Introduction
Bitcoin’s invention is most commonly compared to the time of the
American Gold Rush; this analogy is misleading. The analogy
equates bitcoin to gold, this is problematic because it forms the
view that bitcoins are something closer to gold than fiat
currencies, and furthers the confusion between natural and
artificial scarcity. An analogy more suitable for reflection and
analysis a comparison of cryptocurrencies with early coinage, its
invention in Lydia and its adoption by the Greek poleis around
600 BCE. The times of Greek adoption of coinage were an
important factor of civilization, as Athens was sustained on the
silver slave-mines, used mainly for coinage. Reflection of historic
functions of money used in contexts long since decayed through
the ages informs us on their potential improvement and helps us
avoid its regressions. The past is not completely gone, it is
partially preserved, modified in present conditions, the functions
of money are such remnants of history present in the world today
and when we exclude historic analysis from the analysis of its
present use, we make the mistake of confusing its current use for
progress, and miss its regressive moments. The classical
definition of money determines four functions; money is a store
of value, a medium of exchange, a measure of value, and a
standard of value, yet this functions of money are merely the
functions of its use, that neglect an important aspect of money
creation, that became an evident issue, with the private money
creation of cryptocurrencies.
A short history of money and its functions
Value in general is an aesthetic idea, analogous to beauty, yet
used for different purposes. The specific cases of use of the idea
of value, moral-value and use-value, and consequently exchangevalue,
share this essential character. Not only is the idea of
beauty, or the beauty of the artefacts in exchange always tightly
interwoven with exchange-value throughout known history, it is
essentially the same type of idea, one of actual harmony or
empirical reciprocity. Idea of value in general is composed of
abstraction from some empirical idea reflected with the criterion
of identity, its ground is therefore empirical and its essence pure.
We consider value as a general idea of a standard of human
practice, and consequently as the determination of its potential
practice, and the use-value as the idea of value applied to an
object. An object has a use value, if it is potentially useful for
potential human practice.
A semiotic theory of value
Use-value is not the basis of exchange-value, but its ground. Usevalue
is the mark of possession in general, yet when something is
considered without cost it can’t be considered a possession, even
if it is undoubtedly useful. Potential use of something requires
one to possess it, on the condition that its possession is less
costly than it is to acquire or create the possession. This
consideration is based on actual cost as perceived by the subject,
and is only approximately measured by exchange-value. Without
a consideration of cost, a thing is not a possession, but a mere
natural thing, that can enter exchange only through mediation of
property relations. They are retrospectively considered as usevalue,
because they are given an exchange-value, yet differ from
possession essentially and historically. Land and water are such
examples, that can’t and did not enter exchange until after
property rather than possession started to determine
exchangevalue. The obverse also holds, to transform a natural
thing into a possession or property, it must be given a potential
use. For possession, because it is an actual empirical relationship,
a cost is necessary, for property, because its mode is
representation, it is not. This use can be actual or potential and
should not be reduced to consumption, it is its character of
potentiality, that differentiates it from its origin in labour, scarcity
or cost and it is because of it, that it is not fully determined with
it. Potential use with an idea of cost makes a thing a possession,
yet this is not sufficient for exchange-value. When possessions
are exchanged directly, there is no exchange-value, no standard
of this particular practice, that could determine this
intersubjective interaction. Only with mediation can exchangevalue
gain its autonomy as a specific type of value, as a
specialized semiotics that determines the potentiality of practice.
This process of specialization is a continuum that requires
increasingly complex objectification to progress. It is the semiotic
character of exchange-value and its mediating force between the
general semiotics of cultural values that is a necessary part of
historic analysis of production, as the transformations of practice
are essentially ideal and objective, regardless of their
implementation in things and relations. There is no dialectics
between use-value and exchange-value as ideas, because they
are the same idea, the potentiality of an object for potential
practice, and no dialectics of their use as applied to each other,
because there is no fully determinant relation. However, because
use value as a general idea relates the idea to particularity
without mediation. With exchange-value the bonds of actuality
are broken. The idea of exchange-value is one of relationship
between property and possession, grounded in the relationship
between potential and actual possession. The peculiarity of this
mode of value is evident, when we relate it to use-value as its
ground. Use value is the potentiality of an object for potential
practice, and as its particular mode, exchange value is the
potentiality of a potential object for potential practice. Because it
determines practice not with an object, but with a potential
object, the object must be replaced with property relations, and
because property relations depend on the general idea of value
and its implementation in a given society, it therefore relates the
particular practice to its generality. Exchange-value includes the
relative measure of cost of the object, yet even in primitive
societies, this is not a better more adequate measure of cost, it is
a desubjectivisation of this measure, by objectification and
therefore a more durable measure. By relating between property
and possession, exchange-value rises things to the domain of the
concept, and mere causality to the mode of representation, this
of course is not an event, but a gradual process far from
completion. Exchange-value is therefore a particular mode of
use-value, that as its special mode encompasses its totality as its
content, this inclusion is particular and empirical and depends on
the context of the exchange. This does not mean that exchangevalue
determines every aspect of the human practice, but rather
that potentiality of human practice partially determines
exchange-value, and is expressed in it. Because of its
indetermination, it can determine itself, the more human practice
is itself determined with exchange-value, the more exchangevalue
can be determined with exchange-value. Determination of
potentiality of practice with exchange-value produces a surplus
when made actual, yet because it can be actualized either as
additional exchange-value (profit) or additional use-value
(productivity), this surplus is indeterminate. When use-value of
an object is used to produce exchange-value, there is no
determinate relationship, no direct adequate relationship
between cost and profit, because there is no relation between the
use-value of a particular thing to the exchange-value it occasions.
