Monetary System: minting crypto coins for mass use
Monday 08 December 2014
Up in the hills of the Westcountry in the UK, not so very far from where I spent my teenaged years, lies the little Devonshire town of Totnes. Totnes is well-known for its thriving alternative scene – and that applies to its currency as well as the New Age types who cluster there. As well as some of the best charity shops in the known universe and more ageing hippies than you can shake a joss-stick at, it’s also home to the Totnes Pound.
The Totnes Pound is one of a large and increasing number of local currencies. Something in the region of £12,000 is circulated
just within the town, the aim being to strengthen the local economy and encourage users to forge mutually beneficial business relationships between themselves. It comes in the form of counterfeit-protected notes, much like the regular Great British Pound, and it’s backed by the equivalent sum of money held in a designated bank account.
Creating your currency: the Monetary System
In the real world, creating your own currency is tricky. If you’re not a nation state, then you have to go to the trouble of printing your own banknotes, along with all the anti-counterfeiting measures you’ll need, and presumably making sure you don’t run foul of any regulatory issues inherent in starting your own mint. To ensure that your currency has any real value, you’ll also need to ‘lock’ the equivalent amount of underlying currency away, as the Totnes Pound does (though variations on the theme include money backed by units of time, for volunteering, and so on).
In Cryptoland it’s a little different. Creating an altcoin is a relatively simple matter of tweaking the Bitcoin code – as literally hundreds of different cryptocurrencies have already done. But even then, it’s a pretty specialist undertaking. You’ll need a suitable developer, and you’ll need a large network to bootstrap your new currency. You can’t just run it on one or two computers if you want it to remain secure. In other words, it’s not something currently within the grasp of Joe Public, or the millions of businesses that might benefit from using their own crypto coin of one hue or another.
Enter the NXT Monetary System, an up-coming feature that will enable anyone to create off-the-peg currencies on the back of the NXT blockchain. Users will be able to specify the parameters they want for their currency, and back it by locking a given amount of NXT to provide a floor value for the coin. (Although the upside is potentially unlimited depending on features and userbase, the value is protected since it can always be exchanged back into NXT.) It will even be possible to create coins that are proof-of-work distributed, though their security will still come from NXT’s proof-of-stake network.
Do we need more altcoins?
In an ecosystem awash with clone coins, most of which offer little or no innovation or genuine utility, the question arises of whether we need more forms of cryptocurrency. Some critics have argued – vehemently – that Bitcoin alone is sufficient, and that features and services can be built on top of it rather than embodied in new coins. (The fact that Bitcoin core development has ground to a halt for political reasons is neither here nor there, it seems.) Others suggest that Bitcoin is and will always remain king of cryptocurrencies, due to the simple fact that its immense network effect means it has an unassailable lead over any latecomers – something that may well be true – but that a few altcoins that offer features that Bitcoin cannot might survive in the long run (which might also be true).
But these points of view miss a couple of important facts. One is simply that we are used to thinking in terms of competition: we assume that if one coin is to succeed, then it has to be at the expense of the rest. In reality, cryptocurrency is a tiny, tiny economy. If Cryptoland was a company, it would have approximately the same market cap as Coca-Cola. At a shade under $6 billion, there’s a lot of room for growth. Crypto is a drop in the ocean of the global economy. Competing for a larger slice of the $6 billion pie is missing the wider goal, here.
Second, there are many, many valid use cases for niche or micro-cap currencies. There are something in the region of 180 different national (state backed) currencies in circulation today. Then there are a large number of informal local currencies, like the Totnes Pound, designed to bring value to a specific economy. Cryptocurrency can do the same – in fact, the city of Hull in the UK has already experimented with its own cryptocurrency, partly based on Feathercoin. But, of course, there was the tiresome business of creating the code, GPU mining the coin and bootstrapping the whole endeavour – not something anyone would do if they could avoid it.
What about loyalty tokens – clubcard points, Nectar points, reward tokens of all forms, issued centrally by supermarkets, stores and many other businesses? What are these, if not a kind of currency, exchangeable within the confines of a particular designated economy? These are commonly used as a way for companies to reward their customers with a little bonus and ensure that the money they represent is kept within an approved circle of commerce. What if these could be cryptographically created and freely traded on exchanges, so the market would set their true value but they could still be redeemed in their designated domains? The Monetary System makes creating such tokens straightforward.
Finally, due to the control it’s possible (optionally) to build into the bespoke currencies, there is the ability to peg a crypto coin to a physical-world currency or item – a kind of hybrid decentralised/centralised coin that can be used to transmit real value. Imagine the scenario: a migrant worker in a low-income country is paid in cash and has to spend in the region of 10 percent of his pay cheque simply to send money home to his family. Alternatively, corruption – a huge problem in some parts of the world – erodes the value of an employee’s labour as a series of unaccountable middlemen take their cut. What if all these payments could be made directly, perhaps via mobile phone, bypassing the usual leaky channels? It’s not fantasy: new companies are already researching the viability of doing just that using the new platform, taking aim at a healthy slice of the $500 billion global remittance market.
Monetary System is currently operational on Testnet and will be released in the coming weeks.
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