You know the writers are running out of ideas when they start doing cross-overs

From Steve Moore’s New Crypto Start-up Is Dumb Even by Crypto Start-up Standards by Josh Barro

Here’s how Moynihan and Gasparino describe the proposed venture:

“Decentral,” as it is known, will attempt to perform Fed-like duties in terms of regulating the supply of crypto in the same way as the Fed controls the supply of money for the U.S. economy, they contend. It will exchange its own new token for other cryptos; the supply of the new cryptocurrency will be tied to the value of the dollar or some other “stable” valuation method and will be strictly controlled by an algorithm, company officials tell Fox Business.

You may have some questions. Like “What?” or “Why?” or “What could that possibly even mean?” When I read that paragraph, I also had these questions. It sounds like announcing you’re going to start a private “central bank” that trades in gold in order to control the supply and price of gold. How would that possibly work? It wouldn’t, is the short answer.

So I spoke with Moore’s business partner, Sam Kazemian (a 2015 UCLA graduate whose previous venture, Everipedia, is a blockchain-based competitor to Wikipedia), to ask what it would mean for a crypto start-up to “perform Fed-like duties” and “regulate the supply of crypto.” Having spoken with him and gotten more detail on the proposed business plan, I think the “central bank” branding is distracting and it’s most accurate to say that Kazemian and Moore hope to issue a fiat stablecoin. Let me explain what that means. (Spoiler: It’s still not a good idea.)

   

Before we go on, let's pay a quick visit to Everipedia.

The closer you look at Everipedia, which didn’t respond to questions or a request for a list of its most visited pages, the less substantial it appears. Almost every page on the site is copied verbatim from Wikipedia — although not updated as frequently as Wikipedia — and the trickle of entries posted by Everipedia users relate almost exclusively to sensational topics including YouTube trolls, the “meme war of 2017” and the hip hop producer who tattooed an image of Anne Frank onto his face. Other recurring subjects are activists, white supremacists, and people who were shot and killed by police — all topics that seem engineered to capitalize on trending search terms.

Also unlike Wikipedia, a collaborative nonprofit encyclopedia launched in 2001, Everipedia has its eye on revenue. The site offers a service in which individuals and businesses can pay an annual fee in exchange for a custom-made Everipedia entry that receives “full-time monitoring for updates and preventing vandalism,” starting at $299 per year. Its home page claims that it is “free from ads,” but ads periodically appear on the site, and a link at the bottom of every page labeled “Advertise” links to information for prospective sponsors. Maghodam has trumpeted the site’s growing traffic, but its Alexa score indicates limited popularity.

Which these days is enough to net you $30 million.

Now back the main stage.

For a number of reasons, Moore and the founders of Decentral would like to avoid backing their stablecoin 1:1 with traditional currencies. The premise behind their venture: What if you could have a coin that was stable but that wasn’t backed by a whole bunch of stable assets? What if, like a central bank, you found a way to issue currency and achieve a stable price not through backing by valuable reserves but by fiat — that is, through reliance on a reputation for stability plus certain open-market operations designed to influence the value of the currency you have issued?

Of course, there are some problems with this idea.

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Sovereign governments fail at this despite having advantages that Decentral will not. For example, they can levy taxes. They regulate banks that take deposits and issue loans in the fiat currency and adjust the supply of that currency by telling them how much they must hold in reserve. They also preside over economies in which people are likely to feel compelled to hold and use the local currency — because they have to pay taxes in it, for example. Nobody will need to pay taxes in Decentral’s coin.

Kazemian told me he understands these concerns, and that is why Decentral will begin its operations with a more traditional stablecoin model, achieving a stable price by holding other stablecoins in full and equal value to the coins Decentral itself will issue.

He said a key reason the company brought Moore onboard was to help understand how big it would need to get in order to successfully behave like a central bank and issue a stable fiat currency. “When it is big enough, when it’s the kind of self-fulfilling prophesy of the Fed,” Kazemian said, they would pivot to a model similar to the Fed’s, in which the currency isn’t fully backed by reserves.

That's right, Moore is supposed to be the economic brains of the operation