https://www.federalreserve.gov/faqs/currency_12772.htm

Through out this paper Bitcoin with a capital ‘B’ will denote the network and bitcoin with a lower case ‘b’ will denote the currency.

THE PROBLEM

Paper checks are the least secure form of payment, for reasons too numerous to cover

here. Many bid service businesses will still readily accept a paper check for payment of an invoice, without any scrutiny. With paper checks for larger amounts, the bank will automatically place a 3 day hold on the funds while the traction settles on the back end. That gets added to the 3-5 days it takes for the mail delivery service to move the envelope from A to B. There is a silent loss of purchasing power while the funds are in transit due to the inflationary nature of the dollar. Once the funds are available in the bank account, it can take

another 3-6 days for a fiat on ramp to make the bitcoin available for withdrawal into a hardware wallet for safe keeping.

Why not just use a wire transfer, or the ACH? Wire transfers and the ACH can still take up to 3 days for a deposit to be credited to a users account. There are high fees associated with wire transfers and ACH transactions. This is an improvement, however, there is a better way. Neither, is a solution to the fiat on ramp problem. Decreasing the amount of time from the initiation of a transaction to he time the bitcoin is safely in a private wallet, from as many as 14 days down to 60 minutes or less would be a revolutionary improvement.

It is inconclusive as to whether the Lightning Network will be a viable solution for everyone, at least in the short term, because of the limitations inherent with sending large amounts.

CATERING TO THE SOVEREIGN INDIVIDUAL

There are an ever increasing many people who already live on a Bitcoin Standard.

These sovereign individuals do “Believe” and they do “Get it.” For them, bitcoin is not volatile, but rather the dollar is, as one bitcoin will always be worth one bitcoin, on a Bitcoin Standard. They have rid themselves of the fiat standard and they will want to be quoted a price denominated in bitcoin. In a free market, a business must be able to deliver what the customer desires, and be prepared to cater to these individuals.

THE SOLUTION

All businesses must have a pricing structure they use to determine prices denominated

in dollars. To minimize disruption, that system does not need to be abandoned under this proposal.

The price must first be calculated in dollars, using the existing structure mentioned in the previous paragraph. This value will be called BASE, henceforth. To calculate the bid price denominated in bitcoin, we will first add to BASE not less than 22.5%, resulting in BASE+. Historically, the market price is rarely more than 45% below the 200DMA for any given 50 day period, making 22.5% a half way point, “splitting the difference” with the customer. This addition will be represented as a decimal (.225) and be called SCORE, hence forth. As time passes, and the price of bitcoin stabilizes, SCORE may be adjusted to fit the current market stability, but for the time it is recommended that 22.5% be the minimum. Further more, BASE+, will be the price, if paid using traditional means, and we’ll call the addition a “fiat processing fee.” (This is the situation the proposal aims to incentivize away from.)

BASE + (BASE x SCORE) = BASE+

A bid based on the price of bitcoin when it’s at an all time high will create a situation where a business cannot function properly in the event bitcoin suddenly decreases in value. A bid based on the price of bitcoin at a market low will not give the customer sufficient value for their money in the event bitcoin suddenly appreciates in value.

BASED ON THE 200 DMA

In order to calculate a bid price denominated in bitcoin we must first place a fair

valuation on bitcoin. We propose to settle the price volatility of bitcoin by finding the average of ‘the average daily price’ for the last 200 days. Traders know it as the 200 Daily Moving Average (200DMA). The trader uses the 200DMA as an indicator to buy or sell. The value of the 200DMA will be the valuation we place on bitcoin, for the duration of the contract, or until the price expires, and will be called VALUATION, henceforth. The bid must be delivered promptly after the calculations to avoid what the customer will perceive as a premature price expiration.

If we take BASE+ and divide by VALUATION, we will arrive at an amount of bitcoin that will be the bid price denominated in bitcoin, know as PRICE, henceforth. PRICE will be the the total amount of bitcoin the business expects to receive upon completion of the contract.

BASE+ / VALUATION = PRICE

FIAT PROXY CLAUSE

A clause may or may not be added to the contract to allow for a stablecoin to be

processed as payment, in an amount equal to BASE, in the event of an increase in the market price of bitcoin. A fiat proxy clause will automatically be triggered when the bitcoin’s market price is at or above VALUATION. This will ensure the customer is receiving the fair market price for their money in the event the market price is higher than VALUATION at the time the contract is settled. At this time, the trader will selling.

