Topic: Reserveum: How to create Ideal Non-Inflated money? - page 4. (Read 985 times)

Elastic supply means our money is under constant menace of manipulation by a central authority, that is very dangerous. I think the pre-defined supply feature of bitcoin is great. After all, when we start playing a game we don't want the rules to change at the middle of the match, just because player A or B is at an unfavorable position.
Bitcoin ensures the rules are the same, from the beginning to the end, for everyone and actually I could say that is one of the main reasons why it's pretty valuable and demanded right now.

Good for you - Bitcoin is limited in its creation volumes, indeed. It is this limited emission that makes Bitcoin such a rare good and pushes its market value up and up.

Market trading volumes of Bitcoin do not correlate to the volumes of economy. What defines ideal money is elastic supply - an ability to promptly grow and diminish in its volumes, depending on market demand. This is what Bitcoin lacks. Its creation volume is pre-defined and can not be changed.

Ideal money should not depreciate at all

As far as I know bitcoin already fullfils this goal with its limited supply, not increasing the inflation by printing money like our governments do with their traditional fiat currencies.

I don't see how Reserveum could be more efficient than bitcoin on this matter. There are already thousands of altcoins in the crypto market, and most of them don't have any use at all. I would like to expect yours isn't one of them, although I'm pretty sure it is! 

Thanks a lot for your answer. You are right.

We believe that the ideal money is the money that keeps its purchasing power in the long-term perspective.

And in the short-term perspective, the ideal money can both grow in price (deflate) or fall in price (inflate) depending on the proportion of money supply to the economy volume.

However, it is best to eliminate the periods of the money purchasing power falls with the help of, say, money supply compression.

Reserveum Group reviewed this phenomenon in our new article "Tulip Mania and Green Men"

The ideal monetary currency would be one that neither gains value (deflationary) nor loses value (inflationary). If it were deflationary, it would not be good money because everyone would just hodl in the certainty that the money will be worth more in the future and therefore they could buy more with it. Thus, the economy would then suffer extremely and jobs are cut. If the money were to lose value, then the opposite would occur. People would rather buy things today than tomorrow, because they know they can afford less in the future. Therefore, the ideal case would be if the currency did not fluctuate at all. But how that is feasible is the holy grail, since a currency, like other goods and assets, is subject to trade and demand, and thus gains or loses value one way or another.

Regulating stablecoins and their issuers can have a positive impact on the whole industry - this is the opinion of Fitch Ratings from their report. They believe that lack of transparency hinders the stablecoins market from normal functioning and lowers the potential of tokens.


The first large economy to offer a legislative draft for the stablecoins market is the European Union. The USA is also considering an opportunity of regulating digital money issuers and operators along with banks. Fitch highlights a special role of the USA in implementing the regulation since most of the existing stablecoins are quoted to USD.


First bank licenses owners who can officially work with stablecoins will have enormous perspectives and advantages compared to the current banks and operators. If it happens, the whole financial industry will change.


According to Fitch rating, the guarantee of stablecoin holders' rights, transparent reports and issuers' publicity will raise users' trust and bring the stablecoin market new investments.
As you see, the regulation supporters continue finding new arguments for stablecoins transition to official currencies. However, everyone omits the main question: why does anyone need centralized and legal cryptocurrencies? In fact, they will turn into money units like USD and will not differ from money on digital wallets.


What do you think, do stablecoins need regulation or is it better without it?

Crypto exchange Bitso, one of the largest exchanges in Latin America, along with Circle, the USDC issuer, works on a system of trans-border transactions between Mexico and the USA.

The goal of the project is to create conditions for a convenient and swift money exchange between companies and individuals of the USA and Mexico. These transactions are supposed to deal with a number of the problems that exist now, which are: limits for transactions, high operation costs, and delays, which are characteristic of the banking system.


The new instrument, named Bitso Shift, uses crypto to operate cheap and swift trans-border payments that are available 24/7 and help people exchange Mexican pesos to USD Coin stablecoins that are supported by the US Dollar. According to their press release, payment transactions with Bitso Shift are performed within 24-48 hours. All transactions are operated by fully regulated financial institutions.


According to the World Bank, in 2020, the volume of transactions between the USA and Mexico grew by almost 10% and reached nearly 43 billion USD. There are many Mexican ex-pats in the USA who regularly send money back home. However, many country residents have no access to USD accounts.


