BRICS Digital Currency: Cryptocurrency on a Public Blockchain | Hacker News Reader

BRICS Digital Currency: Cryptocurrency on a Public Blockchain

illya.sh

7 pointsiluxonchik43 comments

As an economist, it's clear to me that the article has been written by someone who's thoroughly unfamiliar with the subject matter of economics. If you want to write about these topics, and be taken seriously, you need to study a lot, and I mean A LOT, before you can even begin to understand the challenges posed by a monetary union, let alone coming up with a brand new design for a monetary system. I don't mean to be harsh, but this is the way it is.

Hello economist and thank you for your feedback,

You've made claims questioning my knowledge level and suggested that my opinions should not be disregarded, yet you haven't presented any arguments on where exctly my economic understanding is ill.

Could you please expand on those arguments?

Well, I don't even know where to start. I will give you just one example:

"The BRICS currency supply formula aims to maintain a constant or increasing value of the currency, while having a dynamic supply. This is achieved by adjusting the supply based on the economic performance of the member nations, ensuring that the value of the BRICS currency reflects the underlying economic value of the BRICS bloc."

The underlying assumption here, and through the entire article, is that the supply in circulation is controlled by the issuer of the currency. In a modern economy (i.e., one with a financial sector) money is primarily created by the private banking system, in a decentralised fashion, not by the central bank. As a result, the central bank, which is technically the issuer of the currency (more precisely, the issuer of reserves) does NOT have direct control of the money supply. Instead the central bank attempts to influence the money supply through interest rates. If you replace the central bank with something else, you're going to have the same problem. You'll have to figure a way to control the money supply, in an indirect fashion. Yet in the model that you present, the issuer has direct control of the money supply, indicating a complete lack of understanding on your part about how the monetary system works.

Hello and thank you for getting back on this,

I feel that there may be a misunderstanding on how you understand the BRICS digital currency to be implemented. I'll address your comment point-by-point:

0. The statement that commercial banks create more money that private banks is misleading. Since 2000, The U.S. government debt grew by about $25+ trillion from 2000 to 2023. Commercial bank loans increased by about $7+ trillion in the same period. Governments resort to the central banking entity directly for the issuance of debt through securities. I am citing the USD data, as it's available in detail and clarity directly from the government sources, like FRED.

1. You are describing a part of to the process by which the money supply increases, which indeed can be done by commercial banks. This is what happens when one gets a loan for a property or kickstart your business. While this is true, I don't understand how it goes against anything in the article. You appear to downplay the fact that the *commercial banks have to strictly abide by the rules set in place by the central bank*, namely on topics like overnight exchange rates, the minimum reserve factor to kept at the central bank, and the eventual premium on those reserves. For example, in the EU we've had negative central bank interest rates for a long time, until recently. This meant that commercial banks were incentivized to loan the money out instead of keeping it stored. In the US, commercial banks were incentivized to purchase government debt securities, like bonds, by not having to take a "haircut" on their value. As such, the commercial banks can be seen as a direct extension of a central bank.

2. It is incorrect to say that the Central Bank "does NOT have direct control or the money supply", and you appear to contradict this assertion when in the next sentence when say that "the central bank attempts to influence the money supply through interest rates". Central bank is the entity that influences the money supply the most, as I've described in the previous point. If you disagree, please explain the correlation between the money supply (e.g. M2), and the central bank interest rates. FRED has this data accessible in an easy to understand manner: https://fred.stlouisfed.org/

3. I'm not sure how far along you've got in the article, or how familiar you are with Automated Market Makers (AMM), but the dynamic supply can be implemented without having a central bank in a traditional sense, as it can all be controlled by a smart contract. In the formula `M = ForT + FDI + PI + ForEx + G&EX + InterSec + Der + ForDeposit + EuroCurrency + MTransfer + Etc`, every argument is a financial derivative, and a smart-contract blockchain + ZKP is the perfect way to concretize them.

4. If by "the issuer has direct control over the money supply" you are refer to the smart contract issuing the currency, then you are correct! A point that you may be missing is that *nobody can influence this process, beyond what is encoded in the code of the smart contract*. If the smart contract has a rule where some "magic entity" can create supply at will, then of course that entity will have full and direct influence on the supply. But this is neither what the article proposes, nor how the BRICS currency is being designed.

Let me know if some parts were unclear. Looking forward to continue this discussion.

