HOW CAFECOIN PLANS ON ADDRESSING ONE OF CRYPTOCURRENCY’S ISSUES
One of the primary factors as to why a lot of people are turned off by cryptocurrency is because of the unstable or volatile valuation of its coins. This has always been the case, and even though there were times it seemed to go only one direction for a while, not too long after it would suddenly take a steep dive, or a sudden climb. For the longest time now, there hasn’t been much that users of cryptocurrency can do about it, forcing them to just focus on the things they could change, and basically just let prices be as volatile as always.
Cryptocurrencies like Bitcoin suffer from this issue. Another thing that holds wide-range adoption of cryptocurrency back is the slow transaction speed and the high transaction fees. Because of these, as well as a number of other factors, merchants are quite reluctant to accept them as a mode of payment. Because not a lot of people are willing to utilize them, they are seen more of a digital version of gold. This brings into question for how long cryptocurrency would actually be useful, considering that for now, it cannot reliably be used as a means of exchange for goods and services.
In general, most cryptocoins that are used as a mode of payment have the potential for high sudden appreciation with high volatility. However, good currencies should have slow to moderate appreciation rates and low volatility. This is the key difference that separates current and available cryptocoins from traditional fiat money. To cite real-world examples, Bitcoin has shown over 100% volatility, and an appreciation of over 700%. This makes it a viable store of value, but it also makes it a bad currency. On the other hand, take a national currency like Euro. They are relatively stable when it comes to valuation, but the valuation doesn’t significantly increase at all, which makes it good currency.
The Foundation aims to have CafeCoin embody the best of both worlds. They plan to impose an economic framework that will get a relatively stable valuation in the long run, and could also preserve the potential for appreciation. The Foundation has done its research, and they will incorporate all the gathered information and lessons to create the right framework. CafeCoin is designed from the start to be a commercially popular and used mode of payment in the market.
If executed properly, CafeCoin adoption rate will increase, which in turn, will increase demand and will lead to an increase of its value while still maintaining the characteristics of a good currency. CafeCoin is set apart from traditional cryptocurrencies by leveraging financial formulas and protocols to stabilize price volatility.
HOW CAFECOIN WILL ENSURE STABILITY
Just like any other modes of payment utilized by merchants and consumers, the market scenario and demand for CafeCoin may change at any given time, and without warning. To make sure that price-volatility stays reasonably low during the launch of its blockchain, The Foundation will choose an ideal stability control mechanism in order to account for and act in accordance to market changes. This will be done through time spent on research in order to choose the most effective method to implement the strategy.
Another thing The Foundation plans to do is to allocate 20% of the initial offering proceeds towards a Reserve Stability Fund. This fund will be used to purchase and sell CafeCoins to reduce volatility. The balance between purchasing and selling is to be maintained and monitored in order to make sure the valuation is steady, and yet retains the possibility of appreciation. An example is when the 20-day Volume Weighted Average Pricing of CafeCoin reaches above 100% of the initial distribution price, also known as the Spacher Point. At this time, The Foundation will release additional CafeCoins to accommodate the market demand.
However, they will not do this without meeting certain rules they set:
- No release below the Spacher Point
Under no circumstance will The Foundation release new CafeCoins into the marketplace if the valuation has not reached the Spacher Point. This is done so that supply and demand is appropriately balanced, and that value volatility is relatively controlled.
- No more than thrice the ACV
Just in case the Spacher Point is reached, The Foundation will cap the total quantity of new CafeCoins to be issued at no more than three times the average coin volume that was traded daily over the previous 20 days during any 6-month period.
- Back to Reserve
Twenty percent of all further sales of the newly issued CafeCoins will be put into the strategic reserve fund to further support future price stability.
The Foundation will also apply the mathematical equation based on Volume Weighted Average Pricing in order to maintain stability. The data included in the equations will be based from real-time market data provided by the leading cryptocurrency exchanges that are able to trade CafeCoin. As an aftereffect to mitigate extreme upwards price trends, The Foundation also proposes the use of its strategic reserves to support the price of CafeCoin in the case of unprecedented and unanticipated downhill price slides. With this, if need The Foundation will be able to spend its reserves by purchasing CafeCoin if the price reported on the major exchanges falls below a reserve price.
The daily quantity of CafeCoin repurchase will not exceed 20% of the volume traded within the 20-day period, so that even when trying to gain value, volatility will still be avoided. By using tried-and-tested mathematical equations and other processes and protocols, The Foundation plans to provide a stable economic environment for the users of CafeCoin. CafeCoin will also become more reliable in the eyes of merchants and consumers as a consistent vehicle of trade for goods and services.
CAFECOIN’S INFLATION PROTECTION
In order to ensure CafeCoin is utilized for the long-term as a true utility token, The Foundation believes it needs to be protected from inflation. To get the right protection, The Foundation will research and assess the inflation using the annual Consumer Price Indices of the two largest global economies, USA and China, wherein the US represents the economic state of the developing world, and China reflects the economic growth of the developing world.
The Foundation will rely on the official data that will be provided annually by The World Bank, and it also intends to give out additional CafeCoins to holders as a bonus, and as a hedge against world inflation. The Foundation will apply a modified inflation mechanism where the CafeCoin holder will receive free distribution of CafeCoins as an inflation adjusted bonus. Issuing new coins will occur every year within two months after The World Bank releases its inflation data.
The CafeCoin Foundation utilizes advanced mathematical equations and formulae to ensure stability is maintained regarding CafeCoin’s value. They have leveraged the knowledge of many experts, and have consulted with many authorities in order to overcome one of cryptocurrency’s prominent issues. With all the protocols and precautions The Foundation plans to implement, users will feel safer knowing that price volatility won’t be an issue when utilizing CafeCoin.