When the market price is below VALUATION, the customer will see a valuation being placed on their bitcoin above market price, incentivizing buying and/or spending of bitcoin during low periods in the market. It is in this instance that care must be taken to ensure the solvency of the business. At this time, the trader will be buying.

It is the business’s responsibility, to adjust these parameters to fit their own needs. The business must never initiate a stable coin clause for their own benefit. This is the reason for the additional percentage being added to BASE, in order to derive BASE+.

In this case, BASE can found by multiplying PRICE times VALUE and dividing the product by (1 plus SCORE.) This should appear on the invoice, for the customer to see, as a decimal that will be used to calculate the fiat proxy price. We can call this a “Market Volatility Score” on the invoice. Each business will be responsible for maintaining their own Market Volatility Score, and must also note on the invoice that the Market Volatility Score in an internal calculation and, is in no way, a reflection on the customer.

In the event a fiat proxy clause is activated, the calculation the customer will use to find BASE will be as follows:

PRICE x VALUATION = BASE+

Then:

BASE+ / (1 + SCORE) = BASE

The customer will pay, with a stable coin, an amount equal to BASE, (which is the original price in dollars under the original pricing structure.)

if then

VALUE > market price

Customer pays PRICE

VALUE < market price

Customer pays using a stable coin in an amount equal to BASE

A COUPLE EXAMPLES:

If BASE is determined at $10,000, we multiply by (1 + .225) and we find BASE+ to be

$12,250. If VALUE is $40,000. PRICE will be $12,250 / $40,000 = 0.30625BTC

If PRICE is calculated at 0.30625BTC the and the market price of bitcoin increases

above $40,000, the customer multiply 0.30625 times $40,000 to get $12,250. They will then

divide by (1+0.225) and finding a fiat proxy price of $10,000 USDT. The stable coin that will be used in this instance should be agreed upon before commencing work on the contract. Here, the customer will simply buy a stable coin with bitcoin, and retain the full purchasing power of their bitcoin, receiving a discount of $2,250 off the price offered for traditional payment methods.

Conversely, once PRICE is determined to be .030625BTC and the market price decreases below VALUATION by 40% to $24,000, which is an extreme case for bitcoin over any 50 day period, the market valuation of 0.030625BTC will be $7,350. Here, the customer is receiving a valuation for their bitcoin of $40,000 when the market price is $24,000.

This can be concerning for a business, as it will amount to a 26.5% discount at the time of the transaction. The low time preference promoted by a Bitcoin Standard will make this a tolerable nuisance. As stated before, a decrease of 40% in the market price below the 200DMA over any 50 day period, is a rare case. However, it should be noted that it has happened in the past, and should be expected to happen again in the future. A careful business can weather this, provided they have sufficient reserves to carry on until the market returns to a profitable valuation.

In practice, it is recommended that each individual company “run the numbers” for hypothetical situations, that pertain to each individual business. It is only in this way that a business will know what works and what doesn’t work.

CONTRACTS WITH NO STABLE COIN CLAUSE

Once a PRICE has been determined, without a fiat proxy clause, and agreed upon by

both parties, the business will expect delivery of bitcoin as payment in the amount equal to PRICE, and the the dollar conversion rate will be rendered mute, as will be the case when two sovereign individuals interact with each other. VALUATION will still need to be recalculated every 50 days or until the contract is complete.

PRICE EXPIRATION

Because of the volatility of the USD/BTC conversion rate, the value we place on

VALUATION must have an expiration period, at which time VALUATION must be recalculated after a maximum of 50 days has past.

If outside conditions exist that require BASE be recalculated, so be it. That is outside the purview of this proposal.

PAYROLL

When it comes time to pay employees, a pay schedule must be formulated to guarantee that employees receive fair value for their contributions. A simple percentage of total profit can accomplish this. Employees will be incentivized to take ownership in the work they perform and, and raises can be given in the form of increasing said percentage. The amount each employee gets paid will be available for anyone to see on the blockchain, so employee’s percentages must be calculated according to production contributed.

Under this system there will be no room for unproductive employees, because the productive employees will find it unacceptable to share the profits with an unproductive employees, if they contribute little or nothing.

Employees will produce more if it means they get a larger percentage of the profits, requiring fewer employees. When the workforce is over populated, some will find the earnings too low and move on to greener pastures, effectively giving every other employee a raise. When the amount of work becomes to great, established employees will ask for more help in the form of additional employees, allowing the size of the workforce to dictate itself.

Employees on a a bitcoin standard will be more productive and cause less conflict between themselves because conflict is extremely unproductive.