To be clear, the issuance of debt by the US government does NOT increase the money supply. It would if the US government took loans from the banking system, but that's not how governments get funding. I'll leave it here, because I don't think that this conversation is going to be productive for either of us. Don't take it personally.

In the US up until about the 20th century, the government was known to only take loans from the banking system in times of war.

My goodness your assertion that US government doest NOT increase money supply is your own thesis? It is so strange seeing US government borrow money and then no inflation (current inflation must be imaginary!)! FED now DIRECTLY buy American T-bills (their excuse is to keep the liquidity going). FED create money out of thin air to give to Yellen to spend! You seriously need to have friends in FED to know what hanky panky things they are doing in there right now. Textbook and what is happening is totally different. I do take it personally when misinformation like yours disguise as "expert" without observed realoty to backup (maybe some links and numbers which by now has never been auditted by any 3rd party similar to Fort Knox).

Central bank and government have been in direct control of money supply for the last 2 decades. Your understanding seems to be glaring missing on that. Whatever econ textbook you have been reading or learning from must be written pre-Clinton time. Just look at how much Americam Treasury pumping money in from direct Fed purchases of T-bills (printing money via phone calls internally or else Jerome will get retaliated by FBI). The situation over BOJ is even worst as they have been doing this internal phone call and then print in the last 3 decades. Check their debt vsd gdp! If private banking can print money on their own, why would they bother with centralized interest rate announcement? Just print and people will flock to it instead of Jerome!

If you want to discuss the monetary system, you should at least have a basic understanding of it. Otherwise you're wasting everybody's time, including yours.

This articles covers how the proposed BRICS digital currency can be realized as a cryptocurrency, thus challenging the claims made in the 'Digital Money Options for the BRICS' paper. The article explores how a public blockchain with smart contracts, combined with Zero-Knowledge Proof protocols like zkSNARKs and zkSTARKs, provides a natural fit for implementing the BRICS currency. It covers how the dynamic supply mechanism, legal compliance on-chain, and the integration with DeFi and zkLocus for authenticated private geolocation can be materialized. It also explans how the BRICS nations can leverage these technologies for a more decentralized, interoperable, and efficient financial system aligned with Web3 principles.

I’m curious to hear the community's feedback on this. Is there something you disagree on?

Unless it has AI it’s not worth our attention. Blockchain is so 2021

I'm not sure how far along you got in the article, but have you ever heard about zkML?

If you have a centralized authority of any kind doing the issuance of the asset, managing the infrastructure, and doing redemption, you don't need a blockchain. It's truly pointless.

You don't have one authority, you have multiple issuing authorities (the BRICS countries) with sometimes competing objectives. It's in the interests of these countries to have a "trust free" mechanism in the sense that it minimises the ability of the other countries to screw them over.

Yes, indeed! I would also expand on how the implementation of this on a public blockchain, expands the "trust free" feature to the general public, as derivatives can be easily created on a smart contract based blockchain.

Hello and thank you for your comment.

I'm not sure how far along you got in the article, but I cover all of these points in the "BRICS Digital Currency as a Cryptocurrency on a Public Blockchain" section. Blockchain is utilized as an authenticated, integrity assured, and trustless state machine and storage layer controlled by a programmable execution layer.

The issuance the currency is performed on a public blockchain through a smart contract. In the article I also cover how the proposed solution would not require any infrastructure management at all. The infrastructure is the blockchain, and the blockchain is run publicly via a consensus protocol. If you are curious about how this is possible in more detail, check out our whitepaper on zkSafeZones - a solution aiming to reduce civilian casualties in conflict areas, by leveraging zkLocus, Zero-Knowlegde protocols and the blockchain: https://zklocus.dev/zkSafeZones/

Still regarding the issuance of the asset, one can leverage zkSNARKs or zkSTARKs to trivially bridge data onto the blockchain from any source, such as your typical HTTPS endpoint. And thanks to their verifiable computation model properties, the correctness of this process can be verified by any third-party, including you and me.

Looking forward to your reply.

If the value of the currency is jointly tied to the economic performance of all member states, I wonder if that then lessens the penalty of bad economic decisions of worse performing member governments?

If designed & implemented correctly - absolutely. In fact, as I outline in the article, this is one of its most exciting value propositions. I'm not sure how far along you've got, but your question is answered in the following sections:

- Supply, Demand, Value & Oranges

- BRICS Supply During Economic Boom

- BRICS Suppply During Economic Downturn

I dont understand enough about economics to confidently argue about this. But it does seem laughable to me to expect BRICS to do anything cohesively.

