Here is our talk from the CryptoFin Conference from October 2019 in Tallinn about how to disintermediate the banks:
Here is the short summary. We need:
- More tokenization
- Crypto credit-money
- Wealth management automation
Here is the talk:
Here is our talk from the CryptoFin Conference from October 2019 in Tallinn about how to disintermediate the banks: Here is the short summary. We need: More tokenization Crypto credit-money...
Oct 16, 2019 . 20 min read
Here is our talk from the CryptoFin Conference from October 2019 in Tallinn about how to disintermediate the banks:
Here is the short summary. We need:
Here is the talk:
Here is our pitch — 3 minutes and 40 seconds — from the Paris Blockchain Week. Enjoy! Here is the transcript: So, we are in the lending business, in the credit business, in...
Apr 25, 2019 . 5 min read
Here is our pitch — 3 minutes and 40 seconds — from the Paris Blockchain Week. Enjoy!
Here is the transcript:
So, we are in the lending business, in the credit business, in the business of credit-money.
Let me start with credit – the credit as such is 5’000 years old. The first artifacts of credit are 5’000 years old. Let’s look at today – 85% of the economy runs on credit. To produce 1 USD of GDP we need 5 USD credit. Most people know it.
But now let’s look – what’s behind the credit – behind the credit is the credit-money. So, credit-money versus base-money. Base-money is the money that you have in your wallet – the coins, the notes – but, it’s 3% of the money. The 97% of the money is the credit-money, the commercial banking money, created by the commercial banks in the lending process.
Let’s think about history now. Commercial banks have been there for 350 years, only. Credit-money has been there for 5’000 years. How did it work the first 4’700 years?
It’s very easy? Peer-to-peer. It was a peer-to-peer credit-money. So, what is credit-money? It’s created in the lending transactions, dissolved in the lending transactions, is transferable, is protected.
We are here on the blockchain conference. Where is the credit-money, where is 97% what the economy needs in blockchain? Is it Bitcoin – no; is in Ether – no; is it Litecoin – no; It’s missing. We are speaking here about the 3%, but we in SmartCredit.io are speaking of 97%.
What we are doing – we are a marketplace – there are borrowers and lenders. They meet in the marketplace. The lenders lend out their money, the crypto and they receive the freshly minted credit-coins, which represent the underlying loans. The lender can use this credit-money to pay the next parties, which can pay with this the next party and so on.
These coins are value protected. There is a loss provisions mechanism. There is a collateral mechanism. These coins are transferable. And the guys, who own these coins at the end, they will receive interest pro-rata.
Let’s think again what we are doing – the lender lends out his money, but he receives the credit-coins. He can use these credit-coins to pay the next parties, who can pay the next parties and so on. We are creating credit-money.
The lending process – we are dissolving credit money at the end, we replace it with the underlying plus the interest. That’s what we are doing – we focus on the 97% and not on the 3%.
So, where are we – we have a pilot, it’s running, everyone who is interested, please look on the website. You can register, you can use the system. There are instructions on how to use the system. We aim to launch in the middle of summer in Europe and then, of course, to roll out in the next locations.
And a little background of the team, of founders – me and my twin brother – we have been long in the banking, in swiss banking, we worked for Credit Suisse as Vice Presidents for 10+ years, we know the banking inside out, we know the credit system inside out. And we started 2008 with monetary systems, Satoshi started …
So, that’s our aim – to create credit-money.
World today is to a big extent influenced by the wealth pyramid so that 1% of people own 46% wealth in the world. It is known, that the rich become...
Apr 23, 2019 . 3 min read
World today is to a big extent influenced by the wealth pyramid so that 1% of people own 46% wealth in the world. It is known, that the rich become richer and we have got somehow used to it. We don’t question it, we see it almost as normal.
But why is it like this? Why is the wealth in the world distributed so unevenly? How did it come that 3.7 billion people have only 2.7% of the world’s wealth?
One of the main reasons is our current banking system — the fiat money system. It creates the impression that stable money is available in the world, right? But behind the scenes, the amount of money is continuously expanded and the unfortunate side effect is that from the money creation profits rich class and poor class sees only inflation of prices.
Even if the poor class has an impression of stable money, relatively they can buy less and less for their money as profits from the fiat money creation accumulate to the rich class.
Why does it happen so? Key drivers here are the proximity to the money creation (commercial banks do this) and having access to the credit on favorable terms. We can summarize this as follows:
Let’s illustrate the effect of the fiat money system with the following simulation which considers the current wealth pyramid, world annual inflation 3.2% and profit from money creation (seigniorage) 2% annual. The inflation applies here for everyone; the profits from the seigniorage are available only to the rich class.
The effect of the fiat money creation system on the wealth pyramid is clear. Rich become richer and the poor become poorer.
What can we do? Cryptocurrencies created non-government controlled money. It is a big step forward. But it is not enough. We need more. We need to distribute profits from money creation (seigniorage) evenly in the world.
Therefore, we created SmartCredit.io. To make the world a better place, to have more even wealth distribution in the world, to give chance to the non-included people in our world and to reduce inequality in our world!
