I wasn't trying to tie it to the dollar per se, that was just an example for the initial stabilization phase. The coin's price will essentially be tied to the global average electricity cost. So if global electricity suddenly got 10% cheaper (eg. new invention) all coins will lose 10% of their value and be worth, for example, 90 cents each (and vice-versa). I find that a very reasonable drawback though, not to mention unavoidable. But if the fed prints a trillion dollars tomorrow that will make the dollar cheaper, so it'll cost people more cents per Kilowatt worldwide, so the coins remain essentially unchanged.
I'm proposing that it is avoidable in the newest version of my proposal.
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But who will the merchants pay their money for to acquire bitcoin credit?
Not sure what you mean. By putting their money on the line, I mean they must maintain a certain balance in their account to get transaction fees refunded. It is basically security against approving bad spends. The penalty for attempting to subvert the network is losing whatever balance you have.
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How will it be decentralized? My suggestion keeps everything in the current design intact except for the number of coins each new block will contain. That's why I believe it requires very simple modification to the current code, plus it will be just as familiar to the existing audience.
It will be less decentralized in that each node in the network is aware of what other nodes are approving transactions. It will be less anonymous in that nodes that are approving transactions will have to sign those transactions. But these trade-offs mean that the network does not rely on hashing power and it will ultimately be far more scalable and far more adjustable than bitcoin. The endgame for bitcoin is that bank-like entities will be running the show as regular nodes have no hope of actually being a part of the network (8Gb/s bandwidth, a terabyte of space every few days). It puts the power back into the hands of the elite.
Not to mention that any direct competitor to bitcoin that is forked from bitcoin is going to have the major issue of 51% attacks on the network. See fairbrix, SC2, namecoin, etc.