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Programmable Elastic Credit-Money ver 2
- 1. Elastic Crypto Credit Money Why do we need it? June, 5th 2019 Martin Ploom SmartCredit.io
- 2. About me • Education: 4 masters degrees + CFA passed • Initially: Product Delivery, then joining the corporate life • Banks: 10 years as VP for Credit Suisse in Zurich, Switzerland • Hobby: monetary systems since Lehman crisis in 2008 • Current: CEO of SmartCredit.io, Zug, Switzerland
- 3. For 5000 years, societies have been. built on credit. Today, over 85%. of global spend. is on credit.
- 4. Credit money has been around for 5’000 years Do we need credit money in the crypto sphere?
- 5. Do we need credit money for the crypto sphere? 1. How does money creation/destruction work today? 2. Why do we need credit money? 3. Last 5’000 years - credit money in different incarnations 4. How does decentral credit money work? 5. Who will create credit money in the future? 6. Roadmap
- 6. How does a monetary system work? Base Money Credit Money In current system: 3% - 7% In current system: 93% - 97%
- 7. How is credit money created / destroyed today? Credit Money Destruction: Loan is paid back Credit Money Creation: Loan to the applicant
- 8. What do commercial banks do in lending ? Create / Destroy Credit Money Protect created money with reserves Credit Ratings for every client Legal Enforcement if non-performing loans
- 9. Why do we need credit money (1) ? Economical activities need: 1. Labour, which need to be financed 2. Commodities, which need to financed 3. Energy, which needs to financed 4. Time, which needs to be financed Time Cash Flow
- 10. Why do we need credit money (2) ? Step A Step B Step C B1 B2 C1 C2 Producer 1st Level Suppliers 2nd Level Suppliers Demand for credit
- 11. Credit Money is one of humanity’s key innovations Pulsating credit money supply – it goes up with the economic activity – It declines if no economic activitiy Base Money
- 12. Credit Money in our current Fiat System Monetary base in U.S. created by the U.S. Fed: USD 3.6 trillion Total commercial bank created central credit- money: USD 15 trillion Fiat World (USD) Monetary base in EU, created by ECB EUR 4.5 trillion Total commercial bank created central credit- money: EUR 12 trillion Fiat World (EUR) Exchange 1944 – now
- 13. How did it worked before the age of fiat money ? Central bank creates gold backed national base money Gold Commercial banks create their own credit money Commercial banks create their own credit money Central bank creates gold backed national base money Nation 1 Nation 2 1660 – 1939
- 14. How did it worked before the commercial banks? Souvereign created money (coins) Decentrally created credit money Souvereign created money (coins) Decentrally created credit money Nation 1 Nation 2 Exchange 500 B.C. – 1660
- 15. How was it before sovereigns created base money? Commodity (Gold, Silver, Wheat, ...) Decentrally created credit money Commodity (Gold, Silver, Wheet, ...) Decentrally created credit money Nation 1 Nation 2 Exchange 2500 B.C. – 500 B.C.
- 16. Borrower Lender Bill of exchange Money 3rd Party Pay with Bill of Excange 4th Party Pay with Bill of Exchange Borrower pays the Owner of bill of exchange How does decentral credit money work today (1)
- 17. Borrower B1 Lender L1 Money 3rd Party Pay with Bill of Exchange 4th Party Pay with Bill of Exchange Borrower B2 Lender L2 Borrower B3 Lender L3 Bill of Exchange Money 5th Party Pay with Bill of Excange Pay with Bill of Exchange Pay with Bill of Exchange Money 6th Party Pay with Bill of Exchange How does decentral credit system work today (2) Money Bill of Exchange Money
- 18. Last 5’000 years we had credit money ... BTC, ETH, LTC ... ? Crypto World Base Money Credit Money This time is different ? Last 5’000 years
- 19. Monetary systems classification Credit Money Base Money De-centrally created credit money Centrally created credit money Commodity based base money Fiat / sovereign coins based base money Our current fiat monetary system Hanseatic Network Mesopotamia 5’000 years ago Bitcoin, ETH, LTC, …. No credit money
- 20. Where is the crypto credit money ? Credit Money Base Money De-centrally created credit money Centrally created credit money Commodity based base money Fiat / sovereign coins based base money Our current fiat monetary system Hanseatic Network Decentral crypto credit money + Bitcoin, ETH, LTC, .... Bitcoin, ETH, LTC, …. No credit money
- 21. Programmable Elastic Crypto Credit Money Bitcoin Ether Stable coins Elastic Crypto Credit Money Decentral Credit Money Creation Decentral Credit Money Destruction
- 22. 5’000 years have passed. What’s now? Scenario 1 Crypto Credit Money will be created centrally Scenario 2 Crypto Credit Money will be created decentrally Commercial Banks will create credit supply for the crypto- sphere Credit Supply is created peer-to- peer / decentrally
- 23. What’s about decentral scenario ? Base Money: National Crypto currency Decentrally created credit money (not yet available) Base Money: National Crypto currency Decentrally created credit money (not yet available) Nation 1 Nation 2 Base Crypto Currency (BTC, ...) Crypto World Exchange Now - future Decentral credit money Exchange
- 24. Roadmap for the Programmable Elastic Crypto Credit Money Bitcoin Smart Contracts Collateralized Stable Coins Collateralized Credit Coins Decentral Programmable Crypto Base Money Decentral Programmable Elastic Credit Money -10 years -5 years now +5 years Decentral Crypto Base Money Decentral Programmable Contracts
- 25. Summary • Credit Money has been around for the last 5’000 years • Credit Money will be created on the top of the base money (commodity, coins or fiat) • Credit Money can be created centrally or decentrally • Crypto is missing the credit money approach • Programmable Elastic Credit Money provides solution for the crypto sphere • Open question:Who will create the Crypto Credit Money in the next years?
- 26. Questions ?
Editor's Notes
- Credit has taken many forms over the ages. This is thought to be the oldest surviving payslip from Uruk, Mesopotamia in modern day Iraq. The workers were paid in credits of beer. Societies have also used other forms such as tally sticks, paper and plastic to issue credit. According to the latest numbers by the Institute of International Finance, over 85% of global spend is issued via credit.
- Credit has taken many forms over the ages. This is thought to be the oldest surviving payslip from Uruk, Mesopotamia in modern day Iraq. The workers were paid in credits of beer. Societies have also used other forms such as tally sticks, paper and plastic to issue credit. According to the latest numbers by the Institute of International Finance, over 85% of global spend is issued via credit.