This seems interesting but a little abstract to me is there any better explanation to this:
https://bitbay.market/dynamic-pegWhat i want to know is how this works i will use round numbers for that purpose in this example:
Put for example that a user has 1000 bays in his wallet and the current market value to USD is 1:1.
In that case how much of this amount is locked in the reserve?!
Or how much is immediately locked into reserve if a user buys 1000 bays from an exchange an send to his wallet?!
In case of value rise to for example 2:1 i suppose that then half of the amount will be locked that means 500 bays right?
But what happens to the funds locked in Double Deposit Escrow or any other contract that were stipulated before the coin has risen?
Will the collaterals also get halved and put into reserve automatically or how this should work?
Thanks.
Yeah good question. When funds are in a contract first the system will make sure only liquid funds go into a contract. Then if funds freeze during a deal you will be able to withdraw the frozen portion using a one month time lock (this is how you are able to transfer frozen funds in general as they are "Slowed down")
The amount your 1000 Bay freezes will be determined by when you received them and the total supply rate. If the supply is at 100% liquid then all coins can move. If the supply drops to 50% liquid and your funds had not moved since the beginning then you would have half of your 1000 frozen and sent back to you in case you try to spend it. Thus you would have 500 frozen from 100-50 and 500 liquid from 50-0. Then when you send a person those liquid funds he may also experience a gradual freeze if the supply continues to drop. If the supply increases then your reserve funds are made available.
When working on the markets your software will automatically make sure you as a merchant get a reasonable amount of liquidity in an offer or else it may notify you otherwise.
During very volatile times we could see the supply adjust a lot in a day. And actually this is the part of this that is more of a balancing act. Should we allow up to 24 changes of 1% in supply a day (when votes are counted) or should we allow less? Those decisions will determine how quickly someones funds could freeze.
When the coin grows in market cap in theory you would see less volatility (as low market cap tends to be more volatile than high market cap). Thus you would see much less of a change in supply in a day.
We are not forcing a specific target with our algorithm and instead going to allow the price to move (hence the name rolling/moving/dynamic peg). Although the same technique can be used to force any currency to X price. We like the idea of giving users more control over their own economy to decide where they want the coin to go in terms of price vs liquidity. And we can adjust some of the variables based on how the tests go and how the market reacts.
