Argentum: a collaborative saving and investment platform for unstable countries
AArgentum: a collaborative savingand investment platform forunstable countries
Leonardo Javier Bel´en , Alejandro Baranek , Xavier Ignacio Gonz´alez [email protected], [email protected], [email protected]
December 23, 2019
Abstract
A crypto coin designed to provide a stabilization instrument backed up by minded like financialinvestments instruments to maintain the purchase value of savings across time, in order toconstruct new tools for unstable economies.
I. Introduction
Among the central and most debated issuesregarding the economy of developing countriesare inflation, which is a sustained and gener-alized increase in the price level of goods andservices over a period of time[1], and hyperin-flation, which is a very high and typically accel-erating inflation . Causes of inflation can beattributed to different interrelated factors thatcan include: demand supply gaps, increase inmoney supply, currency devaluation, increasein the prices of inputs (e.g. oil, labor costs),Economy credibility, market structure, and ex-pectations. Inflation can turn to hyperinflationby a spiral mechanism in which one factor in-duces the other. One of the most important ef-fects in inflation is a progressive decrease in thepurchasing power of the currency. This harm-ful effect is not evenly distributed in societyand generally afflicts more to lower segments.Other related consequences include: discour-aging savings and investments, inefficiencies ingoods and money markets, and implicit taxincrease[1]. Although much research has been There is no consensus about the differences ofinflation-high inflation and hyperinflation. This worksfocus on high inflation for Argentina’s standards, that ismore thant 20% and less than 60% -which is consideredhyperinflation by some international organisms- done to control inflation, by 2018 more than20 countries have projected inflation indexesover 10%[2]. In these countries, inflation dis-tort prices signals introducing uncertainity byeroding the confidence on the prices system.As a big step towards mitigating someof the negative effects of inflation, we con-tribute
Argentum , a collaborative platformand blockchain based cryptocurrency suitablefor unstable countries. By its definition andstructure,
Argentum is aimed to provide toits users a stable currency in a volatile econ-omy, making available a financial instrumentfor savers and investors to maintain the pur-chasing power over time. Backed up by fi-nancial investments strategies available in thehost country, the token value will rely in prov-able assets instead of confidence on the tokenitself.
Argentum serves as a stable value mea-sure for goods and services and can serve as amedium of exchange -when enough relevanceis achived-.
Argentum is conceived not to bea form of enrichment through speculation, onthe contrary, it is aimed to be a tool for thecommon citizen to protect himself against theuncertainity using tools previously available tospecialists.In the next section,
Argentum concept iselaborated: the rules that regulate its oper-1 a r X i v : . [ q -f i n . GN ] N ov rgentum: a collaborative saving and investment platform for unstable countries • December2019ation and the principles that frame its phi-losophy are introduced. Section III elaboratesabout the system in which this concept is devel-oped and finally, in Section V, some conclusionsare discussed.
II. Concept
Argentum is a concept with dual meaning. Itis a cryptocurrency based on blockchain and atechnological platform integrated by a commu-nity of savers, investors, administrators, devel-opers and partners. Savers and investors arethe main roles in the community,
Argentum cryptocurrency operation is governed by these3 main rules:1.
Saving Rule : Argentum valuation ispegged to the Argentine Consumer PriceIndex (IPC es-CPI en)[3], which is the rec-ommended inflation proxy in the world[4,5] for household expenditures. So,
Ar-gentum will be a constant (deflected)valuation measure for Argentina’s goodsand services, which is considered useful incountries with high inflation .2. Creation Rule : Users can acquire anduse
Argentum freely as long as they keeptheir participation under a safety margin,to be defined dinamically by the
Argen-tum Inc. . As all
Argentum tokens haveto be based on the opportunities that canbe found to back those amounts, it maybe possible to for the governing entity toaccept the amounts, put them on hold fora period of time less than a month, and ifno opportunities have been found, returnthe amounts to the buyer.3.
Selling Rule : Although
Argentum holders can transfer amounts unrestrict-edly to other account holders, selling (alas,obtaining other currencies in exchange fortheir
Argentum amounts), can be doneonly if the total amount sold for a givenperiod of time does not compromise theestability of the other
Argentum holders.That threshold will be defined dinamicallyby the
Argentum Inc. . This will discour-age the use of
Argentum for speculativeproposes. In Argentina, for example, real state and capitalassets are commonly traded in U $ D . In order to make possible to implement theprevious rules,
Argentum aims to create anew, standards based, state-of-the-art technol-ogy based currency with following principles:1.
