I recently read a post on readcash that shows the difficulties in adopting BCH by merchant. This is a problem that I have been analyzing for some time, and I came to a more fundamental conclusion than the author of the aforementioned post. The post is correct in asking consumers what they gain from using the currency, but comes to a conclusion that limits the possibilities, which Satoshi and the other Cyberpunks, idealized for digital currency.
To solve the problem of adoption, there needs to be stability in the BCH, and also gains for those who use the system. That is what I will try to explain in this text. I will also explain a possible method, which theoretically can solve the problem of mass adoption of BCH, and which helps in the general development of the system.
In Brazil, and other South American countries, problems of monetary inflation or currency devaluation are recurrent, in these countries during a period of economic instability there is a bonus for people who use cryptocurrencies like BCH. The bonus is in the protection against inflation or exchange protection.
Even in countries with economic problems, which offer a bonus for those who use BCH, these bonuses can be eliminated by the high volatility of the currency, so it is necessary that gains on inflation or exchange devaluation are not subtracted by the sudden drops in the price of cryptocurrency.
However, there are countries with a more stable economic situation, which would not offer an immediate gain for those who use BCH. Thus, it is necessary to offer stability to users in general, and gains, which would make its use more attractive to consumers in countries with a stable economy.
The adoption of BCH is not slow just because of adaptation or difficulties in use. The biggest problem with adoption is the gains that the currency can offer its potential users, when compared to the gains from using fiat money (an economic opportunity cost problem). We must understand that many people do not understand that the current financial system is a scam and that individuals' freedom is being violated, and this is moreproblematic than not knowing how to scan a Qcode.
Instead of, at first, spending time developing a system that tries to facilitate the use of cryptocurrency technology. The primary focus should be on economically adapting BCH for people, offering stability and gains to these potential consumers, so I thought of a method to solve these two problems, which will increase BCH's economic attractiveness.
At first, to stabilize a currency it is necessary to use a system similar to the Crawling Peg, but we do not want to intervene in the market, we want a market as free as possible! The solution to this would be to use a token with the Simple Ledger Protocol (SLP) and develop a native stablecoin.
Companies like Bitfinex, among others, developed their stablecoins with a grotesque error! Tether, and the like, represent the monopolistic, controlled and potentially fraudulent financial model that we experience. The 1-to-1 parity with the dollar, or any other fiat money, requires specialized auditing, and does not differ in any way from the failed conventional system that is in place.
The challenge is to create a stablecoin using the SLP, which has no parity with fiat money and which offers transparency and security for users. Thinking about it, the solution found is to develop a token with stable, global value, backed by a product or service preferably endogenous, and that has economic attractiveness for consumption, therefore, that offers some gain to users.
With this “Stablecash” it would be possible to provide stability and attractive gains to BCH users. The overall value could be the price of a lottery ticket like Mega Millions. The solution I found for the product was to add to the token the quality of also being a lottery ticket, and consequently the attractive bonus would be a prize in BCH, derived from a percentage of the amount paid for this product.
It would work like this: Let's say that 1 "Scash" equals a Mega Millions ticket and that 1 Mega Millions ticket is costing $ 1.84, so a $ 18.40 shirt can be purchased with 10 Scash. It is important to avoid direct correlation with fiat money to ensure the independence of stablecoin, which will facilitate direct conversion with BCH in the future, when the currency becomes large enough to no longer need Stablecoin.
The financial backing of "Stablecash" would be a BCH premium, which could easily be audited by anyone, so if the market needs 1000.00 Stablecash tokens, you should buy $ 1840.00 in BCH, which will be at an auditable public address, if 1 BCH is costing US $ 350.00, 5,25714286 BCH must be deposited at this address in order to dump the 1000.00 Stablecash tokens on the market.
The entire system must be transparent and easy to be audited, and its basic dynamics would work as follows: Let's say that the market demands 1000.00 Scash at the price of 0.00525714 BCH each, so it must deposit 5.25714286 BCH in a public multsig address or guaranteed by smart contract. At first I imagine that this public address should belong to a group in charge of keeping these values, but it is important to develop something decentralized, similar to what happens in the technology environment Decentralized Finance (DeFi). So each 1 Scash corresponds to 0.00525714BCH, which according to the previous example corresponds to 1 a lottery ticket.
The product that Scash offers is a chance to win a lottery prize to compete for a percentage of the 5,25714286 BCH that has been deposited. The method of operation of the draw is not necessarily my responsibility, but I also imagined what it would be like, but it will be explained in paragraph 6.
To understand how a tokenized lottery ticket could serve as a stablecoin. A brief explanation of the behavior of a consumer (bettor) of lottery tickets and the basic operation of the lottery is necessary.
A lottery prize is a percentage of the amount collected in the payment of bets, so if the lottery prize is 50% of the amount collected. Bettors pay 50% of the lottery prize to be entitled to compete for 50% of the total amount to be collected.
The cost of the lottery ticket already incorporates the winnings as well as the risks. Therefore, when a rational bettor buys a ticket, the amount paid is a fixed price, which has already accounted for any fluctuations in its value. Thus, in theory, the speculative value of the asset is softened, without the need for parity and backing with fiduciary money.
