mhps: mhps: I think the proceeds obtained from selling the NBT is not profit, but liablities. NBT are IOUs given to the buyer, promising that “I will pay back $1 to whoever has 1 of this notes called NBT.” If the proceeds is spent (paying for development or to the investors), it is removed from the system. Then there are less USDs in the system than NBTs in the world, The system will be running on fractional reserve. What do I think wrong?

I came to the same conclusion and wrote about it here: Question about selling pressure aka the buy wall I suggested a Proof-of-Collateral, thinking at if there was just enough collateral to make the system solvent and protect against whipsaws, then people would feel more confident and hence not put the system under stress because of fear of the system not being solvent. Chronos comment on this, was that it’s not a long term solution. Jordans comment on the whole thing, is that something doesn’t have to work perfectly for ever, to be useful and add value to an economy for a great while. I agree with both of them.

I suggest that when the cracks starts to appear, a first sign will be super high volume of NBT being traded and sharderholder market price plummeting. Those left holding the shareholder bag, will have to decide if they think it’s worth bailing out the system by injecting new capital. They could very well think that, it could be worth it and then they would buy up floating NBT’s and burn them or park them for ever. If the profit they made earlier is big enough to support this action, they could do it. If the cost outweighs the profit, they might not I think.

If shares are being traded on open exchanges, these profits that could be used as collateral may very well have been squandered by previous shareholders. New shareholders would be holding the bag and when price goes to zero of NBT, they along with current NBT holders will be paying the price for the peg not holding.

I would very much like to be proven wrong on this.

EDIT: I also think that it could be very profitable to be a shareholder during the expansionary phase. Since the price will be super stable and since its decentralized, I very much expect to see many exchanges adopting NBT. I also think NBT could be the backbone currency of decentralized exchanges, which would now offer basically a USD derivative as stable as USD. I believe arbitrage bots will ensure that 1 NBT will be worth 1 USD across the exchange network. During the phase lot and lots of NBTs will be created and create a stream of peercoins into the pockets of shareholders.