Historically, fiat currency has never endured a long existence. In fact, every fiat currency since its inception by the Romans has experienced devaluation collapse. This has had major negative implications for their respective economies. Likewise, current fiat currencies often tend to be a weak store of value. At different points in time, central banks control the value of money at their discretion to match the various monetary policies.
The emergence of blockchain and cryptocurrencies has opened new possibilities against this backdrop to ensure decentralization and stability. However, the present blockchain payment systems and their cryptocurrencies have experienced extreme price fluctuations, thereby restricting the ability of their holder to use them as tender. Three years of stock market instability may be matched by a month of price swings in the cryptocurrency markets. A substantial part of this is due to the deficit in the intrinsic value of cryptocurrencies. Cryptocurrencies generally don’t return dividends, and just a tiny amount of the total value of the currency get invested in their development.
These features hinder widespread adoption, as currencies must be stable and represent a fixed value within an economy. A business with budgeted profit margins, for example, takes a considerable risk when accepting such currencies as a means of payment or as a reserve currency to stay on its balance sheet. Money was created to serve commercial transactions and offer efficiency. Although early cryptocurrencies have laid the groundwork for a decentralized future, their current limitations hinder their use in commercial applications for sustainable use.
Maybe the answer to cryptocurrency volatility is looking at the past
Since ancient times, gold and silver are exchange media and safe stores of value. Such precious metals are imperishable and compact, and they have always played an important part in the international monetary system. As a modern monetary system, however, their drawbacks consist in having no yield attached to them, thereby reducing the ability to use them in transactions because of Gresham’s Law of Money (“Bad money drives out good”): this monetary law describes an inherent problem that plagues both traditional cryptocurrencies and asset-backed currencies. This issue is illustrated in the case of gold and silver, wherein those who prefer it over legal tender or fiat currency usually do not choose to use them; rather, they prefer the less desirable fiat currency for daily operations.
The final major problem with asset-backed currencies revolves around stability. Historically, there have been many cases of fraud involving the use of precious metals and other properties as a solution to payments. To minimize the possibility of fraud and theft, an investor needs to be careful about who they invest with. That’s why asset-backed cryptocurrencies have proven to be somewhat troublesome.
For example, Tether, a company that issues a widely traded cryptocurrency which is supposedly backed by US dollars, was recently summoned due to hidden circumstances surrounding their cryptocurrency’s USD backing.
The need of the hour is a secure, efficient, and fair monetary system. One that combines the age-old stability of gold and silver with the efficiency of transactions on the blockchain. This structure will merge modern, decentralized technology with the oldest, fairest, and most sustainable type of currency, thereby enabling all participants to be their own central bank.
To add to its versatility, spending digitized gold as a fiat currency via a debit card will become accepted as commonly as Visa/Mastercard payments. This will be an added bonus to this project, promoting transactions to ensure continuous movement within the system and thus solving the shortcomings of other asset-backed currencies. The defeat of Gresham’s law will be achieved by adding a specific, multifaceted yield scheme that promotes trade and fairly shares the wealth produced within the system.
This monetary system’s goal will be to provide a globally accessible monetary system, designed to give back to all those concerned, thereby providing a solution to the global need for healthy, stable capital.