Monitoring the Qbit Value

The Qbit system recalculates the aggregate price of all the basket items on a regular basis to see if the price has gone up or down. It then uses standard deviations to see how far the current value of the basket has changed from the index value. If the basket value rises or falls by a small number of standard deviations over time, the Qbit system takes small measures to stabilize the value of the Qbit. If the value varies by a larger number of standard deviations, the Qbit system takes larger actions. 

Note: To provide as much transparency as possible, the QFed publically publishes the list of commodities in the basket. It also publishes the methods it uses to calculate the average worldwide price (in Qbits) of each item in the basket and the methods it uses to calculate the total value of the basket.

Gathering Data

One of the goals of the QFed is to play as small a role in the regulation of the Qbit supply as possible. In other words, we’d like to automate as much of the QFed’s responsibilities as possible and distribute these duties to as many people in the system as possible so that users can take responsibility for the value of their money and be rewarded accordingly.

To accomplish this particular goal, the QFed defines a role in the Qbit system called reporters. Anyone can become a reporter and the duties of a reporter are simple. Reporters voluntarily monitor and report the prices in their local markets of the commodities in the commodity basket used by the Qbit Value Formula. They are potentially rewarded for their efforts by receiving some tokens called Qtickets. When a reporter accumulates enough Qtickets, he or she can redeem the Qtickets for a Qgerand.

The Qbit system stores the reported commodity prices in the current block in the blockchain. When the system creates a new block and confirms the current one, it examines all of the prices in the current block for each commodity. For each commodity, the system throws out the highest 25% and lowest 25% of the reported prices. It then averages the rest of the prices and puts that average into the new block in the blockchain. Everyone whose prices were used to calculate the average gets Qtickets. Only a set number of Qtickets are issued with each block and people are rewarded on a first-come-first-served basis.

The advantage of this protocol is that reporters get financial rewards for their efforts that benefit the system. Anyone who reports wild values for a particular commodity will not get a reward because their value will not be used. 

Also, the limit on the number of Qtickets issued for each block will determine how many people become reporters. If the QFed determines that there aren’t enough reporters, then it can give out more Qtickets. Otherwise, the number of reporters will grow until there are too many and some drop out.

In addition, the possibility that the reporters will use their position to subvert the value of the Qbit for their benefit is remote. The only way that can happen is if the majority of the reporters become lazy or corrupt. In that case, the QFed will implement another method of reportering the value of the Qbit.

How does reporting work? Very simply. Anyone who wants to be a reporter just enables reporting in their wallet. Each time they perform a transaction, the wallet will select one item that is in the basket of commodities used by the Qbit Value Formula (if there are any in the transaction). It then reports the item type and price to the Qbit system.

Won’t this create privacy problems?

The answer is no. Only the item type and price are reported. The system doesn’t know who reported them, where the items were purchased, or anything else about the purchaser. The only information that the system gets is the item type and the price. It enters this into a validated stream inside the blockchain.

Using the Commodity Price Data

The commodity price data contained in the blockchain is important to the system. Assuming that the average price of each commodity is accurate, the system can use that information to automatically disburse Qbits to all Qgerand holders or to offer more Qgerands for sale. These actions stabilize the price of Qbits.

It is important to note that the Qbit system will use published formulas for automating Qbit supply adjustments. In particular, sudden large jumps or drops in prices are possible when the Qbit market is small. To compensate for that, the system makes small adjustments over a series of blocks or over a length of time rather than suddenly increasing or decreasing the supply of money. The longer the aberrations persist, the larger adjustments the system will make. But again, the Qbit system only uses published formulas for these adjustments so that you can analyze them yourself and determine whether or not you trust them.

Regulating Qbit Supply

The Qbit system regulates the supply of Qbits in circulation using a special token that is built into the Qbit system. This token is the Qgerand.

Only the Qbit system itself can produce Qgerands. Qgerands are non-transferrable. That is, once they have been sold, the only things the owner can do with them are to stake them or to sell them back to the Qbit system.

