The World Needs For More Collateral

Community High-Level Discussions
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In 2022, DXY index (showing relative strength of US dollar) was around ATH since 2002, and shortage of US dollars, which is still the most popular world’s trade and reserve currency, was reported for different countries in Africa and Asia:

2023 is a bit better but still there’s shortage of dollars (e.g. India Offers Rupee Trade Option to Countries Facing Dollar Shortage - Bloomberg ).

Why is it the case? There’s no public information I am aware of, and in general offshore US dollar system (aka the eurodollar system , https://www.youtube.com/watch?v=g_aSqVyJ2wE , https://www.youtube.com/watch?v=8GwjR7yRGGs ) is very obscure.

Add on top attempts to create a plethora of new international currencies (such as BRICS’ one which will be gold-backed currency for international trade, similar attempts to build Latin American currency led by Andrés Arauz, attempts of sub-Saharian countries to get rid of colonial CFA currency controlled by Paris), and now it is quite clear that the World needs for more money for international trade, and so for more collateral money can be issued on top of (by private companies, private banks, central banks, and so on). Gold would not be enough.

Bitcoin as a digital gold is even better than gold under certain plausible assumptions (that is one of reasons why KYA approach, simple consensus protocols analyzed accurately from all the angles, cautious protocol update policies do matter). What it lacks is possibility to create trustless derivatives on top of it. For example, as Bitcoin (and other cryptocurrencies) users suffer from high price volatility, it is desirable for many to have stable-priced trustless asset on top of Bitcoin, i.e. algorithmic collateralized stablecoin, but Bitcoin does not allow for that. This is just one example where Ergo is useful for the real world when Bitcoin can’t help.

However, with overcolleralized trustless DeFi, ability to create money on top of collateral is limited. For example, if Ergo market cap is $1B, capitalization of an overcollateralized stablecoin on top of it would be less than $1B.

So for the real world, there is need for:

  • including more assets, so not just Ergo, but other tokens, such as tokenized real-world assets, NFTs, etc
  • allow user to choose fully trustless or trusted or hybrid financial tools on top of collateral

Good example of such flexible monetary system on top of Ergo and custom tokens is ChainCash ( https://www.youtube.com/watch?v=NxIlIpO6ZVI ).

Concluding, Ergo as digital gold with contracts giving possibility to build trustless financial instruments on top of it, and different solutions (such as ChainCash ) to expand monetary base on top of the base Ergo layer without forcing users to accept money of quality they are not happy about, are able to help the World to solve different economic issues.

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Well put, very concise.

I hate to say it but the dollar system isn’t terrible, it’s just archaic. Like telegraph tech. In the end loan and trust are the basis of all economies, and the cash is just used for settlement. I don’t pay my carpenter by feeding a meter, I write a check and I trust his invoice.

The thing that is fascinating about cryptocurrencies is that it enables a much more useable form of cash, while also allowing for more precisely delineated contracts. And as you note, it also allows for explicit grants of trust, like ChainCash or p2p lending, in order to enable economies that are larger than Ergo itself… however, at some point I suspect there would be economic attacks on the core chain.

If we compare Ergo with SWIFT, or even going back to paper dollars, the economy is worth far more than the base money anyway. In fact, it is the lack of traceability and accountability that made the 2008 crisis happen. Too many claims on the same seat at the table. The trust was exploited, and everyone payed the piper in the form of increased fees, increased debt, and increased difficulty in banking.

In any case, Palmyra will bring commodities to a DEX, and that enables expanding the means of trade and collateral on platform. Hopefully they also solve the problem of getting wealth onboarded, because that is a major problem at the moment.

ETA: Create structure for real collateral represented as promises on blockchain. A “docusign” like signature. I don’t know how it is to buy a car where you are… but qx() nailed it for America, get ready to get raked! His idea expressed in the last AMA is good. ERG, and derivatives could make self lending possible.

This does not help future Ergonauts in the same way, but it is worth pointing out. We can be our own bank, and not just a piggy bank… like bitcoin. Had to add.

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I have loved learning from the likes of Jeffrey Snider about what the Eurodollar system is, how it works, and just how significant it is. It’s great that the true competition for cryptocurrencies has been identified here, because it’s elastic currency supply is a feature that must be replicated. It seems Ergo is capable.

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Welcome. “altwright” is very catchy, and that comment was like a stiletto: incisive, and brief.

Eurodollars hurt too when US inflation becomes a problem, and rates rise. Everybody hurts.

When the system becomes unbearable, everybody hurts. We need to build better systems.

