OK, that's the kind of thing I was imagining to make a decentralized market between crypto-currencies, and get transparent, hard-to-game price discovery there. But the AussieCoin guy on the other thread wanted to peg to Australian Dollars. That's the bit I thought would need some kind of trusted authority (albeit a list of independent authorities, so you'd need a quorum of them to make a decision and you could kick them off if they misbehaved).
Am I right in thinking that you're not actually trying to achieve stability in relation to anything beyond another crypto-currency, like prices or a regular currency?
Stability in relation to another crypto-currency would be fairly trivial to achieve. cvTokens allow for stability in relation to
anything (with the caveat that collateralisation in BTC must be sufficient to sustain cashouts). The valuation anchor is set by the creators of each cvToken through a combination of their collateralised amounts and how they market the cvToken to actual adopters--it could be another currency, a basket of currencies, a basket of goods, etc.
In order to create a cvAussieToken, you would begin by launching a cvToken with at least one Aussie Dollar of BTC collateralised per issued token. Initially you would maintain both sides of the distributed market yourself, in order to provide confidence to potential users that the valuation of the cvToken is truly one Aussie Dollar (you would have to adjust the bids continuously based on the exchange rate between BTC and Aussie Dollars). Next, you have to convince people to start buying or accepting the cvTokens you have issued, most likely by convincing merchants to accept them for real goods (or perhaps you are a merchant yourself and that is why you created the cvAussieToken in the first place). Note that unlike BTC there is no incentive for people to buy and hold cvAussieTokens speculatively, so there needs to be a real marketplace already in existence, and consumer confidence needs to build that the tokens are actually being traded on the claimed basis. If you are successful and demand for the tokens begins to exceed what you initially issued based on your own collateral, some enterprising individuals will begin placing their own bids on the distributed market, and you can collateralise the excess demand into further issuance. Continue to be successful in growing the cvAussieToken market, and BTC speculators will begin to join you as backers, attracted by the chance to profit off the risk that token holders are offloading. By this point any attempt to manipulate the distributed market surreptitiously will become quite unprofitable for you, and the price will remain fixed at one Aussie Dollar until or unless the cvAussieToken market disappears.
Essentially what is happening here is that price information is being harvested off of the expectations placed on the token. Initially those expectations are placed by the creator of the token, but as the market for the token grows the net expectations of the market as a whole come to dominate and any behaviour to the contrary in the bidding process becomes very unprofitable. This bootstrapping can happen in any situation where the marketplace volume as a whole exceeds the wealth of prominent players, because the successful adoption of the token takes its valuation out of their hands.