Bitcoin Blog a1

Wednesday, January 20, 2016

Separatists, Central banks, and Strange New Currencies

I currently am enrolled in a microeconomics course on money. In this class, I can't help question if physical currency will exist in the future. I think it may very well not. A possible indicator of this comes from the REPUBLIC VENETA. This separatist group has indicated that they will issue their own digital currency. This currency has a major difference from other currencies like bitcoin because it will also have a central bank. This is such a major deviation from typical cryptocurrencies, I hesitate to even call this Venetian digital currency a cryptocurrency.

This declaration brings some questions to mind. One being, how can a decentralized currency have a central bank? In normal cryptocurrencies, blocks are solved and rewards are given to miners. This is how coins come to be. However, a central bank also has the ability to create and regulate currency. This makes the supply of money potentially less stable, at least from the perspective of people besides the central bank. One perk of most cryptocurrencies is that the supply of bitcoin at a future date is quite predictable. Whereas, the supply of US dollars, for example, is in a way, up to the whims of the Federal Reserve.

According to their website, the Venetian Central bank will also be able to  “... purchase public securities issued by the Venetian Government, always paying with the digital currency.” This practice is known as quantitative easing. This practice can increase the supply of money in an economy, as securities are traded for what is, in essence, cash.

A final note that that is interesting is the following statement: “Moreover, the Venetian citizens who will demonstrate their efforts as activists for the Venetian Republic, will be rewarded receiving a proportional amount of digital currency, in according to the service provided.” I wonder what exactly they mean by this and what services they want. Only time will tell.

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