Edited - 1 fix some errors.
Edited - 2 added the website in the bibliographic reference [1].
Edited - 3 Change title and add little resume.
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While chatting with Ethan Buchman on Twitter, I realized that he was looking for a way to separate the units of account from the exchange medium.
This post simply describes that you’ve already done it but didn’t necessarily realize it, and this way with today’s technological advances, it’s no longer necessary to use inflation to get extra currency units
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Greetings to the community,
I would like to share with you a reflection from my work when I was working for a support for the money and how cryptographic currencies can improve the economic functioning of the Earth system and which joins the spirit of COSMOS.
> The Money
In order to appreciate something intactable such as a size, a dimension, a measure, it is necessary to develop an instrument, a tool, a method such as a ruler, a decameter, a LASER, etc. that will allow us to measure this size, dimension, measure.
Thus for the measurement of a size, dimension, measure, its expression is according to the international system of units:
Dimension, Size, Measure = number (n) of unit . value (u) of the unit
for example :
42 meters
where “42” is a number of units and “meters” is the value of the unit.
• A number being a mathematical object used for counting, measuring and labelling.
• The meter being the length of the path travelled by light in the void for a period `1/299792458` of second .
Even if this discernment does not seem important at first sight, it is noted that in the history of the human being the lack of discernment and reasoning has often led to unfortunate situations, misunderstandings, which can bring dark times. It is impossible for us, human beings, to be able to grasp a distance for example, which is however very real. It is the same for a weight, a mass. We grasp an object which expresses this distance, this weight, this mass.
We take a tape-measure to measure the dimensions of a room but in no case we grasp the distance. Thus for the measurement of money, which is the expression of a price, a purchasing power :
M = n . u either : 42.€
• Where 42 is a number n of monetary units which is a mathematical object used to count, measure and label.
• Where € is the value u of the monetary unit of the European Union system.
Economics is different from other fields of Knowledge because unlike the study of distances, for example, human beings have been able to set a standard meter which is corresponding to the length of the path travelled by light in the void for a period of 1/299792485 second.
This allows to deal only with the number n of distance unit, the value u being fixed. And those who will argue that in the USA they do not use the metric system but the international land mile, the fact remains that the international mile is set at 1.609 meters, it is a conversion.
In economics, it is different because as we will see in the chapter cash - money, the value u of the monetary unit varies in time and space. This implies the use of differential calculus in order to obtain all the possible variations. The possibilities of variation, evolution are defined by the differential calculation which highlights the global change of the system :
`
dM = n.du + u.dn
`
which returns four and only four possibilities, namely :
1. dn = 0 and : du = 0 (dM)n,u = 0 No evolution
2a. dn > 0 and : du < 0 dM = 0 No evolution
2b. dn < 0 and : du > 0 dM = 0 No evolution
3a. dn = 0 and : du > 0 (dM)n > 0 Creation of money
3b. dn = 0 and : du < 0 (dM)n < 0 Destruction of money
4a. dn > 0 and : du = 0 (dM)u > 0 Creation of money
4b. dn < 0 and : du = 0 (dM)u < 0 Destruction of money
These four possibilities of evolution represent the proper functioning of the economic system, it is possible to obtain four so-called incoherent possibilities of evolution, because some of them can cause; by experience, the ruin of the economic system, namely :
2a1. dn > 0 and : du < 0 with : |dn| > |du| dM > 0 Inflation
2a2. dn > 0 and : du < 0 with : |dn| < |du| dM < 0 Devaluation
2b1. dn < 0 and : du > 0 with : |dn| > |du| dM < 0 Deflation
2b2. dn < 0 and : du > 0 with : |dn| < |du| dM > 0 Re-evaluation
This is an accurate reflection of reality, and the use of mathematical analysis may prove useful for the construction of the Money desired by the community. Thus, it is possible to state that when we say :
1. that bankers create money, it means that they increase the number (n) of monetary units circulating in the economic system of which they are a component.
2. that each economic system has its own money, reference is made to the unit (u) of money. For example the Yen for Japan, the Shekel for Israel, etc.
3. that an individual in France has 42€ of money in his pocket, it is considered the mathematical product (n.u) of the number of monetary units (n) by the unit (u).
However, these three sentences are a priori correct. But :
1. in the first case, money is defined as a number (n),
2. in the second, money is considered as a unit (u),
3. in the third, money is understood as a mathematical product (n.u).