Specialty Bitcoin payroll service companies already exist and are innovating new ways to process payrolls every day. Each business should do their own research to decide if this solution is a good fit for them or not.

Employees that are not yet on a bitcoin standard, will get paid an amount of dollars equal the sale price of their percentage. The employer will have to absorb any trading fees that may be incurred. The incentive here, is for those employees to start using Bitcoin.

SUMMARY

Using this as a guide, we can ensure that the customer is never asked to overpay for a good or service. We also ensure the business is always receiving a payment in the currency that is undervalued. An undervalued currency can be held on the a business’s balance sheet with a decreased risk, as there is no need to immediately exchange it in order to preserve purchasing power.

These guidelines can be molded to fit each individual business using a Bitcoin standard. Because Bitcoin’s market price can swing suddenly and without any apparent catalyst, is not recommended that the the Market Volatility Score be less than 0.225, for now.

Many bid services businesses are “blue collar” work and, as such, have a customer base with a tendency to be on the conservative end of the spectrum. It is conceivable that the complexity of this system will result in some resistance from the customers. If this is to work, it is the business owners who must have the integrity to only perform the work on their own terms. A bitcoin standard will breed this mentality by its very nature of being the hardest money ever created.

If Bitcoin continues on the four year cycles we’ve seen in the past, it is the bear market phase of the cycle that conditions exist for market price to be significantly below the 200DMA. Here it may be better to add a fiat processing fee, and then to remove it in the form of a “Bitcoin Discount”. The influx of institutional capital we have seen enter the Bitcoin sphere may, or may not, spell the end of the four year cycle. Only time will tell.

Additionally, this will benefit every single user on the Bitcoin network by incentivizing selling when the price is up and buying when the price is down, pushing the market price towards stability.

There are implications here, that could allow this could be used for the $325T global Real Estate markets, allowing real property be exchanged using a Bitcoin Standard. On a large enough scale, such as the Real Estate market, this could eventually stabilize the price of bitcoin next to the dollar. It will provide a starting place for a global standard in which prices are denominated in bitcoin, and will be ever decreasing due the the deflationary nature of Bitcoin, promoting the widespread use of bitcoin, as a global currency.

https://www.federalreserve.gov/faqs/currency_12772.htm

Through out this paper Bitcoin with a capital ‘B’ will denote the network and bitcoin with a lower case ‘b’ will denote the currency.

THE PROBLEM

Paper checks are the least secure form of payment, for reasons too numerous to cover

here. Many bid service businesses will still readily accept a paper check for payment of an invoice, without any scrutiny. With paper checks for larger amounts, the bank will automatically place a 3 day hold on the funds while the traction settles on the back end. That gets added to the 3-5 days it takes for the mail delivery service to move the envelope from A to B. There is a silent loss of purchasing power while the funds are in transit due to the inflationary nature of the dollar. Once the funds are available in the bank account, it can take

another 3-6 days for a fiat on ramp to make the bitcoin available for withdrawal into a hardware wallet for safe keeping.

Why not just use a wire transfer, or the ACH? Wire transfers and the ACH can still take up to 3 days for a deposit to be credited to a users account. There are high fees associated with wire transfers and ACH transactions. This is an improvement, however, there is a better way. Neither, is a solution to the fiat on ramp problem. Decreasing the amount of time from the initiation of a transaction to he time the bitcoin is safely in a private wallet, from as many as 14 days down to 60 minutes or less would be a revolutionary improvement.

It is inconclusive as to whether the Lightning Network will be a viable solution for everyone, at least in the short term, because of the limitations inherent with sending large amounts.

CATERING TO THE SOVEREIGN INDIVIDUAL

There are an ever increasing many people who already live on a Bitcoin Standard.

These sovereign individuals do “Believe” and they do “Get it.” For them, bitcoin is not volatile, but rather the dollar is, as one bitcoin will always be worth one bitcoin, on a Bitcoin Standard. They have rid themselves of the fiat standard and they will want to be quoted a price denominated in bitcoin. In a free market, a business must be able to deliver what the customer desires, and be prepared to cater to these individuals.

THE SOLUTION

All businesses must have a pricing structure they use to determine prices denominated

in dollars. To minimize disruption, that system does not need to be abandoned under this proposal.

