Crypto credit money — Will this time be different? by@SmartCredit

Crypto credit money — Will this time be different?

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Crypto credit money — Will this time be different?

In the previous article, we did look at the two dimensions of the money — on the base money and on the credit money. We looked as well, which kind of monetary systems existed in the last 5’000 years and what could be possible scenarios for the future.

The key question is — will this time be different? Will we enter the phase with crypto base money without crypto credit money or will there be the credit money as well in the crypto sector?


Here is the summary of the monetary systems from the past 5’000 years.


The first conclusion from the previous article is that the monetary systems are not static, but they are evolving:

• The monetary systems started with commodity base money and decentral credit money

• The next step was sovereign coins based base money and decentralized credit money

• The next step was national base money (either from the sovereign or central bank) and private credit money’s

• The next step was the current central banking base money and central credit money system

The second conclusion is that the decentralized credit money systems without the central intermediaries have existed for thousands of years.

How did the decentralized credit money worked in the past?

As we are in the decentralized crypto sphere, then let’s analyze how the decentralized credit systems worked in the past.

It was based on the bill of exchanges — these are legal documents, which are enforced by the court system. Everyone can issue a bill of exchange, it has only 8 attributes including the wet signature of the borrower. The borrower has to pay not to the issuer but to the owner of the bill of exchange. This results in the value for every bill of exchange — they are backed up by borrower’s obligation to pay. This allows to use the bill of exchanges as a mean of payment:


Bills of exchange are enforced by the court system — there will be no court hearing, there is only validation of the evidence, analyzing who has to pay whom and a court decision. As simple it is.

Bill of exchange system is a P2P system backed up by the court system. Every lender can create new credit money — the bills become the credit money, till they are paid back to the holder. One doesn’t need banks to create the credit money, every person can do this via a bill of exchange.

This system works as well today, without the blockchain. This system was the basis of all decentralized credit money systems in the last 5’000 years.

But there were limitations of the system:

1. Wet signature has to be used — digital signatures are not accepted by the court system

2. Nominations of the bills were arbitrary — tokenization was not possible

3. Time periods of the bills of exchange were different

4. Insurance mechanism is missing, except the strong court system support

The bill of exchange networks could become arbitrarily complex, with multiple borrowers, lenders, and holders. But without the central middlemen:


How could it work in the future

Here is a more detailed view of how it could work:

  • Elastic crypto credit money is created in the P2P borrowing/lending transactions
  • Elastic crypto credit money is destroyed when the loan time periods are finished
  • Bitcoin, Ether, and stablecoins serve as base money
  • Pulsating supply of elastic crypto credit money is on the top of the base money


It would work very similar to the bill of exchange system, but it has to address the weaknesses of the previous systems:

1. Bill of exchanges cannot be used because of wet signatures — We have to use the standard contract law

2. Different nominations issue — Tokenization of the loan obligations via standard ERC20 contracts

3. Different time periods of the bill of exchanges — Tokenization via standard ERC20 contracts help here

4. Insurance mechanism is missing — Decentral insurance mechanism will be introduced


Our forecast for the future is the following:

• There will be national crypto base money’s like Venezuela’s Petro

• There will be decentrally created crypto credit money on top of the national base money

• In parallel, there will be global base money (BTC, ETH, …)

• In parallel, there will be global decentral credit money

This future is not depending on the central bank base money creation of the commercial bank credit money creation. This future will be the alternative financial system. However, it’s not a new system, it has existed for the last 5’000 years. Only this time it will be empowered with the blockchain.



Our forecasted roadmap is the following:

• It started 10 years with the creation of Bitcoin — decentralized crypto base money

• 5 years ago the decentralized programmable smart contracts were added

• Now we are in the face where stablecoins are more and more emerging

• In 5 years there will be decentralized elastic crypto credit money



This time will not be different, there will be crypto credit money as well. It’s not yet there, but it might be there faster than anyone is anticipating.


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