What I’m going to propose is neither new, nor revolutionary.
As it might serve a need of customers, there’s possible business to be made with it.
The proposal doesn’t deal with a token that’s pegged to a currency.
As all major international currencies are issued by central banks, they are not reliable.
They serve as unit of account and for cash purchases.
They fail to be used for holding reserves for future payments and for deferred payments.
They fail because of the unreliable, uncalculable inflation rate.
Good money could be used for all those uses equally good
- unit of account
- cash
- reserve for future payments
- deferred payments
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 USD. For others the reason for that is the reason to prefer them to USD.
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 USD 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!).
How does the issuer make money, if the tokens are meant to be stable in relation to the index?
The issuer requests an offset when selling the tokens of quite a few percent. 10% or 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.
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:
- you have to pay the exchange fees when buying the ETF
- you need to keep the ETF
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.
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.
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.
I’m writing this here, because Nu has the features, that are required for this:
- a split between shares and tokens
- a network that’s run by PoS, which isn’t expensive
- a bot software that can be used to trade at exchanges
- a community with experience in coding and running software
- experience with an organization like FLOT that handles multisignature addresses
If Nu wants to issue that type of token, it can make it a source of revenue and provide customers with a token that is less volatile than a single crypto currency, that doesn’t put all eggs in one basket, that’s out of reach of governments and not prone to inflation created by central banks.
I’m seriously trying to help Nu, whatever some might say.
There are a lot of things that need to be figured out. This proposal is by no means complete. But it might spark a discussion.
If Nu doesn’t want to create that token, others will sooner or later.