A Case for Sound (and Concealed) Money
Seeing the Forest Past the Trees
Bitcoin was created out of the unrest due to traditional markets and how fiat currency can be manipulated due to political whims. It helped to set off the first of blockchain and cryptocurrencies which are fueled by enhancing the properties that define what money is and then cold stamp them in code. The only way the code could be altered and changed is through majority consensus via a hard fork which requires a great deal of effort. This ensures that the ‘Rules of the Game’ does not change at the whim of any individual nor do they change easily when a trend or fad starts. The ossification of a protocol on top of digital scarcity is the key element that lends a cryptocurrency to being sound money.
What is Money?
The concept of money largely has its roots in the bartering system created by early humans. The need to have a medium of exchange for different trade items that didn’t have an equivalent trade value. An example would be comparing the cost of one cow to metal goods produced, they both would have an intrinsic value associated with them, but they might not be easily tradeable one for one, which lent to the concept of having a medium of exchange that could be used to arbitrarily tie the value of any item to the medium facilitating trade. From shells to coins, to paper bills. The concept behind money has little evolved from the concepts of what money can be and how it should work. From ancient times up until more recent times, money typically has always been pegged against an object of known value and then used to convey purchasing power via the object used as money. The peg has been gold and silver, amongst other things.
Where monetary policy has drastically changed and leads to a perpetual system of currency devaluation or inflation stems from money being backed purely on government assurances. In the 1970’s the then US president, Richard Nixon, moved the US dollar away from a precious metal standard, meaning that the US dollar was essentially backed on the faith that the US Government would fulfill its loan obligations and not default. With this in play since then, monetary policy has been used as a political tool and subjective choices as to how money operates, economies grow/contract, and the effects on people with inflation.
This had capitulated to some degree with the banking crisis in 2008/9 which led to the creation of Bitcoin. Bitcoin was designed as a p2p digital currency with programmable rates of inflation, a fixed supply of currency, and a decentralized and egalitarian method of network consensus. Thus the birth of digital sound money.
The Soundness of Money
A very frequently used narrative in cryptocurrency is tagging a particular project as “sound” money. Unfortunately, this is used more often than not as a blind label by the people most vocal about a project, without it actually being sound money. The Primary Principles of sound money can be tied to a few key properties:
- Durability — A measure of how a currency can persist, either in a physical form that doesn’t fall apart or wear down easily or in a digital format that is preserved on something like a blockchain
- Portability — The ability for something to be moved easily, given the nature of digital currency it can move to anywhere that the user who has the private keys can connect to the internet at an instance
- Divisibility — This is a modern twist on more primitive forms of money. Items such as cattle, stones, or shells can not be fractionalized easily like physical change or into fractions like digital currency.
- Uniformity — Again a similar reference to primitive forms of money where is a large cow the same as a small cow? For modern cash with coins or bills, uniformity is a measure of fungibility meaning that one unit of currency is equal to another.
- Limited Supply — A currency maintains its value if the supply is maintained as a limited supply. This can be taken both from different philosophical views to be either strict, such as a hard total supply cap, or managed through an emissions process. Most cryptocurrencies validate this principle with a hard total supply and once that amount is emitted to the public no more can be created.
- Acceptability — This is one area that cryptocurrencies are currently working towards to gain the sound money moniker. As a currency to be labeled as sound money, it must be accepted as proper currency. This means that businesses that offer goods and services will be willing and open to exchange their offerings for the currency described.
When a currency achieves all of these properties, then it can reliably be denoted as sound money.
In addition to all of this, when applying the sound money moniker to a Private by Default cryptocurrency, there comes a very specific issue that is unique to privacy coins. This is the issue of Accountability, in other words, the ability for any person to reliably verify every single Unit of Account in the total supply of the blockchain.
Though this is very easy to do in a transparent blockchain, such as Bitcoin, many privacy coins today are not Accountable due to their obfuscation protocol. They are not capable of having their coin supply audited to an absolute degree of accuracy and so require a large degree of trust that the protocol is working as intended. And of course, if the coin supply is not verifiable and Trustless in nature, it cannot be considered Sound money.
From Bitcoin to Conceal
The revolutionary concepts that were embedded in the design of the system that operates the Bitcoin network truly have given a new way of looking at how money can exist in a programmatic fashion outside of the reach of people squabbling to make changes at a whim. Two major issues with Bitcoin are the lack of untraceability and unlinkability that it possesses, making Bitcoin not suited for truly private transactions. This is important because even with soundness and programmability built in, the surveillance potential and modeling that can be done on it are not ideal. Many of the self-proclaimed Bitcoin maxis are right about the soundness of money and its importance but fail to acknowledge this weakness in the protocol.
Conceal utilizing CryptoNote 2.0 as a core part of the protocol builds a currency that enables privacy by default along with perfect Accountability. In addition, Conceal has many of the same properties as Bitcoin that ultimately make it a real sound money. Conceal has a fixed total supply of ₡200,000,000 in addition to a fixed emission schedule of ₡6 per block powered by a Proof of Work consensus mechanism. This will see emissions continue for at least the next 100 years in a predictable and fair way. The combination of technologies implemented by Conceal makes it both sound and concealed money!
One crucial final point, as explained before, although there are other privacy coins out there, many of them lack the properties described above to define them as sound money. Conceal is both Sound and Concealed (Private), giving you the best of what blockchain technology enables, without compromise.
Reach Out:
If there are additional ways and/or you want to help support and fight the cause reach out to the team in our Discord or across social media!
