Can anyone ELI5 me on Dynamic PEG? I don't understand what it is and on which currency BAY will be pegged to...or if there is another coin running on BitBay which the pegged one
With the Dynamic Peg, BAY is
not pegged to any currency or asset at all. It's one coin, that has multiple levels of liquidity (spending power) within it.
It can best be described through an analogy.
Imagine there is a group of thirsty people, and in front of them is a water vending machine. This vending machine can quickly turn liquid water into ice, and vice versa.
7 times a day, this group casts a vote to express their level of thirst. Based on the consensus of each voting session, the machine releases (or freezes) a specific amount (1-3%) of water, leaving an amount closer to what everyone wants to drink.
If demand falls and water
freezes, then there is less liquid to drink. This puts
upward price pressure on of liquid water.
If demand increases and water
unfreezes, there is more liquid to drink. This puts
downward price pressure on liquid water.
So the price of liquid water becomes stable, in relation to the amount needed by the people. People's level of thirst is always changing, and the price can change right along with it.
--
BitBay's Dynamic Peg is this water vending machine, but for money... and the group of people voting are all the stakers of BitBay's blockchain.
It moves towards a liquid price that everyone agrees on, and the rest is frozen for later. The frozen BAY can then be traded on a secondary market, based on a future speculative value.
Because it is
democratic, there is no need to peg it to an asset or fix it to a price. The total supply is controlled by the users themselves, and not a central entity. History has shown how price fixing and hard currency pegs always fail under extreme market pressure. Because it's not pegged, there is no need for auditing reserves (like tether, gemeni, circle, etc.), or trying to keep a hard price ($1) when the market chooses otherwise... like most other stablecoins.
Instead the dynamic peg allows the price to move and adapt with market swings, within refined limits. It
reduces (but doesn't eliminate)
volatility to the point where people can use BAY as both a store of value, and a medium of exchange. This allows the users of BitBay's marketplace to have a stable form of value when using BAY as a deposit for its P2P contracts.
ps: if a user doesn't want to vote, they can opt to have an algorithm vote for them
Thanks very much for the explanation, it's even a good idea for an explanatory video, I'm not being sarcastic or anything, I really think this