A simple analogy to explain the expected price dynamics of Holofuel

Many are getting confused over the difference between 'price stable' and 'value stable' and what this all means.

Essentially, 1 credit of Holofuel statically represents a unit of hosting (a number determined by a combination of storage over time, processing and bandwidth). The fact that it is a static representation of a unit of hosting makes it value stable. Strictly speaking, it is value static. These credits are not necessarily price stable, however -- but could eventually be.

Why is that? An analogy:

It's like asking "What is the price of a gallon of gas?" when cars have only just been invented.

Gas is the asset and a gallon is a unit of this asset. Since a gallon of gas is always a gallon of gas, you'll be sure when you ask for a gallon of gas that you will always get the same amount of gas.

The price of a gallon of gas, however, completely depends on the market. If cars have only just appeared and people are fine with horses, then the demand for gas isn't terribly high. But people soon realise that cars are way cooler than horses and can go farther and faster too, allowing people to reach places that usually take ages to get to -- especially great for places that are far away from where the trains go. Trains are fast but limiting for most people, but everyone has to rely of them if they want to go anywhere far. Unfortunately, train tickets also cost a tonne but a boycott seems out of the question. Most people think: "That's just how it is"

There are talks of these groovy new automobiles that promise to help people go wherever they want. Train sympathisers try to convince people that the trains are still the way to go and that cars are over-hyped. But a fair portion of the population want to try out the cars, especially those in remote areas who really find the train system way too limiting -- besides, gas is cheap so why not? These testers are getting a pretty sweet deal and soon more people get cars as they realise the amazing benefits that this autonomy provides -- and the demand for gas increases! More opportunities also start appearing that are only possible if you have a car, and more people start realising that both trains and horses are completely inferior -- why didn't we use these things before?!

As demand for fuel increases, the price of a gallon of gas increases. The price increase incentivises more people to start generating gas to sell (it so happens that a steady supply of gas is available in everyone's backyard)...and now the analogy breaks down..

But essentially:

• the asset is the gas itself

• a credit is a static amount of gas. If you provide a gallon of gas to someone and they don't pay you with cash, you can get 1 gas credit and they get 1 gas debit

• the price of gas depends on the market. People can buy gas directly from you with cash and you both negotiate the price of that gas. People can also buy gas credits from you or even sell you gas credits.

Say someone buys a gallon of gas directly from you. Someone else also buys 1 gas credit from you. You can expect to sell both of these for the exact same price since they represent the same thing.

Some individuals may also use gas differently -- i.e. what personal value a gallon of gas provides for them depends on how desperate they are to get somewhere 100 miles away today. Some may pay anything for that gas. Others may only want gas that is provided freely and are happy with this small and unreliable source of gas -- good luck with that!