Cryptocurrency’s volatility is one of the major roadblocks in the way to mass adoption. You can buy crypto at one price value and within hours (sometimes minutes) that price value has changed. Stable coins were initially created to combat this issue. Simply put, a stable coin is a cryptocurrency that is “pegged to” or “backed by” another stable asset like the gold or the US Dollar. There is a good chance that you’ve heard of Tether (USDT), Gemini Dollar (GUSD), and TrueUSD (TUSD). These stable coins are all backed by the US dollar. There is also Dai, which is a decentralized stable coin running on Ethereum.
Dai isn’t backed by the US Dollar. It is instead backed by collateral on the Maker platform. Now, there has been another group of projects that have sought to create a stable cryptocurrency that proposes a mix of standard market pricing and stable fiat value storage without an unsustainable asset backing. These projects are searching for the essential feature of intrinsically containing a mechanism that guarantees both dollar parity and stability.
Mint and Burn
BitCash, Haven Protocol, and Triton are three projects that are currently exploring the option of the “mint and burn” protocol. Essentially, the mint and burn protocol allows for both a cryptocurrency and a stable asset to exist on the same blockchain and allows for the destruction or burning of the volatile asset or the stable asset to create or mint the opposite asset. So, the cryptocurrency operates in a volatile value and conducts basic cryptocurrency transactions and the stable asset operates in static value and operates as a crypto-backed reserve for the cryptocurrency.
BitCash Stable Feature
The BitCash Stable feature, like other stable coins, was created to address the problem of price volatility when sending cryptocurrency to a third party, paying retailers, or storing value. BitCash Dollar secures the value of BitCash for the short, medium, and long term, making it easier to integrate into the financial system. With the new BitCash stable feature, there are now two currencies stored on the blockchain, BitCash and the BitCash Dollar. One account is the BitCash account and the other is the BitCash Dollar account.
The BitCash Dollar account has its own address with “dollar@” in front of the nickname or address. So for e.g. dollar@CoachCryptos would send to the BitCash Dollar account and @CoachCryptos to the BitCash account. Also, there will be two send functions, one function to send from your BitCash account and one to send from your BitCash Dollar account.
- BitCash → BitCash
- BitCash → BitCash Dollar
- BitCash Dollar → BitCash
- BitCash Dollar → BitCash Dollar
- BitCash Dollar = $1 USD.
For example, as of 22 June 2019 the price per BitCash is $0.10, and on this day you send 5,000 BitCash to your BitCash Dollar account. At that time, you will immediately have 500 BitCash Dollars in your BitCash Dollar account with a value of US$500. You can keep the 500 BitCash Dollars for as long as you want, and the value will never change. Now assume the date is now 1 July 2019 and the price per BitCash coin has dropped to $0.05. If you were to then convert the BitCash Dollars (still worth US$500) into BitCash, you would get 10,000 BitCash. So, the amount in BitCash is now 10,000 instead of 5,000, but the value in BitCash Dollars is still US$500.
So, when you hold your money in a BitCash Dollar account, the value will always remain the same. Keep in mind, you can send the money from one BitCash Dollar account to another BitCash Dollar account. You can also make payments in BitCash Dollars directly and there will be no price risk for the merchant.
The benefits of BitCash Stable are groundbreaking. With this feature, you can send US$1,000 to someone across the globe and they would receive it in less than a minute with minimal fees, no conversion fees on each end, no middle man, no hefty transaction fees for both parties, and no having to wait days for funds to clear.
The BitCash Stable feature makes it feasible for an online merchant who may be interested in accepting cryptocurrency as a payment because they can now accept BitCash Dollar without having to sell instantly. Instead, hold the coins in their BitCash Dollar account until they’re ready to sell. This will help entice more online merchants to accept BitCash and/or BitCash Dollars.
How Will This Work?
At the time a user converts BitCash to BitCash Dollar or BitCash Dollar to BitCash, a snapshot of the 7-day moving average price of BitCash is taken and used for conversion.
There are 5 price servers that use a different private key to sign the prices. Each server has a dedicated webpage that holds a list of all price and timestamp information used to calculate the average price. Also, it will print the price read from each exchange with the name of the exchange, the price in satoshis and the price of BTC at that point in time. Currently, our servers read the prices from STEX and CryptoBridge and store them. Then they take a 7-day moving average from the prices and sign the price and timestamp with the private key. This signed price information is then returned as simple text information using the JSON format.
Every block header includes 3 different prices each signed with a different private key. Then the average of the two prices which are closest together is taken. This price is then taken to convert all transactions which are included in the block. So, if a transaction is included in a block then transaction is finalized, and the price will be fixed to the price stored in the block header. All transactions included in one block will use the same price.
Naturally, mint and burn projects will be susceptible price manipulation attempts. Volume is a key factor in regard to the mint and burn protocol. Low trading easily invites a big holder to repeatedly dump the price in order to mint new coins. As the volume increases this becomes more costly and more difficult. While BitCash volume is relatively low, we will utilize a 7-day moving average to mitigate price manipulation. Increasing volume is a major priority for BitCash and is why we have integrated so many use-cases for BitCash beyond the BitCash Stable feature.
There is some collateral damage that comes from using a 7-day moving average. At any given time, the price of BitCash Dollar may be slightly more or less than $1 USD because the price of BitCash will fluctuate over the course of a week. As the volume of BitCash increases we will decrease the length of the moving average because it will become harder to manipulate the price.
Decentralized vs Centralized
The idea of a truly decentralized oracle or server sounds good on paper, but unfortunately it is very far-fetched at the moment. The purpose of the oracle/server is to pull prices from the exchanges, store them in a database, calculate averages and provide signed price information, but the problem remains: who will run the oracle/server and who will hold the private keys to sign the price information? The answer is simple, the developer. If no one runs the oracle/server or holds the private keys, then a simple change of the source code would allow for the someone to submit false price information.
Our approach of allowing our servers to read the price information directly from STEX and CryptoBridge creates a bit more decentralization because the price is developed through the free market and supply and demand.
Ideally, BitCash hopes to be listed on at least 5 big exchanges and have high volume on each exchange. Then we would need all 5 exchanges to agree to provide signed price information directly. This way we could deactivate all our price servers, give a few private keys to the exchanges, and every single BitCash node could pull the latest price information directly from the exchanges. In this situation, no middleman will be needed. This is as decentralized as one can make such a system.
As a reminder, BitCash, as with most crypto, is a new and experimental protocol, so be cautious. There is no expectation of “profits” as this project is an experimental protocol. BitCash coins should not be considered as an investment in any way shape or form. BitCash software is open source and issued with no guarantees. By mining, trading, or acquiring BitCash by other means, you acknowledge that this is not an investment into a company or any such centralized entity.
We are excited to see what the future holds for BitCash and BitCash Dollar. Make sure you have downloaded the most recent wallet in preparation for our fork: https://www.choosebitcash.com/#download
BitCash Official Links:
Website — https://www.choosebitcash.com/
Discord — https://discordapp.com/invite/7P4YcXU
Twitter — https://twitter.com/ChooseBitCash
Bitcointalk ANN — https://bitcointalk.org/index.php?topic=5106123.0
Telegram — https://t.me/chooseBitCash