This particular relation is determined by practical adequation of
the thing to its extrinsic purpose, productivity. The relation of
profit to productivity is necessary for growth of productivity and
the growth of productivity for progress. In negative terms, the
decrease in loss of exchange-value should be related to the
decrease of loss in use-value, risk of losing money to the risk of
losing productivity. This relationship is far from necessary initself,
but necessary to some degree for a society to function,
when this relationship is dissolved and the relationship between
profit and productivity is lost. Exchange-value is the idea that
encompasses the space between possession and property, and
had arguably first entered the world in gift economies of primitive
societies. When a society receives a gift, it is confronted with the
possession of something that is not its property. A gift is at the
same time a thing to possess and an obligation to repay it with
another - debt. Spirits of another tribe haunt the society
possessing the gift, until it is repaid. To reverse Feuerbach’s
thesis on alienation; it is not that human essence is alienated and
objectified in religion, but rather the objectified from of alienation
is given a human essence - it is spiritualized. This spiritualization
is coincidental, this objectification had to be represented, yet
could not be represented adequately as humanity’s knowledge of
the world was still inadequate both in its mode and
representation. Property used as a distinct idea from possession
is first used as spiritualized, yet its essential character of
knowledge is preserved through history. Religion as a mode of
knowledge plays the role of organizing societies as the original
mode of lawfulness, based on divine reciprocity and law. Property
is actual only when possession can become non-actual, when its
actuality is not merely negated, but transformed into potentiality.
Yet with progress, additional risk, uncertainty or entropy is
created that requires mitigation. Systemic entropy is the way
systems are open to their environment, not only does entropy
endanger the internal distribution of exchange value, as the
element within a system, it endangers the system as a whole,
and therefore the use-value of exchange value, and the use-value
affected by it. The two dangers are the result of a single
mechanism of increasing entropy of practice; for both exchange
and production externalities multiply. When externalities can be
accounted for and included in the system, they incur growth,
when not, their decay.
Possession, property, debt, money
It is only by the virtual shadowy double of possession, debt, that
property, becomes actual as property, and can therefore be used
as property, not mere possession. This use implies property
relations and their codification as law and consequently produces
antagonisms with the spiritualized codifications of ‘natural’ or
divine law. The antagonism is a driving force of human progress,
the complexification of human interaction, creation of new types
of interaction and new types of practice facilitated by tool use
sometimes occasion a better form. A new thing means a new use,
and a new use a new type of human interaction. By using
property instead of possession, human interaction can rise in
complexity, that changes the world it inhabits. This mechanism of
intra-societal gift exchange, we can speculate, works as a
selection of societies with potential for cooperation; when a
society returns the favour, it demonstrates that it understands
reciprocity, and therefore shows itself as possessing the
conditions for cooperation. Reciprocity can only be tested when
there is a difference between possession and property, this
reciprocity is the standard of value necessary for exchange value,
that can’t arise from barter, where things are directly exchanged,
but requires the form of exchange, where the process of
exchanging is given a durable form, that can either be completed
or not. Risk of non-reciprocity is used to export the greater risk of
noncooperation; particular reciprocity is used to secure a more
general reciprocity. The particular reciprocity became the special
standard of exchange value, the general reciprocity one of value
in general, that was at first spiritualized as divine. Because
general concepts are more abstract they elude the imagination of
men, so from dawn of civilization, the more concrete tools and
concepts of exchange value are used as their allegories, and
obverse because the particular order of reciprocity is incomplete,
it is supplemented with the divine order. Barter can be viewed as
the solution to mitigate the risk of non-reciprocity, once the risk
of non-cooperation is no longer a threat. Proto-money is therefore
a semiotic tool, an object used for mediating between property
and possession, that creates a specialized thing one can possess.