Too Much Money in Circulation

If there are too many Qbits circulating, the system is experiencing inflation. To counteract inflation, the Qbit system automatically offers Qgerands for sale.

When the Qbit system sells Qgerands, it receives Qbits in exchange for them. The Qbit system puts these Qgerands into escrow. This decreases the number of Qbits in circulation and restores the value of the Qbit.

According to its own rules, the Qbit system cannot use the Qbits in escrow for anything else. All monies received from the sale of Qgerands must go into escrow and stay there until the Qbit system determines that the market has become deflationary.

Too Little Money in Circulation

When the demand for Qbits increases to the point where too few Qbits are in circulation, prices of goods and services start to fall. This is deflation. When deflation occurs, the Qbit system disburses some of the Qbits it holds in escrow to everyone who has Qgerands. This provides people with a fair and distributed way to receive money when the economy is experiencing deflation.

The mechanism for disbursing Qbits to everyone who holds Qgerands is built into the Qbit system. For example, the Qbit system can perform a transaction that sends 10 Qbits to the wallet of every person in the system for each Qgerand that they own. Qgerand owners receive their Qbits automatically when they next connect to the Qbit system on the Internet. They can then spend that money as they see fit.

For users of Qbits, owning Qgerands is an investment. Qgerand owners can stake their Qgerands and earn a modest return (see section 5.4).

Free Market Forces and Money Supply

When Qgerands go on sale, it is worthwhile for people to invest in them because they are a source of future revenue. And by having Qgerands in the system, people voluntarily give up Qbits when there are too many and automatically receive Qbits when there are too few. The system essentially uses basic market forces to control the money supply and match it to the demand for currency. It’s also highly democratic because anyone can buy Qgerands on a first-come-first-served basis. As a result, when disbursements happen, they happen fairly evenly across the whole economy.

To increase fairness in the awarding of Qgerands, the QFed can also hold a raffle. It can sell digital raffle tickets through the Qbit wallet software. Anyone who wants to participate can buy a digital raffle ticket for the cost of the transaction only (which is a few thousandths of a Qbit). This enables anyone to enter the raffle at essentially no cost. Multiple winners can be randomly awarded varying amounts of Qgerands. So even the poorest people in the system have a fair chance at winning some Qgerands that will provide them with some income.

At the QFed, we like to say that using Qgerands in this way enables all boats in the harbor to rise on the same tide. It’s our way of saying that everyone across the system can receive the benefits of using the system in a reasonably fair way.

Part 7

Finding the Index Value

When the QFed first makes its determination of what items should be in the basket, it creates an index value for the entire basket. Before it does, it arbitrarily sets the value of one Qbit to $10 USD . Each Qbit contains 1000 milliQs (pronounced milli-queues), which are equal to 1 cent. All prices used for finding the index value are converted to Qbits using this initial valuation.

Note: More specifically, it sets the buying power of the Qbit to the same buying power that $10USD had as of June 2014.

The QFed first calculates the economic importance of each item in the basket. It does this using the following formula.

Formula 1 Economic Importance

In this equation, Ic is the economic importance of the commodity, Pc is the average worldwide price per unit in Qbits of the commodity, and Vc is the annual volume of sales of the commodity (the number of units sold worldwide).

Next, the QFed sums up the economic importance values of all of the commodities in the basket. This becomes the total value of the basket.

Formula 2 Basket Value

The first time the QFed calculates value of B, it sets this aggregate price as the basket’s index value. 

Part 6

Basket Contents

Basket Contents

The commodity basket that the Qbit Value formula uses are selected in such a way as to provide the Qbit system with an accurate picture of what the Qbit is doing at any given moment in the market. The basket of commodities is a collection of purchasable items that fulfill the criteria  shown in the figure below.

Note: These criteria were proposed by Thomas H. Greco, Jr. in his work, Money and Debt Part 3.