Purchasing power :In order to maintainthe purchasing power, it will pegged toeach currency plus the Consumer PriceIndex, which in the case of Argentina iscalled IPC[3]. In other words,
Argentum is a stablecoin[6] that during economichardships maintains the purchasing powerand during stable times is simply peggedto the currency, ensuring stability in thelong term.2.
Risk Minimization : the coin is de-signed to deal with multiple scenarios, butunlike most of the tokens around, meantto provide earnings maximization in theshort term (hence increasing the volatil-ity),
Argentum will be backed up by ateam of Financial Operators with the ex-press intent of maintaining the value overtime, allowing its use as a safe earningmethod, including measures such as:(a) Actively changing the number of to-kens in the market to equalize itsvalue to the targeted fiat value.(b) Making conservative investments oneach economy it is operating tomatch the targeted earnings rate,making heavy use of optimized port-folios with cyclic and contra-ciclycassets.(c) Adding restrictions to pull outs toavoid economic surges over time,based on the amount of liquid assets.However, this restriction will not ap-ply to transfers between
Argentum users.3.
Transparency and Traceability : In or-der to guarantee traceability
Argentum will:(a) use blockchain based technologies, analready proven technology to storein a collaborative manner all trans-actions, making it nearly impossibleto counterfeit(b) be open source, to ensure communityhelp and audit.version 0.2 CC-BY-NC 3.0 n L M. 2of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019(c) enforce non-anonymity, which aimsto identify every wallet with auniquely identified user, making im-possible to hide assets on Argentum,in the same sense that bank accountscannot be anonymous. In this regard,the user information will not be heldin plain text but encrypted and ac-cesible only on specific situations bythe jurisdictional authorities.(d) make periodic publication ofprogress, which is intended to inform
Argentum holders on the overallprogress of the project.(e) publish online publication of the ex-change rate, with the express aimof mitigate speculation on the cur-rency’s price.4.
Algoritmic focalization : Every humanis a world of decisions. As such
Argen-tum is set to leverage the full power ofalgorithms to maximize its objectives withthe minimal impact, allowing it to runat all times, safely and based on knownrules and procedures. Initially, the philos-ophy behind the elegibility of a tradingalgorithm is to exploit distortions (or arbi-trate) in relative prices, a known inflationeffect[7, 8].5.
Ecosystem friendly : Argentum ismeant to be the cornerstone of many otherprojects that need to be built upon a re-aliable currency.6.
Non-anonimity : All holders have to beregistered properly before being able tooperate in the system, and no hidden orunnamed accounts are possible, both to in-crease the confidence between holders andto comply with government regulations.Information used to identify holders arenot meant to be on the blockchain and/orvisible from outside of
Argentum inc. . III. Details i. Brief analysis of Incentives
The proposed system heavily relies on incen-tives both to educate and reward users in orderto guide them into good saving and investment practices by mantaining the value across timeand boundaries.With these incentives,
Argentum intendsto align the user with this project, making avirtuous circle of growth and cooperation.It stands to reason that it is expectable thatboth savers and investors will keep their invest-ments at least up to the premium rate as toearn the premium in full. On the same man-ner, the premium procedure is transparent tothe user and
Argentum Inc. at all times,adding clarity to the operations, and previsionon what amount is compromised for premiumsand which is available to
Argentum Inc. asunrestricted funds.
Argentum Inc. will publish on a dailybasis a dashboard with information to allowusers to follow up the progress of the project.. ii. Accounting model
Argentum has an incentive model that in-cludes a monthly interest rate and a bonuspremium 10 semesters after deposit which willbe paid on
Argentum if it is in expansion andin AR $ if it is in contraction.In order to understand Argentum ’s ac-counting model there are two main accounts:1) tokens in the public domain and 2) Withheldtokens or tokens that are generated by
Argen-tum Inc. . The withheld tokens are generatedon earnings while the net investment positionyields earnings and are destroyed if the netinvestement position to isolate the impact ofinvestments on
Argentum ’s price. Addition-ally, a small amount of withheld tokens will bedaily deactivated to peg
Argentum ’s price tothe inflation rate.The withheld account includes also the ac-count from which are sourced interest and pre-mium payments to the users. Additionally, thewithheld account includes a anti cyclic fund,which is funded by a ratio over the earningsto cover for contractionary period interest andpremiums payments. Those funds could beused on riskier investments.The tokens on the public domain accountis composed, in turn, by the tokens that areowned by the public and the tokens that areversion 0.2 CC-BY-NC 3.0 n L M. 3of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019
Figure 1:
Expansion Model being offered to the public but have not beenadjudicated yet.It has to be noted that each user has - at least- two accounts, one in
Argentum and one in AR $ . While the Argentum account will beused on the daily basis, the AR $ account willbe used to capitalize during the bidding pro-cess and to refund and award amounts in AR $ by the system. All amounts in AR $ will betransferable to the financial system or used inthe bidding process at any time. As the phi-losophy entails transparency, both savings andinvestment funds into the project have to beoriginated on recognized financial institutions.In the case of an expansionary phase (Figure1), it is possible to find investment opportu-nities on the market, expanding the Argen-tum s owned by users. In such case, tokens willbe created based on earnings and put on thewithheld account. If opportunities are found,
Argentum are generated and disponibilize tousers. Also, with fixed periodicity the systemis set to transfer
Argentum to pay for interestand premiums, while Users can transfer tokensbetween themselves.In the case of a contractionary phase (Figure2), on the contrary, there is a lack of opportu-nities to continue growth, so
Argentum hasto reduce the tokens owned by the Public . Ifthat occurs, tokens will be deactivated fromthe withheld account to maintain valuation.As no opportunities are found, no amountsare transferred o the offered account, which re- Never-the-less, this situation is not desirable andall the efforts of the projects has to be on generatinginvestment opportunities. It has to be noted that thereis a strategy in place to mitigate the damage that maybe produced by contractory periods using an anticyclicfund and promoting the virtuous circle. No matter withthat, the contractory phase is a mandatory process thathas to be designed in order to keep system’s credibilityin different scenarios.
