Bitcoin credit money
Q: Is Bitcredit another altcoin?
A: Bitcredit is not an altcoin. It is a claim to future bitcoin, the real thing, a money substitute with two additional attributes vs bitcoin:
(1) a maturity date
(2) an issuer
Q: Why is it called Bitcredit?
A: It is a portmanteau, short for "Bitcoin credit money". One bitcredit is a claim to one future bitcoin.
Q: Does Bitcredit pay interest?
A: No. Held in your non-custodial wallet, bitcredit is a non-inflationary, trust-minimised credit money. If you wish to earn interest you can lend it out just like bitcoin, thereby accepting credit risk.
Q: Is Bitcredit a stablecoin?
A: No, much better. Stablecoins are not really "stable". They are pegged to some governement's fiat money, thus inflationary at their discretion. Whereas Bitcredit will truly stabilise the value of Bitcoin to give it a constant purchasing power.
Q: What is the difference between credit and credit money?
A: The difference is subtle but crucial for monetary stability. Credit is a promise of money in the future without backing in present value. Credit money is exchanged for, thus backed by, already existing goods and services rendered, real value in the production and supply chain.
Bills of Exchange
Q: What is a bill of exchange?
A: It is a time-proven, private payment instrument which has been in use since the Middle Ages. The Geneva Convention of 1930 regulates them, world-wide.
Q: What is an e-bill?
A: The UN Vienna Convention of 2017 approved a model law for electronic bills of exchange. The UK recently enacted such a law, it was the first major trading nation to do so.
Q: Ok, but how do bills of exchange work?
A: Long forgotten basics! Here is a nice, geeky explainer.
Q: Can e-bills be denominated in bitcoin?
A: Bitcoin is legal tender in El Salvador, so why not?
Q: Is there a surcharge for paying with an e-bill?
A: Business buyers and sellers freely negotiate and agree the purchase price of goods and services. B2B payment in e-bills will become the norm, with a cash discount deducted for payment in outright Bitcoin.
Mints
Q: What is a Bitcredit mint?
A: A mint - also called wildcat - splits an e-bill's amount into bitcoin-redeemable credit money units.
Q: What is a Bitcredit mint?
A: Bitcredit mints run the free "Bitcredit Wildcat" software and create bitcredits upon receipt of an eligible e-bill. They secure e-bill redemption with their verifiable eIOU guarantee capital thereby minimising the residual trust requirement from end users.
Q: Can mints create Bitcredit out of thin air, like banks issue fiat money?
A: No, they cannot. Bitcredit Protocol only allows the minting of electronic bills of exchange verifiably drawn in payment of B2B goods produced or B2B services rendered.
Q: Can a mint rug holders of Bitcredit?
A: A dishonest mint would destroy its business for next to no gain. Failure to redeem even a single e-bill is an immediately red flag for the entire mint. Also, the payers of the underlying e-bill are the ones who owe and send the Bitcoin for redemption, so that mint could have a small one-off gain but not more.
Bitcoin Volatility
Q: Isn't Bitcoin base money too volatile for a credit money?
A: Initially yes, it is a chicken-egg problem. We have to start somewhere, volatility will fall fast with the buildup of a credit superstructure. Meanwhile, users can always hedge some exposure.
Q: What will the price of Bitcoin do when Bitcredit gains traction?
A: Bitcoin will capture its monetisation premium and its value will rise to its true, natural level, as determined by transactional demand. There it will roughly stabilise,. Speculators will leave.
Q: What will the price of Bitcoin do if Bitcredit cannot get traction?
A: Then Bitcoin cannot succeed in the real economy. It's current use csae as a store of value may continue but Bitcoin will always show memecoin-like price fluctuations. Ultimately, its price will follow that of tulips in 1637 if, as, and when some other digital currency takes succeeds.
Q: What does "stable" mean?
A: A money's value is the inverse of the general price level. This means that its general purchasing power remains roughly equal. It will of course still fluctuate but market forces will soon revert it to its true value.
Q: How can the value of Bitcoin become stable?
A: Think of Bitcoin as a fixed quantity of coin (MO), similar to gold coins in the past. Today, it is hard to imagine that gold 's value was a stable $20 for more than a century because the issuance of "yellowback" $20 banknote redeemable in gold coin balanced money supply with demand.
Cryptonomics
Q: But Bitcoin value can only be stable if its supply matches demand?
A: Exactly. Minting fees rise with increasing money demand which regulates credit money supply.
Q: Bitcoin supply is fixed, Bitcredit is elastic. Will this cause inflation?
A: No, this is ensured by Bitcredits most crucial rule: No More Thin Air. Central banks cause inflation when they print money to "buy" government debt which is a naked promise of future value.
Q: Economic fluctuations are a fact, volatility just moves elsewhere?
A: That's exactly what Bitcredit Protocol does: it moves volatility from Bitcoin to eIOU. Bitcoin itself will have rock-steady purchasing power and adoption can start for real.
Q: Can we verify that there is no inflationary Bitcredit supply?
A: Bitcredit verifiably clears on mainchain against outright Bitcoin. Redemption burns Bitcredit. Hence, no inflation. Remember the old Law of Reflux?
Privacy
Q: How about people's right to privacy?
A: For individual end users, Bitcredit payments give privacy because Bitcredit mints issue private e-cash. Bitcredit clearing on mainchain only shows final UTXO balances, usually for B2B players.
Q: How about business users' privacy?
