The Ideal Currency

A solution to the storage of value as liquidity independent of societal ecosystems.

By: Mendel Lipszyc

Paradigm shift

The ideal currency/coin should not be an investment rather it should be a storage of value.

The goal

A coin that stores value at an absolute static point, determined using metrics such as the price index.

Backed by a value that is both inarguable and never worth less than the coin it backs.

Accepted by merchants as a form of payment (global circulation and global recognition).

Have the benefits that blockchain can offer (i.e. anonymity, decentralized ledger, etc).

Regulatable in terms of financial laws (i.e. taxes, trade embargoes, etc).

Target audience

Crypto enthusiasts (not get rich quick crypto investors) who are looking for a coin structure providing the following attributes:

The coin does not rely on third parties for ledger keeping.

Provides full anonymity and privacy within the structure and for those holding the coin.

The value of the coin is not based on a centralized decision-making infrastructure, it is autonomous and relies on passive protocol.

Individuals living in countries with volatile Forex exchange rates, such as Venezuela, Columbia, Argentina, and Brazil:

Locals try to change their foreign currency to US dollars as soon as possible because of the volatility in exchange rates of their currency. They rush to transfer the wealth outside their country to protect it from deteriorating in value. Their main goals are:

A currency that remains stable.

Tradable for goods and services at local merchants (credit cards or payment applications).

Low requirements to open an account in terms of hardware, software, and documentation.

Safe and secure from hackers and thieves.

Cannot be manipulated by outside sources (i.e. government/dictatorship).

Individuals looking to prolong their dollar value given the time value of money theory.

A place to store liquidity that is not subject to deterioration of value through inflation nor at risk of market vicissitudes.

Secured liquidity which does not require the cost and hassle of asset liquidation.

Large corporations moving liquidity



Cross currency spending



Low commission currency exchange



Commercial and investment banks

The structure

The coin is backed by a fund which is invested in publicly traded securities (stocks, fixed income, treasury securities, REITs etc) or private equity both in the US and abroad.

The coin does not represent the funds value (it may have a nominal value, but it does not represent value), so it does not fluctuate based on the fund’s performance; rather, the fund merely guarantees maintaining the currency’s value. This allows the currency’s stored value to remain the same while the fund backing it grows (X% Avg. YOY return) maintaining the value of the currency as time passes. [Note — This differs from Facebook’s project Libra which has their coin fluctuate based on the funds performance].

This distinction is an important one, the coins value does not fluctuate based on the funds performance; rather the coins value remains static. In all likely hood overtime the fund will outperform inflation and be worth far more than the coin it guarantees. This will allow the fund to serve its utility (explained later on) more efficiently and its reliance greater than any asset holding. Further more if the fund where to underperform, being worth less than the coin it guarantees. Which is a possibility during the early stages of the fund. The coin will remain its static value and coin holders can trust the funds high probability to outperform inflation and grow exponentially in excess to its requirement value.

This structure of a currency guaranteed by a fund, accomplishes a true liquidity option to the value of a long-term investment. This idea differs from traditional liquid investments vehicles that charge fees for transactions, require a waiting period for the transactions regular way of settlement, and incur tax events that may deteriorate the value of the holder’s assets.

The structure allows an invested asset (the fund) to be liquid (the currency) without the need for a taxable event. While remaining a static storage of value by having the fund guarantee the currency instead of being represented by it.

How the fund is invested

The fund’s investment strategy can be distributed to vetted money managers including local investors of participating countries. Investment advisors may be given parameters such as: time horizon, risk tolerance, etc. The money manager receives X% of the return after Y% Avg. YOY return.

The fund’s capital comes from money deposited by users who trade in for the coin. Fees and Sales charges are paid with gains made within the fund in excess to the requirements to back the coin.

Back end infrastructure

The core ledger of the coin, will be built on a blockchain platform, preferably one with minimum latency for fast transfers and little or no cost of transfer such as IOTA or Rail Blocks (Nano).

