Crypto Liberty

If you think the control of government over banks is exaggerated, recall that during the recent protest Canadian truckers held during the Covid-19 lockdowns, Prime Minister Justin Trudeau of Canada used his powers to freeze all their bank accounts to financially starve them into submission.

Currency Commonalities

All the government-controlled currencies today have some common features, which too often are liabilities for their citizens.

• Fiat Currencies - Their value is totally controlled by the government, and its actions. The only reason it has value is the government has issued a decree (a fiat) that their currency is legal tender for all debts and those who fail to accept it can be punished by the government.

• Enforced Usage - As noted above, when a government declares that a currency is legal tender for all debts they also enact legislation that makes it a criminal offense if people refuse to accept their currency to pay debts, especially if they refuse to accept it when the government wants to use it to pay debts.

• No inherent value - fiat currencies all lack almost any inherent value. For a time, coin currencies held inherent value because of the amount of precious metal, such as copper, nickel, or silver, used to make the coins. However, the precious metal in our coins has been replaced with other metal and alloys. Today, you cannot get paid a penny for the amount of copper in the US Penny.

• No commodity value - For many years, the value of government currencies were all backed by precious metals. The notion was that, at any time, you could take your money to the government and exchange it for a set amount of gold, or silver, bullion. When the nations of the world departed the gold standard, they made the value of their currencies dependent wholly upon the amount of money they chose to print.

• Unlimited supply - One of the two factors affecting the value of anything is scarcity. Any currency whose value is not directly tied to a real world commodity automatically has an unlimited supply. The amount of currency in circulation can be increased or decreased at the whim of government, rather than being driven by supplies of an actual item of value.

• Systemic devaluation - Inflation devalues, decreases the buying power, of currency.  Central banks around the world maintain inflation targets. Today, the press is making much of the efforts of central banks to bring inflation down to targeted levels. What is ignored is the fact that when inflation falls below targeted levels, those same central banks take steps to increase inflation to targeted levels. 

Currency Problems

Correcting the currency problems noted above can succeed only by directly addressing the drivers of inherent value and the problems currency resolve.

1. Usefulness is inherently valuable

2. Scarcity of something useful increases its inherent value

3. Currency must be portable to be useful

4. Currency must be fungible (easily exchanged for equal value) to be useful

Utility, scarcity, portability, and fungibility, oh my!

There are a lot of useful things in this world. Many have served as a form of currency at some point in history.  

According to the site Short Fact, the ancient Romans used salt as a form of currency. They note that the word salary is rooted in the word salt. Salt was exchangeable, pound for pound with gold. Salt was useful for preserving food for transport or storage and improving the flavor of food. It was transportable. A five-pound bag of salt was worth the same as five one-pound bags of salt, so it was fungible.

Gold, silver, tobacco, and other useful, but scarce commodities have served as currencies because they met these criteria.

Ignoring History

If these factors are so well known and understood, you might ask, "why do today's sovereign currencies ignore them?"

The answer is simple. Because, they believe it is in their own interests to ignore them. Their interests too often do not align with your best interests.

Fiat currency allows government to directly influence inflation and governments use inflation to steal buying power from you for their own uses. Allow a simple illustration.

Illustration

If you own a construction company and today you win a government contract to build a road for $1 million, you probably won that contract based on the assumption that it would cost you $850,000 in labor, equipment, and supplies, leaving a profit of $150,000 for you. Also, payment of the contract usually occurs incrementally as the work is delivered, rather than being delivered up front. In fact, building the road may take months or years.

When you won the contract it was based on the costs at the time of the estimate. But, inflation surges to 10% after your win. The buying power of the US Dollar in inverse to the rate of inflation. So, by the time you fulfill the contract, instead of costing you $850,000 in labor, equipment, and supplies the 10% inflation drove your costs to $935.000. Your expected profit of $150,000 is now just $65,000.

Where you anticipated being able to use $150,000 in profits to pay for the needs of your family, now you have just $65,000. Less than half of what you expected. Meanwhile to costs of meeting your family's needs have also risen 10% with inflation. So, your $65,000 profit only buys what $58,500 would buy when you won the contract. 

Overt and Covert Taxes Take Their Toll

On top of all that, the government has taxed your profits once or twice before you received them, directly confiscating 40% to 50% of the gross income.  When you expected $150,000 in profits you knew after taxes you would probably only net about $80,000 of that. Instead, your $65,000 nets you about $35,000, again, less than half what you expected.