A: Every e-bill has a unique key pair, only known to its parties which form a guarantee chain in case of recourse. If desired, e-bills satisfy KYC and AML requirements, as the invoice paid by it is attached.
Q: How about Bitcredit mint privacy?
A: Mints are the final e-bill party, known to the other parties. Usually, they are in some established, long-term business relationship with the e-bill payer or the prior endorser of an e-bill.
Security
Q: Will I lose my Bitcoins if the issuing mint goes under?
A: No. It is the payer of the underlying e-bill who must pay. Bitcredit splits the e-bill payment input into Bitcoin UTXOs which only your private key can spend.
Q: Will I lose my Bitcredits if the payer of the underlying e-bill fails to pay?
A: No. In this case, the mint must sell eIOUs for Bitcoins and redeem your Bitcredits. In a later phase, this will be done by a smart contract.
Governance and Regulation
Q: Who decides the rules of Bitcredit or coordinates development efforts?
A: Bitcredit has a decentralised "ungovernance" which means:
(1) deliberative processes (structured debates, prediction markets, unconferences, polls),
(2) concluded by transparent voting weighted by eIOU holdings,
(3) which establishes the non-binding general will of participating project contributors.
Q: Who verifies the quality of underlying e-bills?
A: The mints do, in their own interest as guarantors. The encrypted original invoice is part of every e-bill, the invoice identifier gives the unique name of the e-bill.
Q: Who supervises Bitcredit mints?
A: The Bitcredit network is decentralised, a central supervisor is neither required nor sensible. Each mint supervise other mints' e-bills as their eIOU capital guarantees payments.
Reserves
Q: Why eIOUs? Why not outright Bitcoin?
A: A good base money needs a stable purchasing power. If mints had to hold bitcoin to guarantee their fluctuating issue of Bitcredit, fluctuating demand for Bitcoin would cause price volatility.
Q: Why eIOUs? Why not gold?
A: Gold is not a good reserve asset for a Bitcoin system:
(1) High risk of political capture, like so often in the past.
(2) Unacceptable trust required, with paid auditors.
(3) More handling cost and slower recourse process.
Q: How can prospective mint operators get eIOU reserves?
A: They can buy from selling contributors. In time, the project governance will consider if future eIOU issue be sold to prospective mint operators in a more organised sale process. All proceeds go to fund development.
eIOU Capital
Q: Who needs eIOUs?
A: Businesses and end users are not concerned with eIOU. Only Bitcredit mints need them to prove their dedicated guarantee capital.
Q: Is eIOU a security?
A: No, it is not. eIOUs are a digital commodity. They are no investment in any entity, they give no rights and pay no dividend. They do nothing. You can buy and sell them, like any commodity.
Q: A meta money? So, I can pay with it?
A: No, you cannot. "Meta money" means that it has a systemic function in a monetary system. In simple words, it absorbs Bitcoin's volatility to stabilise its purchasing power.
Q: You mean it does nothing?
A: Not quite. It enables bitcoinisation, the emergence of a Bitcoin based monetary system: eIOU absorbs Bitcoin's volatility and helps to stabilise it at its natural fundamental value.
Q: Can eIOUs be generated out of thin air?
A: No, they are issued similar to Bitcoin's halving, by a geometrically declining issue every 3 months, roughly 13,500 Bitcoin blocks. Voting of eIOU distribution for delivered work is done monthly, roughly 4,500 Bitcoin blocks.
Q: How many eIOU are there?
A: The genesis issue comprised 42 million eIOU for the first 3 months, the size of each subsequent quarterly issue declines by 4.2%. In total there will be 1 billion eIOU when Bitcoin reaches its supply maximum of 21 million.
Q: Who owns these eIOUs?
A: Contributors of Bitcredit work items receive rewards in eIOU agains proof of work, subject to voting. Feel free to apply with a proposed contribution or deliverable.
A: BRC-20 sits on Bitcoin mainchain, it is available now and does the job. Bitcredit's production version may upgrade to a better solutions. Candidate technologies are: Taproot Asset Protocol, RGB, Runes, or CBRC-20.
Other questions
Q: What enforces a mint's guarantee?
A: Game theory. Any unpaid e-bill "dishonours" its payer. It also blocks further Bitcredit creation by its mint, like a red traffic light, until they honour their guarantee. So, mints better pay up fast.
Q: Is this fractional reserve banking or full reserve banking?
A: It a new take on full reserve banking, proof of value. With Bitcredit Protocol, it is the e-bill's payer who redeems Bitcredit with Bitcoin exactly at maturity, not earlier not later. No more bank runs.
Q: Bitcredit stops fractional reserve banking?
A: There will be time deposits but no more demand deposits because Bitcoin and Bitcredit are non-custodial. In future, borrowers will want the lender to send the full amount immediately to their wallet.
Q: Is there a lender of last resort?
A: The Bitcredit system neither has, nor needs, a lender of last resort. It is atomically decentralised through e-bills with strong guarantee chains, default is rare and of no systemic consequence.
Q: What is Neo-Austrian Economics?
A: Prof. Antal Fekete wrote the Neo-Austrian Manifesto in 2013 against the ossification of Austrian Economics and proposed several new ideas, including a new take on the Real Bills Doctrine.
Q: Is Bitcredit planet friendly?
A: If Bitcoin had to satisfy the transactional needs of the whole planet, its energy consumption would be enormous. Bitcredit Protocol keeps both price and energy consumption on a sustainable level.