Credit Seeking In Crypto Land

HaLin is a fan of Fermi Problems, inverting intractable issues, and conjuring up humorous solutions.

This Radical Proposal is a humorous missive on a serious topic. How credit would look like in a crypto world.

 

Crypto Earth Bank

One of the successes of paper-based monetary systems is the ability to let citizens ‘own’ other people’s money. The fractional banking system, through the multiplicative effect of credit, enables consumers and businesses to have access to capital that they do not own. This system, despite periodic boom-bust cycles, has succeeded in delivering economic ‘growth’. Cash + credit = ‘wealth’. Throw in more credit and voila! more wealth is created.

Earth Bank Crypto (EBC) currency could be created by converting the stash of current notes and coins in circulation in the world (around $ 5 trillion) and distributing it equally to the world’s 7.6 billion people. Each of us would get around $ 658 equivalent of EBC in our decentralised Earth Bank accounts. This is all the cash that each of us would start with. (This would have the happy consequence of silencing wealth inequality activists. Everyone would be equalised by a stroke of computing power).

No central bank, or governments, would be needed to play Class Teacher to keep errant students in check. Or so the idea would be, in theory.

True to our innate nature, though, several would aspire for more wealth. To satisfy our economic needs and unsubtle aspirations at wealth enhancement, we would urgently need access to cash that we did not own.

 

The Greedy Lend To The Needy

Unused crypto balances of holders could be lent out to those in need of money. Transactions could be recorded on the blockchain, so the trail identified borrowers at all times. To repay, with interest, the borrower would need more crypto. For instance, A borrowing EBC 100, would have to repay EBC 105 at year-end. The borrower would be able to repay with interest only if they managed to garner new cryptos from the existing pile. Borrowers that consume EBCs away with no thought of repayment would be in a bind to repay their crypto debts.

Some enterprising savers, meanwhile, would take to making markets themselves. They would ask for an interest as compensation for their troubles and to protect against defaults. The interest rate they would desire would vary as per varying urgency demands of borrowers. With time, demand for EBC credit would outgrow the rate of growth of EBC itself, leading to interesting outcomes.

The demand would cause the price of EBC and the borrowing rate to go up.

The insatiable growth for EBC credit, and subsequent lack of easy access to new sources of funds, would lead to a wave of defaults. Borrowers and other affected parties would blame usurious crypto lenders. They would urge the Earth Bank to print new crypto. Or let them tap into more unused cryptos, if EBC had a finite limit like Bitcoin. New EBC, or unused cryptos, would have to be passed on borrowers, so they could make whole on their debts.

This would, in all likelihood, lead to a fork. Either the Earth Bank would have to loosen its constraints, and print new EBC to bail out the world. Which would resemble the  present fractional banking system.

Or CreditEBC would come into existence.

With a sole purpose of being used as a transaction medium for EBC credit. Forks, specifically created for credit, could ‘speak’ with other crypto currency through a market observable exchange rate. Rising demand for CreditEBC would cause its price to rise. Unable to access either EBC or CreditEBC, the weakest borrowers would eventually come unhinged. Leading to defaults. And a few suicides.

Earthlings would find that this system was similar to the present system.

The decentralised Earth Bank would be in the same position as commercial banks today. Hoping that not all EBC depositors demand their cryptos back at the same time. And praying that not all borrowers went under.

Cascading defaults would lead to a systemic too-big-to-fail problem. Not unlike the present situation, where banks rely on central bank for bailouts. A consensus would be needed. Finding themselves out of a job, bands of people around the world – who earlier called themselves governments – would try to create a new role for themselves. As overseer of the Earth Bank. They would also aspire to resolve newly created inequalities. Decentralised computing power, overseen by a global band of people, would determine crypto creation. Forks of the inedible kind, built after a consensus was struck, would lead to new crypto currencies.

The blockchain sought to break free of the institutional imperialism of governments and quasi-governmental institutions.

The Earth Bank could take the Earth right back to status quo.

