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The parallel money system

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Why has the government been questioned when deciding to interfere with the economy? Why do we have recessions and even depressions in the first place?

Milton Friedman was an American economist who questioned the government’s position when it interfered with the economy. Opposite to Keynesian economics, which supports government intervention, Milton claimed that the government was a guilty one who constantly caused the economy to run into recession and occasionally into depression.

Why was the government bad at the economy?

The government likes to tell people what they should and should not do. However, the government has no better understanding of the economy than people do. They got resources and do not face any consequences even if they make mistakes. 

The market is a price system

Price is information transmitted from buyers to sellers. It assesses the relative values of exchanged goods and services. If the market sets prices, it shows consumers and producers are at the agreement that the market is the most efficient route to complete such transactions. Price usually contains the most important information between buyers and sellers before completing the transaction. Any distorts of such information will make the route inefficient and lead to waste. The government is wasteful simply because they usually distort price information through its influence, make unilateral decisions that impact the economy incorrectly, and waste resources for the general public to determine what is going on. 

In the current high inflation environment, the government made a mistake regarding the inflation assessment and made mistakes likely again during the recession and turned the economy upside down into recession faster than they anticipated. 

What is the function of the market?

The market is meant to distribute resources according to people’s needs, not their ability to pay. However, the government wants people to think the market is their ability to pay, so they can manipulate the pay rate that directly influences the market. When the market was forced to change, the consequence was that the market would have to restore its balance after the change, then the government would change it again; the market would restore again. Will a break point exist when the market can no longer heal itself? The answer is yes, and it triggers inflation. Inflation is bad because it eats the value of money. Similar to a black hole, it sucks everything in no matter what and does not give anything back.

How to restore the market?

There are several ways. One is to replace the government with a new one to reset the economy. But, of course, the cost is enormous and politically intolerable. The second is to replace the central bank. It is unacceptable because big banks will not allow it, and politicians forbid it. The third way is to replace it with a new fiat currency. It is not permitted politically if your fiat current is the world reserve. It would trigger a global financial crisis. The fourth solution is government controlled economic system. When the government controls the economy, it can easily control unemployment to a manageable level to press down inflation and then continue interfering with the market until it can no longer do so. Then the first solution will kick in.

The parallel money system

In the modern digital economy, we luckily have alternative money that helps us better understand the market and our economy. Compared to the existing financial system, the cryptocurrency market cannot be manipulated by the government but to protect the users. This is because the economy in the digital currency is a pure price system. Therefore, the government cannot and would not care to interfere with the system. Thus, the market can fluctuate, but it is always restored to equilibrium. 

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Crypto Research

The Future of Machine War II

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In late 2021, I wrote an article about A.I. vs. Blockchain. I realized it was closer than I expected.

https://medium.com/@xuanling11/artificial-intelligence-vs-blockchain-the-future-of-machine-war-b685d208ba20?sk=874af90c7acbe857fa004c0ebe0d5e28

Web2 is leading a future of technological centralism. 

The way we see the world in ancient is what we saw became what we believed. Later, the enlightenment process helped humans realize what they had seen was disguised by the nature principle. Once we tested our assumption and received accurate results, we thought we had mastered the nature principles. Yet, we did not make the world better than we thought we could. 

We are living in a world in which companies know more than you than yourself. Companies can likely tell you what you should believe without letting you know. 

The secret weapon that companies like Google invented is A.I. or Artificial Intelligence. 

If A.I. can think like a person, it can easily replace you! Since companies got all your data, you freely offer them by using their free services, and they can replace you one day without you realizing it. 

Without all conspiracy theories behind what Google may or will secretly develop, A.I. reaching consciousness is … impossible.

If it does, Google has successfully made a human – dumb!

The most advanced A.I. – Tesla Autopilot Program cannot distinguish objects between humans and other moving objects during driving.  

Using technology makes people dumber than they think because it takes away your consciousness – the ability to think uniquely!

Blockchain is the future of decentralization.

We need a peer-to-peer system to regain consciousness and break the chain from Web2. 

It gives individuals the power to rethink information.

Think about today’s media; all information is filtered to offer readers without any surprise. News is data that Web2 selected specifically for you to read. 

We need a decentralized system so that you can receive unfiltered information and gives you a surprise that sparks ideas of imagination.  

Web2 is afraid of the blockchain because they are too big to fail. 

 They mimic the blockchain by creating a centralized node system – social media network. 

It is a net growing outward through a single point. Only the problem is that connection is facilitated by technology. And the biggest failure is such technology has a single point of failure problem. 