And since the trans-border exchange between the USA and Mexico is believed to be the world's largest exchange corridor, the Circle and USDC see it as a great opportunity; Jeremy Allaire, the Circle CEO, agreed to that saying: "We are happy to join the Bitso Shift initiative that demonstrates that the blockchain technology can lead the world to high-scale, effective and profitable solutions."


As you see, cryptocurrencies can help people solve their problems quickly and effectively, the problems that were there for decades and couldn't change because of the complexity and monstrosity of the standard financial system. What do you think, dear forum users, would you like to use quick and cheap transactions with stablecoins?

We have already talked about such problems as inflationary pressure and the lack of elasticity in money supply at crisis. What else might be the cause of the huge inflation that we are living with right now?

Problem 3: centralized issuer

Many fiat and even some digital currencies have one centre where it is decided to issue more of that currency or not. For instance, for fiat money it would be the government, while for cryptocurrencies such as Tether it would be their founder and owner, Tether Ltd.

In other words, it is not such automated mechanism that decides how much money should be issued, but a person or a group of people with all the flaws that human brains have to offer. Instead of adjusting the size of money supply to the volume of goods and services in the economy, they continuously expand the money supply in order to lend money to the economy and thus push it forward.

Also, one more thing that a centralized issuer almost always fails to do is to provide a considerate reserve of the currency and monitor the quality of these reserves’ structure.
The solution we have come up with is to introduce the economy to decentralized money emission mechanisms, like the ones that blockchain has to offer. Then we all can go through a transition to digital money that has a transparent protocol.

Problem 4: not enough liquid reserve

As we have already mentioned above, centralized issuers often fail to save up enough reserve that could be easily transformed into valuable resources.
Throughout centuries, money was made of precious metals that were the reserve itself. Later, with the introduction of paper money, the government was the one responsible to provide enough resources, such as gold, to reserve and balance the system.

However, after the Bretton Woods Conference in 1944, gold has been losing its points as the major reserve for the whole monetary system. Then finally, in 1971, the USA declared that its money was no longer tied down to the golden standard, and then the economy stepped into a completely new era. We can even say that the money of today is not backed up by anything, it is pure air and ideas in people’s minds. The only thing that matters is how reliable is the country that issued some currency.

What can be done here? Every emission of money has to be protected by a reserve of an equivalent liquid asset. Whenever the money supply is decreased and the excess money is destructed, the reserve has to be returned to the issuer.

These are the problems we see in the modern monetary politics and the way we could deal with them. What do you think about it? Do you believe it is possible to create such non-inflationary money?

Problem 1: Inflationary Pressure

As we all know, inflation consists of two parts: Supply push and Demand pull. Altogether, it means that the money supply is in imbalance, and so is the amount of goods and services circulating in the economy.

But there is a solution! If someone develops an automated mechanism that would monitor the current volume of the market for all goods and services. Then more money should be issued only when there is an increase in the volume of the real market.

Problem 2: Lack of elasticity in money supply during an economic crisis

Economy does not grow all the time, and we in 2008, and then 2020 witnessed how easily it can reduce by a significant degree. What do governments do in such cases? They issue even more money to “support” the economy, while what should be done is absolutely opposite.

How is it possible to reduce the money supply once the economy is losing its power? The solution is simple: develop a physical mechanism that would destroy excess money supply and return a proportional share of a reserve that supports the money market.

And you, dear forum users, have you ever thought about such opportunities in this economy? Do you think that it is possible to overcome inflation with these solutions? We are waiting for your reply!

At the recently held Money 20/20 conference, chairwoman of the Federal Deposit Insurance Corporation (FDIC) Elena McWilliams said that state regulators have begun to develop standards for interaction between banks and the crypto industry. One of the key tasks of the project is to create conditions for the development of innovative technologies and risk management.

According to McWilliams, the spontaneous existence of the crypto-industry without clear regulation can have a negative impact on the development of the innovative field itself and deprive America of leadership in digital technology development.

Currently, the FDIC, the Fed and the Office of the Comptroller of the Currency at the U.S. Treasury are deciding what role banks will play in operations involving cryptocurrencies. According to the FDIC chairman, the regulators will present a series of related policy statements in the coming months.