China/Russia are not friends, they do not trust each other and even recently China was stealing land back from Russia. India is very much out for itself and has made a habit of fence sitting and flipping positions on a whim.

UAE are power brokers and not a mover and shaker on their own.

Most the rest of BRICS are powerless or fickle or too broken to reliably make changes or be relied upon if changes are instigated by the more senior members...

Cryptocurrencies are not going to change any of that.

They dont have to do things cohesively. They just have to not use USD to transact and use BRICs dollars (or digital yuan or other members money to transact DITECTLY). If they can't, then use gold. Right now, many paper gold traders got spooked because every gold transaction must be deliver physically to Shanghai. This has never happen before where physical deliveries usually waived and then paper gold just go back into the system recycled. If you want to buy oil, you tap on Russian shadow fleet via rubble-yuan. This is NOT recorded in any western books. If you want to buy Tesla and BYD, the final conversion rate remit into China is Yuan. If you need refined shadow fleet oil from India, you pay Indian in rupees. For the first time massively since 1970s, USD no longer been transacted actively in Asia. You can check financial data now, a huge 40% gone missing and had to be estimated because no indication of USD transactions. There is now no direct data how much Russian-China doing business with other than estimated. The same goes with BRICs members internal payments of non-USD since mid last year. The closest estimate is done via accounting of what USD transactions should have "grown" or "loss" year over year. And that is where 40% comes in. Get a friend in FED. You will know more.

Why would anyone trust anything where Russia is involved. It's like "currency of the Axis" or something.

Could you please expand on your concerns, namely in the context of the proposed implementation of BRICS currency as a cryptocurrency?

BRICS exists as an attempt by Putin and Co. to reduce dependency on global economy. Given Putin is waging what's basically a WW III, BRICS is simply his tool of war (not really effective and DOA in practice, but still). So as above, any kind of currency plans for it should be seen through that context.

While I appreciate your reply, it feels that you expressing your subjective view on geopolitics, rather than expanding on the shortcomings of the BRICS digital currency, when implemented as a cryptocurrency on a public blockchain as described in the article.

Perhaps you could elaborate on how precisely you see proposed architecture as a misfit, and explain how existing solutions are better?

Thanks!

You can't separate one from another. It's like imagine Nazi Germany would have invented "currency for the Axis". That's about it. What's the point in debating its technical merits, except for analysis of how it's used as a weapon.

Of how it's used as a weapon?

I already explained it above, but to summarize: depending on global economy undermines Putin's ability to wage war. Having self sufficient economy enables his war. He can't be 100% self sufficient in practice, so he wants to widen it to his current and potential allies economically (that's the whole idea of BRICS in the nutshell).

Having an effective currency therefore would be Putin's tool of war, so a weapon in practice.

I understand that you are expressing your political views, however you still fail to explain how exactly the BRICS digital currency as a cryptocurrency on a public blockchain supports the claims that you've made.

My goal is not to argue. I'm genuinely interested in the feedback. We are building the next era of finance, one that is more transparent, decentralized, trustless and inclusive. By employing mutual cooperation and iteration, we can move towards a better future more swiftly and efficiently.

How about we start with decentralization? Pick your FIAT currency of choice, and tell how many entities have the absolute control over that currency's supply. Now let's compare it to the BRICS digital currency, as presented in the article. Big difference, right? :)

That's not political views. That's just what it is. If you want to engage in demagoguery about technicalities of the currency, overlooking the actual goal behind it (assisting Putin's war) especially with masking it under mutual cooperation ideas - it's a waste of time since you simply sound like Putin's troll who poses as an intellectual.

Geopolitics is obviously involved. And since trust is the most important aspect when it comes to saving in a particular asset, I wouldn’t save my money in something issued by either Russia or China.

BRICS even invited my country, Argentina, to join. I wouldn’t save in a currency made by them until they get it together and keep it reasonably managed for a couple of decades. That’s how little trust they deserve from me at this moment when it comes to investing.

If you don't like Russia, you should prefer BRICs adopt a decentralised currency instead of just using the ruble for west-sanctioned transactions like currently. Because if the ruble becomes the BRICs reserve currency, it would give Russia more economic power similar to how the US dollar being the global reserve currency gives the US an advantage.

