Goldman Sachs recently released its midyear economic outlook report that predicted further drops in price for Bitcoin. The investment bank also reported that in its view, none of the cryptocurrencies on the market fulfill the three traditional roles of a currency: they are not a medium of exchange, nor a unit of measurement, nor a store of value. This is indeed a significant hurdle for all cryptocurrencies seeking to truly “disrupt” the world economy or compete with traditional banking institutions, especially if investment banks like Goldman Sachs seem to lack trust and confidence to take them on.
Therefore, the question now remains — if big names like Bitcoin are not able to fulfill the functions or a currency, or gain trust among the investment giants, can any cryptocurrency do so? Surely there are other currencies out there aiming to achieve the same. Yes. ReMoneta is designed to meet all three functions necessary to be considered a currency and perhaps even more so than fiat.
The three functions of money were originally identified by William Stanley Jevons in his 1875 book “Money and the Mechanism of Exchange,” and have remained common in macroeconomics textbooks ever since. Rightly so, as they are all fundamental to defining currencies in a uniform manner at a global scale even more than 100 years later. If a currency fulfills the three functions, it means John in the US and Hiro in Japan can make a simple buy-and-sell deal because they both agree on the value it represents.
Being a medium of exchange is self-explanatory. To avoid complications brought by the barter system, in which people exchange goods or services directly for other goods or services, a medium of exchange like gold or traditional fiat currencies can be used. People then have a values for all goods and services and can easily make an exchange.
Although the founder of Bitcoin likely expected it to replace traditional fiat currencies, it is struggling to become a widely used medium of exchange. There are companies that accept Bitcoin payments for their goods and services, but this is significantly hindered by capacity constraints, slow transaction speeds, and high fees. Various vendors, like Steam and Reddit, and most recently a payment processor, Stripe, have dropped Bitcoin as accepted currency exactly for the reasons stated above. Stripe’s product manager, Tom Karlo wrote in a blog post back in January 2018, that Stripe still remains positive about cryptocurrencies and may implement them again in the future.
Once ReMoneta’s system goes live on an adapted HyperLedger network in April 2019, users can first benefit from up to 12 million micropayment transactions per second using time-sliced consolidation. Moreover, all of this would come at zero cost for the users — no transaction costs on the network, forever. This means ReMoneta would have the potential to truly be a medium of exchange as it can easily overcome the issues of scalability, speed, and high fees relative to microtransactions, which are haunting Bitcoin and Ether.
Being a unit of measurement, or a unit of account, means that currencies can be used to measure the value of an object or service. There are three important characteristics to meet this criterion: 1) being divisible, 2) being fungible, and 3) being countable. Most cryptocurrencies tend to meet these requirements, so cryptocurrencies being units of account is not debated as much. However, in the recent months, Bitcoin has experienced high levels of volatility, although the basis of classic accountancy states that the real value of the unit of account should be stable.
Meeting the criteria of being a unit of account is very easy for ReMoneta. It is countable, fungible, and divisible. In fact, ReMoneta opens up a new industry of microtransactions. Imagine giving your child US$10 worth of ReMonetas that can be potentially used for thousands of mini transactions in a mobile game, and neither the vendor nor the customer needs to worry about transaction costs or slow speeds. It also has a completely stable price, increasing predictably over time.
The third criterion, being a store of value, means that the currency should at least retain its purchasing power and be “a reasonably stable store of future value.” Although some have argued for Bitcoin as a store of value by stating that stability is unimportant in the current environment, it is still an underlying assumption that a real currency should be able to keep its value. We should note that all fiat currencies like dollars, pounds and euros fail here — they all fall in value. Goldman Sachs added in its report that it expects further declines in the future for both Bitcoin and Ether, as a direct result of these cryptocurrencies not fulfilling the above three functions.
Indeed, among the thousands of ICOs since the first one in 2013, none have really managed to truly break into traditional banking. In fact, the majority have disappeared into the night, some probably on purpose, and others as a result of poor management or lack of a realistic economic model. That is not to say none have the potential to make a change.
For example, even traditional currencies are nowadays rarely a good store of value and a medium of exchange at the same time. The store of value function only holds in the short-term as modern banks aim to produce minimal inflation in order to encourage consumption, which directly goes against the basic definition of a store of value. ReMoneta, however, uses new technology as well as a strong economic model to challenge these shortcomings.
The price of ReMoneta will be calculated by a machine-intelligent model and is designed to remain stable, rising predictably over time. There is a dual token system, ERC20 tokens and ReMonetas. The former floats and the latter is not traded. Thus the ReMoneta system can truly show stability in pricing. The system has land as a backing and thus is entirely measureable and as has been shown in our other articles, increases in value over time.
If Goldman Sachs and other investment banks are looking for an online that could actually take on the traditional fiat currencies, they could take a look at this. ReMoneta, by design, has the potential to meet the three functions of money.
With the continuing bear market in crypto, it is important not to lose faith and trust in all cryptocurrencies on the market, but to watch out for those teams that have a solid roadmap and plans, continue communication with their buyers and who have proven experience and professionalism as we move through the current slump. Some good news about that — ReMoneta breaks the cycle of a falling market since due to its design and construction, the price of ReMoneta steadily rises while at the same time, it meets the definitions of a currency.
ReMoneta is a strongly capitalised ReFinTech company based in the EU which combines Real Estate (RE), Finance (Fin) and Technology (Tech). Visit ReMoneta.com for more information.
