CENTUS White Paper
Introduction
Many digital currencies have been generated in the modern world and are being used as a quasi-money. Cryptocurrencies often have the same functions as money issued at the level of state regulation, and act as an intermediary tool in commodity exchange.
Just like state-issued money (fiat), digital currencies undergo a full-fledged continuous stage of development along with the endless process of development of society:
– Fast response to scientific and technological progress. All engineering and technological achievements are implemented in the money production process.
– Increase in the speed of money circulation, and, as a result, the speed of payments. In turn, this trend is limited in the growth of the payment acceleration price (the growth of commission for conducting and other costs) and its security (ambition to minimize the risk of losing money during the payment).
– Increased availability of payment tools and controllability of the funds transfer process. Enterprises and buyers strive to use the most affordable and simple payment tools.
However, with all the obvious advantages of using digital currencies in the settlement system, cryptocurrency saving and use in everyday life, they have not received mass application both in business and at the consumer level. We believe it is connected to the following issues:
Issue No. 1: Cryptocurrency is difficult to understand
Issue No. 2: Instability and volatility
Issue No. 3: Lack of legal and technical regulation
Issue No. 4: No way to output digital currency to the real world
Private issuers who issue their digital currencies for various purposes carry out informing and training of users on the cryptocurrency market, helping them to understand its nature and ways of using it. The infrastructure required for effective operation is developing at the right pace to solve the problem of cryptocurrency output to the real world. However, in order to make a typical purchase or exchange operation and get the result in the form of real goods or cash, the user needs to use the services of several companies, each of them requires additional time to conduct the transaction and high costs in the form of commissions. At the intersection of two – cryptocurrency economy and classical economy, the problem of developing a single solution has become more urgent than ever.
The price volatility of bitcoin (BTC) and other cryptocurrencies is one of the biggest barriers to the widespread adoption. Unlike paper currencies (fiat), modern digital currencies do not have a Central Bank that implements monetary policy to maintain stable purchasing power, which means that changes in demand can cause massive price fluctuations. If users cannot be sure that the purchasing power of their accounts will remain stable, they will never use cryptocurrency as a medium of exchange instead of alternative assets that have a stable value. Despite the fact that many studies have focused on technical topics such as transaction throughput and smart contracts, compared to them, almost no attention is paid to improving price stability, and we believe that this problem is a much more serious obstacle to the mass adoption of cryptocurrency as mean of exchange.
About Tokens
These are the main tokens of the system. They are pegged to the US dollar and intended to be used as means of exchange and revenue generation through the distribution of seigniorage among token owners. Their offer increases and decreases in order to maintain a price peg to 0.01 US dollars.
Interconnection of tokens for stability assurance
CENTUS provides price stability using the same economic principles that Central banks around the world rely on. The most important of these is the quantity theory of money. In this section, we will cover the following topics:
- How does the quantity theory of money relate a long-term price levels with demand and supply of money?
- How does the CENTUS Protocol assess changes in demand by tracking the exchange rate between CENTUS and its pegged assets?
- How does the CENTUS Protocol increase and decrease the issuance of CENTUS tokens based on the exchange rate?
- Creating markets for increasing and reducing CENTUS supply.
Implementation
The CENTUS monetary model is designed to support the CENTUS currency and provide confidence, especially when the currency market is still small. Its main functions include a reserve in USD stablecoins to maintain constant liquidity and reduce excessive volatility.
The CENTUS smart contract always offers to sell new CENTUS tokens or buy back and burn existing ones. This allows the market to determine the CENTUS supply while reducing volatility by limiting the price to within 0.01 USD peg.
Revenue from sale of CENTUS tokens is held in a reserve, the purpose of which is to ensure the value of CENTUS during the period when the currency acquires its independent trust. Funds in reserve is what allows the CENTUS smart contract to redeem CENTUS tokens when necessary. CENTUS reserves are stored only in USD stablecoins.
When more tokens are purchased from the CENTUS smart contract, the contract issues more coins; when tokens are sold back, they are redeemed from the reserve until the minimum level of 50% is reached, after which the BILLEX auction begins.
When the volume of CENTUS increases with the constant accrual of seigniorage, the total capitalization of CENTUS increases, although at the nominal price, the total value of tokens exceeds the CENTUS reserve. As a result, the CENTUS reserve does not contain the full market capitalization (cap) of CENTUS. In other words, the CENTUS reserve ratio is less than 100%.
