Modern crypto projects face a series of obstacles ranging from plain operational issues to core conceptual principles by which the currency should be made. The most obvious and practical way of creating a digital currency is by getting to the root of the conventional currencies and connecting this virtual entity to real and valuable goods, like precious metal.
One option is to adopt a commodity-based currency whereby the currency in circulation is the commodity itself, take gold for example. The key benefit being the credibility of the currency backed by the intrinsic value of the commodity, there is no need to trust the governing body that gold or silver will hold their value.
The recent example of the Turkish lira highlights just this. After a quarrel over tariffs with the US, the lira plunged more than 25%, entering a downward spiral when individuals possessing the currency began getting rid of their holdings.
The main message to take away from this: governments can’t stop printing money, because they spend more than they earn by collecting taxes. To raise money, they issue government bonds, and pay a fixed interest to all debt holders. To pay off the interest, they print more money, thereby increasing inflation. Ultimately what this means is the monetary system of today is entirely debt-based.
The question then arises of how we can create a healthy economy that pays a healthy interest back to its holders based on the velocity of money rather than the performance of debt. When a system shares its wealth in a fair and honest way, we can now start to drive positive growth and evolve beyond a central control.
This is the potential for cryptocurrency. Everyone who wants to secure themselves against the debt bubble seeks assets that are backed by something real, or at least not dependent on someone else’s debt. It’s very unpleasant for anyone to lose 25% of his/her savings over 10 years, even with a small 2% yearly inflation rate.
So, the real question becomes: how do we break free of this vicious cycle?
Perhaps the solutions are already here with the evolution of the stable coin, backed by precious metals.