Money 3.0: Replicating the FRB money and loan creation model and formula.

(These older two threads are combined into this article.

• Decentralized lending = Peer-to-Peer = Islamic banking:
  https://peerzero.medium.com/the-mxm-overview-and-thesis-for-partnership-with-kujira-usk-db061851b973
• PeerFi.one: Money 2.0
  https://peerzero.medium.com/peerlayer-one-money-2-0-f1a080c41ab8

I think we reasonably discussed the correctness of both of the above in their respective links.

The below article will speak about how in the FRB system all money is created by human work and energy and its core formula is to use the fiat-based present value for the real and future value. First, we converse with gpt4 to get its views on the FRB hypothesis.)

qu:
Critique this hypothesis: in the fractional reserve banking system, the bank approves the loan based on the future ability of the borrower and the present value money for the loan is created. We see this to be exchange of the present value liquidity for the future value payments and profit and we want to emulate this present value liquidity for future value creation process. the greater point is that human energy or work is the source to bring new money into existence and we want to emeulate this process. Thus we created to have types of FV tokens to be given to the investors and lenders and where we will have marketplace for their valuation and trading. This unique FV tokens concept is a key innovation with lot of uses.

gpt4:
The hypothesis that the fractional reserve banking system approves loans based on future ability of the borrower and creates money for the loan in exchange for future value payments and profit is generally correct. However, the subsequent argument for emulating this process through the creation of FV tokens requires further scrutiny.

While the idea of using tokens to represent future value payments and profit has potential applications in certain contexts, it is important to consider the potential risks and challenges associated with this approach. One potential challenge is the difficulty in accurately valuing and trading these tokens, particularly in cases where the future value is uncertain or subject to significant fluctuations. Additionally, the creation of FV tokens may raise regulatory and legal questions related to securities and financial instruments. (This is easy, its the marketplace — once that I invented the Project FV token (balance sheet token.)

Furthermore, while it is true that human energy or work is a source of value creation, it is not clear how the creation of FV tokens would directly address this issue or contribute to the creation of new value in the economy. (Okay, since the main point is agreed to, the FV tokens is easy.)

In summary, while the concept of FV tokens has potential applications in certain contexts, it is important to carefully consider the potential risks and challenges associated with this approach, and to ensure that any use of these tokens is compliant with relevant regulatory and legal requirements. (Boilerplate.)

qu: then, what are some ideas or speculations for Defi or the DLT space to emulate the say fractional reserve banking system’s money and loan creation model (FRBM)

gpt4:
Decentralized Finance (DeFi) and Distributed Ledger Technology (DLT) offer a number of potential opportunities to innovate and improve upon the traditional fractional reserve banking system’s money and loan creation model (FRBM). Some possible ideas or speculations for DeFi and DLT to emulate the FRBM include:

1. Decentralized lending: DeFi platforms can facilitate peer-to-peer lending without the need for intermediaries, allowing borrowers and lenders to interact directly and reducing transaction costs.
2. Tokenization: DLT can be used to tokenize assets, such as real estate or art, and enable fractional ownership and trading. This can increase liquidity and access to investment opportunities, similar to the way fractional reserve banking increases the money supply. (Nice!!! This is worth the price of admission. I been working on creating money 2.0 … this is one of the sources…)
3. Automated risk assessment: DeFi and DLT can use algorithms and smart contracts to assess creditworthiness and manage risk, reducing the need for manual underwriting and increasing the efficiency of the lending process.
4. Decentralized stablecoins: Stablecoins, which are cryptocurrencies pegged to the value of a stable asset, can be used as a means of exchange and store of value in the DeFi ecosystem, providing a stable and predictable source of liquidity.
5. Decentralized credit scoring: DeFi and DLT can use non-traditional data sources and machine learning algorithms to create decentralized credit scoring systems, reducing the reliance on traditional credit bureaus and expanding access to credit.

These are just a few possible ideas for how DeFi and DLT can emulate the FRBM. However, it is important to note that these innovations may also introduce new risks and challenges, and will need to be carefully designed and implemented to ensure their success and sustainability.

qu: I would say that the FRB greatest superpower is to create money without any collateral or assets whereas in DeFi both collateral or assets are required to generate a form of liquidity or in other words no new creation of money happens and is only a substitution, thus what are some of the ways that the DLT and DeFi space could create money without any collateral or assets.

gpt4:
You are correct that one of the key aspects of the fractional reserve banking system is the ability to create money without any collateral or assets, which is not currently possible in the DeFi space. However, there are some potential ways that DLT and DeFi could create new money without relying on collateral or assets:

1. Governance tokens: Decentralized autonomous organizations (DAOs) can issue governance tokens that represent a stake in the organization and can be used to vote on decisions. These tokens can have value, and their creation can be seen as a form of money creation. (Ohhhhh. duh. I forgot about this. Yup. Created by fiat and w/o any work asked for in return generally. A gift. But decentralized and generally equal distribution so no net loss, only upside. However, not sustainable as new work or equity is not created directly.)
2. Yield farming: Yield farming involves lending or staking assets in DeFi protocols to earn rewards, which can include tokens or other forms of value. By creating new rewards, yield farming can be seen as a way to create new value or money in the system. (Not what I am looking for. It's speculative and is zero sum.)
3. Transaction fees: DeFi protocols can charge transaction fees for their services, which can be used to generate revenue and create value in the system.
4. Central bank digital currencies (CBDCs): Some central banks are exploring the idea of creating digital currencies that would be backed by the central bank and could be used as a form of legal tender. CBDCs would not rely on collateral or assets, and their creation could be seen as a form of money creation.

It is important to note that these potential methods of money creation in the DeFi and DLT space are still in their early stages of development, and their potential risks and benefits are still being explored. Additionally, it is important to ensure that any new forms of money creation are implemented in a sustainable and responsible manner to ensure the stability and integrity of the financial system.