11-08, 12:00–12:30 (America/El_Salvador), Naka Stage
Already four weeks after launching Bitcoin, Satoshi lamented Bitcoin's lack of elasticity and expected volatility: "There is nobody to adjust the bitcoin money supply as the population of users grows. That would have required a trusted party to determine the real world value of things. If there was some clever way…" This talk presents a novel solution, rooted in free market principles, that addresses the inelasticity of Bitcoin which makes it speculative and hampers its adoption by businesses. This solution needs no trust in central banks or authorities and relies on community governance.
Bitcoin could be an ideal base money. However, we see that countries in a fiat currency crisis are dollarising, like Argentina or Lebanon. We think that a full monetary system based on Bitcoin M0 also needs Bitcoin credit money M1 to succeed. This needs a free market method to match money supply and demand. The time-proven international bill of exchange is the basis of this system.
Bitcredit Protocol, a community-driven free software, records electronic bills denominated in Bitcoin. Mints called “Wildcat” split these e-bills into non-custodial Bitcoin credit money, for instant private retail payments. At maturity, Bitcredit redeems 1:1 into Bitcoin on the mainchain.
Circulating Bitcredit reflects the broad basket of business goods and services paid by e-bills, valued at freely negotiated market prices. A growing credit superstructure will also stabilise Bitcoin’s purchasing power and flatten its volatility.
Predictability: Businesses can plan and invest without fear of erratic price level fluctuations affecting borrowing capacity or debt service, and distorting information.
Investments: Stable purchasing power facilitates investments, increases capital inflow and economic development.
Savings: With stable purchasing power, savings will not erode over time. People are more likely to save, which makes more capital available for economic growth.
International Trade: Importers and exporters need not constantly adjust prices or hedge against currency risks which makes a country an attractive trading partner.
This talk has special relevance for El Salvador, where it can reduce exposure to foreign central bank policies.
Hubertus Hofkirchner conceived and founded Bitcredit Protocol, a community-driven open software project which aims to facilitate the adoption of Bitcoin by the real economy. Bitcredit is a fiat-less on-ramp and circular Bitcoin system based on an elastic Bitcoin money supply to finance working capital needs and the wage fund for workers.
A former commercial banker, investment banker, and telecom CEO, Hubertus has been an independent serial entrepreneur at the intersection of finance and IT for two decades, founding an online brokerage, a digital options exchange, and a global prediction market platform. He also hosts the monthly Austrian Economics Salon at Vienna's Hayek Institute.