Specialization is a specialization of use, that cannot be complete,
because it includes its exterior, human practice in general and
therefore both use-value and value in general. The difference
between intrinsic and extrinsic money is one of degree, both for
the general concept of money, in its historic development, and
for the particular case. We can construct two ideal abstract types
of money that do not exist, but serve as the representations of
the extremes of the spectrum of intrinsic and extrinsic money.
Pure intrinsic money, as pure commodity money, where its
exchange value is perfectly identical to its use value, and pure
extrinsic money, as pure token money, where the function of
exchange value is completely identical to its use value, meaning
that its only use is its use as exchange value. When a money is
pure commodity money, there is no difference between the value
of something used as a commodity, the value of its cost of
production, and the value of it used as a currency, and therefore
no change of value in its use as money. This is practically not the
case, as commodity money is affected by demurrage, a loss of
material and value through use, or the cost of its use, and
because it could only be made into money by the cost of its
creation. When something is created as money the immediate
identity between exchange value and its cost is lost, by the
addition of its own use-value and its own exchange-value –
money is not a pure medium of exchange. The difference is either
negative, that produces undervalued money, or positive that
produces overvalued money, in regard to the commodity out of
which it is made. True money is therefore no longer a mere thing
that emerges from a practice of exchange, but rather a relative
formalization of this practice into a system where the money
serves as a transmitter. The monetary system includes money as
the relationship between possession and property, and is used in
a formalized context of laws and regulation. The system includes
its exterior as cost and as debt, and therefore actual and
potential cost, because debt carries with it the uncertainty of
cost. Because the element can’t represent the whole in the same
way, that it represented some part of practice as proto-money, it
merely expresses it and obscures the costs of money creation.
The more difference between the cost and nominal value, the
more obscure the cost of money. The independence of nominal
value through history is the independence of property, and the
independence of property depends on the complexity of laws.
Because money is used as a measure of value, by obscuring its
relationship with cost, the relationship of all economic interaction
to cost is obscured. This practical problem, was to be solved by
the market, yet in this regard, markets are inefficient, they can at
best produce a Nash equilibrium, where risk is the lowest in the
given context, yet cannot relate the order of representation to
the order of things. The greater the obscurity of costs of
production, the more obscure the relation of the system to its
exterior, and therefore the lesser efficiency in the system’s
regulation of this relation. Civilization emerged with
domestication of plants and animals and their use for human
purposes that produced a surplus of use-value. The centralized
warehouses were likely to function as combination of different
social functions, as storage, security, banks and temples. The
obsession of early cultures with the connection of the world of
men and the world of gods was perhaps not a mere fantasy, but
the mark of the knowledge of two distinct orders of reciprocity, or
rather the insufficiency of particular actual reciprocity. What the
actual exchange lacks must be imagined, not to lessen one’s
suffering and pacify oneself with the injustice of the world, but to
sustain the actual exchange itself. The representation of debt,
seals signifying what the granary owes to a person, were likely
already used for trade as true money. Symbolic tools for
counting, keeping ledgers etc. predate written language, yet
accounting remained isolated knowledge, part of the mysteries of
the priests. Inter-societal exchange done by individual traders
used commodity proto-money, obsidian and precious metal such
as gold and silver, while intra-societal exchange used more
durable food such as grain and barley. Grain became the medium
of exchange, yet because grain has to be weighed to determine
its quantity, it was not suitable as a standard of measure of
exchange-value, for this function domesticated animals like oxen
and cows were used (one can quickly spot, that a third of a cow is
missing), so the nominal value was determined in terms of oxen,
and paid in grain or metal. The functions of money were separate
in proto-money and money, the standard used for unit of
account, was not combined with medium of exchange and store
of value, the functions are separated in practice because not all
could reliably substitute weighing with counting, the main event
facilitating this substitution is the invention, adoption and
development of coinage.
