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Open Source Monetary Policy

ricburton.substack.com

Open Source Monetary Policy

Money creation’s progress from local communities to global protocols

Richard Burton
Apr 1, 2021
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Open Source Monetary Policy

ricburton.substack.com

How do you make money? This is one of the most interesting questions I have spent time thinking about. How does a new kind of money come into being? Who decides how many $, €, ¥ & £ should exist? When they create those monies, who do they give them to and why? The rabbit hole of monetary policy runs very deep.

I am new to this field so please correct me if I make any mistakes in my assessments.

There are so many great histories of money. My favourite so far is Ascent of Money, by Niall Ferguson. He does a great job of walking someone through the phase shifts in money creation. We moved from local scratches on rock all the way to global blockchains that can be beamed across the planet in seconds.

What I want to focus on is this latest shift: central banking to decentral banking

An excellent 8-minute primer on all the concepts can be found here:

Central Banking

As a global society, we spend an incredible amount of time thinking about who will lead our country and very little time thinking about who will lead our money.

Central banks around the world are built up and maintained in lots of different ways. What seems to be a common theme among a lot of them is that they are mix of appointees and internally elected individuals. There is very little insight into the selection process.

If you were to get all of the world’s most powerful central bankers together in one room it would probably be fewer than 1,000 people.

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
A few people control the Federal Reserve, Bank of England, European Central Bank and People’s Bank of China They are the most powerful people in the world We will look back on this state of affairs in the future and laugh
5:43 PM ∙ Mar 16, 2021
47Likes1Retweet

Think about this for a second: <1,000 people control the monetary pulse of the planet.

That is absolutely insane to me.

Euro

I love this photo of “Madame” Lagarde and her colleagues at the European Central Bank. Have you ever seen more white and grey hair surrounding a table set in such opulent circumstances?

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
@Lagarde Have you added any other women to your advisory board yet? 🙃
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8:36 AM ∙ Mar 23, 2020

When these old men decide to print more Euros, who do you think they think about? Do they represent the young, the diverse, or the poor? Do those people even cross their mind?

Twitter avatar for @crypto
Bloomberg Crypto @crypto
WATCH: European Central Bank President Christine @Lagarde says her institution could launch a digital currency within four years trib.al/tG0NP3b More on @crypto: trib.al/mObOtEG
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5:00 AM ∙ Apr 1, 2021
134Likes61Retweets

Aged academics with lots of letters are responsible for the future generations’ circumstances.

That feels wrong to me.

Bank for International Settlements

Have you ever heard of Agustín Carstens? He is the General Manager of the Bank for International Settlements (BIS). He is the personification of everything I despise about central banking. If you watch this video, you can see him clearly stating that central banks want to track everything you spend in real-time. Today, governments in sensible countries need a warrant to get access to that data. If this big bad boss of banking gets his way, that will go away when they start minting Central Bank Digital Currencies (CBDCs).

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
Call me old fashioned but I will stick to money that isn’t printed by morbidly obese chaps who fetishise tracking all of your spending for life
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5:48 PM ∙ Mar 20, 2021
90Likes8Retweets

This guy doesn’t even bother to hide his organisation’s intentions. He wants full financial surveillance to be the new normal.

That disgusts me.

Federal Reserve

The most successful central bank on the planet is the Federal Reserve. The expansion of the dollar from a single country’s currency to the global settlement layer of the planet is extraordinary.

wtfhappenedin1971.com

The power that the US wields on the global stage is staggering. When the Fed creates more dollars, the world must bend the knee. This a hilarious tongue-in-cheek meme video about their recent performance:

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
The Best Video about The Federal Reserve on The Internet
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2:37 PM ∙ Dec 27, 2020
163Likes41Retweets

Do you know who runs the Federal Reserve? I didn’t until recently. These 7 people wield a level of power that I have only recently started to appreciate.

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
The Federal Reserve Board can have up to 7 members They are appointed by the President & have 14 year terms There are currently two empty seats on this board Two people were proposed by Trump & rejected There are two new people that Trump has proposed en.wikipedia.org/wiki/Federal_R…
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Image
7:30 PM ∙ Mar 12, 2020
4Likes2Retweets

Do you think the world’s global settlement currency should be determined by so few people?

That feels a bit too centralised for me.

21 million Bitcoin

Bitcoin totally changed the game. It came out swinging for the financial system with an innovative new protocol and a very simplistic monetary policy: Let’s print 21 million Bitcoin for 144 years and see what happens.

Twitter avatar for @Melt_Dem
Meltem Demirors @Melt_Dem
so this one time, i said “bitcoin’s supply schedule is looking pretty sexy when compared to the dollar” and now my team won’t stop making chart memes this is pretty epic...
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6:52 PM ∙ Nov 18, 2019
222Likes31Retweets

This is amazing for memes. Everyone can wrap their head around the 21M meme. It is is simple but it is also far too simplistic.