 


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When Political Systems Met For Coffee…

Several centuries of being in a state of war with one another exacted a massive toll on old foes, Democracy, Communism, Anarchism and Monarchy. Strong-headed, each found it impossible to share any podium which involved the other(s). Ravaged by savage battles, they decided that their historical alienation needed a rethink. A secret meeting was arranged in a labyrinthine underground facility at an unknown location.

Monarchy took his place in an exaggerated throne specially designed for him. Anarchism was, unfortunately, seated next to him. This caused him immediate distress.

Democracy sneakily attempted to take credit for initiating the idea. That he had managed to bring thick foes to the coffee table was testimony to his modus operandi. Before airing his views on reconciliation, he pretended to request others to break wind by airing their…views. His eyes would be open but he couldn’t vouch for his hearing mechanisms, and most importantly, his mental faculties. Choosing prudence, he decided against sharing his true thoughts, preferring instead to reflect the view of the consensus.

Anarchism, in a signature display of personality, spilled his coffee on the table, ruining Monarchy’s fine linen apparel.

Communism remonstrated. Uncomfortably jittery at Democracy’s perceived first strike, he wondered what transpired to put him on a coffee table with folks he couldn’t see eye to eye with. He couldn’t entertain the possibility that Democracy was perhaps, as was his wont, overestimating reality. Making a mental note to suitably exterminate the Comrade responsible for this transgression, Communism launched into a splendid account of his many virtues.

The proletariat were the Chosen Ones. They were the all-pervading force that held a civilization together. No government, no ruler was the road to a good life. Anarchism beamed while Monarchy fumed at this reference.

Monarchy suggested that while Communism’s speech was eloquently pleasing, behind his goodwill façade, the cousins Feudalism and Fascism lurked stealthily. Communism interpreted this as a suggestion of hypocrisy and, unsurprisingly, Reddened. He quickly reminded Monarchy that nobody cared about his opinions anyway. Monarchy grumbled and held his chin high, even as no one paid homage.

Democracy, true to his character, had no opinion of his own. Opting to reflect the view of the consensus, he did or said little.

Anarchism broke his coffee mug.

Communism continued. He stood for everything ‘less’ and enlisted stateless, moneyless, faceless and classless as his most endearing accomplishments. Also clueless, soulless and perhaps senseless, thought Democracy. He, of course, didn’t share his true thoughts, choosing instead to express fake smiles of approval. Communism pretended to ignore him but developed Cold feelings nonetheless.

Unhappy with the level of orderliness, Anarchism broke one of his chair’s legs.

Meritocracy made a surprise appearance. Training his guns on Communism, Meritocracy said Communism was like a school teacher. When an exam was held and the kids graded, Communism abhorred the A’s and in a swipe of a pen, equalised everybody. The entire class was graded a C and lo! there was equality, a classless society. It didn’t take many exams for the entire class to be F-ed, quite literally. This is what Communism engendered.

Communism made another mental note to teach Meritocracy a lesson and wondered who had sneaked Meritocracy in. He suspected Capitalism but decided to maintain a poker-face.

In reality, nobody harboured affections for Meritocracy. It was left to Democracy to usher him out. He did so, citing popular will. Meritocracy scowled that Democracy was the spokesperson of the uninformed. At this point, Ignorance, Democracy’s trusted Man Friday, was pressed into service and he duly muscled Meritocracy out of the room, permanently.

Monarchy seemed clueless and sleepy, even though he was high on coffee.

Anarchism broke the table, demanding air time. Noticing that no one listened, he borrowed Monarchy’s sword, against the latter’s wishes, and slew him with an almighty swipe.

Pandemonium broke out at this juncture.

Democracy tried to control the rapidly agitating mob by insisting on a popular vote before killings could commence. Anarchy punched him in the face. Communism belched and conveyed that WMDs were installed around the facility, as a pre-emptive measure.

Democracy’s unused brains went numb. As the spokesperson of the uninformed and the will of the majority, he stayed rooted to his position, hoping that someone would force him into action. When none was forthcoming, he attempted story-telling, threatening Communism that nukes would be met with nukes, should push come to shove. Communism backed off at this threat but stayed Cold. Both stood geared for combat, but preferred manufactured menace to actual warfare.

