From Hayek to LibraX： technology changes money

LibraX will not only uses blockchain technology to assist these institutions in digital money issuance, but also track the issuer's asset status through IoT, AI and other technologies to form a multi-party value trust network.

May 18, 2020 /PressReleaseAgency/ —

"Denationalization of Money" is the last book of Hayek, in which he made an argument: money should be free from government control and be generated spontaneously by the market. We can undoubtedly think it a nonsense in any era in the past. However, the development of blockchain, big data, IoT and other technologies is subverting our way of thinking. New money issuance mechanisms including digital currencies are emerging in the market. In addition to Bitcoin’s widely recognisation, new money issuance methods such as USD-anchored money, gold stablecoin, and Defi have also been continuously verified by the market. As a digital money issuance platform based on blockchain, LibraX may defeat its predecessors and truly realize Hayek's idea of private money.

1. Government monopoly, inflation and conflict between the people and the fiat money

Hayek pointed out that only the government can create inflation because the financial system, controlled by the government but lack of public supervision, has the power to spam money. The main reason for inflation is that the government manipulates the money for its own purposes and satisfies its fiscal “needs” through the printing press, which leads to an uncontrolled increase in public expenditure.

Inflation is an invisible hand stealing your wealth. Before the collapse of the Bretton Woods system in 1970 , the global base currency total was less than $ 100 billion; in 1980, this figure was about $ 350 billion; in 2000, this figure was about $ 1.5 trillion; in 2008, it became 4 trillion US dollars; at the end of 2017, this figure was 21 trillion US dollars. Corresponding to the increase of the global base currency total is the continuous depreciation of the purchasing power of money. For example, the purchasing power of $ 1,000 today is almost the same as $ 25 in 1971.

Inflation will also have a huge impact on social development. Since money is monopolized by the government, it is equivalent to being distributed by power. In this way, those own power have preferential accesses to money, which leads to a huge injustice in process of social wealth distribution. At the same time, severe inflation will trigger an economic crisis with triggering factor of debt crisis, which has been repeated over the past few decades. Therefore, inflation and increasing debt are indivisible. So who is the main culprits in creating debt? The issuance department of the national money, through whose manipulation debt will be transferred layer by layer and eventually passed on to all the people. When the debt of a large number of people cannot be repaid, the economic crisis will be erupted. The 2008 subprime mortgage crisis is the best example. During that time the most serious cases were occured in Venezuela and Zimbabwe, due to money over-issuance and huge inflation, their national currencies， who have lost basic functions, were abandoned by the public.

2. The next money revolution: issuing money that accepts worldwide supervision and competition

The value and credit of money should be determined by the market, not by the authority. The foundation of money is people's trust that currency issuers must have an incentive to maintain credit and value stability.
In Hayek's view, the role of money to act as a transaction medium is the result of people's trust in its value stability， and accepting public supervision is the best way to generate trust. At this point, technology has brought the best solutions. As a digital money issuance platform, LibraX has the most stringent requirement for issuers: reserving sufficient assets to ensure the stability of the value.

In the digital age, data is stored in the central processor, and distinguished by thousands of electronic computers by IP address. The decentralized, digital, and tamper-proof characteristics of the blockchain technology can allow the data to realize the permanent identification of resource entities, and update the asset status in real time by combing with advanced technologies. LibraX will not only uses blockchain technology to assist these institutions in digital money issuance, but also track the issuer's asset status through IoT, AI and other technologies to form a multi-party value trust network.

Compared with the 1940s, our definition of value has changed greatly with the development of technology. In the past, gold and silver were natural hard currencies. Today, in addition to tangible assets such as gold and silver, rare metals, and commodities, intangible assets such as equity, bonds, patents, and intellectual property rights have grown into more investment value, and user data, user traffic, and service capabilities have become the core value of many large enterprises. In LibraX, there will be various assets as reserves for digital currency issuance.

We can see that competition between different digital currencies will produce a more benign money market, because once the issuer loses credit, it will not only lose the reserve assets, but also face more serious economic losses. Therefore, issuers will consciously maintain their credit and keep the money value stable. Therefore, the competition between the issuing institutions is actually the competition of stability.

3. How long does LibraX have to go from idea to reality?

After Libra had to give up a basket of money plans and eventually evolved into a license-free public blockchainn, LibraX will undoubtedly take over the role of free money. But it is not a one-time solution to survive among the fiat currencies for LibraX and its partners.

In the third world where technology is relatively backward, launching payment system is currently one of the most viable options for LibraX, thus breaking Libra's conspiracy to establish dollar-based electronic payments in many small countries, which will have inestimable effects on the country's own monetary policy.
Once LibraX uses its free digital money ideas to help these countries and regions establish their own digital money issuance and payment system to counter the digital dollar hegemony, it will be the most exciting drama in the next few years.

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