> [EMAIL PROTECTED] wrote:
>
> It's funny how every new gold currency company on the block touts
> themselves as revolutionizing global commerce by providing
> instantly-clearing currency transactions. This claim of having
> something new and earthshaking is made by Standard Reserve, GoldMoney,
> and Pecunix, to name three.
>
> But really, anybody with a database and a web-server can do that. All
> you have to do to do international transfers of value is get everyone
> to sign up on OUR system!
>
> It's funny that the companies that make this claim to be the first,
> weren't. E-gold beat them to it. The existence of these new
> companies DOES bring up the point that e-gold needs competition for
> its own good. Competition will force e-gold to provide even better
> services to stay number one. The gold currency market will be much
> stronger if there are a number of companies with a stake in it.
>
> But this brings up a problem. The more digital currencies that come
> on the market, the more fragmented the market will become. Merchants
> are not going to put multiple shopping carts on their web sites.
>
> The gold currency companies need to get together and come up with a
> system that allows one shopping cart to work for all the digital
> currencies. There is a system that would allow this. It is Vince
> Cate's SAXAS software. (The same software that Vince and Sean were
> arguing about the patents to last week.)
>
> No one wants to tie their company down to a proprietary software
> system like that either, though. We need a working group to form an
> API so that third party vendors, like Vince Cates, could create
> software to fit the specs. It would work the same way as HTML and
> browser companies. Anyone could make a financial transaction software
> that would meet the requirements of the API. This way we all have a
> choice.
>
> The gold currency companies need to realize that they would all
> benefit by doing this, even e-gold. Here's why: In a fragmented
> market, say of 500,000 users, e-gold might have 250,000 users,
> GoldMoney 40,000, Standard Reserve 50,000 and so on. Each currency
> is limited by this to its own niche market.
>
> By creating a system that allows all of these currencies to be
> compatible with each other all of the currencies now have a market of
> 500,000 and the users now have a selection of currencies. More
> choices give more freedom to the users. A larger market gives each
> currency provider a better opportunity to carve out a market niche.
> Everyone benefits.
>
> Of course, the largest currency provider, e-gold, has the least to
> gain from this; and the smallest new guys on the block, like Pecunix
> or GoldMoney gain the most. But the additional credibility that this
> type of market would lend to digital gold currencies would bolster
> consumer confidence and help to entice more merchants to switch over
> to gold currency. So even e-gold, the market leader, stands to
> benefit significantly and will get more business from this kind of
> arrangement.
>
> Any thoughts?
The cause of aggressive price competition and standardisation of
electronic gold currencies will be banks, financial institutiuons and
financial currencies which create money in the form of their account
balances and provide transational as well as savings/lending services.
By financial currencies I am referring to currencies backed by primary
liquidity reserves and secondary earnings reserves of interest bearing
securities. For the gold economy the two most fitted to being dominant
financial currencies are standardgold and digigold offering account
based and wallet based currencies respectively.
Standard Reserve is well placed to dominate account based electronic
currency provision offering no storage, account keeping or transaction
fees and a setup to ensure liquidity in its currency. Standard Gold
should begin investing in interest bearing gold securities as soon as
possible to provide revenue to fund its fee free status and security
features. Standardgold is allowed to hold its primary liquidity reserves
in e-gold, digigold and other electronic gold currencies, and it should
offer to redeem its currency in any of these currencies and to accept
any of these currencies for the issuance of standardgold. It should
accept these currencies at gold redemption value less any spend fee
imposed on the payee by the currency, and it should redeem standardgold
in other currencies at face value less any spend fee imposed by the
redemption currency on the payer. It should also abolish value and spend
limits on its free net anywhere accounts.
This makes other currencies primarily redemption media for going back to
the physical monetary base, i.e. gold bullion, and for those so
concerned about financial risk they are prepared to hoard (unproductive)
non-financial assets, and makes standardgold the fee free
transactional/payment standard. It also forces the in-exchange and
bailing-in process to be competitive as the various non-financial
currencies are direct substitutes in the eyes of consumers as means of
obtaining standardgold.
The fee free status of standardgold makes it ideal as an account based
monetary base, on which both banks and value added transaction/account
services can be built. Therefore standard gold should focus on the
security of its accounts, instituions and currency rather than value
added services.
The value added cash card accounts should be spun off as a separate
business.
