It took people several centuries to accept and shift to banknotes backed by precious metals. The banknotes themselves didn’t hold any intrinsic value like gold and silver coins do. Instead, paper money was backed by precious metals stored in a treasury vault.
After WWII the “gold exchange standard” was introduced. This meant that many countries fixed their national currencies’ exchange rates to the US dollar which was in turn convertible to gold at a fixed rate.
This convertibility was available only to central banks. However, this system ended in 1971. That’s where concepts like the fiat system come in. The fiat system, which we still use today, has governments decide whether a medium of payment will be recognised for financial transactions, trade settlement or commerce in a country or jurisdiction.
A fiat currency has value because a government uses its power to enforce this value or because exchanging parties agree to its value… collective illusion. It’s not hard to see how problems could occur with this.
There’re many examples when the fiat currency system backfired under the control of irresponsible or corrupt governments.
The Zimbabwean dollar (ZWD) was worth about 1.25 US dollars in 1980. President Robert Mugabe began confiscating land from the white farming community in 1998, which made the annual inflation rate rise from 32% in 1998 to 231,000,000% in July 2008.
After that, it was estimated that prices were pretty much doubling every day. In April 2009, the Zimbabwean dollar was completely abandoned in favour of using only foreign currencies.
Once one of the richest countries in Africa, Zimbabwe descended into economic chaos largely blamed on its government’s policies. This is an extreme example of how the trust in a fiat currency can be lost leading to economic turmoil.
There are many countries around the world where people prefer keeping their savings in the so called “hard” foreign currencies, or other alternatives like gold, and most recently — Bitcoin! Currently, Venezuela is undergoing a period of raging inflation of its own.
In January 2018, inflation was 84% for the month, implying an annualized rate of 150,000%, meaning prices would double every 35 days. The Venezuelan government has come up with an innovative proposed solution for a stable currency — the Petro, a government-issued cryptocurrency running on blockchain and backed the country’s oil reserves.
Such a centrally-issued cryptocurrency is a far cry from the decentralized nature of Bitcoin and its digital siblings. However, it should also be noted that, with its actions, Venezuela is recognizing and reaffirming the great advantages and potential blockchain holds.
And to make one step towards decentralization and safety of people’s savings, we created a cryptocurrency that has many advantages above metals, paper money and even Bitcoin with its siblings.
Utopia protocol accepts multi-token, multi-coin and multi-LP token as collateral asset.
Utopia protocol supports multi-stablecoin, it is scalable, such as uUSD, uEUR, uAUD, etc.
The collateralization ratio of the Utopia protocol is 110%, which means that a maximum of US$110 of funds can be minted in a stablecoin of US$100.
Utopia protocol designed an on-chain stability fee automatic adjustment algorithm.
Utopia protocol designed an on-chain liquidation mechanism, which is fully decentralized.
The UC governance token is critical to the decentralization of the Utopia protocol, it is deflationary.
Utopia protocol will support multiple chains, including ethereum, polkadot, heco, bsc, etc.
To conclude and summarize — we have seen how the idea of money has evolved through history from a more tangible to a more intangible concept, with each stage having its pros and cons. From barter trade, we moved to commodity money, through commodity-backed paper money, all of which have some intrinsic value, on to the fiat money we use now.
Because this abstraction of value brings us to the next evolutionary step — digital cryptocurrencies powered by blockchain technology. Similar to the fiat system, this form of money has value because people believe in it.
But there is more to it than just a government promise. Promises made by people have been broken many times in history. Here we have solid science, mathematics, and computer hardware guaranteeing the blockchain works as expected.
