October 30th, 2015

Ann Vole

A new currency idea

Bitcoin and litecoin and several others are fiat currencies but the value was created somehow, usually by coin mining which increases the views on a website which moves it closer to the top of the search results in Google-style search engines. A new cryptocurrency is claiming to be backed by gold. That would make it no longer a fiat currency. The key value of any currency is an adjective "fungibility". Fungibility means the ability to be replaced by something else of equivalent value. Fiat currencies hold their value due to continued confidence in the currency by those who hold amounts of that currency in hopes that it will retain it's fungibility. Precious metals have a high fungibility due to the many relatively easy ways to confirm the purity and quantity of the metal at the point of trade. Precious metals retain value well due to the difficulty in changing the amount of these metals in circulation (both adding ignificant amounts into circulation and removing significant amounts from circulation). Retaining value adds fungibility because you are not worried about the currency losing significant value between obtaining the currency and trading it for something else.

My idea is a currency that is based on a proportion of the value backed by a set number of the most stable currencies and a portion backed by a set number of the most stable of tangible assets such as precious metals or land and a portion backed backed by stable investment types (other than the first two kinds of investments). The choices and the amounts will be determined by a set formulation and administered initially electronically (obviously manual actions like land purchasing and storage of precious metals will have to be done over a set time span after the decision to change amounts or types has been made). If someone purchases such a currency, they must use one of these items of value to make the purchase. With several moneys as part of the value system, this will be relatively easy. The overage of that particular currency will trigger a need for exchanges to be made which involves getting rid of the excess amount of investment in that particular currency. All of these will increase both the stability of this new currency but also it's fungibility as it will somewhat follow the world markets for these three areas (moneys, limited resources, investments).