3/28/2022 - Technology and Innovation

How to end inflation

By Horacio Gustavo Ammaturo

How to end inflation

In the next document, we will try to find in technology an innovative, creative and effective response to solve the inflationary phenomenon that affects, in more or less, various nations in the world, especially ours.During January, the U.S. Federal Reserve Board of Governors issued a document on research and analysis under the title “Dinero and payments: the US dollar in the era of digital transformation”.There are several aspects of the functions of the Federal Reserve itself, such as the United States Central Bank, the functionality of money and the different payment processing systems existing on the market today.Something inimaginated, at least a few years ago, is that among the ways to process “purchase power” transfers include cryptocurrencies, even referring to the so-called “starts”, which are those that rely on support in other types of assets. The US dollar, for example the USD T or Tether, the Dai, or the UDC C, is the convertible dollar version developed by the Consortium Center, formed by Coinbase and the Circle Internet Financial.All comments have been used so far for the background to which the document issued by the United States monetary authority, " Digital currencies issued by central banks or CBDC, Central Bank Digital Currency.In this respect, the report clarifies that this is a first approximation work without this implying in any way the beginning of a development process, but the advantages arising from its reading show that sooner or later most countries will have their sovereign money in digital format.Within the advantages that are highlighted are:

  1. Securely meet future needs and demands Payment services;
  2. Draw anonymous transactions. Digital transactions demand identification of both parts of the operation, something that the tradition of physical money cannot solve.
  3. Allow private sector innovators to focus on new services access methods, distribution methods and related service offers.
  4. Draw preset algorithmic models to increase or reduce money supply, In this way, political discrectionality can be resolved with regard to the emission guidelines, giving predictability to the value of the currency.
  5. Improvements to crossborder payments, the average cost per international transfers exceeds 5%, the use of sovereign digital currencies would allow to reduce these sums to 0;
  6. Respect the international role of the dollar, in a world that evolves into efficiency in payment processing mechanisms, the role of sovereign currencies loses space in front of what Blockchain and cryptocurrencies offer.
  7. Financial inclusion, because traditional financial and banking systems are designed to manage operations of certain volume, user profile and quality of registration, something that in most countries does not happen.
With regard to risks, they mention:
  1. Changes in the structure of the financial sector market, the market could leave its dinerary surpluses in digital format, but outside the banking system. This would require banks to offer better conditions to their customers to choose to leave in bank accounts the funds that could stay in the Federal Reserve system.
  2. Security and stability of the financial system, With regard to any market uncertainty, banks may emerge enormous exodus for sovereign digital currencies, putting the system at risk.
  3. Privacy and data protection and financial crime prevention, because of electronically registered operations, all can be analyzed and audited. This does not differ from what happens nowadays with bank operations, or even those that are carried out with cryptocurrencies.
  4. Operational resilience and cybersecurity, As with all digital dineraria transfer formats that exist both concepts, resistance to change and computer risks should be taken into account.
Undoubtedly, the advantages and possibilities offered by sovereign digital currencies are far greater than the risks they present, many of which exist in current systems.The report does not mention other capabilities that would allow to adopt a system based exclusively on sovereign digital currencies. We will incorporate two main aspects, security and monetary / tax system.From the point of view of security, digital money is much harder to steal than the physicist. If there is no money on paper, only registered movements can be made, so the traceability in payments is almost total. Kidnappings, cellars, bank skirts, narcotrafficking or thefts on the streets would considerably decrease.sovereign digital currencies will allow states to adopt new monetary and fiscal models replacing traditional parameters. Let us assume that the following concepts are fulfilled:Payment methods, Only the electronics, mainly the one administered by the Central Bank of the country. This processing system can be integrated with any other, always digital, i.e. physical money disappears.Tax system, Taxes are eliminated as we know them.Monetary model. A model based on “mint and burn”, mine and burn. The state annually agrees, depending on its needs, tariffsemission, sufficient to comply efficiently with all its functions. These funds are issued according to the approved schedule (mint).If, for some reason, the markets consider that the emission guidelines are inadequate, the speed of movement of money would therefore increase the monetary base more quickly, until it finds a new balance, by means of self-regulation that proposes the model.Each time an account is transferred to another, payments, a portion of this sum is deduced in the concept of tribute, unlike in current systems, in which these amounts accumulate in the accounts of the collectors, in this model are literally burned from the monetary base (burn).Consequently, the lack of confidence in a currency, translated at greater speed of circulation of money, in a model of “emitting and burning”, accelerates the reduction of the monetary base. In this way, the sovereign digital asset becomes solid for those who atesoran in the form of savings, because those who make it circular will foster its re-evaluation.The combination of algorithms and circulation emission and burning processes could leave in the hands of systems the decisions of monetary expansion or retraction Making the coin quotes more predictable and reliable.Blockchain technology has come to simplify processes and reduce intermediaries as a result of reducing costs.It is likely that in the coming years there are countries in which fundraisers, central banks, tedious settlements or thousands of forms cease to exist.Argentina is an ideal country to face experiences, at least niche, of this kind.Migrating some of the assistance programs in force could wake up in development programs if we generate transactional ecosystems of the type of “sit and burn” without being inflationary.That would be a good start.

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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