Not really. Ruble is completely dead to begin with for all intents and purposes. Decentralized currency is simply better in comparison. So, yeah, they should totally adopt the ruble ;)

I will refer you to my comment above. The BRICS currency does not have a "reserve" currency, and as such the Ruble is not a reserve currency. A more correct way of thinking is of economic health of the Russian Federation and other member countries is used a "collateral" for the BRICS currency. The "economic health" is defined by algorithmically through a formula. You can find the formula in my comment above and of course in the article.

I'm not interested in the economic health of Russian Federation which is a fascist state with a maniac running it. That's why I'd say anyone sane should be against any projects like BRICS too.

Based on the discussion that we've had I'll assume that you don't have any actual criticisms regarding the value-propositions of the BRICS digital currency as a cryptocurrency on a public blockchain.

Arguments in the form of "I dislike X, therefore everything associated with X is bad" are not very useful. I'll refrain from answering to any follow-ups, unless they pertain to the topic of the article.

I will however, be glad to re-engage on queries related to the BRICS digital currency as a cryptocurrency on a public blockchain.

>actual criticisms regarding the value-propositions of the BRICS digital currency as a cryptocurrency

Seems like an extra layer of non-value that could be leveraged by enthusiasts to more thoroughly extract any real value that may turn out to be underlying the currency itself to begin with, or any time into the future. To everyone elses' disadvantage.

And then there's the really negative side.

Currencies have been seeking shelter from time to time since for them in some ways the cold war never ended.

Currency war has always been rumbling in the background, even as people did a worthwhile amount of disarmament. The Euro came along and there was reduced diversity of currencies to argue over.

Now it's almost like some of the currencies are at each other's throats along with the political parties they are attached to or invested in.

You can't separate the currencies and the politics that go along with it.

And more politicians who are non-advanced by nature are wielding destructive power and triggering the need for re-armament.

There goes non-war currency.

As if it ever came home to roost.

The BRICS currency does not have a "reserve currency". You are thinking in terms of existing currency structures, where a single currency is treated with more importance that other currencies. The BRICS currency itself, is a derivative of the currencies and economies of the member countries.

In the article, I present the formula for the calculation of the supply of the BRICS currency:

`M = ForT + FDI + PI + ForEx + G&EX + InterSec + Der + ForDeposit + EuroCurrency + MTransfer + Etc.`

Each component in this formula represents a key economic indicator:

- `ForT`: Foreign Trade, encompassing the total value of exports and imports between the BRICS nations and the rest of the world.

- `FDI`: Foreign Direct Investment, capturing the inflow and outflow of investment capital.

- `PI`: Portfolio Investment, including investments in stocks, bonds, and other financial instruments.

- `ForEx`: Foreign Exchange Transactions, representing the volume of currency exchanges.

- `G&EX`: Gold and Foreign Exchange Reserves, a crucial component that partially backs the value of the BRICS currency with an asset holding intrinsic value - gold.

- `InterSec`: International Securities, such as bonds issued by BRICS nations in international markets.

- `Der`: Derivatives, financial contracts deriving their value from underlying assets or benchmarks.

- `ForDeposit`: Foreign Deposits, the total value of BRICS currency held in foreign accounts.

- `EuroCurrency`: Eurocurrency Market Operations, capturing the BRICS nations' activities in other currency markets.

- `MTransfer`: International Money Transfers, the flow of funds between the BRICS and other nations.

- `Etc.`: Other relevant economic indicators as needed. The article doesn't develop on the specifics, but you can imagine one of those factors as being the country's Bitcoin reserves.

As such, the supply is algorithmic (akin to UniswapV2's approach of`x*y=k`) and the formul aims to create a BRICS currency supply that dynamically responds to the collective economic state of the member nations

The most likely candidate would be the Yuan, not the Rubble

Neither Yuan, nor Ruble, nor gold, nor Bitcoin can be a "reserve currency" for the BRICS digital currency, as I've explained in the comment above. You could make an argument for the BRICS currency becoming a reserve currency, but not for it having an internal "reserve currency". One of the main goals of the BRICS is to allow the member countries to trade in their own local currency, which contradicts the idea of existence of a "reserve currency for BRICS".

nobody cares... BRICS is barely holding together and HN is crypto skeptic

Democracy will always triumph over authoritarianism

Populists and dictators have to stick together you know.

What do you mean?

Russia, China, Iran, and North Korea primarily are working increasingly more together against The West and democracy.

BRICS is their attempt at something of an economic group with some other nations, but it's not working out as well. When you don't uphold the rule of law, countries that do will outperform you and then people who want to do better will leave you for the rule of law group

Reply on news.ycombinator.com