Figure 2:
Contraction Model mains in zero. However, with fixed periodicitythe system is set to transfer Argentine Pesosto pay for interest and premiums, while userscan transfer tokens between themselves. iii. Financial model
Argentum ’s sucess is tied up to the success ofthe financial team that ensures that the valuedeposited by
Argentum holders is maintainedover time. As explained in II, tokens will becreated only if enough financial opportunitieshave been found. Those opportunities have tocomply with the following criteria:1.
Low risk : normally meaning that theywill have a low return, but they have avery low risk of defaulting.2.
High liquidity : that is, that they can berealized in a short period of time.It is interesting to notice that although theproyect aims to contribute to the estabilizationof the economy, events outside of
Argentum may occur, such as hyperinflation that mayforce the adoption of other rules in order tocontain the damage. In such case,
ArgentumInc. will try to maintain the value on the shortterm based on the opportunities available. iv. User Model
Argentum contemplates distint user roles intension:1.
Saver : He invests the excess excessamounts of his salary, normally in U$Dor fixed-term deposits, in order to savethose amounts to spend them in the fu-ture. He expects - at least - to keep theversion 0.2 CC-BY-NC 3.0 n L M. 4of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019purchase power over time, does not trustthe banking system as he sees a viableoption to keep cash in a safe, due to his-torical reason. He is under pressure fromthe authorities to put those amounts onthe banking system, with negligible results.He is a cautious investor and sees the fi-nancial market as complex and unreliable.He deposits a small amount each monthand transfers out occasionally.2.
Recurrent user : He makes deposits inorder to keep the purchasing power overthe month, expects to make transactionsdirectly from Argentum to other users andany excess stays on the account as savings.He will opt out some tokens to cover costsduring the month, and he is not very in-terested on the long term investment sohe is not competing for the premiums: hejust expects easy of use and keep purchas-ing power over time of the remains of hisoperations. He deposits a greater amounteach month but transfers out frequently.3.
Conservative Investor : He invest sig-nificantly more than a saver, wants to keepthe purchasing power over time and ex-pects to get a moderate interest on hisinvestment. He is willing to invest as longas it is easy and expects the interest andany premiums without any intervention.As his investment power is higher thanthe saver, he is able to access other invest-ment options and prefers stability overmaximizing return, since he is averse torisk. He deposits a lump sum and waitsuntil maturity date.4.
Corporate Finance User : He expectsto lock the exchange rate for a number ofmonths or years. He is very cautious aboutthe result as a failure may jeopardize theproject. However, he knows the marketvery well and looks for the best option tomaintain the purchasing power in the longtime.Although at first sight these user roles arein tension, it is expected to collaborate witheach other on the system due to incentivesalignment. The main difference between saversand conservative investors within the proposedproject is the number of tokens they have intheir accounts. The system is set to turn saversin investors over time.
Argentum is a project that takes very se-riouly confidence and security, so only thosethat can legally own bank accounts on the tar-getted jurisdiction can be users of the system.Furthermore, as to conform to that philosophy,
Argentum holds information details for eachuser to adopt applicable laws. v. Costs
Argentum may charge a small fee for operat-ing and recording costs.Transactions are intended to apply in realtime as long as the blockchain subsystem al-lows its registration. All transactions madebetween users of
Argentum are irrestrictedto the amount that the wallet holds, however,moving to other currencies from it may be re-stricted to the Reserve Requirement[9] of eachjurisdiction per period of time with the cost ofa transaction fee, to avoid bank runs[10] whichmay affect negatively to the currency. If theuser desires to move out to a greater percentagethan said Reserve Requirement, he/she mayhave penalization in time or have the transac-tion costs increased substantially. vi. Governance
Argentum will be governed centrally by acorporation with dual incorporation, havingits headquarters in a globally acepted market,such as United States or United Kindom andhaving a branch in Argentina to operate thetoken, named
Argentum Inc.