Invention of Coinage
The Lydian Lions, coined by the Lydian King Alyattes are arguably
the first coins, they differ from proto-money such as shells, axes,
metal, cattle, obsidian, wives etc. by the distinguishing mark of
authority that gives them unity of a standard. While proto-money
can function as money, it is not created as money, but rather
becomes one through practice and is therefore limited to that
particular practice. Coins are of course not the first money, that is
perhaps as old as representation of counting, yet it nonetheless
represents an important historic event, that sheds light on
important aspects of functions of money and a milestone in the
unification of the different functions of money. There is evidence
to suggest Lydians were not the inventors of coinage, but are
merely considered as such by most classical authors because of
the proximity to the time and place of its Greek proliferation. It is
this proliferation and its conditions that tells us more about
money than immediate innovations of coinage. Lydian Lions were
coined as electrum, an artificial mixture similar to the natural
alloy of gold and silver from the river Pactolus, and were debased
with copper, providing the Lydian king with the profit of money
creation - seigniorage. It is likely that Lydian king Alyattes
invented coins to tax the ongoing bullion trade, by enforcing the
exclusive acceptance of the bullions with his mark for official
purposes therefore collecting seigniorage, or perhaps to lessen
the cost of the sacrifices made to gods. His son Croesus,
reformed the coinage into a bimetallic system of relatively pure
gold and silver coins, that became more usable for other
purposes, because of a monopoly over the mines of gold, he fixed
the ratio between them in a way that extracted seigniorage by
overvaluing gold, and did not have to debase the coins
themselves. A monopoly over gold supply was necessary for this,
along with a strong government that could guarantee the use of
overvalued money, the innovation of coinage considered in this
way, seems more like an innovation of the use of seigniorage as
tax, not as immediate replacement of counting over weighing
already done partially by other forms of money. Seigniorage
differs from normal taxation in important ways, it preserves the
exchange-value of intra-societal exchange by enforcing the
nominal value, and increases the exchange-value of the
government, the loss is only the relative loss of individual in intersocietal
exchange, mostly affecting the periphery of empires. It is
also a tax much easier to collect, value doesn’t have to be
collected from each and every individual, only its official use
must be enforced, as an added benefit, people are of course
happier to pay taxes with overvalued money. While early
warehouses/banks could perhaps collect seigniorage on issuing
their tokens, this seigniorage had to be repaid, with coinage, debt
was free. By this exclusion of determination of debt, coinage
seigniorage could benefit as-if without cost, increasing the power
of the whole, by sacrificing only the individuals when interacting
for their own interests – this is the innovation that benefited the
Greek.
Adoption of Coinage
Coinage did not represent an immediate benefit for trade, as the
already existent trade tools served better for economic
transactions between individuals. The distinguishing mark of true
coins is the mark of authority that provides the coins with the
uniform type, this is the function of measure of value that creates
for it a common type and serves as a unit of account and the
standard of measure. It creates a guarantee that something is
money, not merely by making it recognizable and easy to
authenticate and fungible, but ensures its practical use as
money, by enforcing its use for official purposes. The creation of
money as money, produces a formalization of money, and
transforms money from a thing used as money, to a system
where money is an element of economic exchange with artificial
scarcity grounded on seigniorage. It is therefore more interesting
for theory to look at the benefits of coinage from the perspective
of this shift from money as a thing to money as a system, and
focus on the official purposes and seigniorage, than their classical
functions that are a question of their practical implementation.
The Greek adoption was facilitated not only by economic use, but
mostly by the particularities of the Greek relationship between
exchange-value and value in general. The antagonisms between
divine law and economic exchange were plaguing the aristocratic
Athens. After Theseus unified Attica under Athens, the nobility
had the right of property, they owned the lands that could not be
sold or purchased and required farmers to pay rent in feudalistic
system. The common people of Athens were losing their
autonomy by becoming debt-slaves - when they were incapable
of paying their debt, they were enslaved by their creditor. This
kind of society lacked unity of interests, and produced
widespread civil unrest. Draco was appointed to deal with it
severely, when he failed, Solon reformed the society, by
cancelling debts, making deb-slavery illegal and including
common people into politics. He transformed political
participation from one based on blood, to one based on wealth,
and made political functionaries at least partially responsible for
their action. The divine law, on which property was founded, was
slowly falling into the domain of men, not only had debtslavery
ended, a new unity of politics was born, and nobility became
subjected to law. Athenian economy prospered as a result of
reforms and new interest for wealth. After being ruled by a
benevolent tyrant Peisistratos, and his malevolent son Hippias,
Cleisthenes reformed Athens based on isonomia, equality before
the law, that resulted in the first democracy. Around the same
time Athens coined its coins, and ushered a new era of exchange.
Before this time, aristocrats had no need for coinage, as their
land-ownership provided them with sufficient income from debtslaves,
and there was rivalry amongst the noble houses, the
common people on the other hand, had no interest in using
money with additional transaction costs, flowing into the pockets
of the aristocrats. With the inclusion of all free men into politics,
the public treasury became a common interest of Athenians, and
their participation in politics was paid for with money; this
enabled even the poor to attend and enjoy leisure time. An
additional use of coinage was the representation of the value of
land, that had become property governed by civil law, when the
feudal relationship between land and aristocracy was broken. All
would-be tyrants were exiled and their land sold. The ground of
democracy of Athens was cemented by the use of silver coinage,
as the mark of the new form of social contract that practically
served as a redistribution of wealth on the grounds of equality.
Silver coinage was both symbolic and useful, yet before it could
become useful, it was necessary for intra-societal slavery to be
abolished. A society where the interests of the its people were
united was required, to employ a tool that benefited them as a
whole, and exploited foreigners and slaves. Coinage benefited
both Athenians and other trade because of the low seigniorage
on pure Athenian owls as the first successful system of coinage.
