Where is the working example in crypto, where a peg has, and continues to, work as intended?
That's just it - there isn't a safe one that I know of!
BitBay's approach will be different obviously. It's not going to be pegged to anything, e.g., bitcoin, gold, USD, etc.
It's going to be completely independent; simply based on supply and demand.
This can make for a day trader's 'wet dream'.
I wish I knew more about it myself, but take for example all of the possibilities in regards to a Bay to BTC market pair.
If a trader see's signs of a big price drop coming to BTC, rather than sell out his BTC to USD, he could accumulate BitBay instead over the course of a few days. There would be more than one way to do this. He could potentially buy them straight from the exchanges, straight off the BitBay marketplace (without a middleman), or even a potential 'futures' contract.
If the traders hunch is correct and BTC starts to drop over the course of a few days, then others will be scrambling to hedge their investment capital. This would create an increase in demand to Bay from traders trying to hedge their investment capital would naturally cause Bay to increase in value.
Now this trader has multiple options...
- He could sell his bag, which would be 100% liquid at the time (except in regards to futures contracts).
- Or he could hold, waiting for the right moment to sell potentially before the UVP protocol implements a liquid to frozen coin ratio adjustment. In this example, the increase in demand for BitBay would cause the ratio to increase liquidity of other people's wallets. So the traders best option might be to time this event and sell immediately before it happens to maximize profit on the market's demand. Then he could still earn even more profit by predicting the price support level after the coin get's flooded with new liquidity and buy up more Bay in hopes that the hedgers are not done yet with their exodus, etc, etc, etc.
- Or he could simply wait until he see's the price of BTC to hit a support level and then sell his bay at a premium before the masses try to follow suit. This guessing game is going to be quite intriguing to say the least! Yet if you miss out on the swings of peaks and valleys you still have reassurance that this thing will (long term)continually increase in value - so the only losers are the impatient traders that sell at a loss rather than hold through another cycle.
All of this can be taking place with the trader having assurance that the peg will protect his capital from a potential 'back-stabbing' whale dump that currently seems to plague so many coins with their >insertcoin</BTC market pair relationship, because in BitBay, if the market gets hit with a large seller all at once, your coins would freeze proportionally to your existing quantity. This helps the price balance out without any major FOMO panic sells.
BitBay will give investors a tool to increase profit potential compared to the option of hedging back to the USD. Sure there is no leverage advantage, but that makes it even more attractive to conservative money. And who knows... with Double Deposit Escrow, I'm sure there is a way to create leverage.
The more people see the system as a safe investment, the more they will want it, increasing demand and price in a healthy, organic trend. This will excite merchants and naturally create a positive, organic domino effect.
For those that can't stand the idea of a mandatory network adjustment to their wallets liquid to frozen coin ratio, they will still have options to trade - that's where the futures contracts come into play.
Again, I wish I knew more about all the goodies in store for the rolling peg (UVP - User Value Protection) protocol.
We will just have to wait a little bit longer before it's finally implemented.