Standard Reserve needs encourage the development of banking and lending
and bond issuance in standardgold rather than e-gold. This enables banks
and financial institutions and securities markets to accept deposits,
advance loans and buy and sell securites without currency transaction
costs, and enables instant clearing inter-bank payments (bank A's
customer z instructs bank A to pay bank B's customer customer y, bank A
transfers funds right away from its standardgold account to bank B's
standardgold account, bank B right away credits y's account). Thus any
bank's customer can make payments to any standardgold account holder and
any standardgold account holder can make payments to any bank account
holder. Bank transaction fees would be levied on payers not payees,
based on bank value added in the free banking market (ditto for account
keeping fees). These developments could be started by attempting to form
an alliance with metalsavings so that it would accept standardgold
without any fees and pay out withdrawals in standardgold on request.
Alternatively, now that the debit cards have been launched and are being
promoted by a network marketing organisation, spin this off as a
seperate enterprise and free up standard reserve resources for creating
an interest paying bank. This could be done by creating a credit union
lending to employees whose employer has adopted standard reserve for its
payroll. This would primarily fund its needs by issuing bonds for
standardgold. Simultaneously set up a Cash Management Trust accepting
standardgold deposits and investing in a portfolio of standardgold
bonds. Perhaps also create a superannuation fund investing in
standardgold bonds, marketing itself to, or created in consulatation
with particular standardreserve-for-payroll using employers. These
businesses should be spun off as soon as possible to ruturn standard
reserve to its core currency role.
Standardgold should adopt a publicly stated minimum liquidity target, as
digigold has (25% of currency liabilities), as well as publicly stated
minimum capitalisation target as digigold has (owners' equity of at
least 8% of risk assets) and an investment policy stating what sort of
securities the secondary earning reserve can be invested in, again as
digigold has.
Digigold should adopt standardgold as its issuance and redemption media,
and as its primary liquidity reserve. Digigold should also invest its
secondary earning reserve in standardgold bonds as these become
available. The first step could be an alliance between digigold and
standard reserve to issue and redeem digigold for standardgold at
reduced fees. Ultimately issue and redemption fees between the two
currencies could be eliminated as both currencies can be funded from the
earnings of the secondary earning reserves. The ultimate gold-economy
would include paper/plastic currency redeemable in standardgold backed
by a primary liquidity reserve of standardgold and a secondary earning
reserve of standardgold bonds. This currency would be likewise free of
fees and would not expire as NORFED money does.
Digigold and webfunds electronic wallet offer the development of an
electronic transaction and communication protocol which could create a
standardised environment where finance is based on digital bearer
certificates. Instead of holding bank accounts, commodity accounts, term
deposits, and share accounts, wallets could store digital bearer
certificate currencies ( *any* of them), interest bearing certificates
of deposit of such currencies (which can be cashed in on demand in those
currencies), bond and share certificates and so on, i.e. an entire
financial portfolio. Because any wallet can hold any certificate, the
issuance of certificates is highly competitive/contestible, and the
technology offers greater privacy than account based technology. The
development of this protocol and its myriad issuers, encourages the
development of an account based protocol so that wallets can interact
with accounts, and execute owner instructions. Wallets will interface
with PC accounting and finance software. And/or they could be stored in
internet 'vaults' which would probably be operated as value added
services of personal financial advisers/planners, stockbrokers and the
like. The centralisation of personal financial information (the
disclosure of which would be based on consent based on reputational
trust) enables such organisations/services to offer personal credit and
insurance with reduced asymetric information problems and thus lower
cost.
Will account based services and account based currencies be largely
relegated to the background of electronic commerce? I find it difficult
to conclude not. Ultimately its cheaper to pick fewer account providers
and advisers to trust than to pick many, and the prospect of individuals
holding multiple internet accounts for this and that and keeping track
of them will prove ultimatly uneconomic. Accounts will be opened,
funded, operated and closed by electronic wallets programed by personal
finance software and/or the financial planning/advising/vault service of
the individual.
The technology of digital bearer certificates will enable virtually any
account based service to be available in a digital bearer certificate in
wallet form, as issuers can open accounts and issue certificates against
balances. Thus in effect account services will be unable to do anything
but issue balances and redeem them, transactions between balance holders
will be supurflous or at least highly elastic with respect to
transaction fees and account keeping fees charged. Account providers
will therefore be focused on the issue and redemption of balances rather
than transactions between account holders -- as will digital bearer
certificate issuers. Digital bearer certificate issuers must pass on
issuance and redemption fees. But the loss of customer loyalty and the
reduction in the transaction costs of changing accounts and the increase
in market power of the larger (digital bearer certificate issuer)
customers reduces the extent to which inefficiently high bail-in and/or
redemption fees can be charged.
David Hillary
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