A solution to increase consumer adoption for BCH

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Avatar for Adeilton_Filho
4 years ago

1 – Introduction

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.

2 – The problem of instability and opportunity cost.

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.

3 – The idea

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.

4 – Theoretical explanation.

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.

5 – The Economic Model

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.

Image 01 – The Lottery Ticket Market. Source: Author

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 – The Stablecoin Market. Source: Author

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 – The Stalecoin Market and The Lottery Ticket Market. Source: Author

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

Image 04 – The Shift in Market Demand. 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.

6 – How the Draw Works

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.

Example:

Hash =

d749006ec82fe336276227c39a5d02cc55d27217455354ab36d154827730eb20


Disregarding the lyrics of Hash =

749006823362762273950255272174553543615482773020

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.

7 – Implementation possibilities

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.

8 – Conclusion

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.

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Avatar for Adeilton_Filho
4 years ago

Comments

Interesting. I believe in algorithmic stable coins, but didn't quite get your idea. What is the price stable against if not fiat?

$ 0.10
4 years ago

Interesting. I believe in algorithmic stable coins, but didn't quite get your idea. What is the price stable against if not fiat?

Yes, algorithmic stable coins is an excellent method, but it would not solve the problem of economic attractiveness. Users from countries with stable currencies have less interest in cryptocurrencies, requiring some gain in using them. That's why I thought of a lottery system, which offers the chance to win a prize.

I will try to summarize the method in a simple way. John likes to buy lottery tickets, and discovers a lottery that pays the prize in BCH, he (as a representative agent of that market) decides to pay $ 1.84, per token (ticket). Ok we have a product that has a fixed price, we know that no price is really fixed, probably every year the dollar should have some devaluation due to inflation, but technically its volatility is very low, and so they are considered stable.

The advantage of the lottery ticket in comparison to some products of the economy is that the marginal costs of its offer are nil, and belong to a competitive market, because there are several lotteries. All of this means that the lottery ticket has an elasticity of supply that tends to infinity, we economists call this a perfectly elastic supply. This property causes a token (ticket) offer to rise above $ 1.84 to $ 1.85 and will be rejected by John. If John gives up betting and wants to sell his ticket to his neighbor bettor. It will sell for $ 1.84 because if you try to sell for $ 1.85 your neighbor will prefer to buy at the store, and if you sell for less you will lose money. In image 4 I show that an increase in demand does not increase prices. Other things being equal the price remains stable even with an increase or decrease in demand. So without the need for backing from fiduciary money or algorithms, or contracts, but the free market in action, but with a product offering that tends to have infinite elasticity.

$ 0.00
4 years ago

" if you try to sell for $ 1.85 your neighbor will prefer to buy at the store"

How did the store decide that the price is 1.84 usd ?

$ 0.00
4 years ago

The price is given by supply and demand. I used Jhon as a representative agent. the lottery market is competitive, ticket values ​​differ little for the same prize value or odds probability. example the price of Powerball and Megamillions.

$ 0.00
4 years ago

Either the price of this ticket is going to be stable against BCH or the lottery needs an oracle, right?

$ 0.00
4 years ago

The price will be stable against the dollar, euro and any other fiat money, it will also be stable against the BCH. Because it is not backing by any fiduciary money, but on its own product (lottery ticket), therefore its stability is in the property of the product that has its infinitely elastic supply. Suppose that the market determines the ticket price at $ 1.00 and that after one year the dollar's inflation is 10%. It means the ticket will be no more than $ 1.00 but $ 1.10 This happens because the market accounted that the value of the premium decreased, requiring an increase in the ticket price to correct the depreciating effect of inflation, so the ticket value is stable, but the dollar is not. Now let's assume that the ticket is paid in BCH, at today's price. $ 1.00 is approximately 0.0026 BCH, so 1 ticket costs 0.0026 BCH. After one year the price of BCH will rise 50% against the dollar. How much is the ticket? Would it be 0.0013? At the! because there was dollar inflation, so 0.00145 BCH is the new ticket price. Now you must be wondering: "But is this a stablecoin? The answer is: Yes! But it is an autonomous stablecoin, which does not need backing in fiduciary money, and its main function is not to hold the price equal to the dollar, but to hold the price with the same purchasing power, so it is stable throughout the time of any currency.

$ 0.00
4 years ago

who prints the tickets? a smart contract automatically or a human?

$ 0.00
4 years ago

who prints the tickets? a smart contract automatically or a human?

This technical detail for me is the most complicated. I would like atomic swaps between BCH and Scash, or smart contracts. Well, the important thing is to be simple for the user.

$ 0.00
4 years ago

This is not a technical detail. I'm trying to understand the basic principles of your idea. So far it seems like nonsense, I'm sorry. You need to explain it better. Swaps are good when the token already exists. I'm asking how is it created.

$ 0.00
4 years ago

No problem. You are free to give your opinion. But I thought you were referring to a technical detail, since the issuance of the token is already in the text. "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."

$ 0.00
4 years ago

It is really nice to read your article and try to understand the solution, a different point of view and it worths to evaluate .