Items that fulfill these criteria tend to be commodities such as grains, raw materials, products necessary for housing, products related to transportation, and so forth. The basket commodities are selected such that the value of some of them goes down as economic conditions improve while others go up. Likewise, the value of some of them goes up as economic conditions deteriorate while others fall. Gold is a good example of this. Its value falls and stabilizes when the economy is healthy. However, when the global economy does poorly, its value rises. Products related to housing have an opposite trend. They are in demand and their prices rise during economic booms. If the economy falters, demand drops and their prices fall.

Here’s example of the process that the QFed uses. Housing is a basic human need. To add commodities into the basket that are related to housing, the QFed would first ask, “What is a middle-class house in 100 countries around the world?” Of course, the answer would be different for each country, but that is ok.

Next, the QFed asks, “What are the middle-class houses in each country made of?” The answer would be materials such as lumber, cement, rock, and so forth. This list of materials will be remarkably similar across the majority of countries. So the QFed chooses a specific grade or type of each of these materials that fulfill the selection criteria above. That would go into the basket.

Similarly, the QFed can determine commodities that are important to a technical civilization by asking, “What type of computing power can the average small/medium/large business in 100 countries afford?” It then asks, “What are the components of those computers made of?” This yields a list of materials such as gallium arsenide, gold, copper, and so forth. The QFed then picks a specific grade or type of each material and adds it to the basket.

Once the commodities in the basket are set, the Qbit system uses them to compute the index value of the basket. It is important to note, however, that the basket commodities do change over time, but only in very controlled ways. For example, copper and galvanized steel pipes used to be used quite a bit in houses in the US. These days, builders use new forms of plastic piping. Further technological advances in housing materials will necessitate changes to the basket. But housing materials do not change rapidly over time. Therefore, the housing materials in the basket only need to be updated once every 5 to 10 years.

In other markets, the basket may need to be updated more frequently. For instance,  computer technology changes extremely rapidly. The basket commodities relating to computer manufacturing and production need to be updated at least annually.

The QFed monitors the commodities in the basket to be aware of sudden changes in availability or usefulness. For instance, suppose a large new supply of oil is found that drives down the price of oil significantly. This can have repercussions across the entire market. In that case, the QFed will take action to adjust the importance of oil to the commodity basket and thereby maintain stability.

In a more extreme example, suppose someone discovers a catalyst in dandelions that makes safe nuclear fusion very inexpensive. Further, imagine that the company that makes the Mr. Coffee coffeemaker releases a product called Mr. Fusion. You put your household garbage into Mr. Fusion and it uses nuclear fusion to power your house, car, or whatever.

This scenario would have a profound effect on anything related to energy production and distribution, including oil, materials used for electrical generators, materials used for power lines, and so forth. In such a case, the QFed would make larger adjustments to the commodity basket to reflect the realities of rapidly changing market conditions. It’s important to emphasize here that the market drives the QFed and not the other way around.

Whenever updates are done, the QFed repeats the same process it used to compile the original basket. Therefore, the basket commodities always represent what the sample population spends on housing, computing, and so forth. Over time, the same amount of Qbits should buy the same amount of housing, computing, and other necessities–even if the materials used to construct the house or computer changes. All adjustments that the Qbit Federation makes to the Qbit system’s commodity basket are published publically so you can see for yourself how the value of your money is being maintained. If you don’t like what we’re doing, you can simply dump your Qbits in favor of another currency.

Part 5

Maintaining the Value of the Qbit

The Qbit system constantly monitors the Qbit supply and demand. It always keeps the supply of Qbits equal to the demand for Qbits. 

The Qbit system uses a specific formula to monitor the buying power of the Qbit at all times. This formula, called the Qbit Value Formula, assesses the Qbit’s buying power by evaluating a collection or “basket” of commodities that are available worldwide. On a regular basis, it compares the value of the basket to an index value. If the basket’s value rises, it circulates more Qbits. If the basket’s value falls, it decreases the supply of Qbits until it returns to the index value. This keeps the supply of Qbits evenly matched with the demand at all times.

