Thursday, February 27, 2014

Complex transactions require precise terminology

Imagine you are part of a drug deal or a gun deal.  Tensions are high, heavily armed security on both sides.  Most deals don't end in gunfire due to a deliberate desire to rip off the other party, gunfights occur due to miscommunication.  What was promised?  What was delivered?

In central banking transactions, language differences exist between countries.  Expectations.  Assurances. 

Treaties and trust funds.  Undelivered promises.  Partially delivered promises.  Promises deliberately ripped off.

The above is why a common language to describe complex transactions in a structured way is needed.

Tuesday, February 25, 2014

Federal Reserve and other central banks in a world of Promise Language and Bitcoin

Promise Language and Bitcoin do not define price.  They allow value to be translated efficiently.

Currencies stabilize price.  Salaries and rents and mortgages do not change on a daily basis.

In other words, things are priced in USD not in Bitcoin or Promise Language.  That is one reason why Bitcoin and Promise Language work so well to settle internationally.

Interestingly Second Market is patterning an exchange based on existing gold.  Price fixing with derivatives.  Second Market is bringing an antiquated structure to Bitcoin.  While it appears well hooked up and will gain liquidity, I have mixed feelings on that exchange.

Gold failed because of storage issues AND price fixing via derivatives settled in dollars.  Second Market appears to be setting up the exact same system.  Price fixing twice a day is not necessary for any reason other than to create derivatives to set the price.  Is Second Market's CEO aware of this problem or is he simply cut and pasting gold structure and creating a company?

Saturday, February 22, 2014

Bitcoin's role as part of central bank reserves

Central banks require a clearing settlement device among currencies.  Gold has served that function historically, however, has issues.  Namely: dollar-settled derivatives, requires a vault, and is difficult to transport.

Bitcoin solves these problems.

It is my suggestion that some focus and energy be placed in communicating the advantages of Bitcoin to the various central banks around the world.  This requires trading desks and exchanges to provide liquidity.  The German central bank comes to mind.

Friday, February 21, 2014

A common language to communicate value

Imagine going to Japan and not knowing a word of Japanese.  Your goal is to buy some salmon sushi.  With some pantomiming and lots of gesturing I think most people would figure out how to convey the value that is desired along with the amount of currency required, however, without a common language it would not be the most efficient transaction in the world.

Promise Language is that common language.  Human readable.  Simple.  Computer readable as well.