitcoin tokens seem to be the only "really native" stablecoin on Bitcoin, and they're being phased out.

There is also BAMK (based on Runes), but calling it a stablecoin if the incentives are really meager is at least "ambitious" (if not an outright lie) and I am convinced this could be easily gamed. It would also probably collapse if the usage of that token declined.

[markm]

 The smart contracting token would be needed to manage automatic Bitcoin payouts, which are necessary because tokens will be liquidated when the collateral isn't worth enough anymore (i.e. after a heavy Bitcoin dump).

That situation seems a decent example of why/how being a treasury-based asset could/would be useful:

If in that example occurrence - a price crash on spot markets of an asset used as collateral - the collateral asset were a treasury-based asset, the whole "your collateral is no longer sufficient" mechanism could be based on the calculated (from treasury) value not on the vagaries of spot markets.

Basically the holder of the collateral would snap up the collateral as a bargain just like it probably would also do on the spot markets themselves had it enough of whatever assets the buy-sides of the specific something-vs-thecollateral pairs that were presenting such a discrepancy between the spot market price and the calculated-from-treasury value were typically composed of.

Quite likely the very reason the collateral holder had made the offer of accepting the collateral-asset as collateral was precisely because they did not have on hand at the time enough of a "warchest" of whatever the collateral tended to pair against to be confident that upon a price crash on the spot market they would be able to snap up all the collateral any "dumper" proved willing to "dump" so they decided to try to convince some holders of the collateral-asset to use them as collateral precisely in the hope that such a price crash would happen...

Basically doing finance in units of account - the calculated from treasury values - tends to lead to seeing folks selling dollars for less than a dollar each as not quite right in the head so to speak, since in units of account a dollar is still a dollar regardless of whether someone out there is giving them out free to panhandlers on streets or selling them for peanuts as a advertisement for their brand of peanuts or whatever...

Similarly a bitcoin would still be a bitcoin to those who have a long enough view to simply wait for the spot market price to go back up or for the entire bitcoin project to die so its treasury can be broken into to reimburse its holders...

-MarkM-

[Community SolidFund]

The problem is that this should have been created at the beginning of the Bitcoin civilization. They say that the code is open, but it really isn't. The code can only be copied or viewed, but it can't be rewritten. When the code is open, it can be modified, but Bitcoin's code can't be modified. Bitcoin is controlled by a dozen programmers spread around the world anonymously. And the reason why this can't be done is that every block from the beginning would have to be modified for this to happen. And this can't happen in a blockchain unless it was programmed from the beginning to do so. We can come up with a plan and get away with it, but it wouldn't be with Bitcoin.

[markm]

Not so sure it can't be done, that same cabal of programmers does seem from time to time to have increased support for sidechains and second layer solutions and so on and so on?

Not sure what parts of this thread's range of ideas you think would require fundamental change / fork of underlying bitcoin core / code?


-MarkM-