The objectives of the proposed currency notcovered by the previous section will be carriedout by
Argentum inc. , to cover the needs ofa controlling entity that ensures their overallsuccess, including the following areas:1.
Currency stabilization : One of thegoals of
Argentum is to offer an instru-ment that has an stable value over time, inorder to protect the purchasing power oftoken holders. Since there are many eventsmay occur that can affect valuation, oneof
Argentum inc. core functions includemonitor and correct any deviation fromthe targetted value.2.
Audit : as part of the educational serviceof the project, the company is set to detectversion 0.2 CC-BY-NC 3.0 n L M. 5of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019and take an action on ”bad citizens” of thesystem, those who may use it in detrimentof the majority. This area will greatlyimprove the credibility, stability and goodname of the project in the long term.3.
Controversy Resolution and Legalsupport : Inetably misunderstandingswill happen and the legal team is set toresolve those situations without scallingthem to other instances, on the base of bona fide amongst token holders. Also,the legal team is set to handle relationswith other entities that take part on thisproject and advices the other areas in legalmatters.4.
Research and Development : Evolveover time is a core principle of
Argen-tum inc. , which will be reinvesting in newtechnologies and improvements to supportits operations, not only creating new al-gorithms to detect financial opportunitiesbut also providing the tools to develop-ers who want to use this project as partof their own projects, as long as it doesnot interfere with
Argentum ’s own ob-jectives.Due to the nature of a Blockchain operationmodel, in which operations can be carried outat any given time
Argentum Inc. is intendedto automate many of the operation areas withalgorithms, ensuring fast and acurate responseto users. vii. Partners
Argentum does not intend to rule out thebanking institutions, for which they can con-tinue their normal operations in a electronicbased economy, offering better earnings on sav-ings than Argentum, loans and storing thetransactions made by their clients as a fail saferesource.In fact, the
Argentum Inc. is set to as-sociate with financial institutions in order toacchieve faster results on an ever changing un-stable economy.In order to ensure fast results to entice usersand a collaborative environment to operate,at least the following roles are meant to becovered by partner institutions: 1.
Identity grantor : a partner in charge ofholding the correlation between the wal-lets and their owners registering vital datato map those wallets in the real world.2.
Retail : a partner in charge of handlingthe relations with general consumers, reg-istering and offering them tokens to pur-chase.3.
Corporate : a partner in charge of han-dling the relations with corporate con-sumers, registering and offering them to-kens to purchase.4.
Financial operator : a partner in chargeof handling the excution on the financialmarket, based on signals provided by thealgorithm trading team.Partners will benefit from offering a newand enticing new product in the markets theyoperate, getting preferent rates and a portionof the earnings. viii. Data Ecosystem
As with any currency, the activity can leadto an inflation rate that - if not properly con-trolled - can lead ultimately to the lack of trustby their users and its demise. As such, as partof the analysis of this project, an algorithm hasbeen created that finds opportunities with USDollar futures, offered by ROFEX[11], yieldingan impressive yield in the back testing simula-tions.Nevertheless, it is important to remark thatalgorithms have a very high wear and tear [12]cost, so an ongoing effort to maintain and im-prove algorithms will be needed. To that ex-tent, the system is expected to provide a dataanalysis platform in which any user can down-load a data sample, develop an algorithm andget a reward based on the results. Under thisschema, registered data analysts will be trainedwith sample data (which of course is of no usein the real world), and will be showcased to Ar-gentum and other organizations to get betteroportunities. Some experiences have been al-ready implemented, most notably Numerai[13].This data model is intended to create a ”dataecosystem” with the best talents in each econ-omy, which will help to further ensure the ul-timate success of the project. Whatismore,version 0.2 CC-BY-NC 3.0 n L M. 6of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019
Figure 3:
Disposable Amount the success of the project may mean that bet-ter algorithms can be developed not only forArgentum but for other, riskier, projects. ix. Implementation Stages
It is clear that such a fundamental developmentcannot carried in short time or alone, as it willrequire the joint effort of numerous actors tobe successfull. An outline can be seen in Table ?? .The main factor to consider is that -in orderto make sure that it is stable over time- duringthe setup period Argentum will constitute ahigh risk fund with negative returns.Also, a deep monitoring of the
Argentum in circulation will be conducted in order tomake sure that the demand meets the Argen-tum offering using tools such as disponibiliza-tion and rebuy . In this context, rebuying willbe done when users move out of
Argentum and selling is done to banking institutions bymeans of depositing fiat currency as it can beseen in Figure 3.As such, the final user, who buys
Argen-tum from a banking institution, will ultimatelyexperience two things: a currency that followsthe inflation pattern, and a return made onfixed periods made by the financial team onhis/her account.
