A holy grail for crypto: money supply tethered to credit

I’ve been involved in the crypto space for close to 2 years now as an investor. I am an engineer in real life, so I have taken the time to get into the nitty gritty of how blockchain really works and I have a big appreciation for the conversations many developers and crypto enthusiasts have about the best ways to speed up transactions or maintain privacy.

But when I talk about crypto with friends that don’t have a technical background, they typically ask questions like: ‘how can crypto ever replace real money’. It’s a frustrating question, and one many people with experience in the crypto space have probably heard many times. My answer to them is that so called ‘real money’ is no more real than Bitcoin or any other crypto. It’s all a matter of perception, faith and adaption.

However, this answer is never good enough for people that have a background or interest in economics. This is because FIAT money like the dollar is differentiated from Bitcoin in a critical way: there is an intelligent money supply system for the dollar while Bitcoin has a naive fixed supply of 21 million coins.

Bitcoin’s fixed supply is interesting. It’s the reason many folks call Bitcoin digital gold — it’s a rare and valuable commodity that is hard to mine. One day it will be impossible to mine more of. However, this fixed supply severely limits Bitcoins utility as a medium of exchange because it lowers consumerism and investment motivation.

FIAT money supply is controlled by a regulatory body like a central bank. While no one will argue that regulators are perfect (in some countries they do an awful job and are corrupt to boot) they at least systemically introduce more money into circulation to fit the state of the economy as a function of credit. Sure, over time FIAT currency loses value, but its a decent enough store of value that you can rely on it in the short term, and it’s easy to invest your money long term to sustain growth or to use it day to day.

No crypto has so far succeeded in providing a money supply regulation solution that is tethered to credit and that is a major roadblock for widespread adaption. Lately, I have seen more projects that are trying to address the issue of money supply but my response has been generally lukewarm.

There are now projects which propose to tether supply to the dollar such as Dynamiccoin, which is antithesis to the core concepts which drive most crypto enthusiasts. After all why should we care what the dollar value is? Until just yesterday while browsing Bitcointalk.org, I had yet to see a truly promising project which tries to solve this issue.

I came across the Ryo project in the announcement forum for altcoins (https://bitcointalk.org/index.php?topic=4711929.0). The announcement post for the project talked about this exact issue, so I decided to take a closer look.

I was very pleasantly surprised. The project has a concise and well written white paper and propose to tether money supply to credit as a function of p2p loans. In essence, the project wants every person to function as a sort of mini central bank. It’s a very cool idea which seems promising in theory. The team is totally anonymous and claim to have been working on the project for a year privately. Technically, they say that their code is based off Nxt which is of course a mature project.

I will be following this project to see where it goes, as well as continuing to search for other interesting solutions to this holy grail for the crypto space.