Anarchism, meanwhile, radioed his trusted lieutenant, Arson. Sensing a great opportunity to leave an indelible mark on the meet, Arson flattened the room before proceeding to kick Democracy’s underbelly. As Democracy crumbled to the floor, Communism was overcome with laughter. Arson turned towards Communism and mistaking the guffaws for personal slander, torched him alive.

As Communism succumbed to the invitations of Death, Democracy was relieved.

The will of the majority had triumphed, or so Democracy thought. As he attempted standing up on his feet, Arson whacked his head with a sledgehammer.

Democracy went limp and his non-functioning brains forsook him, leaving him in a permanent state of uselessness.

Arson was a suicidal fellow, given to self-destruction. Delirium stoked suicidal tendencies and he eventually perished to self-immolation, but not before taking Anarchism with him.

None of the Political Systems survived.

A Dialogue Between Bitumen & Petrol

In a tiny attic in the outskirts of an irreversibly polluted city, Bitumen and Petrol found themselves in the company of ageing, ragged tools and other Materials, including Acetone.

A once-happy couple, Bitumen and Petrol now led estranged lives. The bitterness they felt was mutual, with neither particularly appreciating the other’s presence. Conversation was bound to be an uncomfortable affair. As so often transpires in social gatherings, pleasant conversation soon veered to a game of one-upmanship.

Bitumen began enlisting his wondrous properties. When someone asked him about his parent, Crude Oil, he dismissed them nonchalantly. He was also quick to dismiss affiliations to Tar, who he tended to look upon condescendingly. An epitome of viscoelasticity, he enthralled the uninterested audience by twisting several times, often ending up in dangerous positions. When he bent his head over backwards – twice – to face his audience, he was greeted with heavily controlled displays of approval. Loath to giving up the opportunity of composing a self-directed paean, he rambled on.

When introduced to inconsequential companion aggregate materials, he assumed the persona of Asphalt. Often spotted sunning himself on roads, he was incapable of death, even when 5-tonne trailers steamrolled him, as they did regularly. Less-flexible spines went stiff with fear at this boast. Here was a formidable fellow indeed, thought some.

His smart ex abruptly broke Bitumen’s soliloquy. Bitumen wasn’t impregnable, Petrol boiled. She let out a hitherto closely held secret, much to Bitumen’s chagrin. During recreational fornications and oily sleep-overs, she had discovered that Bitumen crumbled, lost his identity and turned into his parent, Crude Oil, the following morning. Petrol confessed to feelings of sheepishness and unease, at this metamorphosis.

Stung by the open insult and with black froth brimming from his mouth, Bitumen blamed their estranged relationship on Petrol’s uncontrollable weakness for Fire. The two seemed inseparable and he had caught Petrol red-handed several times, warming progressively to Fire’s advances, eventually losing herself completely in his hot embrace.

Petrol didn’t take kindly to this allegation. She let out another brutal secret, which thoroughly exposed Bitumen. Bitumen might be very strong but a whack from a crowbar/sledgehammer, falling perpendicularly on his head, was enough to kill him.

Bitumen was stunned.

In an attempt at tangential meandering – a technique taught extensively at business schools – Bitumen changed tracks. He was the undisputed adhesive of Antiquity. He was the magic ingredient behind the Towers of Babel and the Hanging Gardens of Babylon, one of the Seven Wonders of the Ancient World. He was instrumental in immortalising Egyptian kings through Mummification. He accentuated the aesthetic beauty of women of yore, who used him as jewellery.

Did Petrol have such a colourful resume?

Under Pressure, Petrol exhibited a ready eagerness to explode. All that was needed to set her off was a spark. Bitumen’s jibe could have served the purpose…but for the intervention of Acetone.

Bitumen hated Acetone. Apart from a blow from a sledgehammer, Acetone had the power to exterminate him by dissolution. Acetone long nurtured a secret admiration for Petrol. This, of course, did not endear him to Bitumen, who seethed in silence due to Acetone’s superior powers.

