All uncollateralised crypto coins (Bitcoin, Litecoin, Ether) share a fundamental defect; their value as a currency is parasitic on the value of goods and services generated by others (Kowalik 2015). If you get something for noting then you are probably stealing, even if you do not know who you are stealing from. Popularity of crypto currencies is, often unwittingly, motivated by this exploitative capacity. Government fiat-money is no different in that regard but, unlike uncollateralised crypto currencies, it is meant to be issued and spent in public interest. In practice however, 97% of all means of payment (M3) are generated by commercial banks, at interest, in the form of Credit, which leaves plenty of room for improvement (How Money Works). I will focus here on defining the necessary conditions for making a non-parasitic crypto currency capable of delivering what Bitcoin was hoped to deliver but failed, and what bank-credit is certainly not: an intrinsically fair means of payment for everyone.

For any non-government issued coin to be both stable as a currency and non-parasitic on the value generated by others it must satisfy a rage of technical criteria. Its supply must be sufficiently elastic to satisfy the economic demand (this ensures value-stability) and it must be secured by something of equal value to which the issuer already has a legal right. I call this ideal a Robust Secured Crypto Coin, which is essentially a digital Promissory Note fully secured by physical collateral of a special kind. The coin cannot be secured by payment of collateral in Legal Tender as then it would be only a temporary substitute for the Legal Tender with no net increase in the spending power, but by real estate, commodity or products whose value can be accurately estimated by the market. The collateral must be created by the original coin owner.

For example, I may have completed building a house. The market value of the finished house is estimated by a professional valuer at $600k and the total cost of materials, contractor labour and land is $400k, so the net added value is $200k. I pledge this added value as collateral for the equivalent value ($200k) of Robust coins. The coins are minted and are secured by a Lien on the pledged property to ensure the collateral cannot be liquidated. The collateral must also be insured against damage or loss. As a consequence, I can live on my property, I can rent it out or use it for bussiness, but I have also created $200k in interest-free spending power for my immediate use. The real property cannot be sold until the Lien is lifted, and this is possible only when the equivalent number of coins are repaid and destroyed.

The volume of coins therefore increases in proportion to the monetary value of the real property created and pledged as collateral by the coin issuer, in effect establishing a parallel economy to match the alternative currency. This ensures that the coin is neither price-inflationary nor price-deflationary for the mainstream economy (the associated pie of wealth grows at the same rate as monetary claims on the pieces of the pie), and is not parasitic on the value created by others. After a pre-defined number of years (say 10), if the currency would lose value or for any other reason whatsoever, coins can be redeemed from the original owner/issuer by transfer of ownership of the relevant share of the real property (the collateral), or by an equivalent payment in legal tender, whereby the Lien is lifted. Operation of the payment system may be funded by transaction fees, and need not be anonymous.

An important feature of the Robust coin is that because the new spending power is secured by real property already owned by the issuer, it does not constitute ‘income for tax purposes’ (Tax Authorities have the power to may make a special determination on this question) but is more akin to an interest-free loan against one’s own real property. This can be economically liberating and conducive to entrepreneurship.

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