Athens, of course did not have to capture much of seigniorage as
difference between cost and nominal value, because the mere
use of silver benefited them more, much like with gold of
Croesus, it was the relatively costless monopoly of slave-mines of
silver that produced the profit of coinage and benefited all free
men.
The rise and fall of Empires
The Romans reused the ideas of the Greek, continued with
development of law, and used the Lydian bimetallism for their
coinage, the use of seigniorage for military payment, and its
function for exchange-value surplus recycling was essential for
the function of the empire. Soldiers were paid in money and paid
taxes, to sustain the growing empire. This could only be done
because of the earlier republic had established a common
interest of the people as the public commonwealth, that has
persisted through the imperial change. Seigniorage is of course
not the driving force of history, however there is some evidence
to suggest, that the collapse of Rome was partially affected by
the inability of the state to efficiently capture seigniorage, when
the gold and silver reserves were depleted at the end of the time
of Pax Romana. The empire lost its benefits of controlling the
dominating currency of the world, and could no longer sustain
itself. This mode of monetary system, had, in its lesser forms,
survived through medieval times, local lords collected
seigniorage for themselves, spent it on conquest. Renaissance’s
innovation in banking, the double-entry accounting, had to wait
for the industrial revolution to transform production, before the
beginning of capitalism that slowly replaced the feudal order.
Christianity had to abolish slavery in general and the French
revolution, had to abolish feudal bonds, before another systemic
change could occur. Early capitalism of Britain, increased the
uses of use-value of new technology for the production of
surpluses in exchange-value. It revived the commercial practice
of fractional reserve banking, as goldsmiths started to issue
certificates and paid interest on the storage of gold, while they
traded a part of it for profit. This kind of representative money,
was the start of modern fiat, as it slowly shed its connection to
the thing it represented and banking become included in its
creation. The scare of the French Revolution, that had employed
full fiat money to sell the land of aristocrats and failed miserably
as the neighbouring monarchies were counterfeiting it en masse
causing hyperinflation strengthened the resolve of monarchies in
the use of gold species standard. Circulation of gold coin slowly
changed into gold bullion standard, where money represents a
fixed quantity of gold and is exchangeable for it, and the gold
standard, where a currency fixed its exchange ratio to the
currency with bullion or species standard. The gold standard was
abandoned as it potentiated the recession of early 20th century
into the Great Depression, and the fractal reserve system was
slowly abandoned after governments lost their wealth to the
world wars. The modern fiat system is partially determined by
this process of abandonment that provided more and more
seigniorage that provides more control over debt and a greater
efficiency of monetary policy, done with fractional reserve
banking that includes the specific debts of economies into the
process of money creation. With this change, the unified
functions of money were unified with functions of public and
private financial institutions. The system of money is separated
from the order of particular things and takes the general thing,
the economy, as its basis, money creation becomes fully
monetized. This makes seigniorage intrinsic, and with this, the
exchange-value becomes fully monetarized. With this full
monetarization, the cost of liquidity is equal to the risk of loss of
exchange-value, yet without an increase of regulation and
distribution, this risk cannot be correlated with the risk of loss of
productivity. Although today the main tool of seigniorage is the
change of interest rates, it is not used well for its systemic
functions and the inflationary model it uses, presents a
progressive tax on the poorest – prices might be sticky, yet
wages are stickier still. The International Monetary Fund was
founded after the Great Depression as an international safeguard
against the dangers of crises, it had denied the proposal of
Keynes, that would enforce a neutral money as international unit
of account, and instead supported the U.S. extraction of
seigniorage from all the world’s economies, and accelerated the
dominion of its monetary policy. This worked as long as the
systemic functions of seigniorage were used productively, yet the
Great Recession had already shown the cracks in the system.
Because fiat systems are tied to the particular economies, their
use includes private interests of governments, and because they
are unified with the private financial institutions, the private
interests of individuals. When fiat is used as a reserve currency
for another country, it presents a considerable advantage for the
economies of the reserve currencies, and antagonisms of
interests in both. Much like Athens in the times of Theseus, we
already live in a unified world, yet one plagued with intra-andinter
societal debt-bondage, one without equality before law,
without a commonwealth and therefore without a common
interest. Far from being an apolitical form of money, cryptocurrencies
enable enforcement of monetary policy without force,
and therefore ground the potentiality of politics separated from
violence and geography. This is the potential of cryptocurrencies,
the progression past the limitations and particularities
of fiat currencies, necessarily tied to the partial interests of their
countries.
The potential of cryptocurrencies
Current implementations of cryptocurrencies still lack much when
considered for their purpose as money, their improvement
regarding the classical functions is necessary, along with the
progress in implementation of seigniorage for its systemic
purpose. The main achievement of Bitcoin, was to produce a
distributed public ledger, whose integrity can be protected with
means of cryptography and economy alone, its use in finance
could decrease the role of shadow-banking and systemic
corruption. However, because the population of crypto falls into
the intersection of ideological spaces between cypherpunk and
libertarianism, the role of public ledger is seen as inessential.
