SmartCash: The Democratization of Wealth

SmartCash can become the system that replaces the oligarchy that currently governs all people in the world.

Fiat currency and Fractional Reserve banking are taken for granted as "the way things are" by most people who understand them and I would bet not understood by a large majority of the world. This system is a part of what allows oligarchs to ensure personal and corporate wealth equates to political influence. Cryptocurrency shows us that this is not the way things need to be. SmartCash specifically shows us that cryptocurrency can lead to the democratization of wealth if we will it to.

"Fiat" describes every government-backed currency in the world. What makes it "fiat" is that there is nothing of any physical value attached to the unit of currency. No gold or silver backs the dollar. You cannot take your dollar to the Federal Reserve branch closest to you and get gold or silver in return. The only thing of value that is attached to fiat is the people's faith in the government that regulates the fiat currency created by the central bank.

Fractional Reserve describes the system which gives banks a great deal of leeway to the extent that they are able to create new currency at will. Banks must only hold 10% of all of deposits in reserve. If a small savings bank with 100 customers hold savings accounts averaging $10,000, the total of deposits is $1,000,000. The bank only needs to hold $100,000 in their vault. This means the other $900,000 gets loaned out at interest. When a bank writes a loan, they are transferring their debt from themselves to the loan receiver and they will be paid back. The bank records the loan on the "assets" side of their ledger. So when they loan out all $900,000, we can assume that at least some of that gets put back into their bank so it may be used over time, and the rest of it gets paid back over time--probably back into the same bank. So essentially, the loans, totaling $900,000 of new money which the bank must only hold $90,000 of in their vault, allow the bank to loan out an additional $810,000. And so and and so forth. The original deposits can be used by the bank to create a great deal of currency by simply trusting that not more than 10% of the money people have deposited will be withdrawn at any one time. This 10% is commonly referred to as the reserve ratio. tl;dr ALL FIAT MONEY IS DEBT.

Blockchain says we don't need to use currency that can be poofed into thin air and where only 10% of our money is actually there at any time. We don't accept that banks should be able to create money out of thin air. We don't want banks with centralized ledgers to be the arbiters of our currency. We will use a distributed ledger where anyone may choose to keep the entirety of the ledger on their own computer and sync it with the copies of however many other people keep the entirety of the ledger on their own computers. The users of the blockchain validate all of the transactions and everyone on the network knows exactly where each and every unit of the cryptocurrency is at any point in time. Not necessarily that we know which individual holds the private key that controls the coins, but at the very least which public key currently contains the coin. All of the coins that are exist actually exist, attached to some public/private key-pair somewhere. To create more currency, instead of loans or government-backed bonds, in a proof-of-work blockchain, miners may essentially blindly guess public and private key-pairs to validate transactions and they are rewarded with newly created currency. Most of the time the amount of currency that is rewarded is reduced over time.

SmartCash builds on this and says we don't need to give the entire reward of new coins to the miner for their expenses, time, and effort in order for the coin to remain profitable to mine. Instead we will take a portion of newly created coins and put it into a community fund which is governed by a blockchain-backed voting system. Members of the community may propose uses for a part of the community fund and holders of the currency may vote on whether or not to do it or not. We will also take a portion of the newly created coins and put it towards rewarding people who hold significant amounts of the coin in a particular address in their wallets and don't spend it (SmartRewards). This creates a balance against new demand overpowering existing supply by rewarding people who keep their coins off of exchanges. Another portion is given to people who spend the money, time, and effort to run a masternode which syncs and makes public each and every transaction submitted to the network by miners (SmartNodes).

The only potential pitfall here is that 1 SMART = 1 vote. The existing 1:1 relationship between wealth and political influence is still intact in this system, which is a significant threat to democratic governance. A small group of wealthy individuals could exert massive amounts of political influence over a much larger group of less wealthy people. I have not written an algorithm to distribute coins to votes in some ratio other than 1:1, yet so I suppose I am not offering a solution. But the great thing about SmartCash is that once I do, I can share my proposed voting algorithm with the community and create a proposal which would be improved upon and then voted on by the community. If the idea and the algorithm is good enough and the wealthiest members of the community don't organize an effort to block the vote from passing, SmartCash can become the system that replaces the oligarchy that currently governs all people in the world.

Am I betting on SmartCash?? You bet I am.