Power to the people

Banking & Finance
| The European | 18th October 2018
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Berkshire, England, 1261, there was a court case involving an outlaw named Robert, son of William LeFevre. In jest, the court clerk changed the outlaw’s name to Robin Hood. The name stuck, and the rest is a blend of history and folklore. The Robin Hoods of this world were considered “outlaws”, as breaking the law was sufficient to earn the title in United Kingdom common law. But Robin Hood aficionados know there is more to the story than that.

Robin Hood’s notoriety for “robbing from the rich to give to the poor” originated from the land-rich favoured barons, societal laws and socio-economic imbalances. Governments were considered tyrannical even though the Rule of Law was both on their side and respected as the foundation of good government. In light of oppressive regimes, those who dared to subvert the law in an effort to bring change became “pop” heroes, iconoclasts for the common people. From the perspective of the populist movement in 13th century England, tyranny was the abuse of law by those who had the power to manipulate it to serve their own ends. Therefore, historically, in England and other parts of the world, it became the role, and even the responsibility, of certain “outlaws” to seek public redress and justice when the scales of powers tipped to the point of abject abuse.

The present day

In the 21st century, while obviously less violent but just as transformative, actions are taken by those seeking to level the economic playing field such that everyone has equal opportunity and access to systems of value creation and transfer. Many of these people are labelled as “outlaws” as well. Why? Because they are challenging laws set up to preserve an oligarchic regime of a concentrated monied time. They work to ensure individuals have the ability to reach that “land baron” status of the 13th century upper class by removing non-meritorious limits from their potential.

Blockchain technology – or more aptly put, the newly innovative business models enabled by blockchain tech – is being conceived to do just this. It provides a means for peer-to-peer exchanges of value without a trusted intermediary. Simply put, “Peter” can buy and sell things from and to “Paul”, without a broker, banker, exchange or law intermediating or limiting their exchange. The “value” that blockchain-based mechanisms can transfer includes money, processes, claims and virtually any type of asset while eliminating the unnecessary fees (or economic rent) these intermediaries are known to charge, often exceeding the value they offer in exchange for their fees.

In addition to cost savings, the benefits of blockchain-based mechanisms include heightened transparency – all transactions are visible to the community (no personal data is shared), building trust within the system and discouraging bad actors. Not to fret, privacy systems can be erected for those transactions that truly need them.

Furthermore, blockchain mechanisms provide enhanced security over traditional systems as each transaction is cryptographically recorded with the ability to accurately review the details and order of each transaction.

Immutability is another benefit, as no one can easily tamper with, change or erase transactions. Tied to this benefit is the decentralised nature of most public blockchains, which precludes transactions from residing on centralised servers that can be more easily targeted and hacked.

Blockchain technology-based disintermediation has major implications for the existing paradigms in virtually any industry that relies on third-party-facilitated transactions. Virtually everything in society stands to be disrupted.

Current capital markets are based on centralised systems controlled by a few who just happen to garner its greatest benefits. This can be illustrated by the hub-and-spoke model in which a central bank is surrounded by its member banks, shareholders and/or constituencies it serves (primarily, money centre banks). The next concentric circles would be exchanges, then national and regional banks, followed by institutions and high-net-worth families, then finally, in the outermost circle, mom-and-pop and retail investors who benefit the least.

Veritaseum

Veritaseum is reshaping this highly centralised financial diagram so that it is drawn in a peer-to-peer fashion, fully distributed. You may hear the term “decentralised” thrown about in blockchain and crypto circles. However, decentralisation is not disruptive enough for the “outlaw” to prevail. Veritaseum is creating a fully “distributed” system where each and every node or player is its own economically sovereign entity. Instead of a large central circle surrounded by smaller concentric ones, there will be dots distributed in a more random pattern, with each connected to a line connected to another dot – all fully autonomous, independent and sovereign. Veritaseum’s first step in building this new full distribution model was to create a platform and tools for people to transact in a peer-to-peer fashion. Veritaseum has production-ready tools that allow and facilitate the transfer of investments, gold, real estate, and money – and the company is constantly expanding them. The next step is to educate the populous and start onboarding them to the platform, which is where Veritaseum is right now.

For example, the use of the gold-backed, fully redeemable stable token could ameliorate the currency issues currently faced by such countries as Turkey, Zimbabwe and Venezuela. Financial investors can lease their physical holdings of gold in the form of the more liquid stable token to stabilise the volatile foreign currency exposure of these countries, including their banks and their citizens.

Consider Turkey, which has suffered a severe currency and debt crisis that climaxed in the summer of 2018. In less than one year, Turkey’s inflation rate grew from 10.68% (8/2017) to 15.85% (7/2018). Adding to its internal challenges of hyperinflation is the amount of foreign indebtedness the country faces. Its gross foreign/external debt was reportedly just under $467bn in March 2018, approximately 55% of its GDP.

More than 87% of this amount was in other currencies, notably, 54.1% in US$ and 32% in euros, both relatively stable inflationary environments. Its foreign currency reserves were only $124.2bn, compared to short-term debt needs of $239.9bn. This set of numbers shows the unfortunate economic predicament the country finds itself in. The use of traditional remedies, such as debt restructuring, only extends and exacerbates the current situation.

One immediate solution Veritaseum poses is to lease its VeGold stable token to Turkish banks, providing a floor against future foreign exchange risk. As there are insufficient FX reserves and, therefore, likely the banks are lacking liquidity, partnering with investors who are willing to provide the short-term leases in exchange for a return. Veritaseum has spoken to several high-net-worth-family offices that would be willing to provide such leases. This is just one concept that shows how the blockchain is a true utilitarian vehicle that can address macroeconomic issues.

Veritaseum plans to scale quickly over the next two years, bringing its platform into every industry that can benefit from disintermediation. Where the internet facilitates the exchange of information, Veritaseum, through its blockchain-based software, will facilitate the exchange of anything of value among peers.

Further information

www.veritaseum.com

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