Why do we need stable currency?
Whether it is talking about the unit of account (the measure of value), or as a medium of exchange, money is some of the characterization of the whole payment system. In other words, money has become a tool for recording transactions and realizing multilateral liquidation.
In liquidation, the creditor’s rights of a person or an enterprise to some trading object can offset his debts to other counterparties. In terms of block chains, or in terms of distributed ledgers, these clearings can be carried out by some central institution, such as clearing centers, ACH in the United States, which have a general ledger clearing; of course, they can also be done by decentralization, such as before the advent of the central bank. There are Correspondent Banks and the realization of point to point in block chain. Therefore, both methods can achieve liquidation, but in the process of implementation there will be efficiency and management problems.
Then, when we study the stable currency, where should we focus our research?
The stable currency must be constructed as a payment system. What is the key to the payment system? The key is credit, that is, credit. It’s how you create credit and how to manage credit.
In fact, “credit” is a very interesting word. It is money in the banking system on the one hand, but Credit also represents the credit of a bank or an enterprise itself.
Here I use the “hierarchy of money” perspective, because money is inherently hierarchical, the top is Money, the bottom is Credit, and Credit is in the process of expansion and contraction. A lot of people are talking about whether Bitcoin is a currency, but what Bitcoin wants to try is that it doesn’t have any Credit, all the currencies are Money, and I’ll send you Bitcoin as the final settlement. This is similar to criticism by some of the Reserve Bank that there should be no Credit in the economy, and that Money should be the “real currency”. But historically, 100 percent reserve reserves, or very tight monetary policy, have not produced good results for the economy, and Credit has not emerged.
At first, we used gold as the final settlement tool. At the top of the modern monetary system is the Reserves of the central bank, followed by Currency, notes and coins. The next level is the Deposits that we normally have in common, and the NBFI Deposits that we have in non-bank financial firms, such as Bao. Next, we can extend to broader currencies, such as coupons used in chain stores, which you can exchange for gifts, etc., and airline credit cards, which you can also see as broader currencies. Further down there are Personal IOUs among individuals. Some scholars believe that money is the debts between people, the key lies in the issue of this debts behind who. The Issuer on the top issue is the government, and the bottom issuer is the individual. The value of the main issue with ious credit is linked, for example, I now write a piece of paper that I am in a year back to you a house, this is my personal credit, personal credit institutions and of course to credit than when ious expire, often have discount and extension.
The above is a macro Picture, can help you understand, we are talking about currency stability when talking about money, what about what.
Then we will block the chain of currency mapping to the above, you can find, can not find the location of the inside bitcoin. Why? Because modern money is basically a credit currency, that is, debt. But bitcoin does not belong to any one point of this debt, bitcoin is relatively special, it is a bit like gold, is in the external table (Outside Money). But we can put the corresponding digital currency into the other, such as USDT, it can be regarded as bank deposit certificates, Tether we can put below bank deposits. We usually say Token, 90% or more from the traditional perspective, but is a coupon and integral, but it is realized through the block chain, but it does not really out of (currency level) analysis of this standard.