Twitter avatar for @_tom_burton_
Thomas Burton @_tom_burton_
“Bitcoin is a fetish for the number 21M” - @ricburton 2021
4:25 PM ∙ Mar 17, 2021

If we could solve all the world’s monetary issues by counting to 21 million for a hundred years it would be great. Unfortunately, I think the solutions are going to be much more complex than that.

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
I strongly believe at some point in the future a team will release a currency that has a much more useful monetary policy than counting to 21,000,000 for 100 years There has to be something better I also strongly believe that this new currency will be built on top of Ethereum
1:03 PM ∙ Nov 25, 2020
245Likes15Retweets

Do you think the first ever monetary policy to be put into a blockchain is going to be the best possible thing that mankind can come up with?

I do not think so.

Deflationary Ether

The monetary policy of Ethereum is still up in the air. Unlike Bitcoin, it was not set in stone at the beginning. Instead, it was left open to debate. Over time, that policy has matured and strengthened with the progress of the protocol. This interview with Justin Drake is one of the best pieces of content on Ethereum of all time. Watch it:

Justin makes the case that Bitcoin is going to be inflationary for decades. While Ethereum could actually become deflationary within a decade or sooner. If that happens, the amount of circulating supply of Ether will decrease each year.

Twitter avatar for @drakefjustin
Justin Ðrake 🦇🔊 @drakefjustin
if capped-supply BTC is sound money 📢 decreasing-supply ETH is ultrasound money 🦇
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9:48 PM ∙ Jan 22, 2021
578Likes114Retweets

Would you prefer a store of value that was expansionary or contractionary?

I love the idea of a digital and deflating store of value.

Maker

The most successful project in the Decentralised Finance (DeFi) space is a project called Maker DAO. They take in volatile collateral such as Ether and produce a stablecoin known Dai. The system has gone through two major revisions and is now storing over $7 billion of collateral.

defipulse.com/maker

What I find so magical about Maker is that anyone can contribute to the system or get involved in the governance process around its monetary policy. Each week a lot of people gather together to debate the interest rates and risks of the system.

I spent a huge amount of time working on interfaces for the protocol.

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
I have been trying to design the best possible mobile interface for the @MakerDAO system. There are so many nuances to a Collateralised Debt Position. I am trying to focus on the numbers that really matter and make clear recommendations right within @Balance_io. Any feedback?🤓
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2:38 PM ∙ Apr 13, 2019
242Likes26Retweets

The people who built this system spent an incredible amount of time and energy ensuring it was safe for everyone. All of their work is open source.

Do you think a more a decentralised approach to monetary policy is worth trying?

I think is one of the most exciting ideas ever.

Fei

Over the last 4 months, I have been helping the team at Fei Labs prepare the launch of their new protocol. The Genesis Group has just gone live and anyone can participate.

It closes in 2 days: https://fei.money

The Fei team are taking a new approach to creating a decentralised stablecoin for the DeFi space. It aims to be more scalable and capital-efficient. It is testing many new mechanisms which are extremely experimental.

Do you think it is cool that a bunch of people can experiment with new crypto-economics in a few months?

I do.

What’s next?

I like to think of Ethereum as an open source and open state system for economic engineering. Anyone can publish anything and interact with any kind of code.

Twitter avatar for @ricburton
Ric Burton 🇬🇧 ‣ 🇺🇸 @ricburton
Ethereum is a protocol for protocols.
9:15 AM ∙ Nov 26, 2019
191Likes20Retweets

We are going to see all kinds of open source monetary policies play out over the coming decade. Today, most stablecoins target the US dollar and effectively create a synthetic asset.

In the near future, we are going to see much more interesting forms of stability. RAI, FLOAT and OHM are covered in this excellent piece by Ryan Watkins who writes for Messari.

Twitter avatar for @RyanWatkins_
Ryan Watkins @RyanWatkins_
Ethereum is an emerging digital economy in the early stages of a multi-decade economic boom. The Problem? Dollar-pegged stablecoins dominate Ethereum and the dollar is controlled by the Federal Reserve... But what if we had stablecoins not pegged to fiat currencies at all? 1/
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1:32 PM ∙ Mar 25, 2021
729Likes228Retweets

Are you excited?

I am 🌲

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Open Source Monetary Policy

ricburton.substack.com
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LTL
Writes LTL’s Substack
Apr 2, 2021Liked by Richard Burton

a brilliant read Ric, happy to be on this list!

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Steve Foerster
Apr 1, 2021

While I completely agree with your opposition to a global monetary system controlled a few unelected policymakers, I think that case is weakened, not strengthened, by childishly making fun of people for being old or overweight.

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