Thanks to inflation, after winning a million dollar contract, you could find your family living below the poverty line.

When the government awarded the contract for $1 million, they understood that they were going to pay you with money that had less buying power. In other words, they got $1 million worth of goods and services today and paid you tomorrow with currency that they knew wouldn't give you that same buying power they enjoyed. No less a fiscal luminary than Alan Greenspan called inflation a stealth tax.

Free markets are generally quick to respond to meet needs. In this case, however, the market response to currency weakness has been relatively anemic. This is probably because of the significant risk associated with standing up a real currency that might compete with sovereign currencies. Such a product is definitely a competitive threat to the currency monopoly of the central banks and the sovereigns. 

Gold and Silver

After sovereign currencies moved away from using gold and silver to back their value, it became legal for people to buy and sell these precious metals on the open market.

Some people have invested their wealth in gold and silver coins or bullion which they store in safes where only they have access. Because gold and silver are totally fungible and possession is the same as ownership, they must be kept safe.  They are also bulky and heavy, so while they are transportable wealth, there are definite limits for most people on how much they can keep and transport.

Finally, your grocery store won't take gold. Before you can use gold, it must be exchanged into a sovereign currency. That can be done at gold brokers and pawn shops in nearly any community across the USA.

Instead of struggling with the challenges of physically holding precious metals, many have opted to buy "certificates." These certificates are a sort of promissory note. The issuer promises to exchange the certificate for an quantity of the physical asset (gold or silver) on demand. Ostensibly, this transfers the difficulties of physical security for the metals to the certificate issuer. However, these certificates have two big problems.

1) Few of them provide reliable outside auditors reconciling their physical reserves against the cumulative demands of all issued certificates.

2) In the event of a crisis, making the exchange of a certificate for a physical store of precious metal may be impossible.

Cryptocurrency Solutions

Cryptocurrency, being based in the digital world, are highly transportable. They can either be downloaded to the USB storage device, stored on a computer, or parked in a cloud storage on the internet. Almost any computer can be used to access them. 

Exchanging your cryptocurrency for real world goods and services can be challenging.

As for scarcity and utility as drivers of value, although both can be manufactured, just like fiat currencies, cryptocurrency values are not based on inherent, real world features.

Gold and Silver

Some cryptocurrencies have been created following the model of gold and silver certificates. Their only advantage over their paper-based siblings is that the cryptographic keys associated with cryptocurrency makes the certificates themselves slightly more secure. 

In March of 2022, Goldscape.net listed about 135 gold-backed cryptocurrencies as well as several that associate themselves with gold but don't back their coin value with actual gold deposits.

In the digital world, you can exchange your gold-backed cryptocurrency for many other cryptocurrencies. However, to buy goods in the real world, you still have to find a way to get that into sovereign currency your grocery store will accept. Finally, making the exchange of your gold-backed cryptocurrency into physical gold may be even harder than doing it with a gold certificate.

Bitcoin and Gold

Bitcoin is perhaps the best known cryptocurrency. Many have asserted that it is "the new gold."

Bitcoin is based on an algorithm (formula) designed to limit the amount of coin. This is intended to create value through scarcity. As Bitcoin becomes accepted for use as currency (to buy and sell goods and services) the element of utility is added. 

However, there never has been any assertion, except by the uninformed or deceitful, that Bitcoin bears any relationship to reserves of gold, or any other commodity or precious metal. Calling Bitcoin the new gold is marketing hype rather than a fact-based assertion.

Scarcity of Gold

A significant irony of using gold, salt, or many other commodities for currency is that a part of their value is driven by scarcity. Unfortunately, the facts don't support the scarcity argument. Nearly every year additional gold deposits are discovered.

In June of 2022, financial reporter Vanessa Benedict notes that we are currently aware of at least 20 gold supplies that have not yet been mined. This should make it clear that we don't actually know how scarce gold is, because we don't know how much exists. What we know is how much we have found, how much has been mined, and how hard it is to mine and refine it.

The same could be said of any precious metal or other natural resource (e.g., salt).

What we understand is that the supply of any natural resource is bounded by two things:

1. the boundaries of our planet

2. our ability to find and transform that resource into something usable

Attainable Value

The ability and resources needed to find and transform many of our natural resources (or cypto-resources) is often far beyond most people. That is a significant factor affecting scarcity. The resource must be sufficiently valuable to be worth the effort to find and transform it into something usable. If not, it will be left untouched. As proof of this point consider oil and natural gas.

