Digital Solution To Greek Tragedy
You would have to have been living in a cave these past few
years not to be aware of the travails that currently afflict the Greek people
and their economy. As the Greeks debate the choice that apparently faces them,
the Euro or the Drachma, there could be other options on the table. What about
digital currency? Some of you may have heard of it by another name,
‘cryptocurrency’, others may have heard of types of digital currency such as
Bitcoin, Litecoin and our very own LEOCoin. The crisis now gripping Greece could
force one of the most radical rethinks in fiat economics in generations.
Not everyone will be aware of the interesting figure that is
the outgoing Greek finance minister Yanis Varoufakis. Mr Varoufakis has
resigned in the wake of the weekend’s no vote in Greece which rejected the EU’s
current austerity demands of the floundering country, his resignation is
particularly interesting given his previous assertion that it would in fact be
a yes vote that would precipitate his departure.
However, it is not his departure, or the nature of it, that
interests me necessarily. It is his unorthodox views on the potential posed by
digital currency for a struggling economy like Greece ’s that should catch the eye
of those of us working in this exciting digital arena.
Yanis’ reflections on digital currency have focused on
Bitcoin as the case study for his assessments of the potential they offer, and
his appraisal of their potential has largely been negative. Yet this has not
prevented him from examining how a digital currency of sorts could work for his
native Greece .
As the founder of a digital currency, LEOCoin (the exchange
went live this April), that has already seen thousands of businesses engage in
this new type of transaction, I feel his comments are worth exploring further.
Much like the War Bonds of Word War II, Mr Varoufakis presents a theoretical
digital currency as an opportunity to provide a government with immediate, but
sustainable, liquidity in a crisis. In essence Mr Varoufakis advocates a
‘temporary switch’ to a government backed (the Greek government that is)
digital currency that would offer liquidity to solvent Greeks by offering tax
reductions on future taxes. This would mean a citizen would be able to buy this
currency, and use it in digital form, as cash – its value being attached to the
future discounts the individual would get on tax once the economy is ‘out of
the woods.’
What the former finance minister, and world renowned
economist, proposes is the creation of a currency using “cryptocurrency’s”
unique algorithms which he termed Future Taxes Coin (FT-coin for short).
In the example he offers you would purchase, for example, 1
FT-coin for €1000 from a Treasury backed source, then redeem it say two years
after it was issued as payment that extinguishes, for example, €1500 worth of
taxes.
Every year (after the system has been operating for at least
two years) the Treasury would issue a new batch of FT-coins to replace the ones
that have been extinguished, as taxpayers would have used them. To make sure
that the system is fully transparent, FT-coin could be run by an algorithm,
like those used by LEOCoin, designed and supervised by an independent
non-governmental national authority, like how the current digital currency
community ‘polices’ its ledger currently.
His proposition is interesting not least of all because not
only does it fly in the face of current fiat economics, it also flies in the
face of the main reason people use digital currencies currently – namely that
they are not government tender. For business and entrepreneurs it is the
‘access to cash’ during a crisis that could be the vital life line to recovery.
The fact that a digital currency like LEOCoin is ‘stateless’ could be the key
factor allowing a business to keep trading, even as a state falls down around
them. It is for this reason that I am not surprised to see an uplift in the
price of Bitcoin this week, and LEOCoin has also seen increases in trading.
People are looking to currencies whose value lies with the community who use
it, rather than a nation state.
This is where I think Mr Varoufakis’ views, though
interesting, are perhaps short sighted. Rather than a government looking to
digital currency as a potential salvation because of the instant liquidity it
may offer to them, people should be looking to digital currency to trade
directly with each other.
It is small business owners and entrepreneurs that turn
recessions around – you can have all the clever fiscal policy in the world, but
as long as real business people aren’t driving commerce then government
intervention amounts to nothing. That is where the real opportunity of digital
currency lies. Instant trading with the business community, free from the
restrictions of the international banking status quo, is how you can get an
economy moving again during these strained times. That is the big picture for
digital currency, let traders trade.
Let’s Be The Part Of Largest CryptoCurrency
