Endogenous Stable Coins - The First True Form of Magic Internet Money_ David Casey

yeah thank you hi everyone i'm david from resource and i'll be talking about endogenous stable coins today so i'm going to start off with a bold claim that there is not really true native money on the blockchain yet and you'll see why this is not an entirely fabricated claim so it's a bit of an odd claim because the way that blockchain was introduced through the world was through bitcoin which was designed as a peer-to-peer electronic money system no doubt the bitcoin blockchain has caused breakthroughs that are novel and innovative it's also birth to class of surprisingly rich nerds and a new industry and a new asset class but the one thing it was designed to be money a medium of exchange an alternative to state sanctioned existing forms of money in some ways it is it's fungible it's durable it's portable it's certainly not stable stability is one of the kind of key principles of the definition of money so how is crypto doing in general uh bitcoin ethereum these are really exciting assets um in part because they're not money because they're not stable because we get excited when they increase in value normally these are assets that we buy and holds whether you know we're able to talk about it or not because of their potential to appreciate in value so they're not really something that we use as a medium of exchange to spend and earn and make a living okay there might be some diehard devs that take their payment in eth but i don't know any landlords that take eth yet as a as a rent payment so personally i've actually spent what is now hundreds of dollars on a cup of coffee cup of coffee uh this was back in maybe 2015 when i wanted to prove a point to some friends that bitcoin was money and you could use it to to buy things in the real world um another friend of mine was telling me like stop doing that don't do that don't ever spend bitcoin it's a really bad idea but i was trying to make a point you know so i don't have any regrets but um if i spent about you know a couple hundred million dollars on pizza i think i would regret that and i don't think i would ever use bitcoin as money again so when talking about uh crypto as a means of payment and these monetary system monetary functions such as the pricing of goods services labor and capital usually we revert to the best thing that we have at hand which is fiat money fiat currencies even in this industry even in the crypto industry most things are denominated in u.s dollars wrapped in a cryptographic container which we call now a stable coin the thing about stable coins collateralized algorithmic they're not stable in the absolute sense they're stable relative to an external peg which in most cases is the dollar maybe the euro in essence they're the extension of fiat central bank monetary policy into crypto markets which we're all kind of propagating in a sense this is so even in the case of stable coins such as die they're algorithmically controlled crypto collateralized assets that mimic the behavior of fiat money so maybe some of you would be much more comfortable entering into let's say a five-year contract denominated and die as opposed to dogecoin but still die is pegged to the u.s dollar for now and that makes it not an independent market or an endogenous or a native market to the internet so here's the three trillion dollar question what would native internet money look like can we imagine a form of money that is neither pegged to fiat or arbitrary goods such as gold but would allow us still to price things to make long-term commitments and contracts and predict future costs and have things like futures markets can we think of a form of money that we would happily enter into a five-year contract without using fiat as a reference to answer these questions let's try to redefine stability instead of treating stability as an arbitrary relationship between abstract numbers which is how investors think let's try to think the way that normal people think which is what can i do with this money how many hours do i need to work to pay rent this month if i want a new laptop what's it going to cost me how much how much do i need to put in will the value of my savings be the same this week as next week do the things that i want are they going to become more scarce over time if we think like this we'll soon discover that money as a medium of exchange isn't really an asset in the tangible sense rather it is an entry into a ledger tracking human activity and the availability of resources in a given moment and thinking like that we're actually not the first ones that would be thinking this way before golds before most forms of currency they found these uh artifacts dating back 40 000 years at the very beginning of human language human exchange they're called tally sticks they've been in use for millennia for millennia to track alt all types of relationships essentially debt obligations mutual obligations between two parties a piece of wood was broken into two pieces and when they come back together they form one piece this is the first ledger in human history basically it was used to record debt not so much financial debt as we think about today but a more primitive form of debt uh that we can think of like time delayed barter or barter transcending time in space i'll give you an animal from my farm today and you can give me a few bags of rice a few months from now so tally sticks were first made popular by king henry of britain but as i mentioned they've been dated back to more than 40 000 years old which kind of shocked me as i was doing the research to prepare so money is just barter transcending space time the moment that these tally sticks became tradable for example the owner of a farm could pay the worker with a notch on a tally stick instead of with a bag of wheat and then the worker could go take that tally stick to the bakery to get fresh bread the same day a week later etc even if the baker didn't need what the farm owner had so now we're talking about multilateral barter that's asynchronous not in one moment and not between two parties