Join the revolution.
SmartCredit.io Pilot is available and everyone can use it now. One-Pager Here is a one-slider what we are doing - others offer decentral marketplaces, borrowers and lenders meet there and...
Apr 8, 2019 . 19 min read
SmartCredit.io Pilot is available and everyone can use it now.
Here is a one-slider what we are doing – others offer decentral marketplaces, borrowers and lenders meet there and transactions are executed on this platform. We are the only ones, who add something very essential – it’s the transferability of the credit.
The lender will receive during the lending transactions the credit-coins, which represent their rights to the principal and interest. Credit-coins are value protected with the collateral and loss provision funds.
The lenders can use the Credit-coins to pay the next parties, which can pay the next parties and so on. The owners of the credit-coins will receive the interest and principal at the end of the loan. If the lender kept all his credit-coins, then he will receive all interest and principal. If the lender transfers parts of his credit-coins to the others, then interest and principal are paid out pro-rata.
On-demand credit tokenization
At the end of the loan period, the credit-coins are replaced with the underlying principal and interest payments. In case, if the borrower defaults, then the borrower’s collateral is liquidated and loss provisions fund will jump in to cover the difference (if there is any).
Every marketplace needs to create supply and demand. SmartCredit.io ecosystem is doing this via three key components. The interplay of these components results in the self-reinforcements and positive feedback loop. These are the key components and the benefits to respective users:
And please note – the client will always be in control of his private keys. The platform can never control or influence client assets!
The demo videos below have 4 steps:
This video show’s the demo script in a fast walkthrough. It’s 3 minutes long – enjoy:
The video explains the concepts and shows the full demo. It’s 19 minutes long – enjoy:
If you have questions, please send us a message via https://smartcredit.io. Many thanks!
In this video, we discuss the essence of the credit-money - of different incarnations of the credit-money in the last 5'000 years and about what will happen as next. For...
Aug 12, 2018 . 10 min read
In this video, we discuss the essence of the credit-money – of different incarnations of the credit-money in the last 5’000 years and about what will happen as next.
For the beginning, let’s recap how our current fiat monetary system works. We do have:
Base money has existed in different incarnations (commodities, gold, minted coins, and our current central banking money)
Credit money has existed in different incarnations as well (decentral credit money, private credit money and our current highly centralized credit money)
Credit-money is actually not so young, as one might think. Some think, that credit-money exists since the Federal Reserve was created in 1913, others think that credit money exists since central banking was created in 1660s. Actually, credit-money started 5’000 years ago in Mesopotamia.
On this picture we see different combinations of the credit money:
The pendula will move now back from high centralization into the decentralization:
Our current credit-money is heavily centralized through the issuing process via commercial banks deposit insurance and central banking system
Here is the transcript:
Hello guys, I’m Martin, Co-Founder of SmartCredit.io. We are here in Zurich, in the heart of one of the biggest financial centers. We will speak today about credit and credit-money.
Martin, how do world credit system work currently?
It’s actually a pretty simple system, but it’s made very-very highly complex, so that’s it difficult to understand. But let’s explain it in this way:
One one side there are central banks, they create the base-money and they try fo control the speed of monetary expansion. On one other side, we have commercial banks and commercial banks are creating the credit-money.
What is the exact role of central banks in this system?
Central banks are creating base money – these are the coins and electronic base money. In parallel, central banks, what they are trying to do is to control the speed of credit-money creation. Credi-money is created by the commercial banks, it’s ca 90% – 97% of the total money. The base-money is 3% – 7% of the total money.
And what central banks are trying to do is to manage this system.
And how successful are central banks in controlling the growth speed of credit-money?
That’s a point of a view, depending on whom do you ask. If you ask central bank guys, there are many of them, then they will tell you obviously that it’s very successful.
My comment on this is – economies are living systems. And to control living systems from a part of the living system is quite difficult. We see that the credit-money growth has been actually the cause for the most of economical crisis – the Russia economical crisis or Asia economical crisis. If credit-money is growing too fast, then there will be as well the phase where credit-money will be declining. The decline will result in a recession.
Obviously, central banks are saying that they are doing a perfect job, but there are different views about this topic.
You speak about the credit-money and you speak about the credit. What is the difference between these two?
Credit is so that anyone can give credit to anyone – it’s our basic right, it’s basic law – I can give credit to anyone. Credit is becoming credit-money if my counterparty is giving me a claim (I’m a lender in this scenario) and I can use this claim as a means to pay the next persons. That was the way how the earlier monetary systems worked.
Practically the credit-money was created decentrally, it was created peer to peer. And there was the base-money, which was then created by the kings, the sovereigns. On top of the base-money, was the credit-money, which was created by people for people.
And concerning credit-money – the amount of credit-money, why is the amount of credit-money important?
We have a base-money, that’s what central banks are creating. The economy is growing, it’s like a living organism – if a living organism is bigger, then the organism needs more blood in his body. If a living organism is smaller, then he needs less blood.
