Simple descentralized system to "back" Peercoin with goods and services

#1

As you perhaps have noticed, I am concerned about price stability of cryptocurrencies. PPC, or Bitcoin, will only succeed as true currencies if the wild price swings are parts of the pasts. (I don’t mean “price stability” must be necessarily 1:1 to the dollar or euro, but for example, to pay your rent or your food you should be able to pay every month approximately the same amount in PPC.)

One way to achieve this is “backing” the currency with real good of services. But a central bank backing it with gold or silver would not be exactly the “crypto’s way”.

So what I thought of is the following: Every merchant who offers a good or service for a fixed price of PPC for at least one day can be considered a “backer” of Peercoin.

The idea is now to incentive this kind of backing, and do it in a descentralized way.

Basically, you can do this with every e-commerce/marketplace platform like a hypothetical “e-bay” for Peercoin. They can offer a special kind of “ad” to merchants: the “Peercoin Backer ad”. The merchant must sign a contract to maintain the fixed price for at least one day or more if he wants, and cannot delete the ad. When he accepts this, he will be shown with the status of a “Peercoin backer” and gets compensations for this status.

If the merchant receives an offer during a downward PPC price movement and refuses to sell to that price, he would get a negative reputation from the buyer (or from the platform). (Also, often an offer is legally enforceable in many countries if the buyer wants).

On the other hand, merchants should receive a good compensation when “backing” Peercoin with this kind of ads. For example, they could get listed more prominently, with a “Peercoin Backer barnstar”, can post offers for no fees etc. Also, merchants can control their risk if they limit the stock of the products they sell. And “Peercoin fans” should be likely to buy more from Peercoin backers than from non-backers. So it should be attractive for merchants to try this kind of offer out, at least for a fraction of their offers.

There can be also a “Peercoin backer’s” category system: You begin as a “Bronze Backer” with your first ad with a fixed PPC price for a day, and when you have sold many items you promote to a “Silver Backer”, and when you are selling regularly and maintain your prices even in crashs you become a “Gold backer” and so on.

Also, there could be “advanced backing techniques”: For example, your price can track the PPC price evolution at the main exchanges against a fiat currency (e.g. dollar) like at LocalBitcoins or BitPay, but only if PPC price moves up. If PPC price moves down and the price for your good would normally move up, you can opt that you want to “back” Peercoin for a day or some days maintaining the same price.

So in the end a economy of “Peercoin backers” could evolve and the currency would be the more stable, the more backers there are.

This idea is obviously not Peercoin-specific, but I think it could be work well with Peercoin because of the flexible money supply model and a community oriented in sustainability.

What do you think? Is someone perhaps even planning a e-commerce platform for PPC to try this out? :wink:

#2

How about taking a cue from XNF (NoFiatCoin)? I know its different as its centralized but still it is like a good inspiration.

I like your thread as it is talking about very much possible future issues or who has time to talk such things?

#3

Nice idea :).
But the problem will not be solved, as long as the seller of a good must pay his suppliers and materials, his rent and bills in USD or EUR. Sellers will be more interrested in the real to-date exchange rate to a fiat currency than they are interrested in being a “peercoin backers”. Only a stable exchange rate can offer this. Or a complete ecosystem in ppc, where the whole value chain for something is traded in ppc… But this can only be established with trust in the coin, which in turn builds upon a stable exchange rate.

A viable solution would be to have a fixed exchange rate to, e.g. USD. Lets say somebody or a community with a hige stake has an Internet site and offers the coin for a really fixed exchange rate of, say, 10,- USD/PPC. Never more, never less. Everybody can exchange his fiat for this rate and pays a fixed fee of, say, 1% in both directions… As he would for exchanging different fiat currencies.
Soon everybody would know where he can get and sell PPC for a fixed price and sellers as well as buyers don’t have to cope with the hassles of rollercoaster exchange rates. Of course it would make the coin less interresting for short term traders - but for fong term investors, ppc is by design interresting because of the PoS rewards.

Later on, when there is an established ecosystem using ppc, the exchange rate may vary… Because by then the variance will eventually be moderate, like with classical forex.

#4

[quote=“plasmapelz, post:3, topic:1935”]Nice idea :).
But the problem will not be solved, as long as the seller of a good must pay his suppliers and materials, his rent and bills in USD or EUR. Sellers will be more interrested in the real to-date exchange rate to a fiat currency than they are interrested in being a “peercoin backers”. Only a stable exchange rate can offer this. Or a complete ecosystem in ppc, where the whole value chain for something is traded in ppc… But this can only be established with trust in the coin, which in turn builds upon a stable exchange rate.[/quote]

The idea is to help building exactly an ecosystem around PPC.

To lower their risk, merchants first can offer only a limited stock of their products for the fixed price (as “Peercoin backers”), if they don’t trust the exchange rate. They could offer one item for a fixed price in PPC as a promotional offer, like they otherwise would publish special offers with discount prices, and the rest of their products with a variable price like now with BitPay.

The idea is that the more sellers do this - even if they only offer one product with limited stock for a fixed price - the more stable the PPC price will be: When the PPC price moves down, there will be an incentive to buy PPC to buy the “fixed price” products cheaper, and so the exchange rate would tend to move up again or at least to stabilize. And if there are many merchants “backing” PPC this way, the effect would be much stronger.