The price must first be calculated in dollars, using the existing structure mentioned in the previous paragraph. This value will be called BASE, henceforth. To calculate the bid price denominated in bitcoin, we will first add to BASE not less than 22.5%, resulting in BASE+. Historically, the market price is rarely more than 45% below the 200DMA for any given 50 day period, making 22.5% a half way point, “splitting the difference” with the customer. This addition will be represented as a decimal (.225) and be called SCORE, hence forth. As time passes, and the price of bitcoin stabilizes, SCORE may be adjusted to fit the current market stability, but for the time it is recommended that 22.5% be the minimum. Further more, BASE+, will be the price, if paid using traditional means, and we’ll call the addition a “fiat processing fee.” (This is the situation the proposal aims to incentivize away from.)

BASE + (BASE x SCORE) = BASE+

A bid based on the price of bitcoin when it’s at an all time high will create a situation where a business cannot function properly in the event bitcoin suddenly decreases in value. A bid based on the price of bitcoin at a market low will not give the customer sufficient value for their money in the event bitcoin suddenly appreciates in value.

BASED ON THE 200 DMA

In order to calculate a bid price denominated in bitcoin we must first place a fair

valuation on bitcoin. We propose to settle the price volatility of bitcoin by finding the average of ‘the average daily price’ for the last 200 days. Traders know it as the 200 Daily Moving Average (200DMA). The trader uses the 200DMA as an indicator to buy or sell. The value of the 200DMA will be the valuation we place on bitcoin, for the duration of the contract, or until the price expires, and will be called VALUATION, henceforth. The bid must be delivered promptly after the calculations to avoid what the customer will perceive as a premature price expiration.

If we take BASE+ and divide by VALUATION, we will arrive at an amount of bitcoin that will be the bid price denominated in bitcoin, know as PRICE, henceforth. PRICE will be the the total amount of bitcoin the business expects to receive upon completion of the contract.

BASE+ / VALUATION = PRICE

FIAT PROXY CLAUSE

A clause may or may not be added to the contract to allow for a stablecoin to be

processed as payment, in an amount equal to BASE, in the event of an increase in the market price of bitcoin. A fiat proxy clause will automatically be triggered when the bitcoin’s market price is at or above VALUATION. This will ensure the customer is receiving the fair market price for their money in the event the market price is higher than VALUATION at the time the contract is settled. At this time, the trader will selling.

When the market price is below VALUATION, the customer will see a valuation being placed on their bitcoin above market price, incentivizing buying and/or spending of bitcoin during low periods in the market. It is in this instance that care must be taken to ensure the solvency of the business. At this time, the trader will be buying.

It is the business’s responsibility, to adjust these parameters to fit their own needs. The business must never initiate a stable coin clause for their own benefit. This is the reason for the additional percentage being added to BASE, in order to derive BASE+.

In this case, BASE can found by multiplying PRICE times VALUE and dividing the product by (1 plus SCORE.) This should appear on the invoice, for the customer to see, as a decimal that will be used to calculate the fiat proxy price. We can call this a “Market Volatility Score” on the invoice. Each business will be responsible for maintaining their own Market Volatility Score, and must also note on the invoice that the Market Volatility Score in an internal calculation and, is in no way, a reflection on the customer.

In the event a fiat proxy clause is activated, the calculation the customer will use to find BASE will be as follows:

PRICE x VALUATION = BASE+

Then:

BASE+ / (1 + SCORE) = BASE

The customer will pay, with a stable coin, an amount equal to BASE, (which is the original price in dollars under the original pricing structure.)

if then

VALUE > market price

Customer pays PRICE

VALUE < market price

Customer pays using a stable coin in an amount equal to BASE

A COUPLE EXAMPLES:

If BASE is determined at $10,000, we multiply by (1 + .225) and we find BASE+ to be

$12,250. If VALUE is $40,000. PRICE will be $12,250 / $40,000 = 0.30625BTC

If PRICE is calculated at 0.30625BTC the and the market price of bitcoin increases

above $40,000, the customer multiply 0.30625 times $40,000 to get $12,250. They will then

divide by (1+0.225) and finding a fiat proxy price of $10,000 USDT. The stable coin that will be used in this instance should be agreed upon before commencing work on the contract. Here, the customer will simply buy a stable coin with bitcoin, and retain the full purchasing power of their bitcoin, receiving a discount of $2,250 off the price offered for traditional payment methods.

Conversely, once PRICE is determined to be .030625BTC and the market price decreases below VALUATION by 40% to $24,000, which is an extreme case for bitcoin over any 50 day period, the market valuation of 0.030625BTC will be $7,350. Here, the customer is receiving a valuation for their bitcoin of $40,000 when the market price is $24,000.