Irritated at the jibe-slinging match and sensing an opportunity to attract Petrol’s affections, Acetone decided to quell tensions permanently. With an uncharacteristic display of gravitas, Acetone turned to Bitumen. With Godfatheresque menace, he reminded Bitumen of the fate that awaited him, should he, Acetone, decide to exercise his vast powers. Bitumen, unwillingly but prudently, backed down.

Petrol went weak in her liquid-y knees. She knew she could forge a useful relationship with Acetone.

…in the quiet confines of a petrol engine.

The Battle Of Even And Odd

A curious soul interested in the history of the tussle between Even and Odd would have to begin with Oddam and Eve…When the Creator, in a momentary lapse of reason, decided to give the Milky Way some unwanted company, He created humans. Two of them, to set things in motion.

Even had scored its first mighty strike…

The garden of Even probably made Adam and Eve optimistic about the just-born world, to realise they were two-in-arms in the vast expanse of stillness. A solitary organism might have ended humanity through self-destruction, even before chaos had weaved its magic. A marvellous possibility, which, ironically, never saw the light of the day.

The Creator, it turned out, was sympathetic to Even on the subject of Anatomy. He designed Man’s anatomy to be a house of Even, endowing him with two of most things. But great care was taken to ensure that inlets, outlets and reproductive attachments in the anatomy, were given to the house of Odd. Yet, admirers of Odd were few.

Somewhere along the way, inquisitive jocks decided to impart sophistication to the study of periodicity. They named the experiment, Time. By carefully following the motions of heavenly bodies, noting the repetition of mundanities and by running a battery of wondrously incomprehensible experiments in counting and accounting, they eventually succeeded in conquering Time.

60 ticks made 1 minute. 60 minutes turned into an hour. 24 hours turned into a day.

Someone decided to house time in watches for Man to glance at occasionally, through the course of the day. These novelties were initially seen in Circular shapes. A compartment resembling a Zero, housing time, for eternity.

Watches soon evolved, with other shapes jostling for man’s attention. Squares, Rectangles, Parallelograms, Hexagons, Octagons and other members of the Even-Sided Geometric Shapes club, all competed with the Circle for Man’s rare attentions. The Triangle and the Pentagon had to be content with guest appearances, quietly making way for the more powerful Even-Sideds who hogged the limelight.

It seemed Nature danced to the tune of Even.

Mathematics tried to bat for the lot of the Odd. This endeavour though, turned out to be only partly successful. When numbers came into existence, those that could be divided evenly, with odd exceptions, were named Composites (so an 8 which could be ripped into 2 x 4, 4 x 2, 8 x 1, 1 x 8 was stamped a Composite). Those fortunates, which withstood the scissors of division-by-the-evens were grandly named Primes. 1, one of the most useful numbers to Man, felt pride at owning the title of being neither a Prime nor a Composite.

Unfortunately, Primes were clunky, unwieldy characters, feared by most people, who had great trouble handling them in daily mental mathematics. The fastest way to successfully end a game of mental warfare was to pose a multiplication of the Primes, ironically involving Even digits (‘37 x 53, you!”).

The world of Multiplication further tilted the scales in favour of Even. Kids found that only when Odd was crossed with Odd, was the result Odd. Attempts at crossing an Even with an Odd, or an Even with an Even, ended in a victory for Even.

Mathematically assaulted kids found merriment in a game of picking the Odd one out. Oddly, Even as Odd was regularly singled out, few admired the ostracised gentleman.

Elsewhere in the field of astronomy, the solar system played host to 9 planets, till recently. One fine day, a bunch of astronomers decided that Pluto was unfit for Planet Society, unceremoniously ejecting it from the League. The poor chap can yet be seen rolling around the sun forlornly as an outsider, both intergalactically and socially, leaving the planet family happily inhabited with Even members.

Away from the world of science, Man found succour in the pleasantly cheerless world of social networking. Even was discovered lurking here, too, in the form of the Character Limit.

Odd was seen as a mark of the weird, a symbol of incongruity, irregularity, non-conformity; while Even was a paragon of symmetry and general goodness. In the epic battle of Even and Odd, Even emerged inoddinately successful.

There were a few who found the unspoken fascination with everything Even, a little Odd to digest.

They were picked off in the game of Odd one out.