Bitcoin : A simple “Spend & Replace” solution would allow the hodler to freely spend his Bitcoin without fear of losing value while replenishing his Bitcoin account. We propose the following solution:
**Freedom Project** – Application 2 of 26
There will exist market makers and users. Market makers will act as the escrow agent and counterparty to the user. Users will indicate to the market maker a public key for which they desire a price peg. The market maker will regularly scan the blockchain for balance changes of the public key and automatically update positions as necessary. The user will be in sole possession of the private key for the given public key. The user will send a fraction of the desired peg to the market maker to be held as collateral against price volatility. The market maker will charge a daily rate for the price peg as determined by market conditions. This rate can be both positive and negative. Furthermore the user will be charged for changing position sizes. All fees will be netted against the user’s escrow. If at any time escrowed funds move below a desired range, the user will be prompted to replenish the escrow. If at any time escrowed funds exceed the desired range, the market maker will automatically send excess funds back to the pegged public key. Open competition will keep market makers honest. Users can create a list of trusted market makers for which orders will automatically be matched against. Replenishing and withdrawing escrow will involve nothing more than simply signing a transaction.
By pegging value to the public key, the user can easily transact without going through the headache of making matching transactions in a parallel system. Additionally, the counterparty risk is reduced to the extent of the escrowed funds. There is also no web account which can be hacked. All position changes, escrow deposits, and escrow withdrawals will require signed transactions in doing so inheriting the security of the underlying wallet infrastructure.
**Spend & Replace**
The user will indicate a desired Bitcoin threshold level. Any time the Bitcoin balance drops below the threshold, the market maker will assume a position which matches the desired threshold level. Let’s say Bob has five Bitcoin. He designates his Spend & Replace threshold at five Bitcoin. He purchases a Lamborghini for one Bitcoin, and now has four Bitcoin in his spend & replace account. The market maker will instantly see the updated balance on the blockchain, and reserve one Bitcoin for Bob at the Big Mac price when Bob purchased the Lamborghini. Bob finally gets around to replenishing the Bitcoin two weeks later but BCH/BM increased 50%. Fortunately the market maker agrees to sell Bob one Bitcoin at the price when he purchased the Lamborghini. Bob still has five Bitcoin and did not have to spend any additional Big Macs despite a price increase.
The following will be explained when setting up the client in “App 1, Step 8.” Within the Freedom wallet there will exist three core accounts. Users at the touch of a button can move funds between their Standard Bitcoin, Big Mac pegged, and Spend & Replace accounts. Replenishing escrow will involve pushing 2 buttons. All excess escrow will automatically be sent back.
Bitcoin is a distributed, worldwide, decentralized digital money. Bitcoins are issued and managed without any central authority.
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