Stablecoins received special attention at the conference. Once again, the need to regulate tokens on such points as asset security and financial stability of issuers, as well as strengthening anti-money laundering measures, was emphasized.

The standards under development will regulate the storage of cryptocurrency to secure trade transactions, its use as collateral for loans and even the opening of accounts along with fiat currencies. It also became known that the FDIC is considering the possibility of direct deposit insurance in banks issuing stabelcoins.

It seems that American regulators have seriously decided to take the cryptocurrency industry under full control, which actually contradicts the very idea of digital currencies. Do you think this will lead to the decline of the crypto market or will regulators be unable to cope with the scale of a decentralized financial system?

As it became known USDC issuer launched the stablecoin on Hedera Hashgraph blockchain. For Hedera Hashgraph, it is the first stablecoin.
According to the company's representatives, this is an important step towards simplifying the development of DeFi applications.

Hedera Hashgraph uses directed acyclic graphs (DAG) without grouping transactions in blocks. This technology enables it to reach high capacity (up to 10'000 TPS), low delays, and high energy efficiency.

Last month the Hedera board approved a plan to invest 10,7 bln HBAR tokens (around 3,85 bln USD) into the development of the ecosystem. HBAR Foundation will distribute grants between developers, startups and other projects that work on implementing Hedera network in DeFi, NFT, CBDC, gaming, and other industries.

The board includes 23 companies, including Boeing, Google, LG Group, Nomura Holdings, Deutsche Telekom, Tata Communications, London School of Economics and Political Sciences, etc.

According to Shayne Higdon, the Head of HBAR Foundation, the support from USDC will open such opportunities to the network participants as securitization and supply chain tracking platforms.

So now Hedera Hashgraph is the sixth blockchain in USDC family. The stablecoin also works on Ethereum, Algorand, Stellar, Solana, and Tron. They are planning to launch the token on Avalanche, Celo, Flow, Kava, Nervos, Polkadot, Stacks, and Tezos.

Looks like people see great potential in USDC for applying it in different areas of the digital business. We were wondering, dear forum users, do you think such investment projects are rational?

I think that for every Non-Inflated coin it is necessary to create demand in this coin.
To do this promotion is necessary. The coin must be useful for people and it is necessary to continue to develop a project.

Now many coins have a limited issue and burn of the tokens. But to create a demand it is necessary to increase the number of users of the project, continue to develop project and increase its ecosystem.

I think that the most important thing is not to create a Ideal Non-Inflated money but it is necessary to promote the created coin to increase its ecosystem.

I think that first of all it is necessary to create demand in the coin. Coin must be useful. More people use the coin, more demand - higher price of the coin. And it must be a limited issue of the coin.

Cryptocurrency industry is actively developing in different spheres. Now many projects use non-inflated coins and tokens to increase their value.

In its recent report, International Monetary Fund attacked cryptocurrencies in general and stablecoins in particular. According to the Fund representatives, stablecoins are not reliable enough to become a part of the international financial system. Among the vulnerabilities of stablecoins they listed non-transparent emission and distribution, risk of breakthroughs, instability due to high volatility.

IMF analysts called the regulators of developing countries down to prevent losing control over cryptocurrencies - it could be facilitated with the lack of the legal framework. The report outlines that cryptocurrencies and stablecoins may bear serious danger to unstable economies.

IMF calls the international financial community to introduce global standards for crypto assets, which, according to experts, may prevent 'infection' of other markets.

"As the capitalisation of the crypto market grows, the importance of these risks to macroeconomics may grow as well", so commented the specialists.

Recently, IMF has been calling to strengthen regulation of the crypto industry more and more often. It may be a reaction to such events as legalisation of Bitcoin in Salvador, the introduction of free conversion of USDC to USD in the MoneyGram platform, and other signs of popularisation of cryptocurrencies.

We believe that the regulators may have some ground for being worried since they risk losing control over both the shadow economy and the population's finances, should people switch to cryptocurrencies more. What do you think, is this scenario really threatening or will the cryptocurrencies remain a by-product of the financial world?

Now secure storage of information is very important. All information can be hacked that is why people pay attention how secure is the storage of information.

People have more and more information, they need to store all this information and they need a security of information storage.
Blockchain allows to safety store information.