People use Crypto for many varying reasons, some use it for commerce, others see it as an asset and some people see it as an investment tool. Critics of Crypto see it as a valueless asset created out of “thin air”, they base their argument on the fact that Crypto currency has no physical form, but what they fail to see is that fiat money which they argue in support of is in fact created out of thin air and backed by nothing, hence the word fiat which was taken from Latin meaning “Let it be done” , the government says it is money so it is regarded as money.
Crypto currency is create by Mathematical proof, and relies on cryptography and mathematics to make sure each transaction is secure. By this logic Crypto currency is backed by cryptography and mathematics while fiat money is based purely on faith in governments. Conversely a good number of crypto currency users use crypto because they see it as a better alternative to fiat money which is truly wished out of “thin air”.
Whatever purposes people choose to use Crypto for, there are requirements that must be met, one of the most basic being price stability and anonymity.
One of the biggest weakness of crypto currency is price volatility which makes it unfit for some basic uses, to solve the problem of price volatility “stable” coins were created which pegged the price of the crypto assets to fiat currencies held in Bank Accounts. While this might look like it works, it defeats one of the core purposes that make people use Crypto currencies. To solve this problem this paper proposes to create a stable coin collateralized by other crypto currency but whose price will be determined and maintained by a very simple mathematical equation.