Why Beam is Sound Money

What is Sound Money?

Sound Money refers to a currency that derives its value from the markets rather than from the governments. It is resilient to manipulation and debasing . Sound money does not lose its value over time and thus encourages saving and long-term investment, providing its holders with confidence and stability .

What Philosophers had to say

Since the birth of philosophy in Ancient Greece, thinkers were interested in the subject of money and wealth. Like with many other questions, Aristotle was the first to provide a comprehensive view of money.

According to the views expressed in Aristotle’s Politics , good money should have the following properties:

In the 16th century , the issue was addressed by none other than Nicolaus Copernicus , who is most known for his heliocentric model of the Solar System and his mathematical work. During his work as administrator of the economic enterprises of his homeland Warmia (a small semi-independent state that existed in Europe from 13th to late 18th century), Copernicus was exposed to detrimental effects of inflation . Learning from practical experience and observed facts, Copernicus wrote Monetae Cudendae Ratio — a short essay on the dangers of inflation. In that work, he added a fifth important characteristic of sound money , namely Scarcity , and recommended a plan of establishing a sound currency based on gold .

When was our money sound?

Gold and other precious metals answer those five characteristics almost correctly, and thus for thousands of years gold and silver were used as the primary currency.

However, in the early 20th century the gold standard was partly abandoned and eventually abolished entirely in 1971 by US president Nixon as part of Nixon shock . [Instead of a floating standard based on a relatively objective and scarce resource (gold), i t became tied to a single national currency that became the de-facto floating standard . This was the genesis of a fundamental change in the basis of value and currency standards worldwide and forevermore.]

The Crypto Age

Fast forward to 2008 . Amidst financial crisis, Satoshi’s genius creation is unveiled . Bitcoin answers four of the five characteristics listed of sound money.

Bitcoin has proven that durability, portability, divisibility, and scarcity can create money that is dependable and inflation resistant. It is hard to attribute any intrinsic value to Bitcoin or other cryptocurrencies, but one can argue that inherent value is the least important characteristics of sound money (this excellent article by Joe Bowman contains a good discussion on that).

Something is still missing

We believe, however, that there is one more fundamental characteristics of sound money — namely confidentiality . Aside from the vast Rai stones that were used as money on Yap island, most currencies had this property . It was hard to see from outside the castle walls, how much gold a baron held in his coffers, or how much silver a merchant carried in his purse. And of course, today’s fiat currency also has this property to a certain extent — while the bank and the government might know how much money you have, nobody else does.

We are sure that none of our readers will willingly choose to publish the amount of money he/she has and indeed not the incoming and outgoing transactions. And of course, no business owner in his sane mind will publish such a detailed list for all the customers and competitors to see — this just does not make any sense.

While excelling in portability, durability, divisibility, and scarcity, Bitcoin and most other cryptos severely lack in confidentiality.

Why Beam is Sound Money

Beam delivers on the four “classic” properties of sound money and on confidentiality:

Since Beam blockchain is entirely opaque , one might ask how it is possible to make sure that no new money is created. Indeed, the amounts cannot be seen from the blockchain, so how can we make sure that nobody is printing money?

The answer is as follows:

Conclusion

We reviewed the key properties of what is defined as Sound Money and introduced Confidentiality as a new property . We showed that Beam is a currency that has all those properties, and is thus an ideal candidate to serve as store of value and eventually as means of payment as well.

References:

[1] J.Taylor, Journal of the History of Ideas Vol. 16, №4 (Oct., 1955), pp. 540–547, https://www.jstor.org/stable/2707509?newaccount=true&read-now=1&seq=4#metadata_info_tab_contents

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