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The BR2EX And The Gold Standard Comeback

Currencies emerge as an important simplification vehicle for the human need, generated inside the market’s economy.

Notwithstanding, the daily handling and the comprehension as something stablished, the current model is consequent to a series of historical conquests, resulting in the contemporary system’s formation, which continues to evolve.

As said by Polanyi 1, the construction of a market society, required for the operation of an economy market, was accompanied by the creation of fictional goods, among them, the currency. Men’s tendency to exchange, permute and negotiate is based not in a natural tendency, but in the developed market model, especially, during the 13th century.

Understanding that currency is a fictional good and the product of an economy market is important to distinguish its role in human relations, as well as its price variation, taking under consideration that currencies were for a long period of time monopolized by the State.

The tendency to permute is, since Smith2, taken to an extreme and exalted by the classical economists. Now, more than ever, before the plurality of goods that awakens the human desire, the necessity to have exchange intermediaries is consolidated, due to the economy market formation.

In a community that does not possess a currency, three main difficulties can be observed:

(i) finding people with similar exchange intentions, meaning a person who possesses the desire to acquire another’s good and the latter, who also wants to acquire the good possessed by the former, both willing to discard their coveted goods;
(ii) the arsenal of goods possessed by someone must be quite extensive to enable the exchanges; and
(iii) searching for parity in the goods to be permuted.

In this sense, throughout history various solutions were created in order to simplify the exchange and permute of goods in the capitalist system.

The first solution was the commodity-money (followed by precious metals, especially gold). In this first period, some commodities were elevated to the quality of an exchange instrument, becoming the reference in the permute patterns and functioning as a buying and selling relationship.

The search for perfecting the exchange system and the economic activities’ growth – requiring that they were secure and, at the same time, compatible with the transactions’ velocity – resulted in the general acceptance that precious metals would be the best exchange instrument, elevating the commodities-money’s quality. In this perspective the most utilized commodities, silver and gold, are characterized by their

(i) rarity;
(ii) durability;
(iii) desirability;
(iv) divisibility;
(v) homogeneity

Despite the appointed characteristics, the system continued to seek simplifications and, even though the precious metals coins were generally accepted, they presented some inconveniences, among which were the long distances transportation and the hindrances in large amount payments.

Therefore, a new solution emerges, the bill of exchange, and to replace it, given its indivisibility, the banknotes. The latter were known as “paper currency”, they certified that precious metals were deposited, assuring its carrier the obtainment of the metal quantity stated in the document, the conversion into gold and vice-versa.

In this second period, the convertible paper currency (banknotes) starts being accepted by the State for the release of tax debts, marking the beginning of the currency legal tender.

The nominal value of currencies was, as showed, determined based on the value of gold.

Thus, in its origins, currency as known today only gains acceptance with its reference and conversion in gold.

In such manner, the indivisibility, homogeneity and durability could be guaranteed by the papers independently of any coverage. Although, in the process of accepting the paper as a payment instrument, the requirement of desirability alongside the rarity of gold demonstrated the necessary trust in paper currency circulation transactions.

In this context emerges the so-called gold standard. From then on, the states started the process of centralizing the banknotes emission, becoming the metal reserves administrators. In the context it is worth mentioning the race starred by the European states in search for overseas riches, among which the precious metals.

However, the pressures for monetary emissions due to the increasing need for means of payment within the markets in addition to the crises that occurred at the time, such as the continuous wars, generated inflation situations that took governments to suspend convertibility as a temporary measure and that, at some point, started to be implemented with an increasing frequency leading to the installation of the currency’s forced course.

In the 20th century, especially 1944, the Bretton Woods agreement obligated nations to adopt an exchange rate indexed to the dollar, the latter had its value linked to gold.

In 1971, the United States government abandoned the gold standard, making the signatory states national currencies even more related to the dollar. In this moment, the currency becomes fiat3, given that its value is completely bound to the trust in the currency’s issuing agent.

Nowadays, in the 21st century, with the technological advancements, particularly with the informational revolution brought by the internet, other payment instruments with the potential to be a monetary standard have emerged.

The blockchain usage and the advent of cryptocurrencies, such as bitcoin4, are part of the “internet of money”5 new era, in which the commerce can exist in a more flexible and cheaper way due to the lack of human intermediaries who can guarantee the transactions’ integrity. With the new technology it would be possible to ensure that a digital resource or digital currency unity is not interminably copied or reproduced avoiding the simultaneous dispatch for two parties6.

Inspired in the past and following economys constant evolution, BR2EX brings a distinct alternative, preserving the characteristics that led to the previous systems overcoming and correcting past mistakes.

BR2EX is a new payment instrument, highly stable and flexible, arising gradually and assertively, it is based in the main commodity-money, gold.

BR2EX inserts itself in the continuous search for the improvement of exchange instruments that found in the “internet of money” new era one more possibility for evolution.

The search for the already mentioned gold characteristics, such as stability alongside its historical base and its values are fundamental elements for the creation of a disruptive model inspired by the monetary economys history.

Finding support in gold, BR2EX is a new opportunity for transactions to occur without the need for the parties to deposit their entire trust in a third party.

True trust lies not on political entities, but mainly in gold’s integrity and in the blockchain protocol’s mathematical equations. Furthermore, in times of crises, national currencies tend to lose value whilst people look for security in gold.

Therefore, gold is the symbol of security and stability and it presents itself as a more obvious alternative for indexing a stablecoin with the intention to create an innovative payment system to attend crypto economy efficiently.

BR2EX, the past and the future united for the construction of a new paradigm.

REFERENCES

1 POLANYI, Karl. A Grande Transformação: As Origens da Nossa Época. 2ª ed. Rio de Janeiro: Compus, 2000, p.195.

2 SMITH, Adam. A riqueza das Nações: uma investigação sobre a Natureza e as Causas da Riqueza das Nações. Tradução Getulio Schanoski Jr. São Paulo: Madras, 2018.

3 Os Estados Unidos são o último país a abandonar de vez o padrão-ouro. A ordem mundial passa a adotar novamente a moeda fiduciária. Contudo, agora, sequer o dólar é minimamente lastreado no ouro.

4 NAKAMOTO, Satoshi. Bitcoin: A peer-to-peer electronic cash system. In. https://bitcoin.org/bitcoin.pdf, 2008.

5 ANTONOPOULOS, Andreas M. The Internet of Money: A Collection of Talks. Vol 1. Createspace Independent Publishing Platform, 2016.

6 FILIPPI, Primavera De; WRIGHT, Aaron. Blockchain and The law: The Rule of Code. Kindle Edition. London, England – Cambridge, Massachusetss: Havard University Press, 2018. P. 369

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