[size=14pt]Introduction[/size]
What I’m going to propose is neither new, nor revolutionary.
It just tries to recombine some things we already have.
And it might serve a need of people.
Plus it’s a step into the direction of offering “good money”.
Good money could be used for all those uses equally good
[ul][li]unit of account[/li]
[li]cash[/li]
[li]reserve for future payments[/li]
[li]deferred payments[/li][/ul]
But we don’t find good money in the world.
As all major international currencies are issued by central banks.
They serve as unit of account and for cash purchases, but they are not reliable and suffer from inflation, hyperinflation or monetary reforms.
They fail to be used for holding reserves for future payments and for deferred payments, because of the unreliable, uncalculable inflation rate.
To make a token good as reserve for future payments or for deferred payments, you need to base the value of the tokens on commodities, raw materials, food, industrial products (finished and unfinished) and alike; things you or others want to buy with the tokens - now or in the future.
If the tokens keep the value stable measured in that basket of commodities and goods, they are stable and not prone to effects of inflation caused by central banks.
If the token transactions are processed on a blockchain they can have the benefits of crypto currencies while being more treasured than fiat money.
Some might perceive it as drawback that these tokens aren’t stable in relation to fiat money. For others the reason for that is the reason to prefer them to fiat money.
At traditional exchanges there’s a lot of trading regarding commodities, raw materials, food, industrial products including derivatives. It’s easy to find a price index. It would be easy to base a token on a combined index. The fiat money price of that token would be floating. The composition in terms of commodities, raw materials, food, industrial products would change together with the change of the individual relative value.
But the token would at each time allow you to cash out the value of a% of commodityThis, b% of commodityThat, c% of raw materialWhatever, d% of… etc. (keep in mind that a, b, c, etc, can change over time!), which would lead to stable buying power.
[size=14pt]Why making the efforts?[/size]
One reason to make the efforts is to make the world a better place.
This alone is a good reason. But I see a chance to make money from it by making buyers/customers happy with it.
How does the issuer make money, if the tokens are meant to be stable in relation to the index? And how does it make buyers happy?
In short: the tokens are sold for an offset and bought back at face value. They save the buyers from mirroring an index on their own. Nothing new. Just another ETF, but…
Longread: the issuer requests an offset when selling the tokens of quite a few percent. 10% or way more doesn’t look unrealistic, especially not if you account for the real inflation rate of e.g. USD. I’m aware that the Fed proclaims a low inflation rate, but depending on what you look at, USD had a considerable inflation rate during the last 8 years. You save the customers creating a basket of all that commodities and goods, provide them with a token that’s fungible and can be transferred in small units, save them from the exchange fees they have to pay when buying e.g. exchange traded funds (ETF) and offer a token that represents all those commodities and goods.
I’m favoring ETF, because that would save from some trouble dealing with way too many individual products/index funds.
From that offset the operational costs are paid and on top of that revenue can be made.
In difference to a standard ETF the tokens would “owned on a blockchain” and could be transferred just like crypto currency units. You would be on the way making “good money” by creating such an index.
[size=14pt]Would that it were so simple[/size]
The devil is in the details.
As the tokens represent a basket of commodities, you need to buy those ETFs when a customer buys tokens. After all you need to back (ideally 100%) of the tokens by that basket to make the token a reliable and trustworthy product.
That creates two problems:
[ul][li]you have to pay the exchange fees when buying the ETF[/li]
[li]you need to keep the ETF[/li][/ul]
The first problem costs money and might require minimum purchase/sell amounts of tokens (not very convenient).
The second problem can lead to confiscated ETFs in case a government might not want such a business.
[size=14pt]Damn, so close - what now?[/size]
A solution that is less than ideal, but maybe a step into the right direction is right in the field where this token shall be placed: crypto currencies.
Instead of ETFs that stand for commodities, goods, food you make a kind of crypto index. You issue tokens that represent onwership of (just as an example) a% BTC, b% LTC, c% ETH, d% XMR, etc. - you create a crypto coin index.
The tokens in the index need to support multisignature transactions and most have a high trading volume at a tight spread, otherwise you need to limit the amount/value of tokens that can be bought per time to adjust the price.
If a customer buys a token, the proceeds are invested in the crypto coins listed in the index.
The crypto coins are being bought at an exchange and deposited in publicly known multisignature addresses. The sale offset is accounted separately and operational costs are being paid from it. If there’s money in excess, the revenue can be invested in development or distributed as dividend, e.g. as tokens (after the index crypto coins have been bough, of course)
That way customers can always verify that the tokens are backed by the crypto coins they represent.
Just as with creating a basket of commodities/goods, it saves the customers from putting all together on their own.
The easiest way for making it on the own would be to buy a lot of different crypto currencies and manage at least all the private keys for them, maybe even wallets, clients and blockchains. The alternative would be to leave them at exchanges, but that’s not exactly one of the most safe places.
While this crypto coin ETF is not exactly “good money”, it’s a chance for people to participate in the (price) development of crypto currencies without the need to deal with all of them.
They can buy and sell ETF tokens for BTC. If they buy from the issuer, there’s a buy offset. If they buy on the market, the spread will be somewhat smaller.
[size=14pt]How to do it - in a nutshell[/size]
PeerAssets seem to be a platform on which that could be implemented.
I think you’d need (at least) two PeerAssets:
[ul][li]one that represents the issuer (at the beginning distributed across the board of directors, who can use them for voting)[/li]
[li]one that represents the fund tokens (which can be bought/sold for BTC)[/li]
[li]and the third I can think of are tokens (corporate shares) that entitle you to receive dividends, but that have no voting rights; they are optional and can come later[/li][/ul]
I already have spent some time thinking about the implementation, but like to postpone writing more about it than I already did.
Before I want to know whether I’m completely wrong with my idea to base this on PeerAssets.
The PeerAssets white paper says e.g.
“PeerAssets enables easy querying of the blockchain for relevant transactions and offers some extra features like shareholder voting and dividends payouts.”
And the deck, deck spawning, cards and card transfers appear sufficient to do the job for all the two (three) PeerAssets/decks I mentioned above.
What are your thoughts?