Solving volatility in crypto with IOTA Abra
This article is written with a simple language to reach a broader audience
If a company was to start accepting crypto as a way of payment for its services, it could have difficulties in making a profit in a Bear market (downward trend) as we have seen lately and many times before in crypto. Obviously a huge problem that needs to be solved until the used tokens are more stable.
One of the proposed solutions for this has been instant exchange to/from crypto to Fiat currency in the moment of payment for the service.
(Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity)
Let’s use IOTA as an example to see if this instant exchange to Fiat would be practical and logical. IOTA is designed in such a way that it has no fees and therefore is good for micro transactions, but we will use charging of your electric car as an example here today.
If the car owner is using his mobile phone and has an app on it for paying for the charging, it would most likely be connected to a VISA card or similar.
When your car is connected to the charger, a flash-channel is opened, this is done by the car owner and smart charging station trusting each other,the car receives electricity while the amount of electricity is measured while the charging is being done. When the charging is finished the flash channel is closed and payment is done through the app from Fiat to IOTA tokens.
Then when the car charging company receives the crypto tokens,they are suppose to convert the crypto back to Fiat at the moment of delivery.
I think I do not need to explain that this would be insane and stupid, going on like this forever, why on earth would you use the crypto in the middle and not just Fiat. IOTA is working towards the goal making their crypto a common way of payments in the future, just like Fiat money is, and we need solutions until this is a reality.
Other use cases where there is micro transactions, this idea with Fiat-crypto-Fiat makes it even more crazy, I do not think micropayments is possible with VISA anyway.
Using Bitcoin for any of the above use cases is not even possible today due to the costs of sending the crypto, you might end up with a higher fee then the actual amount than you owe.
Ideally humans and machines would hold their own crypto in personal wallets in the future, either earned or bought to be used when needed. We might see instant conversion on the private side from Fiat to crypto to begin with, since there are few transactions needed on a daily basis per individual.
But what about the service providers? They receive crypto many many times per day and it is these companies I am focusing on in the solution that will be described.
Securing profitability through hedging with financial instruments built using IOTA Abra (Qubic smart contracts).
IOTA Abra is a new and innovative practical computer language/code built to be run with the IOTA Tangle technology and make it possible to connect it to other networks through something called gateways. It is expected to be launched with its basic functions before the end of the year, according to the genius development team working on it.
-Abra is a new practical computer language being developed by the IOTA Foundation
-Qubic is a packaged Abra program, consisting of Abra code
-An oracle is a Qubic-enabled node(Q-node),it has the capability to run qubics and function as an oracle
-Anything that generate data transactions that are meant to be processed by a qubic is an Oracle
-The Q-nodes can participate in an assembly of Oracles that run the same Qubic tasks to get to a quorum consensus about the results
-Qubics monitor the Tangle and will witness movement of crypto into an address
-When the qubic registers crypto arrived on an address, it will post a qubic result transaction on the Tangle which can be the trigger for the Oracle to perform the exact same physical, on-chain crypto movement that was instructed in the qubic.
-The qubics continue to monitor the Tangle and when the action performed by the Oracle is completed, the qubics will post a completion notice of the process on the Tangle as an ‘receipt’
-So qubics monitor the Tangle and qubics can instruct Oracles or other qubics to perform tasks, qubics can not send crypto but can instruct Oracles to do so, at least this is how it will function in the beginning.
Financial instruments commonly used in stock and commodity markets built with Abra for hedging against high volatility in crypto.
The finance markets have many tools that is commonly used everyday by it’s participants, we will in this article focus on Options.
What is an option?
‘’In finance, an option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on a specified date, depending on the form of the option. The strike price may be set by reference to the spot price (market price) of the underlying security or commodity on the day an option is taken out, or it may be fixed at a discount or at a premium. The seller has the corresponding obligation to fulfill the transaction — to sell or buy — if the buyer (owner) “exercises” the option. An option that conveys to the owner the right to buy at a specific price is referred to as a call; an option that conveys the right of the owner to sell at a specific price is referred to as a put.