Stephen Fisher - Monday, July 24, 2017
Cyber-currencies are hot.  The Initial Currency Offering (ICO) craze is bigger than the finger-spinner. Should you 'invest' and what are cyber-currencies really worth?

The basic logic behind a cyber-currency is that it serves as a medium of exchange to ease the physical difficulties associated with barter.  You may have some coconuts that I want, but I don't have the ball-bearings that you want. We cannot do business.  But wait, instead I have a cyber-currency called 'Fish-Coin' which happens to be accepted by the ball-bearing manufacturer.  I give you Fish-Coin for the coconuts and then you exchange the Fish-Coin for the ball-bearings.  Deal done - I have coconuts, you have ball-bearings and the manufacturer has precious Fish-Coin!

How precious is Fish-Coin?  Well, I guarantee that there is only 100million Fish-Coin on issue while there are 1.2trillion US Dollars on issue.  Therefore, 1 Fish-Coin is worth $12,000.  So if you can buy a Fish-Coin for less than $12,000 you have an arbitrage opportunity.  IF you value the US dollar then the Fish-Coin equivalent must be $12,000 and, what's more, if you think the supply of US dollars is increasing then Fish-Coin is going to appreciate in USD terms in line with this monetary expansion, therefore protecting you against inflation...

This all sounds dodgy but the logic is internally consistent and quite SOLID. If you value US dollars then the exchange rate with my newly imagined Fish-Coin must be FC1 = USD12,000.  What's more, my FC is much better than USD since it carries the protection of a triple-Artificial Intelligence enhanced Blockchain technology with both private and public encryption keys, and unlike BitCoin, there is no endogenous debasement mechanism (no mining for FC!).  Fish-Coin is clearly the BEST MONEY EVER IMAGINED, and therefore, by Gresham's Law ("The Good money drives out the Bad"), my Fish-Coin is the dominant medium of exchange which means that it replaces the USD entirely, not only as a medium of exchange, but also as the Reserve Currency of choice for the world's Central Banks...I could go on...

How can something like Fish-Coin be so logically elegant yet equally the biggest load of clap-trap since Bernie Madoff's "double lookback" option strategy? The fault lies not with the creator of Fish-Coin (ie me), but with the creator of the US Dollar (ie the US Treasury) and those who use it (ie you).  Just like Fish-Coin, the US Dollar is worth ABSOLUTELY NOTHING and those who happen to hold real-money-balances at the end of the day when the sun goes down, must have the confidence that they can buy their ball-bearings or pina colada's (a coconut derivative) or whatever with it as soon as the sun comes up the next day.  It is this confidence that tricks people into carrying US Dollars in their wallets rather than spending them completely.

So should you participate in the cyber-currency craze? No.  Is there any cyber-currency worth buying? The only one that I can think of is Sushi-Coin which is fully backed by a standard piece of sushi available from New-Tskiji market in Tokyo.  If you can't trade your Sushi-Coin for ball-bearings or a pina-colada, at least you can eat it!

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We all use our spare time differently - some of us sail, some of us read and some of us spend just a little too much time working out whether that South Australian Shiraz really did deserve a gold medal


And then there are those of us who spend their spare time thinking about the better application of monetary policy, about Central Bank intervention risk and, of course, about Greece


Meet Fish, our CIO, who is almost solely responsible for keeping First Degree's lawyers constantly on standby, with his alternative (and just the right side of libelous, according to those lawyers) view of what those in power are mucking up


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