Since the invention of Bitcoin, most of the effort is directed at
removing the public ledger as the function of public transparency
of economic interaction for the benefit of anonymity. Although
anonymity is a useful tool for the individual trying to resist a
corrupt regime, the abolition of this corruption is the greater
cause. The potential of public ledgers to abolish shadow-banking
is still far 11 removed, as crypto-currencies themselves currently
fall into this exact category, as viewed from traditional regulatory
institutions, and more often than not, rightly so, as the vast
majority of interaction in the space of crypto-currencies is one of
fraud. Blockchains are the first implementation of a distributed
public ledger produced by a synchronous decentralized
consensus, it is because synchronicity can’t be achieved with
cryptography alone, that economic game theory has to be
applied for this purpose. There is a lot of technical innovation still
required to increase the use of cryptography for the functions
that are in current schemes done by economics, however the
function of seigniorage will always be determined by economics.
The essential technical innovation of crypto is the creation of a
public ledger with the ability of codification of property relations,
this will without doubt create new forms of relations between
property and possessions, yet will also have to preserve some of
the old, such as money. Public ledger enables triple-entry
accounting, that in addition to the double-entry accounting, that
accounts for values as debt and credit respectively, separately
accounts for the legitimate change of values. Current
implementations of achieving consensus are done by employing
the function of seigniorage in an inefficient manner, this means
they do not represent an improvement over the implementation
of fiat, but rather implement its lower form into a digital context,
by this they constitute a progression of monetary technology, but
not of money itself. Money is a practical semiotic tool that
determines human practice by relating exchangevalue and usevalue
thorough relating property, as codified law of society, to
possession through debt. It is either productive or unproductive in
relating exchange-use and useexchange, by increasing the
potentiality of objects in human practice, cultivating possessions
into a more adequate form for our purposes or by increasing the
exchange-value of the whole. Because it is a practical semiotic
tool that relates property relations to possession, it creates social
antagonisms and conflicts with the immediate relation between
property, law and subjectivity. These antagonisms multiply
especially when the codification of property relations divides the
interests of a society. These conflicts affect the sphere of values
of societies, the grey spheres of morality, as un-codified values.
Money can only relate property to possession through debt, and
consequently requires a mitigation of the increase of entropy of
this inclusion. Because this inclusion of debt is a function of
money creation, that at the same time produces a surplus of
exchange-value as seigniorage, the latter therefore has a
systemic role in the system, one of mitigation of entropy. In fiat,
where exchange-value is fully monetized, this role is crucial, as
monetization means that seigniorage becomes intrinsic, and
representation stops representing, thus completely abandoning
its relation with costs. Money is a system of the relating of
semiotic content to its environment, the regulation of the world
with the dominion of law, and its consequence the formalization
of useful things to property relations and their regulation. While
this process itself depends on empirical forces, on violence, it can
never attain universality it requires, no common interest of man
in general can be achieved and its role as a general equivalent
will always function as the dominion of particular interests. As
long as its existence depends on a particular force, particular
interests play a determining role, and no common social contract
is possible, no common ground. Cryptographically secured public
ledgers remove this need for violence, and provide us with the
opportunity to base the common grounds on knowledge instead
of power. Seigniorage is the essential property of money as
money, a function that connects it to monetary policy and makes
monetary policy internal to it, by this it relates property relations
to the specific possession of money and determines its value.
With cryptocurrencies, a monetary system is possible without the
use of force, and consequently without an actual government, yet
this lack does not make it apolitical, but rather necessitates a
different form of politics for its adoption and use. The particularity
of interest that fiat includes as its monetary policy is possible,
and because cryptocurrencies only have a minimal economy, it
breeds even more particular interests. Despite this, it has a
potential for universality like no other type of money before it.
What is therefore required, is the development of monetary
policy that would circumvent the reliance of money to economy
and use seigniorage for its systemic function, as a mechanism
that exports entropy and correlates exchange-value to use-value,
using profit of money creation for its productive use. The ideal
money, as we view it, is not a currency with a stable value, but
one with increasing value, that at the same time distributes
exchange-value and distributes the surplus of increased
productivity of use-value. A stable currency only means that the
value increased productivity has not been distributed and is a
structural inefficiency in exchange-value distribution, required for
stability of the system. The task of cryptocurrencies is not only
the development of technology to provide a better use of money,
but also the exploration of the space of monetary policies in
these new conditions, to seek improvement in the systemic use
of seigniorage. This is the main concern of Xaurum, the
unification of the interests of all its users, based on an increasing
commonwealth implemented as a cryptocurrency with dynamic
and distributed elastic seigniorage.
