Monday, April 20, 2020

The Future of Cryptocurrency


The global monetary system is falling apart. The Federal Reserve has dropped the reserve requirement to zero and is now buying junk bonds. This is a golden opportunity for cryptocurrencies to move into the mainstream. The question is, are they capable of performing at least as well as fiat money? Unfortunately, no.

The problem is that cryptocurrency enthusiasts mischaracterize cryptos as money. To support this notion, they often list the three main functions of money as a unit of account, a medium of exchange and a store of value. However, this list only describes the main functions of money and not what it is. Much confusion has arisen from failing to recognize that “Goods are wealth which you have, while money is a claim on wealth which you do not have. Thus goods are an asset; money is a debt.” - Carroll Quigley. Money is a security that acknowledges a debt owed. This is why cryptocurrencies are not money. Even the SEC now views cryptocurrencies, like Bitcoin, as speculative investments instead of securities because they do not secure assets. Having mostly speculative value also means that such cryptocurrencies have an indeterminate value that constantly fluctuates, making them unusable for anything besides trading.

So what is needed to enable a cryptocurrency to compete against fiat money?

First, to function as money a cryptocurrency has to be issued as a security, otherwise transactions will be barter. However, securities cannot be issued by a decentralized system. Only a legal entity such as a corporation can issue securities. Once issued such a cryptocurrency can be used in a decentralized manner, but it must be legally issued first.

Second, the main problem with fiat money is the fractional reserve system that permits creation of money without underlying assets, which is essentially a legalized counterfeiting of money. This is what cryptocurrencies are able to solve using a public blockchain such that the total amount of cryptocurrency in circulation is always equal to the value of the underlying assets. If the underlying assets are denominated in this cryptocurrency then it would directly represent the underlying. This approach would make the cryptocurrency creation process public, while allowing transactions to be kept private.

Third, a cryptocurrency requires a monetary system, i.e., a set of legal institutions to allow this cryptocurrency to function within the economy. At a minimum, the system must have the means for maintaining accounts, performing transactions, resolving disputes, and making and servicing loans. Such a monetary system would permit a cryptocurrency to function legally within the economy.

Finally, the system must be controlled by its members, for example, as a credit union.

Given all this, it is clear that none of the existing cryptocurrencies are suitable for use in such a system. This is why Axio was invented. Axio was specifically designed to satisfy the fundamental goals for which bitcoin was invented for and to be able to function within the economy.



Visit the Axios Foundation website for more information.


The statements contained in this document are exclusively opinions and forward-looking statements, which involve known and unknown risks and uncertainties which may cause actual events or results to differ materially from the estimates or results expressed herein. We do not make any guarantees regarding estimates, projections or results contained herein, whether express or implied, and disclaim any liability therefor. 


Monday, April 13, 2020

What is Next for Cryptocurrencies?

Bitcoin was invented as a test for a decentralized Peer-to-Peer payment system. Since then much effort was made to improve the idea, however none have produced a functional currency. The reason for this is that cryptocurrencies have fundamental problems.
  1. Cryptocurrencies have an indeterminate value which is why they are only good for speculation and illegal activities.
  2. A decentralized system means that there is no one there to resolve disputes or help when problems arise.
These and other problems prevent the use of cryptocurrencies in business, relegating their use to enthusiasts and speculators. Yet cryptocurrency activists resist any attempts to fix these problems in ways that do not confirm with their views. They are attached to ideas that were improperly used to justify Bitcoin as "money". But to move forward we need to acknowledge these problems.

In over a decade since the Bitcoin was invented, no real progress in creating usable money has been made. If we want different results, we have to try different approach. And a different approach does exist but we need to abandoned all preconceptions. We need to get back to the original goal – to create money outside of the banking cartel that must function within the system yet be apart from it, and it must be under control of the people.

Such a project exists. It is called the Axio. The ideas behind the Axio project was started when bitcoin started out, but there was this belief that all these problems will be solved through some decentralized process. This has clearly failed. So this religious attachment to decentralization had to be abandoned and tokens had to become money. This is what Axio is about. Achieving the goals the bitcoin was created for.



The statements contained in this document are exclusively opinions and forward-looking statements, which involve known and unknown risks and uncertainties which may cause actual events or results to differ materially from the estimates or results expressed herein. We do not make any guarantees regarding estimates, projections or results contained herein, whether express or implied, and disclaim any liability therefor. 

Monday, April 6, 2020

Axio and Deflation

The economic theory describes deflation as a decrease in the general price level of goods and services. Then the theory describes causes of deflation and its terrible consequences. The primary cause of deflation is a decrease in the money supply that in turn hurts the economy. On the other hand, expansion of the economy is inflationary. The theory does not consider that money can maintain value irrespective of the money supply since it has no mechanism for it.


The Axio monetary system is a deflationary monetary system in which Axio will accumulate the value of the interest payments within a supply of a fully backed currency. This is because the Axio will be issued as debt and extinguished when it is repaid, while the resulting interest payments would increase the value of the Axio by the amount of the interest. However, deflation makes it difficult to repay loans with money that become more expensive over time. Left as is it would make Axio unusable for business.

The obvious cure for deflation is inflation, however it has to be done in a productive way that would benefit everyone. The solution is to issue additional Axio for the balance between interest payments received and the balance of the bad loans that would cause inflation within the system. This amount can then be used to pay for operating expenses of the Foundation, and the remainder could be distributed as interest payments to all depositors.

This approach would solve the problems of deflation, stabilize the value of the Axio, and would provide interest payments to the depositors without the need for inflation. It would make the Axio monetary system less susceptible to the fluctuations in economic activity that create booms and busts of the Business Cycle associated with the current inflationary monetary system. And given all the other great advantages of the Axio, would allow it to compete effectively against the established fiat currencies.


The statements contained in this document are exclusively opinions and forward-looking statements, which involve known and unknown risks and uncertainties which may cause actual events or results to differ materially from the estimates or results expressed herein. We do not make any guarantees regarding estimates, projections or results contained herein, whether express or implied, and disclaim any liability therefor.