Quote from: funsponge on May 03, 2017, 12:40:00 AM

Quote from: fluxer555 on May 02, 2017, 06:14:13 PM

Just to make sure I understand correctly...

By being able to change the liquid supply, we can manipulate the spot price. This shouldn't affect market cap, however, because we're decreasing the supply to increase the spot price, and increasing the supply to decrease spot price. Since market cap = (supply x spot price), in theory, we should be able to keep the price constant.

My questions:

1. At what frequency is the liquid supply updated? It's not uncommon for crypto to have ±10% in a few minutes, and this could be troublesome for a consistent peg.
2. Is voting really going to be effective enough to keep track? It seems like it would be a full time job to constantly adjust the liquid supply manually.
3. Does the existence of illiquid supply affect the demand in any passive way? The dynamics here seem complex.
4. Will we ever get into a situation where BAY will be locked away indefinitely, in a sort of "checkmate" between keeping the peg consistent, and the inevitability of a drop in demand if the peg were to change (to release illiquid funds)?

I have taken this info from a slack discussion that was happening today as other people have asked about it.

How to vote.

there is a default setting in the wallet So by default you are voting to automate the pegging, which means you are requesting an algorithm decide for you. Your other 3 options are:
- Vote to Deflate
- Vote to Inflate
- Vote to Maintain Supply

If you select any of the bottom 3 you will need to cast a vote to let your voice be heard. All that requires from this point on is that you stake your Client
If you change your mind in the future you simply change the setting.

It's that simple!

How often voting occurs.

The voting could technically be counted 24 times a day . . once an hour. meaning 24% compound + or - in either freeze or thaw. That is really aggressive and can force a pretty stable price or if we want a bit more play or slow and gradual rolling peg the temperament of 2-5% maximum per day (counting votes 5 times a day) is much more slow freeze

please keep in mind this is on going discussions as its never been done before.

David's trying to think of everything like the chess master he is. He's always trying to think 5-10 steps ahead

Thanks for remembering those details. Also I should add to automate the vote would be what most people will do. I was thinking we might have to add another option to that dropdown box which is "vote towards target" and have them vote to a target supply or price. Its possible to only let those decisions for each user run for a week or so to force them to occasionally check the software again to recast it. These are mostly user interface decisions but not protocol.

The idea of how centric do we want to make an algorithm gets closer to the heart of protocol.

Actually the frozen supply can effect demand in a good way. There is a bylaw being added to allow transfer of frozen supply on the condition it is locked in a 1 month time lock. This "slows" the frozen funds so you could just say there are variable speeds of liquidity. The slowed funds are used for bonds, credit swaps or trustless loans and really all kinds of cool instruments never before thought possible in crypto.

If there becomes a speculative market, i would think the frozen/slowed funds would become the speculative market. Because those give access to voting power, can be staked for interest and also serve as a future. It will be one helluva fun trading game.

I can see the peg falling into the situation you described. A few potential risks is it is deflated too much so the price goes way too high and cannot be recovered to that target. Another risk is the network can't agree on a supply so it gets stuck at a certain level.

But consider that there is always changes to the economy and the ones holding. So most likely it would never really get stuck at a specific supply. Someone who buys up 100% of the liquidity would end up seeing the supply inflate. So i think as long as there is consistent demand that is something we shouldn't worry about.

But lets say this happens. Then we would want to consider forking to update the algorithms perhaps?! The cool part about this is that its an awesome social experiment so we can see how it goes and adjust and get inspired to improve upon it with better algorithms.

In theory, we can do it based purely on algorithms without voting but for now I really like combining the two.