The concept of a reserve ratio of less than 100% in the CENTUS context requires further clarification to avoid misunderstandings. For example, a reserve ratio of 95% does not mean that 95% of CENTUS issue revenue is deposited in the reserve, and the remaining 5% is withdrawn from the reserve for other use. Revenue is always fully deposited in the reserve; the decrease in the reserve ratio is due to the fact that the CENTUS contract awards seigniorage to token owners 2 times a week, increasing the supply of coins in the hands of owners. In other words, it is the CENTUS owners who benefit when our model reduces the reserve ratio – by increasing the number of their tokens.
Similarly, a 95% reserve ratio does not mean that the CENTUS contract will buy back only 95% of CENTUS tokens and become insolvent. Instead, the smart contract, when the reserve level reaches 50%, launches a discount auction of BILLEX and sells them to CENTUS owners in exchange for their tokens with a discount that is converted into profit when the bills are repaid later. Thus, the contract always has the ability to redeem any number of CENTUS tokens.
Further development of CENTUS
Universal basic income (UBI) is a state or other institutional material support for community members. Universal (guaranteed) income consists in the absence of additional (along with belonging to the society) requirements for receiving assistance. It is believed that such a support system can reduce financial anxiety and improve mental and physical health, increase motivation to work. Typical arguments against a decrease in the desire to work and a corresponding decrease in productivity.
This is a social concept that involves regular payments of a certain amount of money to each member of the community by the state or other institution (such institution is represented by CENTUS seigniorage network in this document).
Universal basic (unconditional) income is regular payments, which are sufficient to cover basic expenses: rent, food, and clothing. They are provided regularly, free of charge, without any counter obligations, and do not depend on age, marital status or income level.
Initially, this method of interaction between the state and the individual was considered from the point of view of eliminating excessive social inequality. This was a key goal. And as an economic background, they used such a concept as “social dividends”. It was introduced by Clifford Douglas, British major, who was convinced that every citizen is entitled to a part of the national wealth.
Everything looks quite logical: if you are a citizen of the country, then you also own part of the national wealth. It is like being a shareowner and receiving a part of the company’s profit in the form of dividends.
Attempts to introduce cyclical payments of UBI in different countries are accompanied by discussions and contradictions of opponents and supporters of this measure of socio-economic support of the population.
Taking into account different approaches, states are trying to replace social payments with monthly accruals of UBI, thereby giving to the society the right to dispose its income based on its needs. However, it was calculated that, if Switzerland had introduced such kind of social benefits, the expenditure for the introduction of this measure would have been about 200 billion dollars per year. Given the financial condition and small population of this country, this figure is significant even for them.
So far, the main sources for payments of universal income have been named as follows:
- Universal basic income should replace all existing social benefits.
- Higher taxes. This is nothing new, and now all social programs are implemented by the state at the expense of taxes. Nevertheless, at present, social benefits and taxes are not symmetrical, that is, taxes are paid by some people, and benefits are received by others. The progressive tax rate is designed to redistribute money from the richest to the poorest.
We can often hear reproaches such as why those who work should support those who do not work, or who, in the opinion of society, do not work enough. What can we reply? It is in the interests of society as a whole. At least, this is how economists and sociologists explain this fact.
In addition, the redistribution of funds between social strata by other means is becoming more difficult.- Another source of payment of universal basic income are funds saved on reducing the bureaucracy. After all, officials dealing with social payments will no longer be needed. Every citizen will simply receive the amount due to him or her on a monthly basis.
- One of the options for obtaining funds for the payment of universal basic income is seigniorage (income received from the issue of money and assigned by the issuer on the property rights).
A number of countries have successfully implemented UBI accrual policy.
Canada
One of the very first experiments on the payment of a universal basic income took place back in the 70s in the city of Dauphin (Canada). The project is called Mincome. According to the project, each resident of the city received monthly payments for 5 years. We must admit that this was one of the longest experiments organized at the state expense.
Evelyn Forget, an economist at the University of Manitoba, studied the results of this experiment. She noted in her report that the level of employment has not decreased at all. At the same time, the number of volunteers has increased, and the social activity of the population has increased.
The rate of hospitalization in the city decreased by 8.5%. During the experiment, a larger number of teenagers graduated from schools, rather than leaving school study unfinished.
Namibia
A coalition of organizations launched a pilot project in Ochivero village, Namibia, with a population of about 1,000 people. For a year, each resident of the village had received 100 Namibian dollars per month. As a result, men stopped illegal hunting, children were not starving, and many children improved their school performance. Employment increased by 11% as people opened pastry shops, hair-dressing salons and brick-making workshops. Additionally, crime rates dropped by 42%.