The unique hybrid solution offers FDIC style account insurance, enables KYC compliance, evades money laundering abuse, and offers absolute anonymity. This is done through enabling two account types on the blockchain. The first is a cryptographic blockchain account associated with a verified ID (i.e. a social security card) which will be called a KYC account. The second is a cryptographic blockchain account left entirely anonymous which will be called a Crypted account.

All purchases of newly minted coins from the fund require a KYC account. KYC accounts as well as Crypted accounts can then send coin to any other account be it Crypted or KYC. Taxes must be paid for coin transferred from a KYC account to a Crypted account. This taxing system puts a small fee to gain anonymity but stops tax evasion.

Merchants may also be required by local law to only accept purchases from KYC accounts. The purchases may still be kept anonymous to the merchant and only be accessible to the regulating party. For merchants wanting customer information for personalization, a separate running software can allow for customer tracking without giving identifiable data. This mechanism will be similar to that of Apple login.



The storage of cryptographic keys for both KYC and Crypted accounts can be done manually by the holder or through using a third party wallet provider. For KYC accounts, FDIC style insurance can be offered from wallet providers and they may require the cryptographic keys be stored with them to ensure no one steals the account. Wallet providers are a key function to the operation of the coin, therefore, a unique benefit was designed to give wallet providers a strong incentive in what will be called double leverage. This will appeal to traditional banks and encourage them to offer special accounts for this coin.

Double leverage

The double leverage is the wallets’ ability to receive revenue from the value backing the coin while investing the coin itself, accruing two sources of revenue from the one coin.

First leverage: The traditional incentive which remains in this structure for banks and wallet providers is their ability to charge fees or to invest a percentage of the coin stored with the account holder’s knowledge and consent. However, the amount invested must be insured by a third party which can provide liquidity in a scenario where account holders wish to pull out.

Second leverage: The unique incentive has the fund pay out a percentage of the gains made after the X% buffer to wallet providers based on the amount of coin stored with them.

Merchant acceptance

The coin is held in an account that can be accessed by the individual on a mobile app or web interface to view balance and other account data, and can be used toward transactions anywhere in the world.

To gain acceptance from merchants as a form of payment, the fund provides the user with a debit card on the Visa or Mastercard network to allow users to make transactions for their purchases.

Providing local currency for debit transactions

The fund pays out USD (or local currency) on behalf of the user from a set aside account to provide liquidity for purchases made from the user’s account. This liquidity account allows for the fund to remain within the investment structure without liquidating positions to cover user expenditures. These transactions allow the fund to incur revenue from the transactions through these specific methods:

Interchange Fee-

The fund uses the interchange fee (or swipe fee) to make a return on the money used for shopping at merchants. It would be ideal to have it on the credit network which usually takes a higher fee. Any of the coins that is “changed” into currency to pay the merchant, no longer has to be backed by the fund. This leaves the fund with a profit taken from a percentage of the interchange fee.

Payment Portal-

There is also going to be a payment portal that allows merchants to receive payment without a fee. This option does not change the currency into a local currency, but they do get first seller rights (mentioned later on). In this option the merchant is receiving the coin (not local currency) which requires no transaction fees from either the merchant or buyer. This allows for the circulation of the coin within the economic ecosystem.

The web page for buying this coin should promote the buying of existing coin as opposed to minting new every time. This will create a demand for those selling and looking to exchange their coin on a peer-to-peer exchange for other currency. We will give first seller opportunity to merchants who use the payment portal and accept the coin as payment. This will help them sell their coin to enable a quick conversion to local currency.

Liquidating the coin

There are three ways for someone to change the coin into another currency, some with fees and some without:

Converting the coin into a specific currency for a fee. This will remove the coin from the ecosystem and allow users to liquidate their holdings. The fee from the conversion can be used to generate income for the fund.