IV. Associated Products
Argentum represents the core project, we con-sider that it is - by itself - not very useful with-out projects that use it as its foundation. Infact, since
Argentum ’s mission is to maintainthe purchasing power over time, it is the per-fect tool to create a set of products for a morecustomized experience. For that reason, weenvision that the implementation will go along with two associated projects, namely
Aurum and platinum , being those projects the onethat will drive
Argentum to success. i. Aurum
Aurum is meant to provide a long term, lowrisk saving strategy for the working class, lever-aging most of its functionality in
Argentum .Unlike
Argentum , it is customized to guideits holders into saving, producing a premiumbased on performance on maturity date, whilemaintaining its value over time like
Argen-tum . i.1 Key differences Social Aim : The main motivation forthis token is to provide a tool for middleclass citizens of unstable economies to beable to harness the financial opportunitieswithout a direct involvement in the marketto allow them to maintain the purchasingpower of their savings over time.2.
Rules :(a)
Saving Rule : Aurum valuation ispegged to the Argentine ConsumerPrice Index (IPC es-CPI en)[3],which is the recommended inflationproxy in the world[4, 5] for house-hold expenditures. So,
Argentum will be a constant (deflected) valua-tion measure for Argentina’s goodsand services, which is considered use-ful in countries with high inflation .Along with this, Aurum is intendedto pay a moderate interest on thecurrency, around 2%, which the userwill see as an incoming transactionto his/her account.(b)
Investment Rule : Purchase of
Au-rum will be regulated by a monthlybidding process. Users who acquiredtokens through the bidding processare eligible for a premium. For thosecases, ten semesters after the pur-chase, users are entitled to receive upto a premium rate (around 70%) ofthe net position of the proportionalearnings amount. In Argentina, for example, real state and capitalassets are commonly traded in U $ D . version 0.2 CC-BY-NC 3.0 n L M. 7of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019(c)
Aurum Rule : Aurum monthlypurchase price will be defined by amethodology explained in i.2 withthe aim of penalizing speculation andconcentration of purchases. Thatis, those who wish to acquire largeramounts of
Aurum , will receive ahighest purchase price. This will dis-courage acquisitions of
Aurum forspeculative proposes.Following this rule, the objective pro-posed by
Aurum is to provide ad-vanced financial tools to commonpeople, previously available only tohigh performance individuals andcorporations, in order to promote sav-ing habits.3.
Permanence bonus : In order to moti-vate users to store their wealth in
Argen-tum , a bonus price will be in place withthe excess earnings resulting from the fi-nancial operation, as indicated in sectionII.4.
Secondary Market : Although transac-tions amongst
Argentum users are ex-pected, they will not be encouraged inorder to incentivate savings. i.2 Monthly bidding
The mensual bidding is the process in whichinterested users are able to purchase coins atthe lowest cost. The offer to the public is de-rived by the investment oportunities predictedand not related to the historic returns. Thebidding will be a fair process to allow peopleto access to the coins in the same conditions.Both savers and investors access to the samebidding.Following
Argentum ’s philosophy, whichdisponibilizes a financial tool for the aver-age user, the bidding process inspired on theD’Hondt methodology[14], named after Bel-gian mathematician Victor D’Hondt, who de-scribed it in 1878 for proportional allocationof parliamentary seats to the parties.Initially, the monthly bidding can be de-scribed as follows, although it can be adjustedbased on the experience and the market, a taskthat will be undertaken by
Argentum Inc. expression of interest : Users depositsthe compromised saving/investement am-mount in AR $ into their accounts strictlybefore the bidding time. investors mustexplicit a discounted rate for access tocut the process will be implemented in 3stages.The bidding will happen initially at thebeggining of the second week. In suchevent, the user deposits an amount in the AR $ account and sets the price he/she iswilling to pay. The system then runs a deconcentrative bidding , a process designedto give equal opportunities to both saversand investors.2. bidding : Users deposit the amounts topurchase the token and set the maximumprice they are willing to accept.3. execution : The system decides how the Argentum will be distributed based onbehaviour (that is, if the user is a goodplatform citizen) and price. During thisstep,
Argentum Inc. will charge for thecoins distributed, refund the remainingamount and transfer them to the bidder’swallet to complete the operation.All premiums and interest payments arebased on historic earnings and doesn’t takeinto account the investment oportunities andare paid on
Argentum (expansion model) or AR $ (contraction model) on fixed periods tobe determined by Argentum Inc. . ii. Platinum We that some holders will be less risk-adverseand thus a customized product can be createdfor them, which allow them to get a betterreturn on investment, at the expense of therisk.This project is key to
Argentum , as it canleverage on the opportunities metodologies andalgorithms that discovered to be are far toorisky for
Argentum operation. ii.1 Key differences
1. Although
Platinum valuation may bepegged to the Argentine CPI, it will pro-vide a return on investment based on to-kens owned and their share on the profits.version 0.2 CC-BY-NC 3.0 n L M. 8of 14rgentum: a collaborative saving and investment platform for unstable countries • December20192.