India
In 2011, the Association of women entrepreneurs, supported by UNICEF, conducted an experiment that lasted a year and a half. Each adult in 10 villages was paid 200 rupees and a child was paid 100 rupees monthly. Economic activity has increased, and food and school attendance have improved. The government of India took into account the results of the experiment, replacing 29 different social programs with direct payments to citizens.
In addition, this year, Arvind Subramanian, an economic adviser to the government of India, suggested that the introduction of unconditional income at the national level should be considered. In the annual report for the government, the estimated amount was also named – 7620 rupees or $113 per year. Even such a small amount, according to many, could significantly reduce the level of poverty in the country.
Germany
In 2014, the German entrepreneur Michael Bohmeyer started implementation of the pilot programme “Mein Grundeinkommen” (my basic income). Several dozen randomly selected people had been receiving 1,000 euros each month for a year.
All participants of the project note that their sleep has become much calmer. However, not much has changed in their lives in general as students continued to study, workers continued to work.
The author of the project noted that the idea of basic payments is based on four principles: it is universal, it solves individual problems, it does not depend on any conditions and creates a high minimum standard of living for citizens.
Many countries are in the middle of an “experiment” now. We will be able to evaluate the results only after some time. You can find few examples of these countries below.
Finland
The Finnish national insurance authority has proposed replacing social benefits with a fixed payment for all adult citizens of the country, regardless of income level. It is expected to set payments at 550 euros per month, and later raise to 800 euros.
Kenya
In October 2016, Givedirect, the New York based charity organization which fights poverty in East Africa, launched the largest project thus far for paying an universal basic income in Kenya. Residents of 40 villages will receive about $ 22.5 per month for 12 years. This is not just a charity event, but a scientific experiment aimed at collecting and analysing data on the effectiveness of universal basic income.
USA
Participants of the Economic Security Project, launched at the end of 2016, are researching the potential benefits of universal basic income in developed economies. The initiators of the project with a budget of 10 million dollars are more than 100 organizations and individuals, including Chris Hughes, Facebook cofounder, and Sam Altman, Y Combinator Foundation President.
Spain
As part of measures to mitigate the social and economic consequences of the coronavirus pandemic, the Spanish government is going to introduce a universal basic income in the near future. Nadia Calvino, Minister of Economic Affairs, announced this on April 5, 2020. The Spanish government wants to maintain a universal basic income even after the epidemic. The Minister of Economic Affairs expressed hope that the universal basic income will remain a “permanent structural tool”.
There are about 20 ongoing experiments in the world related to the payment of universal income. Scientists are trying to figure out whether we are motivated enough to continue working without starving.
Annex
White Paper – documentation that describes the project, new process, or algorithm in detail. It is part of the company’s content strategy. Its purpose is to provide useful information about solving a particular problem.
Token, digital token – a term used in the cryptocurrency environment to refer to an intangible asset, a tool that gives access to certain services, or an internal currency.
Cryptocurrency – a type of digital currency, creation and control of which are based on cryptographic methods. As a rule, the record system of cryptocurrencies is decentralized. The functioning of these systems is based on blockchain technology. Transaction information is usually not encrypted and is available to public. Cryptographic elements are used to ensure that the transaction block chain database is unchanged (digital signature based on a public key system, sequential hashing).
Blockchain – a continuous sequential chain of blocks (a connected list) built according to certain rules that contain information (about transactions, agreements, and contracts). Copies of block chains are stored and processed independently on many different computers. Most often, the blockchain contains information about transactions in various cryptocurrencies, but blocks can also contain other information.
Decentralization – the process of distributing functions across the entire system without a single centre. A decentralized network (Peer-to-peer network) is a computer network based on the equality of participants. Often there are no dedicated servers in such a network, and each node (peer) is a client and in the same time function as a server. This organization allows you to maintain network performance with any number and any combination of available nodes.
Smart contract – program code that describes a set of conditions that cause certain events in computing systems to occur. It is designed for technical implementation of conclusion and maintenance of commercial contracts in the blockchain technology.
Stellar – an open source network for currencies and payments. The software operates in a decentralized open network and processes millions of transactions daily. Stellar relies on the blockchain for network synchronization.
Stellar address – a unique set of characters for sending / receiving cryptocurrency. Addresses are not repeated in the network. The address also acts as a public key that is used to sign blocks.
Fiat money – ordinary money, the nominal value of which is set and guaranteed by the state (dollars, euros, rubles).