I’ll try to explain. Imagine in the very distant future. The marketcap of Bitcoin is 50X what it is now: $250,000,000,000 dollars. Let us assume that a majority of Bitcoin have been mined, so the value of each Bitcoin is $250,000,000,000/ 21 million Bitcoins = $11904.761904762 per Bitcoin. Now, let us assume that in that same time, 25 billion NuBits have been produced, so the total marketcap of NuBits is $25 billion x $1/ Nubit = $25,000,000,000. So the total marketcap of NuBits is exactly 10% that of Bitcoin. This means that in a non-fractional reserve system (asssuming that all NuBits are sitting on an exchange, waiting to be bought), 10% of the Bitcoin are being used to hold the peg of NuBits at $1 (for now, let’s ignore any other currency used to peg).
The price of a Bitcoin tries to go up from $11,904.76 to $12,000. What happens?
The holders of Nubits see the price of Bitcoin going up, so they want to make a profit, and they sell some of their NuBits for Bitcoin. Some of these sellers will hold on to this Bitcoin and rebuy Nubits later on. However, other will cash out: they will use these more valuable bitcoins to buy that car that they have been looking to get, or to pay their mortgage. In other words, they will add to the supply of Bitcoin on the free market, which will tend to drive the price back down.
In a situation where the price of Bitcoin is trying to drop to $11,000, the system will work in reverse. As the price of Bitcoin drops, holders of Bitcoin will buy NuBits to try to preserve the value of their holdings. To keep NuBits pegged at $1, more NubIts will have to be released “into the wild” (increase supply). So as NuBits are sold for Bitcoin, more bitcoins will be used to hold a smaller number of NuBits at a $1 peg. If the supply of NuBits gets dangeroursly low, then we will just have to create more of them.
So what you see is an elastic system where NuBits and Bitcoin constantly keep each other in check, and stable in price. The only reason that you can’t see this effect now is because the marketcap of NuBits is so much smaller than that of Bitcoin. But you will see the effect more and more the marketcap of NuBits grow.
What I have described is already happening between Bitcoin and all of the other altcoins (taken as a group). If you look at the marketcap of Bitcoin versus all of the other altcoins over the last year, the ratio of the Bitcoin marketcap compared to all of the other altcoins has dropped dramatically. I remember when the marketcap of Bitcoin was around $10 billion, and the marketcap of all of the other altcoins combined was far less than $500 million. Today, the marketcap of Bitcoin is about $4.6 billion, while the marketcap of all other coins is about $0.9 billion. So a lot of money that could have gone to increase the price of Bitcoin actually went to increase the price of other coins (e.g. Ripple). So the altcoins tend to have a stablilizing effect on the price of Bitcoin.
Basically, what I am saying, in effect, is that NuBits will one day become the dominant altcoin, and it will do what all of the other altcoins are doing today. However, the price rise in Ripple is actually becoming pretty scary. A few months ago, I would have said that it will be impossible for Ripple to ever surpass the marketcap of Bitcoin, but it is looking increasingly possible that it could. In my opinion, this would be disastrous because we would then just shift to another bank-controlled system, and we’d be back at square one.
This is where NuShares come in. At some point, the masses of crypto-currency investors will realize that minting/buying NuShares is a better long term investment than buying Ripple. At the same time, some huge announcement will stop the bleeding of money from Bitcoin to Ripple (for example, Google is building an online marketplace to compete with Amazon. A few months from now would be the perfect time for Google to announce that this new marketplace will accept Bitcoin as payment. Accepting NuBits will come later).
So in summary, I believe that Bitcoin and NuBits will peacefully co-exist. NuBits will eventually be used for small to medium sized transactions. Bitcoin will be used for very large transactions. NuShares will be the investment for people who just want their investments to grow in value over time. NuShares will eventually replace putting your money in bank savings accounts, buying bonds etc etc. Bitcoin mining will become an occupation of only large organizations: mining pools and large multimillion dollar hardware establishments. “Common people” will mint NuShares instead because that will be the only option for solo minting/mining once all of the other altcoins have been displaced by NuBits/NuShares. So I believe that the future for NuBits/NuShares/Bitcoin will be extremely bright. I think that the price of Ripple will crash at some point in the future, but I’m not sure what the cause will be (full disclosure: I don’t own any Ripple, and I don’t plan on buying any, for the philosophical reasons stated above).
By the way, I probably don’t need to state the obvious, but I think that the price of Ripple is going up so fast because the banks (and/or their aligned interest groups) are secretly pumping money into it to destroy Bitcoin (which they are deathly afraid of). But what may happen is that one of the people/groups in their ranks might get greedy and dump early, as you typically see in the classic pump and dump scenario. I believe that Ripple is in a bubble phase, but once that bubble pops, it will be extremely difficult to get it to inflate again. I just hope it pops before too many people get hurt.