1

If I wanted to create a digital coin (asset) and wanted to keep the value of that coin steady (Think a dollar. It's worth a dollar today and a dollar tomorrow and a dollar every day.) What would be the best way to go about trading that coin? I am not looking to increase or decrease the value of the coin, I am looking more for a way that the coin could be cashed in by the holder. I figured I would come here because you all are way smarter than I am. :)

TIA

1

You would need to create some guarantee that someone would be willing to exchange this token for exactly a dollar. This means that the value of the token would in no way be market driven, except that it is pegged to an existing currency and its value fluctuations. I don't believe there is a way to do this in a decentralized manner, but since that's not what you asked, I'll assume that's okay.

You would need to create a company/organization that issues the token, and guarantees that they will buy it back for the price you peg it to. For example, you would always exchange one token for one dollar. This would have to be a legally binding agreement, so that if your organization ever refused to exchange at that rate, holders of the token would have legal recourse against you. You would also need to be able to prove your solvency, and thus hold enough assets in dollars that holders of the token can be assured that you have the dollars to exchange if there was ever a run. If a question of your solvency ever arose, your token would drop in value, so you'd have to allow regular audits of your organization's asset holdings.

Likely, much of this probably negates many of the advantages you are attempting to seek by creating a digital currency in the first place. The trust in your system would be based on the legal system and the government that enforces that system...just like government issued fiat currencies. Your organization would more or less be a bank, but a bank that issues its own token, and therefore is locked out of the existing financial infrastructure. You would be subject to regulation, and therefore won't be able to offer anything more than a bank does.

In the modern age, nearly all money is digital. You've basically just asked how to start a bank.

  • Jestin, Thank you for your answer. This is basically what I thought but I was looking for the possibility that there was a different answer. I appreciate you taking the time to answer. – Don Man Oct 12 '17 at 18:20
  • There still might be another solution, but if so, it's beyond me :) Pegging means issuing a guarantee, and that guarantee has to be trusted. Tying a decentralized currency to a centralized currency will likely always cause the trust model of the centralized currency to be inherited by the decentralized one. – Jestin Oct 12 '17 at 18:24

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.