Testing the eggheads in the cryptocurrency market

Some of the world’s best-known economists on Thursday announced plans to create what could be described as the thinking person’s cryptocurrency. Saga aims to address many of the criticisms frequently thrown at bitcoin, the world’s biggest cryptocurrency, to position itself as an alternative digital currency that is more acceptable to the financial and political establishment.

It is being launched by a Swiss foundation with an advisory board featuring Jacob Frenkel, chairman of JPMorgan Chase International and former governor of the Bank of Israel; Myron Scholes, the Nobel Prize-winning economist; and Dan Galai, co-creator of the Vix volatility index. The Saga token aims to avoid the wild price swings of many cryptocurrencies by tethering itself to reserves deposited in a basket of fiat currencies at commercial banks. Holders of Saga will be able to claim their money back by cashing in the cryptocurrency.

The currency also aims to avoid the anonymity afforded by bitcoin, which has raised financial crime concerns with regulators and bankers. Saga will require owners to pass anti-money laundering checks and allow national authorities to check the identity of a holder when required.

Oh so respectable sounding!  They’re not doing an ICO, instead there is a variable fractional reserve system, and the ruling principle is that Saga, the asset, “entitles its investors to a rising number of Saga as usage of the cryptocurrency grows.”  It sounds like a bet on the notion that bootstrapping is central to crypto success.  But do investors really want “safe harbours from the raging volatility”?  Do investors want a currency at all?  By the way, this one is proof of stake, not proof of work.

Here is their web site, and here is the White Paper.  Here are other readings on the asset.  Here is the original FT article, FTAlphaville is less impressed.

Do the participants have too much skin in other games?  So far I don’t see the point of doing this one, as it doesn’t create an asset with a truly different risk profile than the others, not from what I can see.

Comments

Classic academics! They're not doing an ICO, since they are afraid they may get rich. Like the two Scottish professors who invented copper wire (but did not patent it) by fighting over a penny!

It sounds like they will make money via the "variable fractional reserve system" if this succeeds.

I did not read the details, but I guess there's something like "founder shares" that the proponents of this scheme will make money off of, if the system catches on. Kind of like an ICO then, after all.

Bingo. This sounds like Uber, where either everybody ends up having to get a taxi medallion or nobody has to get a taxi medallion. This is a currency trading desk and will eventually be regulated as one, or not, at
which point the competitive advantage will disappear. Still time enough for the founders to sell their shares to some greater fool.

Between grapes and truffels and hard boiled eggs, give me grapes.

Unbelievable. The more they win academic prizes, the dumber and more arrogant they become. It’s a kind of idiot savant syndrome.

Alex and Tyler, beware winning a Nobel. If they call you, you better answer: thanks, but no thanks, I still have a life to enjoy.

Now, if you want to do a real crypto, striking out things like energy consumption and risk with miners, I do think that George Mason and Mercatus Center are today the most reputable outfits to start with. Not a guarantee, of course, but a great start. Don’t forget Boettke, you need a bona fide Austrian.

It may not make sense theoretically, but I predict this will be a smart idea for the people starting it (as measured by profit).

Both this comment and the FT Alphaville article acknowledge there are real problems with Bitcoin, such as the large waste of energy caused by proof of work. I think any credible scheme which could reduce this waste by reducing the use of Bitcoin deserves some points just for that.

It may not make sense as a concept, but I think it makes sense as a product.

There are most likely lots of people who want to get into cryptocurrency (given the current craze), but are scared off by the fringy, anti-establishment aspects of it. A "respectable" cryptocurrency is likely to find plenty of investors.

What people want is free lunch money.

Ie, money for nothing.

Get rich by not working.

No one is creating crypto currency that represents an hour of work by a top surgeon, Jeff Bezos, Donald Trump.

Who doesn't want an hour of Trump channel surfing and angrily tweeting in frustration about how much he lost in his efforts killing health care jobs, or making millions hungry and homeless with the related job losses, or to get more non-whites killed by government gunmen, trying to create as many weapon making jobs as Obama?

The best he seems able to do is create employment for lawyers and community organizers.

How about a cryptocurrency based on the work generated by a Trump tweet or executive order in anger?

Any currency that does not tie to paying workers is worthless. A hunter-gather needs no currency. Carrying currency would simply be a burden.

"The currency also aims to avoid the anonymity afforded by bitcoin, which has raised financial crime concerns with regulators and bankers. Saga will require owners to pass anti-money laundering checks and allow national authorities to check the identity of a holder when required."

What? Isn't the possibility to avoid governments exactly why current cryptocurrencies are popular? The latter requirement also means there needs to be some central authority controlling everything and keeping track of the owners, which basically destroys the whole point of having a non-centralized system.

This is basically a very inefficient way (because of the traditional problems with cryptos like mining) to achieve the same that fiat currencies and traditional banks are already doing.

Yep. But it still makes way more sense then hot pepper coins.

One could imagine the point is to avoid the fees placed on money transfers. It hasn't really worked with bitcoin, as you have to pay a fee to convert it from cash to bitcoin and visa versa.

Why not buy the basket directly?