Xaurum
Xaurum is a representative cryptocurrency based on an
increasing amount of gold. It is designed as a store of value first,
and uses distribution of seigniorage to achieve its goal.
Regardless of the technology of its implementation, Xaurum
could be summed up as an economic game with the next
economic agents: the commonwealth, traders, users, money
creators and the foundation. Increase of the commonwealth gold
provides the basis of unity of interests of all economic agents,
this is the main systemic function of seigniorage, its other
functions are used to regulate the particularity of the interests of
economic agents into unity. Because the commonwealth is
composed of physical gold, that provides the guarantee to be
exchanged for xaurum, it requires centralized control over money
creation (coinage) and destruction (melting). For this task a legal
entity Auresco Institute was created, that sustains itself with the
rebate on gold. Certified 999.9 investment gold is bought from
Good Delivery refineries and because its retail prices are
relatively high, Auresco can charge its fee while still providing
lower than retail prices of gold for the commonwealth. Because
xaurum in exchange has a higher market value, than the value of
its gold base, the difference can be used for increasing the
commonwealth and incentivizing coinage. Market value is used to
mitigates counterparty risk, and commonwealth value mitigates
market value risk, to ensure its function as the storage of value
with the addition of surplus. Commonwealth is sustained by
seigniorage, collection of fees of transactions and will seek
additional forms of income through economic activity of Auresco.
3.1 Functions of cryptographic monetary systems
(a) consensus
Consensus is a practical intersubjective agreement for a single
data value. Distributed consensus is currently achieved for
cryptocurrencies in two ways, by proof-of-work and proof-ofstake.
Proof-of-work, requires mining, the process of finding
blocks, bundles of recent transactions, and verifying them by
using computation. Mining blocks, verifies transactions and is
rewarded by collecting transaction fees and seigniorage of money
creation. Proof-of-stake uses the tokens of cryptocurrency as
miners, making them less dependent on electricity, as most of
electricity of proof-of-work is not used for useful computation, but
competition for seigniorage. Proof-of-stake currencies use
quantity of tokens for this competition and unite the interests of
users and miners by making possession of tokens sufficient for
creation of new money.
- centralization of seigniorage / division of interests
The antagonism of proof-of-work and proof-of-stake mechanisms
is one between the security of the blockchains and centralization
of money creation - the security of a blockchain depends on the
distribution of mining/staking, and because mining/staking is
collecting all seigniorage, mining/staking is centralizing. Its
systemic function is limited to creation of consensus, creating
antagonism of interests between money creators (miners/stakers)
and users. Another problem of capturing seigniorage is
potentiated by the increased money velocity of cryptocurrencies,
achieved by making the function of money as medium of
exchange digital and therefore much more efficient. This
increased velocity of money, means a loss of captured
seigniorage to the market, as the demand for new cryptocurrency
is indistinguishable from a general demand for more exchangevalue.
The result is the decrease in price that decreases the
exchange-value of users and increases the exchange-value of
miners in another currency, this is factor is potentiated when real
costs like electricity are relevant.
- commodity loss of seigniorage
In proof-of-work seigniorage is captured through competition, and
therefore partially lost in the form of electricity cost (negative
seigniorage mechanism of difficulty), this loss is prevented in
proof-of-stake, as their cost is trivial (liquidity), yet this solution
has its own problems. The cost of liquidity is equal to risk of
value, and because value is correlated to technical innovation it
is immediately endangered by competition, these problems are
perhaps good short-term initiatives for innovation, yet they
reduce their functionality as money, especially as store of value.
Xaurum bases all its other functions on its function as a storage
of value, and uses the proof-of-stake model, its value is the
combination of intrinsic value of the digital asset and extrinsic
value as a representation of a physical-asset.
- end of seigniorage as the base of artificial scarcity
The other issue of current cryptocurrencies is their two-fold
model, that demands the end point to the new money supply in
order to produce artificial scarcity. This is a consequence of the
halving mechanism used for artificial scarcity, where at a point in
time, production of new money supply is halved. Xaurum bases
its artificial scarcity differently, not on the quantity of new money
supply, but on quantity of gold required for new money supply to
enter circulation.
(b) public ledger
The blockchains combine the function of consensus with the
function of public ledger, they are nonetheless distinct and could
be separated in different cybernetic systems. While consensus is
used to prevent double-spending by linking new transactions to
the history of all transactions, the function of the public ledger is
to represent all transactions and distributions in currency, or
rather to publicly represent objective information in general.
Because the blockchain combines both functions, it requires
synchronicity of the system and the whole of the past must be
included in every full node. The true accomplishment of
cryptocurrencies, despite the dominant sentiment in favour of
anonymity, is the public ledger. This is the practical
intersubjective epistemic field, created by consensus that enables
the epistemic agents to know that they know what they know.