Part 5

Advancing Qbit Technology

The QFed is dedicated to making the Qbit system a platform for innovation. To assist in this, the QFed has designed the Qbit system to use a smart blockchain that allows for additional protocol layers to be added to it. 

In addition, it provides facilities for side chains that enable 3rd party innovators to do whatever they want within the minimal rules of the Qbit system. Currencies, coins, and tokens on side chains can be directly exchanged for Qbits, can participate in the Qbit system’s distributed currency exchange, and can be stored in the Qbit digital wallet.

Also, the QFed creates and manages open source projects that integrate the Qbit into many different types of software. An example is the point-of-sale software for the Qbit (QPOS) that enables point-of-sale terminals (the modern version of cash registers) to process Qbit transactions. 

Part 4

Promoting the Qbit

The Qbit Federation promotes the use of the Qbit by participating in conferences, writing articles, publishing Qbit-related materials on its web site, and so forth. The QFed is dedicated to making the Qbit a world-class economic system that will serve the needs of its users for generations to come.

Part 3

The Qbit Federation

The Qbit Federation (QFed) is a nonprofit organization designed to publish the Qbit software and promote the use of the Qbit. The Qbit Federation employs the staff it needs to in order to accomplish its goals. It also offers rewards, called bounties, for innovation within the Qbit economy. Bounties are paid in Qbits.

This section presents an overview of the Qbit Federation, what its purposes are, and how it accomplishes its purposes.

The Qbit Federation was created for the following reasons.

Figure 6 1

In this series of articles, we’ll examine each of these goals for the Qbit Federation.

Part 2

Side Chains and Code

For programmers, side chains can be a bonanza. 


Because you can store source code, script code, or even executable code in a side chain and make it accessible from anywhere. And if you’re worried about how the code will run on people’s systems, you can also embed the compiler in the blockchain. Or you can use an interpreter.

Now combine your ability to make source code, scripts, and binary executables with the ability to store smart contracts and digital content. What can you build? Remember, this will be available worldwide. Could you make an artificially intelligent blockchain that will bring the financial analysis abilities of Wall St. to the masses? Or could you create a side chain that stores and analyzes the research data needed for advances in medicine and automatically lets subscribers have access? Could you build a side chain that extends most or all of the advantages of Qbits to traditional currencies like dollars or euros?

The possibilities are really endless.

Using Side Chains, Smart Contracts, and Decentralized Autonomous Organizations

A side chain that stores documents, together with smart contracts, can provide the basis for decentralized autonomous organizations (DAO). DAOs are organizations that people just join, use, and contribute resources to because it’s in their best interest to do so. There is no central control.

One possible DAO that is enabled by a side chain is a bank. A DAO bank would have no corporate headquarters. It would function according to a set of rules described in documents stored in the side chain. Anyone who participates in the DAO bank can be sued by other participants if they do not participate in the way that is described in the founding documents. In this way, the organization can police itself even if there is no central control. It is even possible that the blockchain and smart contracts could provide the basis for the bank’s internal arbitration system, if it has one. 

The DAO bank would use both features of the side chain and smart contracts to automatically pay people for providing services to the system. If too many or too few people try to provide services, the laws of supply and demand would automatically decrease or increase the number of service providers as needed.

Another way that DAOs could be used is to provide roads. A common objection to limited government is, “Who would build the roads?” In considering this question, let’s ignore the fact that roads were built and maintained for literally hundreds of years in North American before governments were involved with them. When a builder decides to put up a housing subdivision, it can build the roads. The builder can then use a side chain and smart contracts to create a DAO. The members of the DAO would be the homeowners in the subdivision. The DAO could automatically collect and manage funds, as well as handle other tasks needed. The government need not be involved at all.

Part 14

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