The Valuation Problem
"There is nobody to adjust the bitcoin money supply as the population of users grows. That would have required a trusted party to determine the real world value of things."
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Satoshi Nakamoto, Bitcoin's pseudonymous inventor, was acutely aware of Bitcoin's elasticity problem. After all, his intent was to develop a better money, and a good money must have a stable purchasing power. He was unhappy about the fact that a growing number of users would mean that the price of Bitcoin would go up.
Writing in 2009, Satoshi saw no way to adjust the money supply: "If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that."
The Bitcredit Solution
Bitcredit solves the valuation problem by using real world data to determine the correct currency supply, as follows:
Bitcredit accepts the value to be the price resulting from the negotiation and agreement by the buyer and the seller in a commercial transaction. Self-interested business opponents each have a primary goal: a profitable trade. When both agree we know that the resulting price is the "peg to something" which Satoshi sought.
When a commercial business pays with an electronic bill of exchange, its bitcoin amount becomes known to Bitcredit protocol. This provides the input needed to adjust the money supply programmatically to the right quantity.
The invoice paid by that e-bill is encrypted and attached to it, its hash is the identifier of the e-bill. This gives verifiable proof, minimising trust.
When at last a full node receives an e-bill and creates bitcredits in that amount, the three parties to the e-bill (drawer, drawee and payee) have already verified it. They form a guarantee chain in case of default, effectively eliminating the need for trust.
Read on: Real bills