Only one definition is accurate and the other two can only be simplifications instigating language abuses. In order to avoid confusion, misunderstandings, mistakes and errors, the sentences should be presented as follows:
1. bankers create monetary units (not money in the strict sense).
2. each economic system has its own monetary unit (not money in the strict sense).
3. an individual in France has 42€ in his pocket (money in the strict sense).
Indeed, in any field of knowledge, any size, any dimension, any measure is always considered by the relation :
Dimension, Size, Measure = number (n) of unit . value (u) of the unit
which becomes for the measurement of money :
‘Money = number (n) of monetary value . value (u) of the monetary unit’
or, for the above-mentioned example :
M = n.u ; 42€ = 42.€
This shows that it is imperative, unless otherwise stated, to specify all characteristics unambiguously.
> CASH - MONEY
Generally speaking, it is always confused Cash (legal instrument of payment) and Money (expression of a price), which are two different characteristics. The Cambridge dictionary gives the following respective definitions to Cash and Money :
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Cash : “money in the form of notes and coins, rather than check or credit cards”.
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Money :“coins or notes (= special pieces of paper) that are used to buy things, or an amount of these that a person has”.
The Larousse dictionary gives the following respective definitions to Cash (in France we use the term Argent) and Money :
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Cash :“Any money of this metal - Any money of any metal whatsoever, or any paper accepted as currency - Any money in any form whatsoever (stocks, bonds, bank notes, …)”
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Money : “Metal coin struck by the sovereign authority to be used for exchange - Set of coins or notes of small value - Legal instrument of payment - As a settlement instrument, money is a means of settlement or purchasing power that enables the bearer to purchase goods and services or to repay a debt - The term money is also used in the sense of a monetary unit, which is used to express the price of a product or service of goods”.
These definitions are polysemic and cause economic, political and societal instability because it is very unlikely to have a precise definition of the value u unlike the other field. The human being having evolved, it is necessary to use reason in order to discern the “value support” from the “value of the support”.
Indeed, the general relationship valid in all cases of measurement, namely :
Dimension, Size, Measure = number (n) of unit . value (u) of the unit
which becomes for the measurement of Money :
Money = number (n) of monetary value . value (u) of the monetary unit
In physics, the constancy of the value u of the unit under consideration is normally always ensured by the most rigorous and exact definition possible. In econophysics, this constancy (of the monetary unit) is no longer valid.
Indeed, it is certain that for a constant number of monetary units, the Money can evolve more or less according to the value (u) of the monetary unit, per example it’s possible to be rigorous with the meter which is the length of the path traveled by light in the void for a period of 1/299792485 seconds, but it’s impossible to be rigorous when the values of the European Union need to be explicitly expressed because they differ from one individual to another despite their similarities or expectations in different places and times.
So this value u may vary according to the economic system under consideration (in space), but also within the same system, according to the date of measurement (in time). Thus, in a given economic system, there can be :
• a constant quantity (n) (∂n=0) and,
• a variable quantity (u) (∂u≠0).
For this reason, by their names, it is forbidden to confuse Cash and Money, so it is obligatory to discern them. So, in a given economic system, any value support (tokens, coins, banknotes, check, drafts, bank cards, magnetic tapes, etc.) are objects that can be considered as invariable in time, as opposed to the value supported.
Actually, the question can be asked about the difference between a 1€ coin, a 1€ banknote, a 1€ check, the inscription of 1€ on a heterogeneous database (current bank counting system).
It is easy to answer that the difference is only in the support and the value expressed remains the same. We can notice that the supports can be invariable in time; a 1€ coin will not vary without a physical modification being carried out as with a hammer blow for example, whereas the capacity of purchase of this coin will vary according to the price of the Products put on the market.
Let’s take a 1€ coin, the inscription of 1€ is however fixed and did not vary since its release in 2002, however its purchasing power increased or decreased according to the prices of the Products put on the market.
Another example, if a 1€ coin allows you to buy 1kg of flour today to make excellent pizza and tomorrow only 0.9kg, it is obvious that the coin itself has not changed at all, but that the value of its unit has decreased. In the same way, the unit would have increased if another day the coin allowed the purchase of 1.1kg, without the coin having been modified in any way. The coin must therefore be considered as a value support, a legal payment instrument :
• the support being constant, fixed, invariable and
• the value dynamic, evolving, variable.
It is possible to say that the support contains more or less monetary value depending on whether it consents to the acquisition of more or less Product, i.e. depending on the price of the latter.
