Honest question: What's the value of this service? It seems you seem to suffer with any volatility: the exchange rates would be a constant drain on your net worth. Without any volatility, the service basically does nothing.
There doesn't seem to be any benefit, other than maintaining a minimum or maximum balance on your account. Perhaps this is useful for merchants who want to accept BTC without the risk of holding an excessive amount of BTC. Hmm. I might have just answered my own question.
I must be misreading, because it looks like a guaranteed price floor on exchange rates.
I thought it was widely known that those are not sustainable. It's exactly what Soros exploited to break the pound, and that was backed by a government, while this is just some guy's app.
http://en.wikipedia.org/wiki/Black_Wednesday
Those who don't learn from history...
Now this is a smart scam. He can do exactly what it says on the tin by keeping a pool of extra bitcoins to supplement his users when value falls, but when value rises he gets to recharge his pool with the surplus. This is built on the assumption of a "conservation of value over time" which in the long run is true (if it proves false then bitcoin has failed anyway) but in the short run you could easily have a crash where the net loss by users is less than the backup pool. You are also leaving yourself open to the controller of the backup pool stopping the service or just skimming off the top of it with users having no means of recourse.
If I'd want to keep $20 worth of bitcoins (or gold or dog poop) - I'd just keep $20 stashed away and when ready - would buy the beloved security at it's current market rate.
Why would I need extra middleman's service for that until actually ready to convert dollars to commodity?
If I was operating this service, I would just sell the Bitcoins as they were deposited to me. When people wanted to withdraw, I would buy them back at the current market rate. Of course I would do this in bulk and have a small reserve pool of Bitcoins to reduce my fees and improve liquidity, but that's not very significant.
As long as I can buy/sell for cheaper than I am charging my customers (which I can if I'm using MtGox at 0.5% and charging 0.75%), this is profitable with no risk to either me or my customers. There is no need for this to be a scam or a gamble by the operator (although it doesn't exclude the possibility, obviously).