A Hybrid Currency? : NHC History Blog
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Franklin Noll, PhD
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Franklin Noll's Blog on Monetary and Financial History.

A Hybrid Currency?

by Franklin Noll on 07/29/20


An example of hybrid currency: $50 Interest Bearing Note, 1865

An idea for discussion: What if there was a currency, physical or crypto, whose value changed with the amount of its usage?  

In the past, hybrid currencies (in the US) like the Continental Dollar or the Interest Bearing Note gained value over time as there was an expected payout in silver or gold at the maturity of the banknote/security.  Modern fiat currencies cannot do this, whether they are banknotes or cryptocurrencies.  But, what if we replaced the time component with usage?

Imagine if the value of a bitcoin, for example, increased every time it was added to a block.  In effect, every user of the coin would become a kind of miner, encouraging the use of the currency.  Would this stabilize the currency in the process?  And, would this scheme require some sort of valuation peg (perhaps a basket of goods—not another currency or specie)?

Imagine if the value of a banknote changed, according to clear rules, every time it passed a point of sale.  By raising or lowering the value of a note (never lowering it below its face value), you could speed up or slow down the velocity of the money supply and hence, inflation.  (BTW, the banknote would have a QR code that would be scanned.)

It just seems to me that the future of banknotes and cryptocurrencies means getting passed our believing that the current world of currency is the only one that can exist and that we have to bow to the existing system.  Certainly, our monetary past suggests that things used to be very different. Satoshi Nakamoto certainly thought outside the box.  Perhaps, it is time we did the same.

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