Exploring finance: When will we know our established system is working?
2017: Research on the future of finance with an eye on a new crypto project
THE LONG FINANCE INITIATIVE began in 2007 by setting out to answer a simple enough question, but one that had not really been tackled properly before. The question was: “When would we know our financial system is working?”
Ever since then, Long Finance aims to improve society’s understanding and use of finance over the long term, by posing awkward questions and encouraging innovative answers.
Of course, the timing of Long Finance’s launch was expedient. Back in 2007, a crisis in the subprime mortgage market in the US mushroomed into a full-blown international banking crisis and the collapse of the investment bank Lehman Brothers. Excessive risk-taking by banks had unhinged the financial structure of the world and only massive bail-outs of financial institutions and other restorative policies prevent a possible total collapse of the world financial system.
Just over a decade ago however, nobody had produced a functioning Blockchain. That would change very soon when cryptocurrency’s famous pioneer Satoshi Nakamoto conceptualized the world’s first cryptographically secure ledger and made it the core component of Bitcoin.
The cryptocurrency world was set in motion, and Long Finance now has the oppotunity to debate the strengths and weaknesses of fiat against crypto. One could argue: We will know our financial system is working when a cryptocurrency solves the problems that fiat has created. But that would simplify things too much. In contrast to the short-termism that defines today’s economic views, the Long Finance time-frame is roughly 100 years.
As a community, Long Finance seeks to expand frontiers, change systems and deliver services. And the key point for us — indeed the reason we are blogging about Long Finance at all — is that it has already joined forces with DasCoin through various activities. They include the provision of evidence-based examples of how financing methods work and don’t work, and then developing the methodologies to solve these financial problems.
Long Finance research interests range from a Standards Markets approach to regulation to the nature of money. Long Finance hosts roughly 30 events a year including the bi-annual conferences, and runs four programs including: the London Accord, the Financial Centre Futures, the Eternal Coin and Meta-Commerce.
In November 2016, Z/Yen Group — “a commercial think-tank that spots, solves and acts” according to its website — organised a Long Finance seminar to explore the intellectual mechanism of DasCoin, ultimately helping the company to produce the White Paper it launched in Hong Kong in January 2017. Participants were particularly interested in its hybrid approach combining centralised and decentralised features, the KYC process in which bona fide participants in the network are officially whitelisted, and the referral-based licensing system.
They were equally interested in the opportunity for capital appreciation within the system. They noted however the need for clarity on how DasCoin would work in practice, notably the conversion process between fiat currency or Bitcoin to DasCoin.
Following the publication of the seminar proceedings, and DasCoin’s White Paper, Z/Yen Group ran an economic simulation to test the potential strength and practicality of DasCoin under a range of plausible scenarios. The economic simulation was intended to provide a means of discussing the economics of DasCoin with outsiders, and could form the basis for the specification of a “market quality” dashboard for discussion with regulators and academics.
Z/Yen carried out a detailed analysis of the key features of the system including token exchange, conversion mechanisms, capital appreciation, and governance.
The research was overseen by Michael Mainelli, chairman of Z/Yen and founder of the Long Finance initiative. He is also Emeritus Gresham Professor of Commerce at Gresham College in London and a highly sought-after speaker at blockchain events around the world.
The links between Mr Mainelli’s enterprises and DasCoin were extended when DasCoin acted as a platinum sponsor of the 2018 Tacitus Lecture given by former Microsoft CTO Nathan Myrvhold on February 22 at London’s Guildhall.
