Don’t currencies achieve stability as they grow in size? If so, why not focus on adoption vs. building a specific system like this?
First, we must define the meaning of stability itself, and understand its relationship to time.
In our opinion, stability is only perceived when value changes slowly over a long period of time, and volatility is perceived when value changes quickly over short period of time.
For example: If the US Dollar’s value drops 5% in a day, it is considered a global crisis. If it slowly drops 5% over three years it’s considered normal.
In essence, stability equals low volatility… and low volatility occurs when supply and volume intersect during a significant length of time.
Despite its fundamental structure, the US Dollar has successfully maintained the appearance of stability for its users. This is primarily due to its massive volume. It does fluctuate in value, but that value has changed over a long period of time. Many cryptocurrency proponents are waiting for adoption (volume) in order to achieve this kind of size, and therefore become stable. However, this process can be a double-edged sword, as stability itself is needed for adoption to take place.
Given historic price data, currencies like Bitcoin could easily take take another 10–20 years before they are considered a “low volatility” currency. BitBay’s Dynamic Peg speeds up this process exponentially.
Questions, comments, concerns? Please post them in the comments below!