As a store of value, a medium of exchange, and a unit of account, fiat money achieves monetary utility. However, since the elimination of the gold standard in 1971, fiat money has essentially been free floating in the market without intrinsic value. Instead, it derives value from its status as government-issued legal tender. In short, fiat money has value because governments and central banks say it does.
This dynamic is problematic when the same parties guide monetary policy. Governments or central banks can expand or contract the money supply to achieve target inflation and interest rates. In a growing economy, stable, predictable inflation is acceptable to policymakers, given the marginal impact on purchasing power. However, over the long-term, inflation inherently devalues any fiat currency. At worst, the unchecked printing of money triggers destructive hyperinflation.
The common thread is this: everyday consumers suffer most for the shortcomings of fiat. But what’s the solution? To answer this question, the utility of digital currency must also be part of the discussion.
The arrival of blockchain-enabled cryptocurrency represents the next step in the evolution of money. These digital currencies live on-chain in the absence of a central authority. Instead of rolling off a printing press like fiat currency, cryptocurrency miners “mint” new tokens while competing for block rewards. It works like this: blockchain networks utilize a consensus mechanism, like Proof of Work (PoW), to validate transactions in the absence of a central authority. Miners compete to solve complex mathematical algorithms to validate transactions and add them to the blockchain. The successful miner receives block rewards in the form of cryptocurrency for their efforts.
While mining is responsible for the genesis of new cryptocurrency, secondary markets determine prices. Since emerging over 11 years ago, the cryptocurrency market has proliferated. As of October 2020, the total market value was around $450 billion, with new initiatives seeming to launch weekly. However, cryptocurrency prices remain highly volatile as the market maturation process continues. As such, digital currencies present questionable utility as a store of value or medium of exchange.
Stablecoins, originating from the realm of decentralized finance (DeFi), are built to tackle this shortcoming. These supported digital currencies maintain a 1:1 ratio with fiat currencies like the USD or EUR. However, many of the most popular stablecoins like Tether (USDT) and USD Coin (USDC) are still directly tied to the fiat’s value, in this case, USD. As such, price stability results at the expense of autonomy—a stablecoin backed by fiat still perpetuates harmful monetary policy. Governments and central banks can directly affect the value of these stablecoins by expanding or contracting the supply of fiat,causing inflation — the public has no control over the policies that may devalue their currency. Further, fiat-backed stablecoins hold collateral off-chain, resulting in a concerning lack of transparency.
AXIA Dual Blockchain Design
New solutions are necessary to ensure everyone benefits from the next generation of money. AXIA offers a fresh take on how a global reserve currency can be designed to benefit people beyond national borders. Although AXIA Coin is supported like a commodity-backed stablecoin, the allocation of value functions much differently. The AXIA Dual Blockchain Design highlights how this particular mechanism, and others, interact on the platform to achieve optimal stablecoin-like performance, but within a true open and decentralized marketplace.
The AXIA Coin Network Blockchain
The AXIA Coin Network Blockchain facilitates the transfer of value between participants. Users interact with this network through a decentralized application (DApp) built on a public blockchain network. Like some fiat payment networks, AXIA distinguishes between user groups—individual, business, or charity. The AXIA Transaction Link (ATL) operates as a series of connected smart contracts on the AXIA Coin Network Blockchain, executing transactions in line with predetermined user group rewards and fee schedules. Each of these transactions registers to the AXIA Coin Platform Blockchain for complete transparency.
The AXIA Reserve Blockchain
Every time ATL smart contracts trigger the collection of transaction fees, a specified percentage is allocated to the AXIA Reserve. This automated process results in a predictable flow of value to the platform reserve. The Asset Accumulation Algorithm (AAA) simultaneously deploys these funds to build up reserve holdings and maintain reserve value in any number of real-world assets including real estate, art, or commodities like gold and silver. As the AAA makes purchases, the records become visible in real-time to the public over the AXIA Reserve Blockchain. Those maintaining the security of the AXIA network, also known as nodes, can view every transaction. These nodes also provide real-time, third-party verification and disclosure of the asset-base valuation.
The Future of Money
In contrast to existing fiat and cryptocurrency frameworks, AXIA improves the utility of money by adding a fourth function—the creation of value. In combination with a finite token supply, the accumulation of real-world assets in the AXIA Reserve ensures that AXIA Coin grows more and more resilient. Further, by rewarding network participants based on their user group and enabling greater transparency, AXIA addresses the limitations of existing stablecoins and presents a unique approach to deploying a reserve currency with global scalability.