Answers to @Winslow's questions:

Q: How can a 1:1 swap be enforced AND liquidity be maintained?  If the market were to net want to swap hybrid on one chain for another, and the exchange rate of 1:1 is imposed, where does the liquidity come from so that all those who want to swap can swap?
We create liquidity on 1:1 swaps by letting allocators earn a fee on every swarm transaction they are part of. So technically this makes a swap 1:0.99 for a user switching chains, with 0.01 going to the allocator swarm. We want to make sure swapping chains is always done for a reason, and supports the network. Bitcoin transactions work in a similar way, and also have a fee.

So this is what I understand, and please correct me if it's off: it seems to me that when the allocator fee is included, the exchange rate need not be 1:1 for hybrid living on different chains.  It's (1+fee1 : 1+fee2), which amounts to a floating exchange rate set by market forces.  This makes economic sens as a way liquidity can be provided, but also means that the hybrid on each chain are effectively different currencies, in the sense that they would be priced separately on any std exchange (e.g. Poloniex), and there's no reason their prices would need to be close to the same as one another.


Q: What are the specific trades that can be made to instantiate the arbitrage?
For arbitrage, a trader would have to make use of an exchange in combination with Internet of Coins swaps. For instance, to arbitrage on HYBRID part ETH vs XCP, the traders sells HYBRID for ETH on EtherDelta, sends that to an exchange (centralized or decentralized), and trades it for XCP there. Then the trader sends it to the CounterParty DEX and buys HYBRID. The circle is complete. However, this will only be done in case of large price imbalance between chains. Otherwise, the arbitrage trader cannot make profit on this.

I see that this arbitrage could exist (and hence correct for) price mismatches between Hybrid(XCP) vs Hybrid(ETH) as existing via IOC swap vs as implied by those prices and the ETH:XCP prices on exchanges.  What I don't see is that this forces the price of Hybrid(XCP) : Hybrid(ETH) to stay close to 1.  I.e. as long as prices are consistent (but possibly different from 1) then no arbitrage will be possible. The price would have to be close to 1 if the IoC coinswap could guarantee liquidity at that price, but again I dont see how it could do that without market-based fees, which effectively is equivalent to a floating price, not a fixed price of 1.

Q: How many HYBRID tokens will be added per new crypto?  If any, how are they to be sold and to whom do the revenues from the sales go?  Or maybe you mean no new HYBRID tokens will be issued, i.e. there will always be 7M?  But then how would other chains be included within IOC's weave-based DEX?
We don't just add HYBRID to every crypto. We add the chain system that have their own token/asset system. Per system this would be 1M tokens. We would make these fungible either by proof-of-burn or organizing a sale. Any additional proceeds would go to the NLnet foundation to make sure they are used for further development.

Hence this is a potential source of inflation for hybrid holders, yes?  I.e. if you increase the hybrid supply to add a new coin and make that hybrid exchangeable wrt the existing hybrid.

For a lot of cryptocurrencies, however, we can use methods next to HYBRID for swaps, like for example atomic transactions.
WIthout issuing new tokens, this would be inflation-free


Q: What happens if less than 900k tokens are sold on a chain?  Are 1M still issued, and if so how are they allocated?
Most likely we would issue the last 100k by finding someone willing to fund them, or emit them in a slow sale. We will vote on that when we add another chain system.

My question was aiming at something different.  Im not concerned with the gap between the max of 900k tokens sold per chain and the remaining 100k, which are to be issued over the next few years.  I'm concerned with e.g. if e.g. only 9k tokens are sold for e.g. NXT.  Then are you only going to issue 9k (10k) hybrid on NXT, or will you issue 900k (1M), in which case how will those extra tokens be distributed?  That's a major inflationary concern at the moment, since only ~215k hybrid have been sold out of a possible 6.3M (7M).