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About the AnyHedge protocol and how Bitcoin Cash is already a store of value

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Avatar for LeoBeltran
Written by   23
1 week ago

One of the most recurrent points of the maximalist narrative is that Bitcoin must become the reserve currency of banks and financial institutions, acting as a “settlement layer” where these organizations net their accounts. Only if that happens, they say, will Bitcoin see its ultimate goal fully realized.

However, as we know from the laws of supply and demand, without a huge volume of transactions that should be tens of thousands of times larger than even exists today, it’s virtually impossible for Bitcoin to take on a stable, long-term value by effectively allowing users to make secure monetary commitments in the future—both for savings and investments.

For that reason, we can assume, without going into too much detail, that Bitcoin-BTC currently constitutes a speculative investment, and those who support it seek first and foremost to make a profit and not to replace the current economic system. Totally, everyone is free to seek profit in any way they prefer, and there’s nothing wrong with that. However, to promote a misleading rhetoric to convince new and inexperienced investors to neglect the real objective is, at the very least, reprehensible.

Other projects, like Bitcoin Cash, seek to carry out a financial revolution that will conquer the world of everyday transactions, having the actors—both sender and receivers—at the heart of its operation. It seeks to meet the demand for useful money where it is scarce and where the freedom of the market is restricted for various reasons. Even so, Bitcoin Cash has to overcome the same barrier as any asset so that its price can be considered non-volatile over a long period of time.

We might naively believe that, with Bitcoin Cash having a much smaller market capitalization than Bitcoin, it will be harder to become a store of value. However, not only is Bitcoin Cash much more useful and easier to use than Bitcoin, but one of the simplest and most comprehensive value-preserving systems is already implemented on its blockchain.

With the AnyHedge protocol, developed by the General Protocols people, and its functional platform, Detoken, it's already possible to create intelligent contracts so that those who want to can safeguard the equivalent value in US dollars when creating a contract.

What is the difference with a stablecoin? While it may seem the same at first, this is not the case and the implications are profound:

  • Unlike a stablecoin, such as Tether, the dollar value is not safeguarded by an institution, but by a simple protocol arbitrated through a decentralized contract.

  • Collateral is not required to be in dollars. In fact, no dollars are used at any time. A value can be set in any currency by common agreement between the parties, but Bitcoin Cash is used directly at all times.

  • Being in Bitcoin Cash, the system allows for a low fee on each transaction and a high possibility of having good liquidity. That’s why it would work better than other alternatives like DAI, which don’t contemplate using it as digital cash.

What is a contract like in AnyHedge?

In its basic form in traditional commerce, a contract has three intervening parties: two interested in exchanging a future good for a determined value and a judge or guarantor, who takes care that the established terms are fulfilled.

The difference, simply and without going into technicalities, is that an smart contract allows you to program a certain behavior in advance and be fully confident that, once certain conditions are met, it will be fulfilled. AnyHedge allows the creation of future contracts recorded on the Bitcoin Cash network. This network is decentralized, anyone can audit it and it has a predictable behavior. In this case, the blockhain itself, with the impartiality that characterizes it, acts as a “judge.”

How the value of Bitcoin Cash is stabilized with AnyHedge

Let’s take an example using daily figures and units. Let’s suppose that Alan has a bitcoin valued at 500 euros. Since the crypto market is still volatile, he estimates that the price could fall. He makes a contract with Barbara, who offers him the possibility of covering that 500 euros for a period of one month. It’s as if she were to say, “Give me the bitcoin and within a month I’ll give you back the amount of bitcoins equivalent to 500 euros.” Alan accepts and knows that, no matter what happens, within a month he will still have five hundred euros in his pocket. From then on there are two possibilities:

  • The price decreases. Let’s suppose that in one month from the date of the contract, the price goes down by half. In that case, Barbara gives Alan back two bitcoins that are priced at 500 euros—250 euros each. Alan did not lose in nominal terms and increased his equity in bitcoins. On the other hand, Barbara “took over” Alan’s losses.

  • The price increases. If the price doubles, at the end of the settlement period Barbara gives Alan back 0.5 BCH. That amount is worth 500 euros, so Alan has not lost purchasing power.

What is Barbara’s incentive to offer this service? The idea is that Barbara also makes contracts with other people, using the exact same capital as collateral. For that reason, if the price of the bitcoin went up, she would make a much higher profit than if she simply bought a bitcoin and waited a month. This also implies a greater risk, because in case of market volatility, a sudden downward movement could liquidate her investment.

Detoken works in an analogous way to this system, offering security to savers and profit potential to speculators, uniting both in a common market.

How does this impact on the theory of “Bitcoin as a store of value?”

We could bluntly tell a maximalist that Bitcoin-BTC is no longer necessary to store value. You can now create intelligent contracts to achieve the same effect in Bitcoin Cash, without the need to inflate real money. In addition, the use of Bitcoin Cash as a medium of exchange—another of the fundamental characteristics of a currency—remains constant, without affecting the properties and opening the door to the possibility of an economy driven by this cryptocurrency.

And yet, the protocol is still just getting started. Future possibilities are limited only by innovation and development. There’s no doubt that once it’s integrated with the rest of the Bitcoin Cash ecosystem—wallets, exchanges, merchants and solutions for investors—the liquidity and usefulness of a system that works while maintaining the characteristics of a cryptocurrency, will allow a lot of people, perhaps for the first time in their lives, to have a reliable money that's free of the “peso” (🇦🇷) of inflation.

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Avatar for LeoBeltran
Written by   23
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Comments

thanks for sharing!

$ 0.00
6 days ago

I am glad to see your good progress on the platform. This is motivational for all newbies.I joined this platform one week ago, I will request you to overview my article that I wrote and suggest me how to improve further from this one https://read.cash/@Shakar/from-beggar-to-beurocrate-719670cd

$ 0.00
6 days ago

Great

$ 0.00
6 days ago

The idea is that Barbara also makes contracts with other people, using the exact same capital as collateral.

this "leverage" is the key incentive for the "long" position that took me a while to comprehend. i still need to look at the code to fully grasp it all 🧐

$ 0.00
1 week ago

A value can be set in any currency by common agreement between the parties, but Bitcoin Cash is used directly at all times.

The secret is out. BCH is the UOA.

Great writeup!

$ 0.00
1 week ago

This system is currency agnostic. Anything can be used as the unit of account (euro, yen, gold, oil barrels, etc.) I’m very exited to see what the next step will be.

$ 0.00
1 week ago