Saturday , February 24, 2024

Security Notes: The Positives of Negative Cash

Have you ever seen a bank note marked “One Negative US dollar”? Have you ever tossed a “negative dime?” Can you even think of any meaning for such entities? What is impossible for physical money is a simple tag for digital currency. It is not just easy to mint, it is very helpful to trade with.

If I hand you a digital string worth $100, it is the same as if I pulled out of my wallet a $100 bill and handed it to you. That is positive cash. On the other hand, if I hand over to you a digital string worth minus $100, then I confer upon you an obligation to pay me that much money. Paying negative cash is in essence being paid positive change.

Positive cash and negative cash cancel each other out. They share the same digital representation and are traded with equal ease back and forth—stored anywhere, exposed or hidden, as the case may be. By casting both cash and credit into a unified format, both accounting and planning become that much more frictionless.

We are all painfully aware of the complexity of today’s consumer credit market: the networks, the issuer, the acquirer, the processor, the gateway, and the myriad compliance outfits, all in full force for any insignificant credit-based transaction.

Instead, let your lending bank issue you $5,000 of negative cash. You then carry in your phone a digital coin worth that much, and marked “negative $5,000.” You take your family to dinner, and you honor the $250 restaurant bill by splitting your negative money coin and handing over to the waiter $250 negative dollars.

The waiter’s portable terminal recognizes your digital transmission as negative cash (a promise to pay made by your bank), and presents this negative money to the mint. The mint verifies this negative coin, debits the lender’s account, and sends positive digital cash for $250 to the restaurant. In parallel, the mint sends you a negative cash coin for $250, with you as the obligated party at a specified due date. The lender is the designated payee.

No acquirers, no issuers, no processors. It’s you, your lender, the merchant, and the mint. The coins themselves carry the full measure of the accounting load.

Minting credit and obligations as coins of negative denomination lubricates the flow of wealth and trust. The coins carry around the full history, and offer a third accounting leg to complement the two sets of books: expense and income. For a loan to be executed, the lender will issue to the borrower two coins. One is positive cash in the amount of the loan, payable right away, and the other is negative cash for a larger amount, payable by the borrower at a later time.

Negative digital coins may be posted on a public ledger to allow traders to assess the financial viability of other players in their financial community.

The same security that keeps positive digital money from fraud and counterfeiting will keep negative money from repudiation and mischief. Positive and negative coins will mix and match. They will enjoy the same protocol of safekeeping and for safe transporting. This is the benefit of streamlining, which creates new efficiencies and leverages the power of credit to create greater and greater prosperity.

By minting negative coins (obligations to pay), any entity that commands community trust can be a de facto mint for tradable currency. Say Google and Amazon issue digital coins that obligate them to pay the coin’s face value at some specific future date. These mammoth companies may use their trade power to force these coins on their suppliers. For as long as Amazon and Google command the community standing they claim today, their digital negative coins will have a dollar-equivalent value. Much as the Euro trades against the dollar, so would Amazon’s negative dollar have an exchange rate with Uncle Sam’s currency.

While everyone is worried about Bitcoin competing with fiat currency, the competition, in fact, would emerge from any entity of community trust. It would be virtually impossible to halt this avalanche of currencies with regulatory countermeasures. More important, it would not be advisable. Society should level its collective trust. That is how progress is made. By simply extending the efficiency of positive digital cash to negative digital cash, society would shift up a gear in its drive for better lifestyles.

—Gideon Samid •

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