Consequently, it is therefore forbidden to associate, confuse or assimilate the support and its value and it is therefore obligatory to discern, identify and name them differently. More specific, the term “value” may not be used except to specify “value” of the monetary unit.
This noun is in fact much too general; actually, it is possible to say “value” of the utility, “value” of the product, “value” of the shares, “value” of the hour of work, “value” of the minimum wage, “value” of the retirement point, etc.
In this proposal, the support is defined as Cash and Money is defined as value. Thus, Cash (token, coin, banknote, check) is the support of the Money and the Money is the value of the Cash. In another way, it is possible to pose that when an economic agent receives any income, he only receives Cash, the value of this Cash being defined by the prices of the Products placed on the market.
The evolution of the quantity of Money can therefore only be obtained according to the two hypotheses below:
1. either by changing the number (n) of monetary units to a constant unit (u), i.e. with :
∂n ≠ 0 and : ∂u = 0
2. or by variation of the unit (u) of monetary unit at a constant number (n) of units, i.e. with :
∂u ≠ 0 and : ∂n = 0
The choice, Cash for the support and Money for the unit (value), was dictated by the Cambridge and Larousse definitions set out above and briefly repeated below:
• Cash being “all metal”, “all paper”, “all support”,
• Money being “a purchasing power”, “an expression of price”.
> BANK
The Larousse dictionary gives the Bank the following definition :
Bank :
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A financial institution which, receiving funds (Cash and monetary unit) from the public, uses them to carry out credit and financial operations, and is responsible for the supply and management of means of payment.
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All operations performed by banking institutions; place where these operations are performed.
The Cambridge dictionary gives the Bank the following definition:
Bank:
- An organization where people and businesses can invest or borrow money (monetary unit), change it for foreign money (monetary unit), etc., or a building where these services are offered.
We can resume that a bank provides a counting system, and that it is necessary to have the most secure and robust supports : legal instrument of payment, possible in order to exchange monetary units quickly as well as a book of accounts in order to limit money laundering.
Cryptographic monetary systems rely on asymmetric ciphering to secure exchanges of monetary units between participants.
Receive addresses are the result of cryptographic hash functions (message digest, condensed, abstracted) and transactions are cryptographic instructions in the form of a serialized message[2][3][4] containing abstract information.
These supports, objects, data structures, matrix, enhanced text file will remain immaterial in a computer system, but have proven themselves to be sufficiently proven to be vectors-supports, legal instrument of payment i.e Cash, such as in ancient times spice, rice, bones, and now silver, gold, tokens, coins, banknotes, bank cards, etc.
A distributed accounting register, distributed ledger, or a blockchain is a register that is simultaneously recorded and synchronized on a network of computers and that evolves by adding new information that is intended never to be changed or deleted, so by construction there is no money laundering or at least very limited.
By coupling this support which are simply limited by the size of the hard drives in the IT infrastructure ; where a large number of monetary unit is created in the genesis bloc according to the consensus, with this kind of register it is possible to obtain a tamper-proof book of accounts and transfers from person to person, programmable or not, depending on the needs, a.k.a a Bank.
But, this way we are automatically at the possibility 3 from hypothesis 2 (p3h2) of the resolution of the differential calculation of the Money:
n is fix dn=0 and u is variable du≠0 so M evolve according to the price of the products put on the market dM≠0
While the current banking system corresponds to the possibility 2 from hypothesis 1 (p2h1). But the current system not being perfect; in the mathematical sense i.e. n and u always evolves while being balanced, we evolve in the hypothesis 2 and more particularly in the 4 incoherent possibilities of evolution being able to risk the ruin of the economic systems.
With our proposal, we no longer need to use inflation (p2h1), which is difficult to control, to obtain an additional monetary unit in order to Work for enrich the economic system. The technological revolutions of recent years allow us to make the transition from possibility 2 of hypothesis 1 (p2h1) to possibility 3 of hypothesis 2 (p3h2) and this is a real revolution.
Bibliography :
• [1] Economical Physics - Reflections on the economic power of work and the mechanical power of money – Pierre Campergue : https://econophysics.science/en/
• [2] Mastering Bitcoin : https://github.com/bitcoinbook/bitcoinbook
• [3] Mastering Ethereum : https://github.com/ethereumbook/ethereumbook
• [4] Yellow Paper ethereum : https://github.com/ethereum/yellowpaper
• [5] Bitcoin : A peer-to-peer electronic cash system : https://bitcoin.org/bitcoin.pdf