What the last fortnight tells us about the value of value-stable cryptocurrencies
There is mass panic but I am calm. Bitcoin is down $2,500 and Ether is down $500 but my digital currency of choice is Holo fuel.
Shortly after Arthur Brock wrote his piece on Building Responsible Cryptocurrencies Ether increased in value almost five times over two months. Everybody holding Ether, because of their belief in its long term potential, was happy. And people holding “altcoins” were happy too, because they saw equally dramatic rises in their portfolios.
Then the sell-off came. Perhaps it was Chinese New Year profit taking, or new mechanisms to short cryptocurrency prices, or banks warning they would reject crypto money. Everybody looked for reasons to explain the mass panic they felt as the price of Ether dropped $400 over a few days. People began to feel poor, and wondered whether they should sell. Newcomers experienced the psychological pain of loss, while old hands remained steady and wondered how big the blip would be.
The sell-off was good news for others, especially those of us wishing to use Ether as a medium of exchange. For example, Holo whitelists participants in its ICO so that when we launch they are free to participate immediately rather than go through identity checks last minute. The price to whitelist each participant has increased fast because gas prices on the Ethereum network is correlated with the price of Ether.
All of this illustrates the risk of using something that is not even designed as a currency, Ether, as a medium of exchange.
Arthur shared the design principles of Holo fuel, from dynamic supply that can expand and contract based on real market behaviour, and demand, sufficient supply where currency is not too scarce, not too plentiful, but just right to maintain a strong internal value. Emaline Friedman described how we calculate and benchmark the asset that backs Holo Fuel, computing power. Today I’m going to share what the sell-off would look like…
In a world where Holo Fuel and more distributed Holochain apps exists.
I log on to the Holo website, buy $1,000 worth of Holo fuel at a similar price to the price I paid yesterday, rent a fairbnb apartment, take an Unter to a friends house, send my nieces and nephews $50 USD worth of Holo fuel each and sleep peacefully. Twitter is flooded with doomsday tweets, Clutter is quiet.
I can buy Holo fuel directly from Holo. The price is the current computing power of the network, as always. This means my Holo fuel will not increase or decrease based on a market, but will increase slowly as the compute power of the network increases. My transition from one currency to Holo fuel and out of Holo fuel is based on the same principles, which means I am not at the mercy of the price setting or liquidity of an exchange.
Holo can handle this because we run a dynamic, sufficient supply. When you buy Holo fuel, you are credited and Holo is debited. If you choose to leave the Holo network, your supply is debited and Holo is credited the same amount. No coins are created, no coins are destroyed.
I can use Holo fuel even while other currencies are crashing around me. Distributed applications built on Holochain (we use Unter/Uber and Fairbnb/Airbnb as illustrations) are designed to use Holo fuel or another mutual credit currency as their medium of exchange, which means while the underlying asset exists (and assuming the Holo reserve account has holdings in the currency I choose to exit from), I am free to enter in exchanges of value all day, every day. Some of these exchanges involve money, and some are simply sharing identity or credentials as I cross a border, buy a parking permit, or even review the latest x-ray of my broken toe.
Some days I want to try and make some quick money, and so I transfer my Holo fuel into Ether and ride my luck, hoping I can get in and out to make a gain and be able to fund another day on spaceship earth. I’m happy that after I exit my positions I can keep my digital holdings in Holo fuel where they are safe, secure, retrievable and of course, value stable.
In the last two weeks, potential participants and partners emerged, curious to know more about ‘our value-stable, asset-backed, mutual credit cryptocurrency’. They are looking to integrate it into their wallets, use it as a low-risk store of value in the crypto-world, and use it as a medium of exchange.
We look forward to talking to you and others about its potential.
To learn more please read Holo’s two foundational documents and the posts linked above:
Documents:
- The Holo greenpaper created by Arthur Brock, David Atkinson, Emaline Friedman, Eric Harris-Braun, Erin McGuire, Jean M Russell, Nicholas Perrin, Nicolas Luck, Will Harris-Braun.
- The Holo Currency Whitepaper by Arthur Brock and Eric Harris-Braun.
Posts:
- Emaline on Distributed Computing in Context
- Arthur on Building Responsible Cryptocurrencies
- Jean on Holo’s Token Sale: Whitelist First