Ergo may be capable, if work continues… My dad used to tell me that I “have great potential… take care it isn’t always that way.” Sadly I realized only about 3/4 of my potential, but I would not trade places with anyone. The problem isn’t me, the problem is that my 3/4 is supposed to be Warren Buffet’s 3/40000000 of me, or so. I think you all know what I mean. I’m all about property rights, but Adam Smith, and both Roosevelts, would puke on our modern American dream. Property is way too abstract, when Disney gets to sue anyone close to their 100+ year old “IP”. When your data gets harvested by every commercial service you use, making it super easy for my government, your government, corporations, and every interest “observer” to take note.

We built the panopticon that the powerful demanded, and the few complained, and the fewer resisted, and the least of them became more than two persons. Many became more than just three.

We are here for the win. We are here for humanity. We want to bring settlement, peace.

I am at the beginning of a long journey in to the stratumsphere. I already took the first several steps.

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I completely agree.

I want to try and understand Chaincash fully, because at this point it sounds exactly like Jeffrey Snider’s description of what he believes an ideal currency/tool for trade would look like: a decentralized and elastic currency supply, completely out of the hands of the international banking system cartel (https://youtu.be/EoCfYifNswg?t=1540). I find his argument for the attribution of the exponential prosperity achieved post-WW2 to this primary but centralized feature of the Eurodollar compelling.

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I will check that out, but I find it very unlikely that any world currency, no matter how elastic, could evade the banksters; we just need to embrace and extend them. At some point, an old lion wants to rest, and they will.

Eurodollar, onshore dollars, they are all getting drawn back to the biggest pools of liquidity, and abandoning the rest.

This is what it looks like every century or so: they get tired of getting scorned and call in all the favors -creating deepest scarcity. Dollars, gold, real estate, whatever… supply, demand, liquidity, accessibility.

So now we live in the building with a wrecking ball, suspended from a crane on the roof. Do you want to live here? Well it is better than the Lira, or whatever. Yes, but it is a wrecking ball… maybe we should move?

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Based on my current understanding on how the Eurodollar system works, the root problem that needs to be addressed is the unjustified expansion of governments in pursuit of utopia. It is this pursuit that is driving the issuance of debt that the international banking system is hooked on using as their collateral for the Cantillon effect it produces. I can only think of a handful of catastrophic scenarios where the U.S. government in particular would fail to meet their payments on the debt - in lieu of those scenarios, I don’t doubt their ability to keep fueling this machine.

As for addressing the current state and trajectory of the world’s governments, I subscribe to a reformed branch of Christianity, so I’m convinced the answer to this question is inherently a theological matter. We need just and restrained governments, but a trustworthy and self-controlled people is a prerequisite to that. I’m working towards a day where a tool such as Ergo can flourish in such an environment, but before such a time it seems that Ergo will be useful in the fight.

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Yes, I agree. The US can keep writing bonds and the Fed can keep buying them, indefinitely:

But at these rates, that will restrict the new dollars from entering the system. It will settle into a new equilibrium, probably targeting 3-4% inflation, and a lot less economic activity. For those that need eurodollars, however, these will be the worst of times. Their inflation will continue to skyrocket, fueled by our own, but with ever more violent spasms of disinflation and even deflation, as they whipsaw in the rarified air of expensive but depreciating dollars.

If they want to sell us cheap crap on Amazon, they will need to take those dollars and do something with them. And if we want to buy their cheap crap on Amazon, we’ll need to keep running on this treadmill… get that cheese. This all seems so natural, like a system that just evolved… right? But it did not evolve, it simply reacted to changing tech. It’s still the Babylon system… the vampire.

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I was struck by Lyn Alden’s description of what you want money to be, at 27:50…

“If you’re the user of the money: I want it to appreciate over time. I know the supply, I know the rules, the rules are not going to be rug-pulled on me. I want to bring it anywhere in the world. I want nobody to be able to dilute it, I want nobody to just be able to take it from me […]. I want it to be fast, and I want it be secure.”

Well, call me an academic and I’ll just laugh, but while a fixed supply is fine for “digital scarcity” and store of value, it does nothing for trade. It’s useless, by itself. Like gold.

She suggests that the only alternative to bitcoin is the existing system, including hard assets, this is dogma.

In the mean time, many alternatives develop. In terms of monetary value, platinum is far closer to optimal if you want metal. God was well aware of tungsten, no matter what the scribes understood.

In term so digital scarcity, it’s just an expansion of the art/media market. To the extent that it replaces the dollar an steps on the feet of other players, it will be resisted. Right now Bitcoin is going through the next stage of adoption by increasingly sophisticated money grifters… just like what happened to gold.

This guy Jeff is pretty cool, thanks.

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It was incredibly brave of Snider to pitch a solution that was clearly not Bitcoin to a room full of Bitcoin maxi’s, and I think it’s a testament to the quality of his argumentation that he was not booed off the stage as a consequence.