Platinum can be transferred betweenholders freely, and have the same sellingrestrictions as
Argentum .3.
Platinum uses all the infraestructurethat is developed for
Argentum , as longas its fit, including riskier algorithms andmethodologies.4. The underlying fund can be deposited ei-ther in
Argentum or other assets thatmay not be as liquid as in the case ofthe
Argentum , allowing investment inriskier, long term assets.
V. Benefits
Argentum is intended to:1. Mitigate transaction costs between thebanking institutions2. Isolate citizens from the local economicinstabilities, providing a nearly risk freeeconomic tool to store wealth and save sur-plus earnings for future use, without theneed of entering on the financial market.3. Create a base from which other projectscan build upon, providing goods and ser-vices with the confidence that they willmaintain the value over time.4. Help to create a paperless economy in asafe way, implemented on best practices.
VI. Conclusion
Following the study, it is clear that there is alack of a financial instrument to empower themiddle class of unstable countries. In this orderof ideas, Argentum may be a viable optionto allow common citizens to save and spendwithout the worries of a major economic eventthat may damage their financial stability. Assuch, Argentum aims to:1. Mitigate transaction costs between thebanking institutions2. Isolate citizens from the local economic in-stabilities, providing a risk free economictool to store wealth and save surplus earn-ings for future use, without the need ofentering on the financial market. 3. Help to create a paperless economy in asafe way, implemented on best practices.With that in mind, it is feasible to indicatethat
Argentum may be a way to stabilize aneconomy in a fast and secure way, based onconcepts that can be replicated nearly withno effort in different jurisdictions, while at thesame time provides a tool to build upon otherprojects.
VII. Anexes i. History of Currency i.1 Barter
Barter is a system of exchange where goodsor services are directly exchanged for othergoods or services without using a medium ofexchange, such as money[15], and was the firstsystem implemented by societies to acquire orsell in ancient times. Although it may be suf-ficient for many small scale economies, it isextremely difficult to control and - although inuse in some jurisdictions, normally as a mea-sure of emergency - it tends to be unstable overtime due to the fact that is nearly imposibleto value one good based on any other. Someof its more clear limitations include:1.
Double coincidence of wants . Forbarter to occur between two parties, bothparties need to have what the other wants.2.
There is no common measure ofvalue . In a monetary economy, moneyplays the role of a measure of value ofall goods, so their values can be assessedagainst each other; this role may be absentin a barter economy.3.
Indivisibility of certain goods . If aperson wants to buy a certain amount ofanother’s goods, but only has for paymentone indivisible unit of another good whichis worth more than what the person wantsto obtain, a barter transaction cannot oc-cur.4.