So, a lottery ticket with payment in BCH, the bettor has already accounted for the possible currency variations when making the payment. In the same way, the bettor acounted the possible values of the prize and his chances of winning. It would work like this: Suppose the project developers decided that 40% of the prize amount is given to the winner of the draw, so buyers are paying for 60% of the token to be entitled to compete for the prize of 40% of the amount collected.
If, after the draw, the value of the BCH goes down by twenty percent (-20%), these costs have already been counted by bettors at the time of purchasing the token. Therefore, the amount paid for the token reflects a stabilization of currency fluctuation, which softened speculation by rationally considering the risks involved in the purchase.
It is in this way that a lottery token would make it possible to derive a stablecoin, through the market, with an analysis anticipated by the buyer in an instant of time, which incorporates the possible fluctuations of the BCH. Thus, a stablecoin governed by the free market.
But what about non-gamblers? Obviously, Stablecash would not be limited to bettors only, but its functional characteristics would meet the needs of those who demand a stable currency. Also offering the opportunity for earnings to its users. So, necessarily, users would not buy the currency, but would use it in their transactions (accepting and issuing). Soon there would naturally be a “free rider” on the part of the other users who are not characterized as gamblers.
To illustrate the expected result of the proposed mechanism, I will use simple examples of basic microeconomics and some graphs. Firstly with the lottery market, I demonstrate how your offer can be represented by an infinitely elastic demand.
With the possibility of increasing its offer with virtually zero marginal cost, and its market in a competitive environment. The supply curve tends to be perfectly elastic in the lottery ticket market. Thus, the price tends to remain constant, as shown in image 01.
Image 02 of the graph shows the stablecoin market. With the price anchored in possible fiat money reserves, the price remains stable, similar to a perfectly elastic supply curve.
Image 03 shows both markets. In this example our token market is anchored in the lottery ticket market, thus keeping its supplys correlated.Image 03 – The Stalecoin Market and The Lottery Ticket Market. Source: Author
The image in graph 04 shows a shift in the demand curve of the stablecoin market. Demand at the moment zero represented by D increased, moving to point D¹, which caused an increase in the quantity of tokens demanded from Q to Q¹, but did not put pressure on prices. This shift may occur due to increased income or new expectations from users, with the shift of the demand curve to the right or to the left, but in both cases the result would not pressure the price.
A system for the draw requires a more technical knowledge of the functioning of the blockchain, which I don't have, so if there is any mistake I would appreciate the criticism in the comments. Regardless of how the draw would work, the most important thing is to be easy to audit. After all, transparency is one of the main qualities of a blockchain system, and lottery too.
As explained earlier, each token is also a lottery ticket. It means that by consensus each token makes it possible to compete for the prize, which corresponds to a percentage of the amount paid for the token.
To be drawn, I thought about using the transaction hash, so it is necessary to use (transmit) the token to be able to compete for the prize, thus stimulating its use, because the more it is used the greater the probability of being the winner of the draw. The transaction hash would be like the lottery ticket numbers. A hash consists of numbers from 0 to 9 and letters from A to F. You should disregard the letters and recognize only the numbers.
Let's assume that the last 6 numbers are the ones that are recognized to compete for the prize, being analogous to the selected numbers on a lottery ticket. Later it would be enough to compare the NONCE of the block, which has been mined, with the hash of the transaction. If both have the same 6 final numbers, the sender's address (input) will receive the prize.
Disregarding the lyrics of Hash =
Then the ticket numbers are: 773020
If the NONCE of the block is: 3389773020 the input address of this transaction is the winner of the lottery.
I believe that 40% of the amount paid for the tokens could be used to pay the prize winner. Of the remaining 60%, at least 40% must remain in the wallet to maintain the game's attractiveness and consumer interest in the token. The rest of the amounts could go to the BCH developers, as well as to the miner who would discover the winner, who might be compensated for making the payment by airdrop at the input address of the winning hash.
With the creation of the native BCH Stablecoin, it would be possible to solve the problem of BCH membership in merchant by correcting instability and offering gains to users. The BCH would have an increase in consumption because of the demand for the token as well as to pay for the gas of the token. This increase in consumption will tend to raise the price of BCH, another important factor is the concentration of coins stored for the premium, which will tend to accumulate over the years making BCH even more scarce, contributing even more to the increase in its value.
As the years went by, the BCH would have a much higher value and consequently its volatility would be reduced, so it could dispense with the native Stablecoin.
The text presented a solution to increase BCH's adherence in trade, through a native Stablecoin using the SLP, which would dispense with the use of fiat money, and which would offer stability and gains to potential consumers worldwide.
The native Stablecoin would have properties similar to a lottery ticket, which with a perfectly elastic supply its price would not fluctuate with the increase or decrease in demand for the token.
The prizes would be awarded to those who transmit the token, with each transaction hash functioning analogous to a lottery number, the result of the drawing being the combination of the hash numbers with the nonce of the block.
Finally, it can be concluded that the token would hypothetically solve major problems of the BCH by increasing its value in a virtuous cycle. For, the token provides greater demand for BCH, as well as increasing its scarcity, with the concentration of coins in the prize address. It would solve financial resource problems for developers and increase the membership of sha256 miners.
I hope you liked the text. Be sure to comment what you think. This text may have several grammatical flaws, since English is not my native language. I would be grateful for any corrections, grammatical or methodological.
Peace be on you.