And they cannot escape the law of economics – the law of diminishing. So we will see Web2 grow slower due to the law of diminishing that they require more data with few increments of advancement through A.I. without any breakthrough because A.I. is a deterministic system that works with a lack of randomness. 

In Web2, they assumed everyone was stupid, and they offered solutions to everyone.

In Web3, everyone is good and should anticipate solving a problem together.

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Crypto Research

Financial sanction to mixers

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Have you heard about financial sanctions from the US on virtual currency? At least, I have not yet. But the US Department of Treasury has issued sanctions on two crypto services: Blender.io and Tornado Cash.

To clarify, the US sanctions on tools but not target specific entities or groups of people.

So why bother to sanction something that the government probably won’t be able to sanction in the first place?

What is a mixer?

A cryptocurrency mixer, sometimes referred to as a tumbler, is a tool for money laundering. The sole purpose of the invention is to make transactions untraceable.

How to mix?

Even crypto is pseudo-anonymous, but it is traceable through your wallet address. A mixer is a black box service to filter your traceable wallet address into the untraceable wallet address.

How to wash your money clean in the traditional way?

https://dimensiongrc.com/the-stages-of-money-laundering/

The assumption is you will not get caught at each stage, and then you place your dirty money in a bank through companies and use the funds to purchase legal goods like houses or luxury goods.

There are mature regulations and rules to stop you from putting your dirty money into banks.

Digtial money landury

https://www.eurospider.com/en/know-how/compliance/211-what-is-a-cryptocurrency-mixer

A Crypto mixer or tumbler is a service to pool dirty digital currency in their favor and redistribute it into designated wallet addresses or addresses randomly generated. 

It is a challenge to stop transactions because there is no entry point for law enforcement to stop at each stage. 

https://home.treasury.gov/news/press-releases/jy0768

Ultimate Mixer

Tornado Cash is the king of the mixer. Unfortunately, there is just no way to trace transactions anymore. It is a smart contract with zk-SNARKs (zero-knowledge proofs) that does not require revealing a wallet address during transactions and ghostly distributed funds without leaving any traces.

This tool is the ultimate weapon that the government has to shut down, or there is no way to prevent transactions.

In Conclusion

Let’s change the future – legally. 

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Crypto Research

Why there is not crypto banking exist

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We have always heard about cryptocurrencies, crypto exchange, banking, and trading platforms, but we do not really grasp the idea of crypto banking. Crypto banking is a contradicted idea. If crypto is to replace banks and give users full control of digital money, why do you put your crypto into the bank? The new research paper argued that there are risks for banks to adopt crypto, but they did it anyway.

Banks want crypto

Cryptocurrency has a rough road at the beginning and continues to experience a bumpy road ahead. The institutional investors were watching its performance. In early 2017, institutional investors had opportunities to adopt crypto, but they found out the return of the investments was less than traditional financial assets. Regulations were not a concern for some individual institutional owners, but banks were conservative at the time. As a result, some investors adopted it in early 2018 than banks did. Then suddenly, the crypto market took off in 2020, leaving many banks to regret their decision in 2017. Many banks set up their digital investment group to rush into the market and increase prices. Of course, many of their investment positions are instead of shadow positions. It is unclear how much they have been invested in and what vehicles they took to invest in cryptos.

Crypto Exchange

Crypto exchange is a bank-like platform for crypto. Banks offered a place to purchase fiat currency. Crypto exchange did the same duty as traditional banks did. Since there was a gap between the crypto and banks, the crypto exchange took responsibility and offered crypto services. The crypto exchange took off after 2020, and they left banks in the dust. Then, crypto winter came in early 2022, and banks again hesitated to enter the crypto and started denouncing crypto usage, particularly in the Defi area. But interestingly, they tried to find ways to get into crypto without being directly exposed to cryptocurrencies—hint: through hedge funds.

How much banks exposure to crypto

We do not know how much banks have been exposed to crypto. We learned that the big Wall Street players were exposed to the services of the digital asset through State Street of their $41.7 trillion assets. Some have been exposed due to Luna’s collapse and 3AC bankruptcy. But again, no specific dollar amount was provided. 

Survivors

Since the crypto winter, institutional investors have been cautious about crypto exposure. However, crypto exchanges are the winner again. They are exposed to crypto and take risks more than banks do. As a result, they likely will weather the uncertainty. Furthermore, there is no need for crypto banking to handle your crypto assets since many such services will not survive long in the crypto environment. 

Crypto is resilience

Despite its fluctuating price and unsecured assets, crypto is resilient to phase out any bad business ideas and bad actors in the economy who wants to or try to dominate the market but who transfers risks to users to believe they are the one who should take responsibility for their carelessness. Unfortunately, those business models will not survive long.

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