And the credit is like the blood in a human’s body. If there is fast economic growth, then we need automatically more credit. If there is low economic growth, then we need less credit. This problem cannot be solved with the base-money only, this problem has to be solved with the credit-money. That’s why the credit-money is very important for economic development.
If there is no credit-money, if there is only the base-money, then it will probably end up in the deflationary economy, because the price of the money will be too high for the fast growth phases. That’s the reason for the credit-money.
In today’s world, we have commercial banks and central banks. When did the commercial banks emerge?
People think that commercial banks have been there forever. Actually, it’s not so. The commercial banks started to emerge like 350 years ago. The first central bank was created in Sweden, it was around the 1660s; the second one was created in London around the same time.
And the first commercial bank was Netherlands Wechsel and Handelsbanken, the role of this bank was to trade the wechsels, because peer to peer money creation was based on the wechsel, in English: bill of the exchange system. That’s the first commercial bank was created.
However, the economy worked as well before, and it worked pretty nicely before the commercial banks were created.
And how did it worked before?
Commercial banks – they cam 350 years ago. But the peer-to-peer credit systems and credit-money systems they were there already 5’000 years ago in Mesopotamia. They were there in Phonecia 3’000 years ago, 2’500 years ago. They were used in the Islamic trading network, they were used in the Mediterranean trading network, they were used in the Hanseatic trading network.
So, peer-to-peer credit money has always been there in human history. And interesting is, that the peer-to-peer credit-money, which is actually 5’000 years old, is olden that the coins-based money, which was created by Greeks, by Romans, by Chinese and by Indian civilizations, at the same time – ca 2’500 years ago. But the peer-to-peer credit-money is older than the coins-based money.
Your question was – how did the economy then work before? It was a prosperous economy, we know the renaissance in Europe, we know how good the Hanseatic network developed, how good the Mediterranean network developed. We know as well Phonecia, how strong was their economic system; Mesopotamia – the very old country. So, these were the phases of pretty nice economical development.
But if the economy worked without the commercial banks, why did these commercial banks emerge at all?
Initially, when the commercial banks emerged 350 years ago, then at that time the peer-to-peer money system had some short-comings. For example bill of exchanges had different loan tenures – one can have one week, one can have one month, one can have one quarter. Additionally, there are different nominations.
It wasn’t standard money like it was today, where we have standard units of money. The units were arbitrary at this time, as well the loan tenures were ar at this time.
So, the commercial banks were like a marketplace to exchange different loan tenures, to exchange different nominations – 1 gulden in Holland, 5 guldens or 99 guldens – that was the first role of Netherlands Handels- and Wechsel Bank.
What happened after that?
raryInitally commercial banks were created to enable the wechsel (bill of exchange) system, then the system developed so that the commercial banks started to issue their own fiat money, their own credit-money. So, it wasn’t anymore the peer-to-peer credit-money, but the commercial banks took over.
Nowaday’s commercial banks taking over is very much connected with electronic money. If you have older systems if you go even back 50 years ago or 100 years ago, the peer-to-peer systems, the peer-to-peer credit-money systems, they were still used. But the more and more electronic money has appeared the less the peer-to-peer credit-money systems have been used.
That means the credit business is consolidated into the commercial banks.
So, you imply that all these central credit money systems emerged as a result of standardization?
It emerged as a way to deliver the scale effects. From one side you had this wechsel system with the limitations, which btw, can be solved very easily with the blockchain system and from another side the commercial banks had their scale effects.
These were scale effects, these were the effects of the transaction costs. They were able to process credit and credit-money much easier than the peer-to-peer systems. And that’s why the commercial banks emerged this way as they are. They just did this in a more effective way.
What if there is some other way to achieve this standardization you mentioned? With blockchain?
If you are looking back, then there are always these two competing systems – one is the peer-to-peer system (decentral credit system) and the other is the central credit system like it is today with the commercial banks.
The current commercial bank’s based credit system is more effective to create credit – there is a scale effect, there is processing the information and the transaction costs are lower.
However, if we are adding now the blockchain technologies, then this will enable the peer-to-peer credit networks and credit-money networks, it will give the same information to every participant. It will enable the alternative monetary system, which has been there much longer, than the coin based money.
Does it mean that with blockchain technology we can bring more emphasis again to the decentral credit-money-system?
Exactly, blockchain will be an enabler for the peer-to-peer decentral credit-money system. It takes away the advantage of commercial banks, the advantage being the scale effects and the lower transaction costs. These advantages will be taken away from commercial banks as dis-intermediaries. Probably they are not so much required as they are required now. And the credit can be created in a peer-to-peer way and credit-money can be created in a peer-to-peer way.
Are you saying that we are going back to a decentral future like we had decentral past?
Human history has been pretty much the decentralization fight with the centralization fight. There have been cultures, which have been more decentral and there are more central cultures. Central cultures try to control more things, than the decentral cultures, where the degree of freedom is higher.
There is always this question of how you process the information. If you are centrally processing information, like commercial banks are doing this today, then they have an advantage. But thanks to the blockchain technologies we can go again on this decentral route, we can start to do more and more in the decentral systems, meaning the degree of centralization of big organizations will go down.