If I read their white paper, they will tell me the rule by which the basket is selected. If the notaries in charge obey that rule, automatically, then so can I. So rather that make a new coin based on the collected basket,, just verify my thumb print and let me run the algorithm in their secure machine. I can fill and empty from my own tiny basket.

Of course, the "basket of currencies" turns off libertarians. The point of cryptocurrency is a medium of exchange (and store of value) tethered to the ether not government (i.e., the "basket of currencies"). Why would a good libertarian approve of a cryptocurrency that isn't crypto? Or to paraphrase John Bolton: "if Saga lost ten currencies, it wouldn't make a bit of difference if there are any remaining". .

Store of work.

If something requires no work, does it have value in any currency?

Ie, how about a currency that is based on an hour of sunlight on a hectare of space at L1 Lagrangian point over earth?

Lots of energy, but no work. Capturing that energy by some method and using it would be work, with value, but the potential energy flowing by has no value.

Can they issue little handheld paper certificates too, so we can carry them with us and use it to buy goods and services? Smaller denominations can be made into tiny metal circles.

That's a great idea. Transactions would be anonymous and costs would be very low, since you could just hand the pieces of paper to someone.

We would have to come up with something analogous to a Bitcoin wallet, but existing in physical form, to hold the currency in.

xD Thank you you two, this made my day more cheerful :-)

I second that. Best laugh I've had this week.

Been there done

We can replace cellulose paper with plastic. We can put digital counterfeit proof markings on a digital representation of value. We can insure against double spending. No third party involved, you and I on a desert island can click plastic cards and exchange a $20 bill just exactly as if it were paper. Not a simulation, emulation, or glorification; we exactly replace ink with digits. We exactly take a bunch of digits from one plastic card and move them to another, no third party check necessary.It is called bearer cash.

But what good is money on a desert island?

If Alexander Selkirk had a million dollars in any currency, including gold $20 gold coins, during his 4 plus years on what is today Robinson Crusoe Island, his life would have been worse, not better. Mere hints he had the money would have meant the Spanish would have hunted him down and killed him. They saw him in the distance but he concealed himself enough so they gave up looking because finding him wasn't worth the work.

I think investments on these random ICOs are not the way to go. It is absolutely must that we focus on investing in multiple options; it will help us with better results. I say the BEST option right now is in category of upcoming ICOs, it is Sphere .

They are based upon decentralizing social network with not just allowing us complete control over our privacy, but also give earning opportunity. They are on the sales in 3rd round. It’s coming to end within next 2 days. There is upto 40% bonus, so only 48 hours remain for it.

The currency also aims to avoid the anonymity afforded by bitcoin, which has raised financial crime concerns with regulators and bankers.

Then why would I use it?

The Saga token aims to avoid the wild price swings of many cryptocurrencies by tethering itself to reserves deposited in a basket of fiat currencies at commercial banks. Holders of Saga will be able to claim their money back by cashing in the cryptocurrency.

Don't currency traders already do this? It looks like they're using a term, "cryptocurrency," to get a competitive advantage by avoiding regulation as a "security."

They are using a regulatory fix to create a form of bearer cash. They are solving the right problem with the wrong method. The problem is the 10,000 dollar bill, in digital form. Hedge trading sequences cannot take the effort to call Powell up everytime they trade a fiat currency across banks, their trades can go a hundred times a second across multiple exchanges, not time to call the central banker, they want the bearer cash version of fiat they can pass around in dark ,but legal, pools. Ripple is trying to solve the same problem.

We know how to pass around bearer cash, safely,but guv won;t let us do it. A derivative is treated like a stock, not currency, and it has an easier ability to be passed around digitally without calling the SEC at each transaction.

The correct solution is to legalize digital bearer cash in dark pools and the longer the fiaters are restricted then the fiaters lose market share, we get inflation. Fro some stupid reason, some 6 billion people suddenly decided digital ment no more cash. No, quite the opposite, digital is making it all bearer cash, the blockchainers and the central banker fouled this up royally. It is far easier and cheaper to use the 20 dollar bill in digital format with our plastic cards and no central baking looking, point to point cash, no blockchain, not central bank; justy two endpoints who understand how the $20 bill works,in digital form.

There is demand for this type of cryptocurrency from the investment community. As it is now, the primary currency pair between all crypto-assets is bitcoin

So price changes in bitcoin seemingly impact all other cryptos

What is the point of Saga for the user?

We got to join in on major options not any random ones. The one that got scope and potential is what we require to look at. In that, I consider Lift Token ICO as one of the hottest upcoming on.

It is the NEXT generation’s driving platform, which ensures great rewards for drivers and easy route for passengers for a comfortable and cheap ride! The presale is on now with 35% bonus, so just too good.

Crypto market is really going wild with so much to handle, so that’s why we need to be extremely wise and careful with how we go about dealing. The biggest problem is regarding the exchange/withdrawals. As many people have plenty of Cryptocurrencies, but now they just can’t find ways to convert it into cash. This is where MatrixPay® is really a great option. It offers Debit Cards, which enables one to convert Cryptos into cash (USD/EUR/GBP) in simple and easy way, so that makes me like it so much!

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