Difficulty in storing wealth . If a soci-ety relies exclusively on perishable goods,storing wealth for the future may be im-practical.version 0.2 CC-BY-NC 3.0 n L M. 9of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019 i.2 Currency
As a consequence the creation of a currencyoccurred. A currency (from Latin currens )refers to money in any form when in actual useor circulation as a medium of exchange, espe-cially circulating banknotes and coins, and ina broader sense to the system of money (mon-etary units) in common use in a jurisdiction.Its history go up to 2,000 b.c., used firstin Mesopotamia and then Egypt as a form ofreceipt representing grain stored in temple gra-naries. In this early stages, metals were used assymbols to represent value stored in the formof commodities. However, it had a fundamen-tal flaw: in an era where it was not possible tostore assets, the value of a medium could onlybe as sound as the forces that defended thestore. To solve that, a number of treaties werestablished to allow merchants’ safe passage butthey were not enough to solve the issue. As aconsequence, metal itself became the store ofvalue being mined, weighed, and stamped intocoins. Coins could be forged, but at least someguarantee was given to the taker that a certainamount of the metal was received, which leadto the creation of weight units for them andcreated a unit of value that, in turn, lead tothe creation of banking.During the Tang and Song Dynasties inChina, banknotes were created as a meansto relieve merchants from exchanging largeamounts of coins, implemented later in nu-merous regions. They had some advantages(they reduced the need of transporting largeamounts of money, it facilitated loans, enabledthe sale of stock in joint-stock companies, andthe redemption of those shares in paper) butthey had also disadvantages: as the note hasno intrinsic value, there were no constraint inprinting more notes than they have specie toback them, which in turn created a new infla-tionary pressure. As a consequence, banknoteswould often create inflationary bubbles whichcould collapse if people began demanding hardmoney, causing the demand for paper notesto fall to zero. However, it was also very ad-dictive, as the speculative profits of trade andcapital creation were so large.This situation lead to the gold standard, bywhich every note printed had to be backed upby precious metals. Most of the industrializedworld was in some form of it by 1900. By the end of the XX century all countries are in someform of of floating fiat currencies in the sensethat the bank note is no longer backed up byprecious metals anymore. Fiat Currency canbe defined as an intrinsically valueless objector record that is widely accepted as a meansof payment. i.3 Alternative Currency
An alternative currency (or private currency)is any currency used as an alternative to thedominant national or multinational currencysystems. They are created by an individual,corporation, or organization, they can be cre-ated by national, state, or local governments,or they can arise naturally as people begin touse a certain commodity as a currency. Mu-tual credit is a form of alternative currency,and thus any form of lending that does not gothrough the banking system can be considereda form of alternative currency. ii. Crypto Currencies
Crypto Currencies are a type of AlternativeCoin, based on concepts like encryption anddecentralized databases. Their most prominentexponents are BitCoin[16], Ethereum[17] (bothbased on the BlockChain), IOTA[18], based onthe Tangle, and the long awaited Libra [19].As with every currency, a number of disad-vantages are present, including the following,as indicated by the Stanford university[20]:1.
No Buyer Protection : When goods arebought using Crypto Currencies, and theseller doesn’t send the promised goods,nothing can be done to reverse the trans-action. This problem can be solved usinga third party escrow service like ClearCoin,but then, escrow services would assumethe role of banks, which would cause Bit-Coins to be similar to a more traditionalcurrency.2.
No Valuation Guarantee : Since thereis no central authority governing theCrypto Currencies, no one can guaranteeits minimum valuation. If a large group ofmerchants decide to ”dump” any of themand leave the system, its valuation will de-crease greatly which will immensely hurtversion 0.2 CC-BY-NC 3.0 n L M. 10of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019users who have a large amount of wealthinvested there. The decentralized natureof most Crypto Currencies is both a curseand blessing.3.
Valuation Fluctuation : The value ofmost Crypto Currencies is constantly fluc-tuating according to demand. As of June2nd 2011, one BitCoins was valued at $9.9on coindesk.com . It was valued to be lessthan $1 just 6 months ago. This constantfluctuation will cause BitCoin acceptingsites to continually change prices. It willalso cause a lot of confusion if a refund fora product is being made. For example, ifa t shirt was initially bought for 1.5 BTC,and returned a week later, should 1.5 BTCbe returned, even though the valuationhas gone up, or should the new amount(calculated according to current valuation)be sent? Which currency should BTC tiedto when comparing valuation? These arestill important questions that the BitCoincommunity still has no consensus over.4.
Built in Deflation : This is speciallyharmful in BitCoins, since the total num-ber is capped at 21 million, it will causedeflation. Each BitCoin will be worthmore and more as the total number ofBitCoins maxes out. This system is de-signed to reward early adopters. Sinceeach BitCoin will be valued higher witheach passing day, the question of whento spend becomes important. This mightcause spending surges which will cause theBitCoin economy to fluctuate very rapidly,and unpredictably. However, due to thelack of protection, they normally sufferfrom5.
Energy consumption : In the case ofBlockChain based Crypto Currencies, dueto the process needed to produce a newhash, there is a huge energy consumption,which creates serious issues in most areas.For example, although it is expected to de-cline over time, BitCoin was consuming inJuly 2017 as much energy as Denmark[21].In January 2018, it was set to consumemore than Argentina[22].6.
Storage needs : Due to the character-istics of the BlockChain in which storesevery single object in every instance of thedatabase, its data storage needs are huge, creating a bottleneck in processing thestorage for new objects. This, althoughis not a serious problem while the use ofthe Currency is marginal, over time willmake storage of the full database nearlyimpossible to the average user, defeatingthe purpose of total transparency. iii. Currency Stability
One of the main tools Governments haveto deal with economic issues are collectivelyknown as Monetary Policies, and they are nor-mally carried out by the Central Bank or Cur-rency Board of each Jurisdiction, often target-ing an inflation rate or interest rate to ensureprice stability and general trust in the currency.Generally speaking, the monetary policies canbe:1.
