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)?
Why is this necessary ? What is the benefit ? It just seems like how the central bank works except you are giving people the chance to vote. It seems like an unnecessary complication that has the potential to cause problems. The average Joe won't be voting anyway so this is one more way for the whales to manipulate the price
If you ask for the #1 complaint of merchants accepting bitcoin as a payment option is that they fear its volatility. Their cash flow comes first and foremost, which means they can't afford to hold bitcoin if they sell items for bitcoin and then wake up one morning to see the price of bitcoin is down 5-10% because, for example, the damn Chinese government all of a sudden decides to manipulate the price through new unexpected regulation laws. Merchants must retain their profits to stay afloat. So they typically do the most obvious solution, which is to cash out to fiat as soon as the transaction is complete.
The rolling peg will solve this. The goal of the rolling peg, in my opinion, it to provide a solution where the price of the coin can still fluctuate, but in a much more stabilized environment. My hopes are that it would become even more stable than most of the forex 'majors'.