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Currency Stability Options

One point of concern for many public distributed digital currencies is that they are volatile. This is likely partially due to the fact that they are available world wide and trade twenty four hours a day so there is very little environmental constraint to subdue peaks on price run ups and dips on down turns.

My opinion is that the ability to trade freely any time you want is a great freedom but the dependability of value in a currency is a serious issue for individuals and businesses that want to rely on it.

I have been thinking about some possible systems and or protocols that could be added to Safire that would optionally allow some users to increase the stability of the value of their holdings by trading availability of their reward payments over time.

The details outlined here are only preliminary and will undergo much more review and consultation before integration with the project.

Basically a client application could allow node operators to select an option that would either pay out a block reward upon creation as the current protocol dictates or put a portion of that reward into a new type of ledger balance that is completely owned by the user but only accessible in regular disbursements when the market is below a three year simple moving average.

The system won’t gain these users any extra funds or directly stabilize the traded price but it will give users an extra disbursement to subsidize the decline in purchasing power. This could give small businesses and investors the ability to use and store Safire currencies and have extra assurance that if the market drops they would have extra income to make up some portion of loss.

The way this might work is by using a new protocol transaction type that is issued with the creation of new blocks and assigns the reward to a stability balance that is separate from the regular balance. The market price and moving average values can be calculated by user clients and submitted by a vote mechanism. Because all operations on chain need to be deterministic the vote transaction record would be submitted by all active users every set period of time and if a majority is reached the disbursements issuance restriction can be lifted. This would happen when the market is down by a certain percentage from the average causing the votes to be submitted.

Disbursements could then be issued in new blocks as requested by individual users having a stability balance. The amount would be a ratio of their balance divided by a factor that estimates how long bear markets usually last.

There shouldn’t be any harm in this vote being abused. If everyone decided to submit a market decline vote record when the market is not in this state is only allowing people to withdrawal their funds early.

This certainly wouldn’t guarantee that markets rates will return but it would allow for more stability and time for people to plan and adjust.

 

We at the Safire project are eager to hear your thoughts on if you think stability mechanisms are of value and any other possible mechanisms that this could be accomplished by.

 

 

 

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