Security Notes: Recovery: The Foundation of Progress

Biologists point out that Darwinian evolution was so spectacularly successful not because of exceptional wisdom going forward, but on account of a robust means of recovery. Countless errors and myriad missteps were followed by effective recovery, so the process was ready to try again. Indeed, recovery is the silent foundation of progress. In our business, we need to focus on financial recovery on both fronts: the value of money and the holding of money.

Money must continue its service to society through good times and bad times. Good times are powered by hope; bad times are driven by panic. If money is anchored on hope, then it is not there for us when hope fades. Silicon Valley Bank soared on two hopeful premises: innovation pays off, and unanchored money will stay afloat. The bank was betting with crypto and intoxicated by the promise of innovation. The trajectory was upward.

Successful innovators become news stories, however few they are in a crowd of failing innovators nobody ever hears of. The luster of innovation mostly reflects the light of hope and expectations rather than an inner glow. All the while, SVB relied on unanchored crypto coins, which presented themselves as stable because their value was determined by complex algorithms no one fully understood. And then a perfect storm happened (as they always do).

For money to be there when panic washes away reason, it must be anchored to the most solid assets we can think of: a fiat currency like the U.S. dollar or the euro, precious metals, oil reserves, real estate, manufacturing facilities, and the like. A smart combination of such assets should serve as an anchor for the newly developed universal digital money.

Imagine a coin that represents a fraction of the wealth of humanity. This coin will not fluctuate in value because it has no reference to fluctuate against. It is like the universe, which cannot move up or down because there is nothing to measure its position against. It is not easy to mint such a stable coin, but we can come ever closer. And the closer we come, the more we will have money to help us recover from our mistakes.

So, while Bitcoin started the digital-money revolution with the idea of unanchored money, floating on hope and expectations, its mature descendants are becoming more anchored than any form of money otherwise. Stablecoins based on a complex probability calculus are neither stable nor coins. A counter breed of coins, BitMint among them, is generating the full scale of digital-money magic, but each coin is redeemable by assets that are not defined by the algorithms that mint that coin. Read more about it here: Bitmintcash.com/anchor.

The second element of recovery works against theft and misappropriation. Digital money flows and stays in the labyrinths of mathematical procedures and communication technology, a juicy target for those who abuse their talent and occasionally outsmart the financial network. A prudent security team will build a robust recovery plan for the day they are outsmarted. One powerful means of recovery is the use of an identity-bearing financial language. It is the digital equivalent of imprinting a dollar bill with a serial number. Such imprinting creates a traceable digital coin that will not be redeemed if any former owner receives it fraudulently. Check out U.S. Patent 11,107,156.

Innovation is the fuel for our survival. Innovation requires daring. Daring results in a few spectacular successes flanked by many monumental failures. We need to have a good means of recovery to prevent the latter from voiding the former.

—Gideon Samid, gideon@bitmint.com