Okay, why do you say only initially at parity? If you ever lose parity people will have reason not to hold zitcoins even for a short period.
I'm confused as to how you are going to do that anyway. You are going to start with a hoard of BTC and zitcoin I guess or only zitcoin? Then you promise that you will buy zitcoin back 1 to 1 if people give you bitcoin for them? Or you sell them for $ cheaper than bitcoin with the promise of redeption for bitcoin?
I'm trying to understand. Who buys the first zitcoin? Why would they buy it at parity?
Let's make it a more concrete example, maybe that will help us see if I'm full of it.
It is commonly known that bitcoin's fixed-quantity monetary policy is popular among libertarians.
Galuel recently proposed an expand at 5%/yr monetary policy with a distribution sure to be popular with French socialists.
Right now bitcoin's market cap is trivially small. It is not inconceivable that Galuel could find a wealthy French liberal to back a bitcoin alternate that better suits their (slightly silly) view of the world. All this is extremely cheap as political statements go. He could do all of this for 10% the price of one TV commercial.
Let's say that Galuel realized that Knightmb has lots of BTC sitting around doing nothing. So he cut a deal with Knightmb to buy up half his stash for French Euros. All this took place off the market so it didn't effect BTC prices elsewhere.
Now let's also postulate that Galuel doesn't auto-generate coins like bitcoin. Instead he just generates 1 Trillion ZTC into his own account. Then he sets monetary policy by giving them out however matches his short and long term goals. He also has an initial stash of Euros/Dollars from the wealth Frenchman.
Now he starts promoting zitcoin as the progressive alternative to the regressive bitcoin system. All socialist should shun bitcoin and use zitcoin.
He sets a price to sell his unlimited zitcoins at one bitcoin or the equivalent in Euros. Now like here, people show up just to see what zitcoin is about and to help support global socialism. They realize all of this is cheap and buy some ZTC just on principle using Euros.
To support the currency, he promises to buy ZTC for equivalent BTC, but only from merchants. Now there is a merchant incentive to take them. People have them, why not take their money. Those people don't have BTC and don't want BTC.
Now keep in mind Galuel has a 100% reserve of Euros backing his ZTC at current BTC to Euro rates. But he has no need to spend it. He also has a stash of BTC he bought from knightmb. At the current volume, say he could keep ZTC trading at parity for at least year. Remember initially Galuel is simply slowly selling the cheap BTC at a profit in Euros.
That is enough to gain traction and to give his currency the same perceived value as BTC in most people and merchant's minds. People will begin to trade these among themselves at parity as well. Every time a merchant doesn't trade a ZTC for a BTC, he can support the currency longer.
Eventually he announces it is time for a 5% "progressive" bonus for each user rich and poor alike. So he start handing out more money. Then more and more. By its very nature, this will upset BTC libertarians because it effects the total volume of things that people see as fungible.
Eventually the libertarians will pester the socialist NOT to peg their ZTC to the BTC. Galuel will quit swapping any excess BTC he has left. And will tell merchants to swap it on the exchange. Prices will start to diverge.
It seems plausible as a hypothetical.
What happens next I'm really not sure.
It seems to me that at least initially, people would save their BTC and spend their ZTC. As BTC customer numbers declined, it seems hard to resist the number of customers offering ZTC.
I could be wrong though. Show me.
Disclaimer: I'm NOT proposing that Galuel's progressive inflating currency is a good monetary policy. I think it is a silly policy.
I'm posing ZTC as a type of Gresham bad money vs BTC as Gresham good money.