Baking Bread Amidst Price Volatility

19 Sep 2014 / CodaSiren

In many a conversation, I have come across the argument that Bitcoin, or other cryptocurrencies for that matter, would never be regularly used by merchants because of the inherent price instability in the markets. There are those who contradict this opinion by pointing out that when Bitcoin is beyond its adoption phase its price will stabilize enough to enable it to be used just like fiat currencies. This discussion doesn't matter much to me. The day my fridge or pantry is capable of stocking up on food automatically, it may well do so by using dedicated assets to buy different types of groceries. Price instability will not be much of an issue. A more stable price in cryptocurrencies would be good in my opinion, and yet there is another way to work around the insecurity of price fluctuations (besides NuBits). By using dedicated assets tied to representative real-world units of value, fluctuations in the price of cryptocurrencies matter less in the daily life of a consumer. Actually, using assets in this way could make life a whole lot easier. Let me give an example.

Tom is a baker, and wants to sell loaves of whole grain bread. He picks his favorite asset-supporting blockchain (NXT-AE, CounterParty, Ethereum, Mastercoin, or other) and creates an asset on it called TOMSWHOLEGRAIN. In its description, Tom promises that one asset of TOMSWHOLEGRAIN is always going to be worth one loaf of his tasty wholegrain bread. When someone buys this asset from Tom, it can later be exchanged for one loaf of Toms bread at any supporting point of sale, one-on-one. Tom makes sure he has enough ingredients and capacity to make enough bread to live up to the demand. The statistics on his asset give him a lot of helpful information. He knows how many assets have been bought, and thus how much bread he owes the buyers. He can also anticipate on future orders by extrapolating the data. He may be able to stock up on local and fair ingredients, and thus make local trade realistically competitive against global trade, which is better for the environment. Tom will not be entirely free of price fluctuation. At least for the cryptosphere, we can agree with the Greek Heraclitus that "everything is in flux". Still, the effect of flux will be a lot less for Tom when he uses his dedicated asset, than when he would offer his bread for sale denominated in Bitcoins. Besides this, Tom needs to worry a lot less about speculators, as his small asset will not be very attractive to traders who would rather take part in highly liquid and volatile markets. It is relatively easy for him to automatically calculate the price of his TOMSWHOLEGRAIN asset, using variables like the current cost of flour, or energy as inputs into an automatic pricing API. To make all this user friendly, he only needs a front-end onto his digital, asset-based sales system to make it usable for anyone. Even without front-end, however, my fridge orders TOMSWHOLEGRAIN and other assets as soon as my Volatilecoin paycheck comes in, making sure I can eat until next month. For each product Tom has, he can issue an asset. Some products that cost a similar amount of ingredients and energy to make, could be grouped under a dedicated asset. Assets could be named, or use codes translated back to a product table. In any case, Tom has enough flexible options to jump-start his business on the blockchain. Possibilities are endless. And if he wanted to, Tom could start today.



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