The surface presence of oil and natural gas deposits have been a problem through most of human history. It wasn't until the 19th Century that someone began to realize the utility of this resource that it became valuable.   Today there is scarcely a human being alive who does not understand that these resources are valuable and useful.

The Most Amazing Value

Using land (real estate, dirt) as a currency is theoretically ideal from the standpoint of utility and scarcity.

Most Attainable

Perhaps the most easily attained, yet finite, natural resource is the land beneath our feet. Our planet is not getting larger or smaller. The landmasses rising above the sea are not increasing, or decreasing at any appreciable rate.  Some of the land is best used for the production of food (arable), some for the housing of people and industry (habitable), and some is considered uninhabitable. Through the application of science, those uninhabitable places may yet become habitable or arable, or both.

Most Useful

Throughout human history the ownership (or control) of land has been synonymous with wealth and power. Not only does the land beneath our feet have inherent utility to give us a place to build shelter for our families, it can produce the very things we need to feed and clothe them.

Owning the land means owning the resources embedded in the land and on top of the land. Those resources, used effectively, result in living standards that promote long life and comfort.  However, transforming the natural resources of your dirt into something useful and valuable requires significant effort and expense.

The inherent value and wealth of land, some lands more than others, has been one of the key elements of many wars and less large-scale thefts. One group of people wants to possess the land (and associated opportunities) that are currently held by someone else. One group is willing to take that land by force and those who hold it are willing to use force to resist that change of ownership.

Protection and Growth

Another reason land has been so attractive to investors throughout history is that its value has continued to rise. This protects peoples' wealth against things like inflation. Also, it is much harder to steal land than it is to run off with gold or silver. A thief cannot put your land in a bag and cart it off along with your gold. They must stay and face you. That makes it more risky for them to try to steal it.

These two factors mean the storing wealth in real estate protects your wealth against things like inflation and theft, while allowing your wealth to increase in value as the real estate you bought becomes more valuable.

Challenges

Using real estate as a currency has some very big challenges:

• Buying real estate can be expensive

• Real estate is not transportable

• Investments in real estate are difficult and time-consuming to exchange for cash (i.e., land isn't a liquid investment)

Cryptocurrency Answers

Fractional Ownership and NFT Cryptocurrency

Several cryptocurrencies have emerged in recent years which attempt to transform real estate into a currency.

Most of these solutions begin with a specific piece of real estate. A specific building, rehab,  or development project. They represent fractional ownership interests in these properties as cryptocurrency known as non-fungible tokens (NFT). These ownerships are non-fungible because 10% ownership in one is not necessarily an equal exchange with 10% ownership of another property.

These solutions provide advantages of being a transportable ownership. As noted previously, cryptocurrency is highly transportable. They also make it possible for people to invest their wealth into real estate regardless of whether their wealth is massive, or miniscule.

 However, the non-fungible nature of this solution is a major problem.  This way of investing in real estate is almost as illiquid as buying land outright.

A Revolutionary Currency Solution

Beginning in the 4th quarter of 2022 people have an unprecedented opportunity to embrace a true currency which uses real estate as the basis of its value and resolves the challenges of cryptocurrency.

CuBit (TM) uses 65% of the deposited wealth to buy real estate. They invest in properties that are appreciating in value, either naturally or through forced appreciation. That value appreciation is passed on to the coin holders to grow their wealth.

The remaining 35% of the deposited wealth is kept in cash (liquid assets) which can be used to meet short-term, modest liquidity needs of depositors and DirtiCoin.

No Certificates, No Fractional Ownership

CuBit (TM) pools the invested wealth together into its publicly viewable Asset Ledger (the Ledger). Because it is a pool, depositors do not hold certificates or NFTs that align to specific properties. Instead, they have a fully fungible currency. As DirtiCoin expands into a large number of digital exchanges and incorporates a debit-card its utility as a medium for exchanging for real-world necessities will likewise expand.

Size Doesn't Matter

The financial world has always been rife with fraud. Some assert that our central bank systems are little more than a government approved way to defraud people of the buying power of their wealth.

The cryptocurrency world has likewise been a breeding ground for fraud and theft. 

The fact is that there are no perfectly safe places for you to store your wealth.

Because of that uncertainty, the folks at CuBit (TM) have gone to great lengths to prove they are worthy of trust.

The Asset Ledger