the tracking of mutual obligations made it so that value could be produced in one moment in in space time and then consumed at a later stage or the teleportation of value what's interesting here is the amount of these tally sticks that were in circulation it's not constant it's not scarce nor is it unlimited rather it expands and contracts based on the real state of the economy it's a type of state machine so notch tally sticks were created when work was being done and they would be destroyed when redeemed so they come into circulation and come out of circulation as value circulates so in theory this is an elastic money supply that expands contracts and adjusts itself based on the value in reality in real time this is what some economists call an endogenous money supply arising from within the system rather than being imposed from outside the system so one of the questions that we ask ourselves at the resource protocol is how could this method of endogenous money be ported onto a blockchain to create money that's truly endogenous to the internet and not reliant on external pegs or external economies that are outside of this kind of native ecosystem that we're building so something that came up in our research that we think answers many of these questions is an old monetary system that is still in use in many parts of the world called mutual credit you may have heard of it as barter networks or business-to-business trade networks or peer-to-peer cashless networks but as i mentioned these networks have been around for 40 000 years since the beginning of money and they often arise in countries with very poor central fiat currency systems so you have them in argentina you have them in lebanon you have them in many places around the world today there's many trade networks in the us as well to my knowledge almost none of them are leveraging blockchain technology so just like tally stix mutual credit is money that is created when it's spent into existence so in this example we have a farmer and a farm and the farmer provides uh their harvest to the farm and receives 20 resource dollars as a payment resource dollars are as far as we know the first stable coin that enables on-chain negative balance accounts up until now the erc20 standard used by most stable coins only enables balances of zero or higher which doesn't permit the existence of mutual credit systems on chain so we had to develop a new token standard for for specific type of stable coin mutual credit stable coins um and we have the first stable coin that enables um actually i'll ask you guys has anyone ever seen another token or cryptocurrency that you can hold an on-chain balance below zero okay i've been asking this question for a while so um we might or might not be the first one that's a good question let's talk about it in a bit so we've created a stable coin that just like tally sticks are backed by the things that are traded with it if you're credit worthy you can get access to a credit line and you can spend into negative balance spend money into existence issue credit as a business or a freelancer or sole proprietor as you need it and then that credit is destroyed or the circulation contracts when someone comes to you anyone from the network anyone from the resource network which is a closed membership network and then your balance goes back to zero as you provide products and services to the network in a sense the rusd or the resource dollar can be redeemed against all goods and services currently offered on the resource market so addressing the question of do we want to allow balances below zero you might say going back to the tally stix example they only had value because someone in the case of the example the owner of the farm was obligated to accept them as a form of payment and of course the same is true for resource dollar the circulating supply of resource dollars maintains its value because someone somewhere has a corresponding debt that needs to be paid in rusd in our cases these debts are legal obligations and they can be transferred to a debt collector for us dollars in the case of a default so yes you do need a functioning government or a functioning obligation system to make this work so how do you pull this off in a decentralized environment how do you get people to pay their debts or how do you even assess credit worthiness to begin with so to answer these questions we have built the resource protocol that would really require its own presentation to go into i'm happy to talk about it outside but i'll just give you the really really short concise version so underwriting risk assessment risk assumption and risk management are achieved by a distributed network of competing underwriters on an open market with staking mechanisms in another token a collateral token and reserve pools to cover defaults while the enforcement of obligations and defaults are transferred to a secondary debt market where defaulting accounts are auctioned off to the highest bidder without the protocol or the resource dow ever having to directly interface with court systems while the mechanics of endogenous stable coins are fascinating what's much more interesting is that they've already allowed us to issue over a million dollars of interest-free credit which our users have used to pay payroll for employees purchase basic goods such as food and access to health care note that not a single dollar of us dollar currency was actually lent this is interest-free debt endogenously created from network activity the value is created as it's spent into existence just like the tally sticks from 40 000 years ago the best part is that you don't need to trust our network the resource network which is the first mutual credit network built on the protocol you can create your own you can design your own underwriting scheme your own risk management scheme or you can tap our network of underwriters the resource protocol can be used by anyone anywhere in any jurisdiction any supply chain any industry any city to create their own endogenous stable coins and serve their own circular economies so thank you for listening i'm david from resource