$ 0.50
4 years ago

Thanks!👍🏼

$ 0.00
4 years ago

An interesting combination - I have not seen such a proposal before!

$ 0.50
User's avatar btcfork
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4 years ago

Thanks! I spent days thinking about how to solve these complex problems, in a way that used only the free market.

$ 0.00
4 years ago

There is already an SLP stable token. It is honestcoin https://honestcoin.io

$ 0.00
4 years ago

Okay so let me see how much of this I understand.

We have BCH We have an SLP (scash)

BCH fluxuates in price Scash will not.

To get scash you lock up x BCH in a smart contract for x scash.

Somehow a baseline needs to be decided for BCH to scash conversion.

If BCH value goes up then more Scash I should get for my BCH.

however

If BCH goes below where I got my scash the amount of scash should go down

This would be the only way to keep scash stable.

You would want to pay out more Scash if it becomes more valuable in a lottery type system. That solves part of it. The ones who have a chance to win this are people who have their BCH locked up. Those who just have scash are not eligible.

But what happens if it goes below the lock ?

I think what might be possible is instead of that why not do it this way.

The smart contracts can be bought and sold.

So say the price of BCH goes up from where a contract was made for scash lets say 500 scash was bought for one BCH which was valued at the time for 250.

Now BCH is valued at 500 but wait that means I should have 1000 scash.

To get 500 scash I only need .5 BCH so I could get a new contract locked and use it to buy out the old one by putting 500 scash back which then unlocks my BCH and returns it to my wallet.

Obviously you wouldn't want to do this if BCH is less valuable.

BCH is now 125 so it costs you 2 BCH to get 500 scash.

But if I have 500 scash I should be able to buy out that BCH out of the contract.

Correct me if I am wrong but I think this way we could stabilize the value of scash while BCH fluxuates. Without the use of luck and lottery.

If I am not mistaken this might be how DAI works on ETH.

You could actually build a dapp where people who want to participate in trading BCH and scash any can be withdrawn at any time but say bc of the value is higher than normal to get scash then the dapp automatically will deposit BCH to get scash. Then if you can get more BCH for the scash you got it will turn in the scash for BCH that should stabilize the supply and demand for scash and keep its value pretty stable . By doing it in a dapp and having it automatically use the funds in the dapp it should be easy to audit and see just how much bch is locked up and how much scash is in circulation. And the whole process is not centralized! In the dapp you could also have a donate option to devs select a % and the team you would want to give a cut of any profits from the trades.

$ 2.01
4 years ago

You did not understand the text. First - There is no lock up between Scash and Bcash. The lock up is between developers, miners and other custodians of the BCH fund. Second - Scash is not dependent on BCH fluctuations. I realized that you analyzed the text full of predefined concepts. There are several ways to stabilize a currency, either through contracts, either through containment and dumping of coins, or even through financial collateral. But this method proposed in the text is very original, as it would not be enough to solve the problem of instability, it is also necessary to solve the problem of BCH economic attractiveness.

The methods already known do not solve the problem of attracting potential consumers. Attracting consumers is the central objective of the text in an attempt to increase the adoption of BCH.

$ 0.00
4 years ago

Interesting idea, thanks for reading and replying to my post.

Keep in mind that I don't see anywhere where you actually addressed the thesis of the post of mine that you linked to, which is that we need BCH inflows in order to maintain merchant adoption. I don't see how your proposal addresses inflows.

It sounds like you are proposing something roughly in the same universe as DAI and PoolTogether and it sounds quite interesting. It is my understanding that at this time, we are unable to deploy this kind of technology on BCH but that Tobias Ruck's Mitra project may advance that goal.

I am skeptical about so tightly connecting a MoE with a lottery ticket. This could erode people's confidence in the currency given all the connotations around lotteries. That said, I don't doubt there would be a market for it.

We already have the ability to have stability in-wallet. See the BitPay and Coinomi wallets as two examples. We just need to make it easier and cheaper. But this addresses a pain point for the consumer, less so for the merchant and still does not address the inflows issue.

I look forward to see where you take the idea, very interesting! Kudos!

$ 0.00
4 years ago

Thanks! Your idea of remittances is fantastic, but it's just a path, I believe in the most attractive BCH for consumer, and an SLP token could be the solution. Scash would be a independent Stablecoin, not backed by fiat money. The consumer could benefit from a currency with a stable price to make their purchases and still compete for a lottery prize with each purchase of a product or service. I believe that this would generate BCH inflows in the retail trade.

$ 0.00
4 years ago

Our business plan is the product of 2+ years of research and real-world ground work of 80+ team members with 5,000+ new crypto users and 1,300+ merchants in 20 cities in 8 nations on 3 continents. So, it is more than just a path, it is the product of hard experience, research and testing.

Your proposal is very interesting and if I can be of service to you in helping to develop it, definitely let me know! It is undoubtedly very interesting and you should keep developing it. One thing you might do is devise an MVP, attract a team and start testing it.

$ 0.00
4 years ago