Topic: Self-regulable economy based on cryptofiat money (Read 938 times)

Aleksei Okoneshnikov
Email – [email protected]
Facebook- https://www.facebook.com/groups/cryptofiat/

”Whoever controls the volume of money
in any country is absolute master
of all industry and commerce”
(James Abram Garfield, US President)

What is wrong with fiat money?
Despite a lot of criticism about fiat money, we have to admit that their invention and using have made a big sense to modern economy development. The accelerated economic growth of western countries and their sociopolitical dominance in the world took a place due to the implementation and spreading of their fiat money. Central banks have learned to manipulate the economy, to reduce the destructive effects of the cyclical crises on the economy, to instigate growth and economic recovery by adjusting the money supply. The functioning of this mechanism repeatedly implemented in practice, but turns up one question – why there are so many dissatisfied?
Fact is that the way of managing interest rates by central banks is not capable to pointwise treat diseases and economy problems. Treating economy by central banks methods is akin to treatment in a hospital on the basis of average temperature, diarrhea or other general condition of patients. In economics there are always certain industries and enterprises that are economically healthy and need additional funding for their development, but liquidity’s decreasing in market and high interest rates of central bank for inflation control destroy them,
or on the contrary, economically sick enterprises continue to exist via cheap borrowing funds and become a source of enormous number of bad debts paid by all society. We can put up with this state of things provided that suffer would everyone without exception but, in fact, banks always “print some money for themselves” in difficult times and that’s not fair. The modern system of issuing money allows banks to parasitize on the community and not bear responsibility for issued loans. However, in this situation that may be not a problem of fiat money’s idea but the system
of their production and managing. What if fiat money can be a great tool in the right hands and how to do it?

Why cryptofiat?
Bitcoin invention, or rather invention of algorithm “blockchain” as a registry entries you can trust without having to trust someone specifically, has created a new wave of money
re-invention. Have been published many different types of “gold”, “silver” and other, sometimes obscure money, but there is one really interesting project developed by Ripple Labs company.
If to explore their product, we see that they are positioning Ripple system as a global exchange and as a tool for fast and cheap money transfer. However, if to see into Ripple it becomes clear that Ripple is actually a tool of cryptofiat money’s production and management and that
is a truly explosive technology.
In Ripple system everyone can effectively carry out their natural right to give and take debt (ie actually “print” their fiat money) that truly opens up new opportunities and freedom.
We no longer need central banks for the fiat money production. We can take back their rights
to give debts on behalf of all the people. From now, everyone available to “print” their national money, 1:1 (one to one) equivalent to banknotes of the country’s central bank.
Strangely enough the almost complete absence of the topic about cryptofiat money’s production and management by Ripple Labs. May be they don’t realize what they “have done”?

Free banking rebirth.
In real life every man is unlikely to “print” their own money. It’s enough if many independent entrepreneurs would create their own cryptofiat money. In fact, many of them have already been printing money, for example, in the form of gift certificates, bonus points, etc.
They perfectly understand the benefits from money creation but so far there hasn’t been
so simple and effective way to exchange the same type’s fiat money of different issuers among themselves.
Simple exchange scheme might work like this:
At the first stage the workers and entrepreneurs have to arrange that they are going
to use the same cryptofiat as money. Entrepreneurs have to negotiate with independent third party (let’s call him Freebanker1) a guarantee that all the cryptofiat money they receive will be provided by state fiat money. All participants must use the same systems of production, accounting and managing cryptofiat money, such as payment system Ripple . Further, in the Ripple terminology, they must create trust lines (trustline) (Fig. 1)

https://i.imgur.com/FlGhkxT.jpg

Freebanker1 concludes civil contracts with entrepreneurs binding himself to repay on demand his cryptofiat money 1:1 in national currency issued by the central bank of the country. Entrepreneurs pass any number of central bank’s fiat money to Freebanker1, receiving in return equivalent to local currency cryptofiat money from Freebanker1. Thus, local microfinance system of Freebanker1 and entrepreneurs is created.
Entrepreneur1 gives salary to his workers as payment for 1 month in advance by cryptofiat representative money issued by himself (for example, USD), herewith concludes civil contracts with his workers binding himself to repay on demand his cryptofiat representative money 1:1 in national currency but not earlier than the salary payment date for the actually work period.
Entrepreneur2, Entrepreneur3,…, EntrepreneurN, Freebanker1 do the same things, designating their money in Ripple system in the same way (for example, USD). Despite of the same name it’s all actually just different types of cryptofiat money because they are issued by different subjects.
As a result, any worker is able to pay for any entrepreneur (within the microfinance system) for goods or services by cryptofiat money received from his employer, ie cryptofiat money created by entrepreneurs will serve as a means of payment (Fig. 2). The algorithm of the Ripple will independently change the balance of transaction addresses and determine who to whom have to pay and how much is the remains debt.

https://i.imgur.com/mCJZcaJ.jpg

As long as entrepreneur’s workers are not going to spend all the money at once,
the entrepreneur just tell to Freebanker1 to provide much less his cryptofiat money than he issued, for example 1:10. Thus, the entrepreneur has benefit №1: the entrepreneur will receive interest-free loan in the amount 90% of his worker’s salary. Since each ware ultimately made by people, so that actually 100% of the value – is the spending for salary
and since it’s so, in the economy will be colossal amount of funds received in an interest-free loan.
Since Freebanker1 has no civil contracts with workers, he is not obliged to “cash out” entrepreneur’s cryptofiat money  and so the only way to spend them – to buy goods and services from involved in local microfinance system entrepreneurs. Workers will be instigated to spend money just within the system where entrepreneurs get benefit №2: goods and services of entrepreneurs will become more competitive in the market. As long as established microfinance systems are local and within one country that allow to maintain domestic markets in a simple way, limiting the activities of transnational companies, free movement of funds and labor migration.
Freebanker1 also receive incomes, for example, by simple placing fiat money of central bank to commercial bank by buying government bonds and carrying out entrepreneur’s cash services.
If necessary, entrepreneurs and workers can fully or partially exchange cryptofiat money to fiat money of the country’s central bank in accordance with civil contracts (Fig. 3).

https://i.imgur.com/CvzT5a1.jpg

In conclusion.
Entrepreneurs in more economically developed countries operate in an environment
with low inflation and have no difficulty in attracting loan funds with low interest rates and therefore the implementation of using cryptofiat money likely will begin from less developed country. Where the loans are issued with double-digit interest rates and so interest-free rate provides huge competitive advantages and profits.
Absolutely for nothing central banks around all the world are concerned that bitcoin can destroy their business because a decisive battle of cryptocurrency with modern finance system is going to be on the fiat money’s field. Free banking will put an end to central bank’s monopoly of issuing national fiat money. Central banks will be not able to control the amount of money, ie manipulate the economy. Furthermore, no one could do it.
Free bankers will create self-regulating macrofinancial system for self-regulating economy based on cryptofiat money by uniting their microfinance systems.
Economic crises are inevitable but they will occur not like now, affecting on everyone
but bankers. Crises will be local and affect just on interest of confided bankrupt bankers.