Working Paper for a Stable, Market-Elastic, Blockchain-Based Currency
MyCoin (MYC) is a theoretical, Ethereum-based token that will be traded on the Ethereum block chain. MYC will comprise of the following:
1. MYC will be a naturally stable crypto-asset constantly backed by a real basket of commodities.
2. MYC will constantly and consistently adjust itself with the global commodities market.
3. MYC will only be issued when assets are put into the MYC infrastructure, and will be destroyed only when assets are taken out of the MYC infrastructure.
4. MYC will eventually be redeemable in gold, but there will be a fluctuation of the amount of gold that one (1) MYC can purchase. This is because MYC will be based on a basket of commodities, and not solely gold.
5. The commodities market is the underlying market of everything, and is the only physical market that affects the values of fiat currency. Commodities include metals such as gold & silver, consumables such as wheat & barley, and energy such as petroleum & natural gas. Commodities will all be widely & diversely traded goods with a strong market volume basis.
Small and Medium Enterprises (SMEs) have a trade financing problem. They are unable to receive trade credit for imports, to the tune of $1.9 Trillion. You can read more about this from the experts here, here, and here. Blockchain has been proposed as a great solution to this by IBM, along with many other organizations. These proposed projects solve many problems, making information accessible to banks about SMEs. However, we are not convinced that the risk-profile will necessarily change dramatically by solely the opening of information. Better forms of financing must also be provided to SMEs. Here’s how it’d all work:
1. 100 MYC are issued by MyCoin in exchange for $100 in assets. The tokens are sent to the purchaser, and the $100 is retained by MyCoin in extremely liquid assets, such as USD or gold until an SME with funding requirements is found.
2. Ahmed, a small trader in Indonesia, wants to purchase wheat from Raj, a farmer in India. A price for a bushel of wheat is $100. Ahmed and Raj agree to do a business transaction.
3. Ahmed receives trade financing from the MyCoin network. The MyCoin network purchases the bushel of wheat from Raj for $100, and tells Ahmed that he has to pay back 100 MyCoin, plus a premium of $5 on the date of delivery.
4. The price basis for the MyCoin Ahmed has to return is based on the market price of USD/MYC on the date of purchase, not on the date of delivery.
5. When the wheat is delivered to Ahmed, he attempts to purchase 100 MYC from the market.
6. The MYC holder sells their coins to the buyer, and receives $100. The MYC are returned to MyCoin, who destroys them.
This micro-transaction is merely the proof-of-work for a miniature ecosystem in which there would only be one commodity, one token holder, one buyer and one seller. Let’s explore another scenario:
1. When the wheat is delivered to Ahmed, he attempts to purchase 100 MYC from the market.
2. The token holder only wants to sell Ahmed 10 MYC. Ahmed now needs 90 MYC.
3. Ahmed can purchase MYC from MyCoin at any time. He merely logs on, and converts existing assets to MyCoin. The price that Ahmed will purchase at will be the median price of a MyCoin based on an oracle + 2% to encourage market liquidity.
4. MyCoin sells Ahmed the MYC and replenishes the asset backing for the coins in the market. The MYC returned to MyCoin are destroyed, as the case in the previous scenario.