A delayed cash out will provide users the option to receive a specific currency without a fee after holding it in the fund for X amount of time to allow the fund to complete a long-term investment strategy or to strategically reinvest the fund in short term money markets to provide liquidity without losing on investments. There is a limit of how long between request and liquidation is permitted on the fund.

(Peer-to-peer) Put it on the public exchange allowing the user to sell it themselves. This would require a healthy and sustainable ecosystem.

FAQs

While the coin may be rendered as a decentralized asset, and information relating to the ownership is encrypted, the assets backing the value of the fund is still physical in nature and relies on parameters pertaining to the laws or economic situation of the country where the investments are made. What is stopping governments from seizing these investment assets?

Even in a situation where a government were to seize assets associated with the fund, the fund is diversified in assets from other countries providing a more secure structure than relying on one country or asset class. So the coin and the fund backing the value of the coin are decentralized.



The coin is encrypted on a decentralized ledger thus allowing ownership to remain anonymous and secure from investigation or seizure. This means that no entity can target a specific person or persons; rather, any attack would have to be made on the whole system and everyone that uses it, simultaneously.

What is stopping the fund managers/banks from liquidating or extracting value from the fund for self-interest?

The fund’s performance is public and transparent. If the fund were to underperform or attempt to liquefy, these issues would fall under the permeators of the SEC or equivalent regulatory body in a given country. The fund compensates performance to the money managers based on how well the fund results quarterly or annually. The money is also never in their ownership but rather under their advisory. The fund is controlled by a trustee system or controlled under a financial institution that has a reputational risk. The process is documented within the parameters of contractual law.

Authors notes

The concept of merchants only accepting purchases from KYC accounts

This will allow the government to monitor monetary movement. The idea is that if a drug cartel were to receive all their coin from Crypted accounts and then tried purchasing an expensive house or an expensive car they would have to transfer the coin to KYC in order to complete the purchase. This will give the Feds an opportunity to ask where they got that money.

You might ask well what’s the point of a Crypted account then. The goal is to allow the storage and movement of coin out side the system and independent of central authority. This doesn’t negate that within the system the government gets to police their own economy. Within the walled garden of their curated society they get to choose the rules for merchants and customers to create the experience (i.e. America). The only difference is that the coin is not locked to their market place performance and regulation. Only when you choose to participate and for that exact transaction.

Another way to look at it is seeing fiat currency (enforced legal tender) as owning a gift card to a specific shop. This gives it value everywhere but only that shop (country) is forced to honor it. What happens if the shop no longer has the goods and services you want, if new rules or lack of them ruin the shops experience, or what happens if the shop totally shuts down. All these things effect the value of the gift card but also leave the gift cards utility entirely in the hands of that specific shop. The shop gets to choose rules for how their gift cards work, such as requiring an ID with the gift card, requiring proof of purchase of the gift card, or deciding criminals can’t use their gift cards and may have theirs confiscated. The ability for the shop to create rules within its ecosystem is what allows it to be its best.

The big idea is not too create a lack of rules within the shop, just to separate the gift card from the shop. To design a storage of value independent from any country. No one can control its independent value nor enforce any rules outside their ecosystem. America’s leverage won’t come from value being locked to their ecosystem but from the value of their ecosystem itself. Theoretically America can still leverage other countries into enforcing KYC in their countries, first world countries would probably want to anyway. Still the distinction is the coin not being in central control, empowers the individual free from the societal structure.

I would hope that one day the same would happen in the world of software platforms and personal data.

No taxes for crypto purchases, since it cannot be considered an asset which appreciates in value.



It’s possible that the unique setup of static value of the coin backed by an actual fund allows the coin to make purchases with local merchants without being considered the liquidation of an asset. This is because the coins value is static and may help its classification as something other than an investment.

Low latency fee-less blockchain

The use of KYC accounts may enable a new structure for consensus and ledger storage. Another possibility from such a structure is a protection from a single entity’s anonymous 51% attack.