Merchants with low variable costs and high fixed costs (e.g. software sellers) would specially benefit from this model, as for them it can be more important to sell a high quantity for a lower price than a small quantity for a high price. For them, every PPC crash can be a “selling machine” if they adopt the model.

A viable solution would be to have a [b]fixed[/b] exchange rate to, e.g. USD. Lets say somebody or a community with a hige stake has an Internet site and offers the coin for a really fixed exchange rate of, say, 10,- USD/PPC. Never more, never less. Everybody can exchange his fiat for this rate and pays a fixed fee of, say, 1% in both directions.. As he would for exchanging different fiat currencies. Soon everybody would know where he can get and sell PPC for a fixed price and sellers as well as buyers don't have to cope with the hassles of rollercoaster exchange rates. Of course it would make the coin less interresting for short term traders - but for fong term investors, ppc is by design interresting because of the PoS rewards.

Of course this “backing” system can be implemented also in descentralized exchanges (like “LocalPeercoins”, perhaps FuzzyBear could implement this model there as a possibility for exchangers) and this could make the stabilizing efect even stronger. For a maximal stabilizing effect, there should be both things: goods/services merchants and PPC/fiat exchangers. The more exchangers offering fixed price, the more merchants will be willing to adopt the model, and vice versa.

#5

[quote=“d5000, post:4, topic:1935”][quote=“plasmapelz, post:3, topic:1935”]Nice idea :).
But the problem will not be solved, as long as the seller of a good must pay his suppliers and materials, his rent and bills in USD or EUR. Sellers will be more interrested in the real to-date exchange rate to a fiat currency than they are interrested in being a “peercoin backers”. Only a stable exchange rate can offer this. Or a complete ecosystem in ppc, where the whole value chain for something is traded in ppc… But this can only be established with trust in the coin, which in turn builds upon a stable exchange rate.[/quote]

The idea is to help building exactly an ecosystem around PPC.[/quote]

Very good thoughts, and definitely an issue to be addressed (as someone having done his fair share of Forex and Commodities trading, I am on record around stacks of Crypto coin fora to do talking and talking and then some talking for “a real economy” behind (any) Crypto coins needed to make them “stick” or become more widely used and accepted among the general population).

The problem is not even a typical Peercoin problem but even applies to “big” Bitcoin itself: real coin usage is far from being wonderful yet, and almost all merchants use it for pass-through transactions only to have their BTC converted “back” to dollars by Coinbase or similarly…

The same phenomenon is present with some fiat currencies of small economies being very volatile (almost Bitcoin-style) in Forex markets.

It is, hence, the real use of coins creating some sustained “velocity of money”, and therefore value, that needs to be improved upon.

Fixed exchange rates or having merchants “holding the buck”, as in being stuck with it, will not solve the problem though. On the contrary, it would further DIS-INCENTIVISE using Crypto coins at all (from merchants’ point of view)…

Measures like those are yet another way of central planning anyway, nothing could be more incompatible with the wider Crypto coin space!

More promising approaches are used by the Isracoin and the Guncoin and also Potcoin communities: they are running measures to spread their coins and reward participating merchants (in their coin) for accepting them. Producing a, possibly RaspberryPi-based, simple PoS (here meant as point-of-sale) terminal and distributing it on the cheap or for FREE to both e-commerce and bricks-and-mortar businesses might do the trick. It would make it both easy and automatic for merchants to actually start using the coin. And it comes with hugely superior terms (over a Visa in-store terminal), no charge-back risk too. We would need to point this out very clearly with any campaign like this.

An additional “special air drop” of coins could be instigated for merchants delivering their products to other merchants for Peercoin payments. Think of it as a more substantial PPC payout for actual B2B transactions in peercoins!

Some “real-life services” are already available for peercoins today, and these need to be extended in order to build on this positive first step…

#6

Good point Marquix.

#7

Haven’t seen the answers from June as the thread is quite old :slight_smile:

My idea was to make this backing system optional. Merchants who want to back the price should be able to do it (but when they chose so, then they must maintain their position for the time they chose), and merchants who need to change price when exchange rates move, should be able to do that too.

But in my last thoughts about this “backing system” I am moving to the idea that a specialized payment processor would be often a good way to reduce the risk of the single merchant. The payment processor would act as an intermediary and take part of the risk. I have to elaborate on this idea further though. But these payment processors probably would appear anyway if “backing” is rewarded or incentivized in some way.

Measures like those are yet another way of **central planning** anyway, nothing could be more incompatible with the wider Crypto coin space!

Disagree, as every merchant could opt for backing or not-backing. No one would be forced to do so by a “central” instance.

The other measures you mention can be implemented by virtually any coin without any code changes. The idea of incentivating commerce distributing coins to merchants is a good one, but (imho) cannot be automatized as such an algorithm very probably would be gameable. So it would be up to individual communities and sub-communities to do that via donations or a centrally-distributed pre-mine.

PS: With NuBits and BTSX (bitUSD) we now have two examples of (somewhat) descentralized fixed-exchange-rate coins / cryptocoin-based assets. I am following both approaches closely. I think they are not ideal solutions but can help to understand the underlying mechanisms of price stability.