This can be concerning for a business, as it will amount to a 26.5% discount at the time of the transaction. The low time preference promoted by a Bitcoin Standard will make this a tolerable nuisance. As stated before, a decrease of 40% in the market price below the 200DMA over any 50 day period, is a rare case. However, it should be noted that it has happened in the past, and should be expected to happen again in the future. A careful business can weather this, provided they have sufficient reserves to carry on until the market returns to a profitable valuation.

In practice, it is recommended that each individual company “run the numbers” for hypothetical situations, that pertain to each individual business. It is only in this way that a business will know what works and what doesn’t work.

CONTRACTS WITH NO STABLE COIN CLAUSE

Once a PRICE has been determined, without a fiat proxy clause, and agreed upon by

both parties, the business will expect delivery of bitcoin as payment in the amount equal to PRICE, and the the dollar conversion rate will be rendered mute, as will be the case when two sovereign individuals interact with each other. VALUATION will still need to be recalculated every 50 days or until the contract is complete.

PRICE EXPIRATION

Because of the volatility of the USD/BTC conversion rate, the value we place on

VALUATION must have an expiration period, at which time VALUATION must be recalculated after a maximum of 50 days has past.

If outside conditions exist that require BASE be recalculated, so be it. That is outside the purview of this proposal.

PAYROLL

When it comes time to pay employees, a pay schedule must be formulated to guarantee that employees receive fair value for their contributions. A simple percentage of total profit can accomplish this. Employees will be incentivized to take ownership in the work they perform and, and raises can be given in the form of increasing said percentage. The amount each employee gets paid will be available for anyone to see on the blockchain, so employee’s percentages must be calculated according to production contributed.

Under this system there will be no room for unproductive employees, because the productive employees will find it unacceptable to share the profits with an unproductive employees, if they contribute little or nothing.

Employees will produce more if it means they get a larger percentage of the profits, requiring fewer employees. When the workforce is over populated, some will find the earnings too low and move on to greener pastures, effectively giving every other employee a raise. When the amount of work becomes to great, established employees will ask for more help in the form of additional employees, allowing the size of the workforce to dictate itself.

Employees on a a bitcoin standard will be more productive and cause less conflict between themselves because conflict is extremely unproductive.

Specialty Bitcoin payroll service companies already exist and are innovating new ways to process payrolls every day. Each business should do their own research to decide if this solution is a good fit for them or not.

Employees that are not yet on a bitcoin standard, will get paid an amount of dollars equal the sale price of their percentage. The employer will have to absorb any trading fees that may be incurred. The incentive here, is for those employees to start using Bitcoin.

SUMMARY

Using this as a guide, we can ensure that the customer is never asked to overpay for a good or service. We also ensure the business is always receiving a payment in the currency that is undervalued. An undervalued currency can be held on the a business’s balance sheet with a decreased risk, as there is no need to immediately exchange it in order to preserve purchasing power.

These guidelines can be molded to fit each individual business using a Bitcoin standard. Because Bitcoin’s market price can swing suddenly and without any apparent catalyst, is not recommended that the the Market Volatility Score be less than 0.225, for now.

Many bid services businesses are “blue collar” work and, as such, have a customer base with a tendency to be on the conservative end of the spectrum. It is conceivable that the complexity of this system will result in some resistance from the customers. If this is to work, it is the business owners who must have the integrity to only perform the work on their own terms. A bitcoin standard will breed this mentality by its very nature of being the hardest money ever created.

If Bitcoin continues on the four year cycles we’ve seen in the past, it is the bear market phase of the cycle that conditions exist for market price to be significantly below the 200DMA. Here it may be better to add a fiat processing fee, and then to remove it in the form of a “Bitcoin Discount”. The influx of institutional capital we have seen enter the Bitcoin sphere may, or may not, spell the end of the four year cycle. Only time will tell.

Additionally, this will benefit every single user on the Bitcoin network by incentivizing selling when the price is up and buying when the price is down, pushing the market price towards stability.

There are implications here, that could allow this could be used for the $325T global Real Estate markets, allowing real property be exchanged using a Bitcoin Standard. On a large enough scale, such as the Real Estate market, this could eventually stabilize the price of bitcoin next to the dollar. It will provide a starting place for a global standard in which prices are denominated in bitcoin, and will be ever decreasing due the the deflationary nature of Bitcoin, promoting the widespread use of bitcoin, as a global currency.

English: https://github.com/nostr-protocol/nips

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