Crypto & The Holy Grail of Collateralization by Michael Waters

“The quest for the sacred Holy Grail is the quest for eternal life, health, and riches. When we arrive at the end of our quest to find the Holy Grail of cryptocurrency, we will find much the same.” J Christian Barlow, Co-Founder of Quest Crypto.

Biblical tradition has given us the story of the Holy Grail, thought to be the cup that Jesus drank from at the Last Supper, and that Joseph of Arimathea used to collect Jesus’s blood at his crucifixion. Centuries of religious fascination have given it a legendary aura — the cup can grant the drinker immortality and riches, but any attempt to obtain it has been fraught with mortal peril.

Similar difficulties face those on the quest to find the Holy Grail of crypto-collateralization. Much like quests for the biblical Grail of old, these modern-day seekers face possible financial ruin, public ridicule, and even loss of life. The risk they face is arguably better justified, as the goal of attaching real world collateral to cryptocurrency has the potential to completely revolutionize our global markets.

We’ve already seen a conceptually wide variety of asset-backed cryptocurrencies hit the market — from gold backed, to real estate backed, and even to digital art backed, it is clear that the possibilities for creating new types of crypto are limitless. It is also clear that there is a need for an asset-backed cryptocurrency that can actually replace the US Dollar. The US officially decoupled the value of the dollar from gold in 1976, resulting in economic growth along with vast inflation. With no real asset backing it, the dollar has become a speculative currency and has faced a consistent reduction in buying power, lessening its power to mitigate market crashes and recessions.

It is now virtually impossible to return to the gold standard, as it faces the same issue as other real-world assets of being finite and exhaustible. No current attempts to create an asset-backed coin have resulted in anything viable enough to completely replace our current forms of currency. Some may argue that a speculative coin should naturally replace a speculative dollar, but a digital currency anonymously changing hands on a blockchain is far from the private, securely monetized, and asset-backed coin that will provide global financial security in a recession.

The Quest for the Grail, then, still stands: to find the right kind of inexhaustible asset, which can also be guaranteed to always hold value, and then to attach that to a digital coin in a way which would allow it to be tracked and insured against depreciation, damage, and adverse equity claims. The list below provides the specific issues which must be resolved in the creation of such a coin. Future articles will be dedicated to more in-depth discussions of these points, but for now –

Your Quest has begun.

List of requirements that must be met for the “Holy Grail” of crypto:

• Proper valuation of the asset backing the crypto
• Protecting valuation
• Guaranteeing the asset value
• Hedging against loss and devaluation
• Hedging against inflation
• 3rd party protection of the asset’s value
• Proper collateralization
• Authority to initiate the statutory protections
• The reason for the statutory protections
• Must be a 1:1 ratio
• Transparent documentation
• Tracking the asset
• Tracking the token attached to the asset
• Resolving existing issues with pooling assets
• Defining and enforcing DEFI ownership rules
• Crossing borders
• International trade
• Protection of rights for both the token and the asset owner