Expansionary : it happens when theeconomy is stimulated by maintainingshort-term interest rates at a lower thanusual rate or increasing the total supplyof money in the economy more rapidlythan usual, It is traditionally used to tryto combat unemployment in a recessionby lowering interest rates in the hope thatless expensive credit will entice businessesinto expanding. This increases aggregatedemand (the overall demand for all goodsand services in an economy), which boostsshort-term growth as measured by grossdomestic product (GDP) growth. Expan-sionary monetary policy usually dimin-ishes the value of the currency relative toother currencies (the exchange rate), thushaving an inflationary effect.2.
Contractionary : this case maintainsshort-term interest rates higher than usualor which slows the rate of growth in themoney supply or even shrinks it. Thisslows short-term economic growth andlessens inflation. Contractionary mone-tary policy can lead to increased unem-ployment and depressed borrowing andspending by consumers and businesses,which can eventually result in an economicrecession if implemented too vigorously.Nevertheless, during economic hardshipsGovernments tend to fund their deficit by ex-panding the economy, which rapidly can outversion 0.2 CC-BY-NC 3.0 n L M. 11of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019of control, depreciating the currency and seri-ously undermining its credibility in the market.When this happens, as the currency is unableto retain value over time, citizens need to findways to store wealth, aggravating the situation,which can lead to what is called hyperinfla-tion. Examples can be found in Argentina[23],Rusia[24] and now Venezuela[25]. iii.1 Stable Coins
However, when thinking on stability coins onthe Crypto world, it is possible to say that itis a cryptocurrency that is pegged to anotherstable asset, like gold or the U.S. dollar. It’sa currency that is global, but is not tied to acentral bank and has low volatility. This allowsfor practical usage of using cryptocurrency likepaying for things every single day[6].In that sense, the most common cryptocurrencies, Bitcoin and Ethereum, are veryvolatile, which makes them inconvenient to useon the day to day basis. Price changes area shock to the consumers and prevents themfrom using that coin as an exchange of value.Ideally, an optimal stable cryptocur-rency should have the following four traits:price stability, scalability, privacy, anddecentralization[6]. However, out of themain options in the market today (Tether[26],MarkerDao[27], Havven[28]), all of them arepegged to either the US Dollar or Euro. iv. Argentina’s Case
Argentina’s history with inflation is long andcomplex, leading to what is known as the
Ar-gentine Paradox [29]. Although being a veryresource rich country, its economic situationis highly tied to its political instability, datingback from the 1930s, before which it was wasone of the most stable and conservative coun-tries until the Great Depression, after which itturned into one of the most unstable.At the end of the 80s decade, an hyperin-flation event arose, which seriously hinderedthe economy, forcing government to lock theexchange rate in what it was known as ”con-vertibilidad”. It lasted until 2002, which afterthe harsh economic crash of 2001, when itwas replaced with a dirty floating exchangerate which created a serious imbalance in the economy, which at this time, in 2018 is stillaffecting the day to day life of its residents. Asof 2018, Argentina - while making great effortsto stabilize the economy are being made bythe Goverment - remains unstable.In Argentina there are a number of elementsthat threatens the economic and monetary sta-bility, including:1. Negative real interest rate.2. High Inflation levels, occasionally withhyperinflation[30].3. CPI Manipulation, with negative effectson the long run[31, 32].4. Recurrent devaluation events, with theconsequent overshooting and specula-tion over the exchange rate equilibriumvalue[33].5. Recurrent defaults, the last one in2001[34], resulting in a general lack ofconfidence on the Banking and Financialmarkets, among common users.6. Pendular changes in economic and mone-tary policies, including the Central Bankmission and role on the market, whichcreates instability[ ? ].As a consequence, low risk investment in-struments are not common which makes nearlyunfeasible or too complex for the common userto maintain the purchasing power in the longrun. This paper addresses the issues exposedwith the aid of machine learning[35] techniqueson the financial market and blockchain relatedtechnologies[36] for the accounting and userside. v. Argentine Financial Landscape After a contraction of 1.8% in 2016 and 2.9% in2017, Argentina now sees itself inmersed into amonetary crisis that required an InternationalMonetary Fund program of US$50.000 Millionin April to help maintain the current exchangerate with no success, which in turn rushedArgentines to rush for Dollars, since they areperceived as the way to mantain the purchasingvalue over time.version 0.2 CC-BY-NC 3.0 n L M. 12of 14rgentum: a collaborative saving and investment platform for unstable countries • December2019
References
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