A path to freedom via an energy-standard monetary system
by Maryna Trifonova, Head of Content at Jax.Network
Nowadays people use a debt-facilitating monetary system based on fractional reserves and trust in the lender of last resort, i.e. central banks. However, nothing guarantees long-lasting trust in these institutions to fight against inflation and uphold human progress. Purchasing power is eroding every day. At the end of the day, it creates enormous gaps in society, leaving 9.2% of the world, or 689 million people, below the poverty line. A new monetary system based on JAX can eliminate these issues and stimulate rapid progress.
Inflation and manipulation
It’s a common fact that the American dollar, USD, is one of the dominant currencies in the world. Its price fluctuations influence other currencies, whether the countries issuing and operating these currencies want it or not. Therefore, it creates a big dependence on the Federal Reserve and concentrates the power in single hands. Taking that into account, it’s not a surprise that many people are concerned about the value of fiat currencies. The USD has become a global reserve currency. Any shocks that derail the US economy or excessive money printing can, thus, disrupt markets globally. Nowadays, the primary concern is inflation.
Within the last 12-month period (from Feb 2021 to Feb 2022), the annualized rate of inflation in the USA alone hit 7.9%, and that’s one of the most developed countries in the world. Keeping in mind the dependence of other countries on the US dollar, we can conclude that other countries have similar results, if not even worse. It pushes people to get into debt, from which there seems to be no way out.
By managing the money market of the USD, the Federal Reserve keeps the global currency market in its pocket. That’s why new financial technologies such as cryptocurrencies emerged. It’s the lifebuoy for many people, whose income may and will be preserved thanks to stablecoins, or even volatile crypto such as Bitcoin, to preserve long-term purchasing power in countries with hyperinflation. The problem most people face is which coin to choose, as there are 28 cryptocurrencies tied to USD, not to mention over 19,000 coins in general.
Introducing a new paradigm
The pain points described above are well-known to each person with a basic understanding of economics. However, very few have given any further thought to the issue, not to mention put an effort into creating the framework for changing the status quo. Obviously, the gold standard was quite an effective solution back in the days but whether it would work in the modern world remains a big question. The tendencies move toward digitalization and simplification of processes. Artificial intelligence, the Internet of Things, virtual reality, and eventually, blockchain solutions hint that people are eager to embrace new concepts that disrupt modern understanding of reality.
According to the recent survey conducted by Analytics Insight, Indians who prefer to buy cryptocurrencies or have an interest in the cryptocurrency market are mostly in the age range of 20–40, the tech-savvy generation. On top of that, it’s estimated that the cryptocurrency industry can bring around $184 billion of extra profit to India by 2030. Just imagine how big an increase in the world economy it can create when adopted in every country. Humankind just needs to agree on which cryptocurrency to apply for this game-changing mission. And USDT, which is tied to USD, is obviously not a good choice.
We spent around three years creating a blockchain system with proper incentives in place that will keep checks and balances. As a result, we came up with the JaxNet protocol, which houses two coins — JXN and JAX. The latter is more interesting to the point of our discussion here. Unlike USDT, JAX is pegged not to the inflationary fiat currency but to the cost of hashrate used for printing this coin. Proof-of-Work, which lies in the basis of the JaxNet protocol actually ensures that new JAX coins can only be printed, when some amount of effort was put into mining. To be more precise, we went even further and require miners to choose between BTC+JXN and JAX block rewards. It means that printing JAX is only possible when BTC and JXN are sent to an invalid address, in simple words, burnt. Thus, any manipulation with token issuance is not just prohibited but impossible, as it would otherwise cut miners’ profits.
As for inflation, it’s contained with the help of the three key factors, one of which we already outlined above. However, for the sake of proper interpretation, let’s take a quick look at all of them together. So, the already-known component is the burning mechanism called Proof-of-Value, which makes miners do an economic arbitrage between JAX and BTC+JXN. It logically leads us to the next factor: assuming that miners are profit-motivated, they only print JAX when there’s a demand for it. Thus, even though the supply of JAX isn’t capped, scarcity is still ensured, as each miner or mining pool decides for themselves how many JAX they want to print. And finally, we apply a K-coefficient to adjust the money supply that can be minted in the current epoch. This parameter is directly linked to the aggregated hashrate across all shard chains.
Given everything mentioned above, accepting JAX as a universal payment method is the only reasonable conclusion humanity should come to. Fiat systems are obsolete and suffer from inflation and manipulation that deprive citizens of their hard-earned profits. This game-theory-based artificially engineered shortage of resources is what created the existing gaps in society. An energy-standard monetary system brings freedom over citizens’ money and lives back to them.
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