Following the filing of S-1 and Form 10 with the United States Securities and Exchange Commission, American CryptoFed DAO is rethinking the whole economy and the way trade is conducted.
By creating a managed blockchain monetary system, CryptoFed CEO Marian Orr is considering a Hayek model of monetary theory using a pair of crypto tokens to manage the money supply and theoretically eliminate inflation (and deflation) in the economy.
The Chayanne, Wyoming start-up is structured as a Decentralized Autonomous Organization (DAO), which Orr described as similar to a limited liability company in the structure of the blockchain industry.
Form 10 filed
American CryptoFed, launched in July by mSHIF, intends to “create and maintain a monetary system with zero inflation, zero deflation and zero transaction costs,” the company said in its Form 10 filed with the SEC.
CryptoFed’s blockchain will run on the Entrepreneurial Operating System (EOS) and will be open to all EOS members. Orr compared the business model to that of a cooperative.
Speaking at the Merchant Advisory Group annual conference in Orlando, Florida, Orr presented the vision for the new business. “Our goal is not to make money,” she said.
Transaction costs incurred
“I come from a political background, not a crypto background,” said Orr, who noted that transaction fees incurred by municipalities for things like issuing building permits can lead to a deadweight loss.
Orr is the former mayor of Cheyenne, Wyoming, from 2017 to January 2021. The first woman Mayor of Cheyenne, although officially a Republican, Orr describes herself as a “Wyoming girl, leaning libertarian”.
“Municipalities lose 1% to 3% in transaction fees,” since all permits issued are generally paid for with a credit card rather than cash.
“We can create a currency that stays constant,” Orr added. “We are trying to create an economy that is not based on debt. An economic system that is not based on (the assumption of) 2% inflation.
Ducats and locks
The CryptoFed environment is based on a parity of digital tokens: Ducats for consumer spending and Lockes for managing the supply of Ducat through open market transactions – buying and selling Ducats to maintain price stability.
As stated in the Form 10 deposit, the Locke offer is set at a finite number of 10,000 billion, while the Ducat offer is unlimited. Ideally, banks would buy Ducats in US dollars, acting as miners along the blockchain.
The value of a Ducat will be indexed to the US dollar and will appreciate according to the price index of personal consumption expenditure.
Locke’s assets are then used to buy Ducat supply off the blockchain, to avoid inflation as supply increases. CryptoFed will essentially take on the role of a central bank.
Zero inflation and deflation possible
“As long as the prices of goods and services are set in Ducat and the target equilibrium exchange rate is maintained, Ducat’s inflation and deflation should remain close to zero,” according to Form 10.
“Ideally, the money you invest in Ducat and Locke will be more stable,” Orr added.
Consumers using a QR code will be able to purchase goods and services from merchants, who in turn will be able to convert Ducat tokens to US dollars via smart contracts along the blockchain. Locke and Ducat tokens are not convertible into other crypto assets.
November 15 8-K deposit
CryptoFed’s deposits with the SEC were to register both Ducats and Lockes as digital tokens and not as securities, forcing the SEC to take a final position. Even without official comment from the SEC, Form 10 is effective in 60 days and CryptoFed is expected to file its first 8-K on November 15.
“We hope to hear from the SEC. The chairman of (SEC) Gensler has previously said, ‘If you’re crypto, we want to hear from you,’ ”she said.
Orr noted that Gensler has extensive knowledge of crypto assets, having taught a “Blockchain and money” course at the Sloan School of Management at the Massachusetts Institute of Technology.
Merchants already under contract
Orr spent Monday in Orlando, Florida to attend the Merchant Advisory Group annual conference. She said CryptoFed had around a dozen traders contracted to use the platform and was in talks with major retailers and airlines.
Orr added that she did not have access to specific details due to the SEC’s reporting rules as the company waited for the SEC’s comments on their recent filings.
Read more: Wyoming company seeks SEC approval for blockchain-based DAO status
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