Public ledgers are a practical application of the positive
introspection axiom of epistemic logic: “Knowledge of p implies
knowledge of knowledge of p.” and useful for every instance of
our dependence on objective information, such as property
relations, law and money. The classical functions of money that
are based on representation, that is unit of account, standard of
value, medium of exchange, are easily achieved by public
ledgers. Ledgers elevate exchange to the mode of
representation, however the function of storage of value remains
extrinsic to public ledgers. That is, we can know, the unit of
value, the sender and receiver of value, the type of value, but not
value itself. For this reason, all cryptocurrencies are
representative in the same manner as fiat, or better defined as
expressive as the intrinsic value of consensus determines their
value, and should be considered as digital commodities first, and
money second, as the expression of this value. Expression,
however, is not representation and value itself is left
undetermined. Because of the essential function of the public
ledger, Xaurum will prioritise its functions over others in
implementing its policies.
Xaurum monetary policy
The main purpose of all Xaurum monetary policy is to sustain the
common interest by increasing the commonwealth. The
commonwealth is stored as gold reserves that serve as the basis
of Xaurum's value, the increase of the commonwealth increases
the base value of all Xaurum. This means that the ratio of
Xaurum to gold is increasing with coinage, and the users of
Xaurum are rewarded with an increase of exchange-value, both
as the determined increase of exchange-value in gold and the
indetermined increase of exchange-value of its price. Xaurum's
main innovation is aliquid, the dynamic distributed elastic
seigniorage. Aliquid is used for systemic functions of Xaurum and
is the changing ratio between the seigniorage paid to the
commonwealth in gold and the seigniorage paid to the money
creator in xaurum.
(a) the supply of money
Xaurum's money supply is elastic, coinage of new money supply
is determined by demand. Because coinage of new money pays
part of seigniorage to the money creator, the demand for Xaurum
can be only a cloaked demand for more exchange-value in
general, this would mean that seigniorage would not be captured
and the commonwealth would not increase. To distinguish
between the demand for Xaurum and demand for exchangevalue
in general, some additional regulation of coinage is
necessary. The goal of coinage is sustainability of seigniorage for
the benefit of the commonwealth.
- mining
Xaurum mining is done by mining other cryptocurrencies for
value, exchanging their value for gold, and issuing Xaurum. The
higher the quantity of miners mining, the higher the seigniorage
given to them. More miners mean more market activity and
consequently more volume, this increase of volume should be
proportional to the seigniorage given to sustain the price of
Xaurum. The goal of xaurum mining is to find an easy to use
distributed mining process (that seems likely with storage
mining), to provide a distribution of xaurum for trivial costs to the
miner and non-trivial surplus in xaurum. - minting Minting
requires a masternode, possession of 1000 Xaurum as the proof
and guarantee of the common interest that the Xaurum
commonwealth requires. Because minter possesses 1000
Xaurum, he has the good of the whole in mind, as he profits both
from the increase of the commonwealth and from seigniorage. It
is therefore in his interest to sustain the market price both to
keep profiting from seigniorage and for seigniorage to profit him
directly. Minting is additionally restricted by the last price of
minting, as there was demand for new Xaurum at the former
minting, we can consider that there is no new demand when the
market prices are not higher. Minting also requires a legal entity
to be established, to prevent issues 17 with governments. The
goal of minting is to provide a distribution of xaurum for money,
lowering the costs of large amounts of new coinage.
(b) availability of money
Because the immediate relation with the market would result in a
unsustainable inflation decreasing seigniorage, coinage is
restricted by the determinations of coinage, and artificial scarcity
mechanism of increasing density, that ensures that coinage does
not happen with zero or negative seigniorage to the
commonwealth. Through this mechanisms, Xaurum achieves
money supply inflation.
(c) cost of money
The cost of Xaurum increases as the ratio of gold to Xaurum
increases. With the growth of the commonwealth, each xaurum is
exchangeable for an increasing amount of gold, and to create
new xaurum an increasing amount of gold is required. To
accelerate this process and increase seigniorage the artificial
scarcity mechanism of density is applied as the increase of cost
for coinage. Through this mechanisms, Xaurum achieves price
deflation.
(d) cost of transaction
Every transaction pays a small fee, this fee is excluded from the
money supply, further increasing the ratio of gold to Xaurum.
Xaurum Coinage Xaurum Coinage produces new money supply; it
is organized as a commonwealth where inflation immediately
profits all users by increasing the base value of Xaurum in a
greater proportion than it decreases it by money inflation.
Best and safest option to store your coins are the hardware wallets
Ledger Nano S or Trezor Wallet
At the moment you can buy Xaurum from the following exchanges: HitBTC,
Livecoin, C-CEX and Mercatox
