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MyCHIPs Digital Money

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Credit Certification

As mentioned, MyCHIPs is regulated, but not by a single, monopolistic authority. Rather, the duties of managing the system fall to members of the network itself.

We noted how participants can be both lenders and borrowers—both issuers or accepters of credit. Similarly, any participant can become a regulator within the system as well. They will just have to price and perform their services responsibly if they expect to be successful.

One service, we will call credit certification, has been covered in passing, but not pointed out explicitly. In our examples above it was shown how you could shop at Home Depot using the time credits you banked from your job at Wal-Mart. As mentioned, this doesn’t work because Home Depot trusts you, but rather because Home Depot trusts Wal-Mart. And that trust will likely be based on a real-world contract which either company can enforce in a civil court, if necessary.

So to reiterate, money is all about trust. If people trust you, it is easier for you to issue money, or credit. Certainly, you could just issue your own credits directly on the MyCHIPs network, but they might not be considered very high quality by anyone else. If no one knows about you, you might need the help of someone who already has a better reputation than you do. If that party is willing to somehow endorse your credit, your quality rating can be much higher.

So in our examples, the employers became certifiers or guarantors of the credit of people who, by themselves, might not have as much credibility on the network. Normally, you might have to pay a fee for such a valuable service. But an employer is in a good position to do this for free, or even at a small rate of interest paid to the employee, because it saves the company money on debt or equity it might otherwise have to seek elsewhere.

But many people work at companies that might not be particularly credible within the network. Other people may be farmers, lawyers or otherwise self employed. Furthermore, many will have a need for larger or longer-term tranches of credit than can be secured solely on the basis of an employment relationship. Examples could include the purchase of a car or a house.

This is the bit of good news for our friends in the banking industry. Their jobs may not have to go the way of the buggy whip, after all. As it turns out, bankers are pretty good at evaluating collateral, such as a home or a commercial building, figuring out how much it is worth, and then creating a credit facility for a lesser amount. This practice, commonly called a mortgage, is just a form of credit certification.

In other words, banks don’t usually lend you money out of their vault to buy your house. They create new, state-sanctioned money and trade it to you in exchange for the private money you create, based on your promise to work, along with the equity in your home.

In a MyCHIPs network, credit certification is a great niche for all those out-of-work bankers displaced by the revolution in new money. They can just do their same old jobs, but in a slightly more honest and open way—that is, after a few arcane, and protectionist, existing federal laws have been repealed.

The idea is pretty simple. You create a trading identity on the MyCHIPs network and associate it with a new or existing corporation. That company records a clean, insured, first position trust deed on a piece of real estate. And you also obtain one or more independent appraisals showing the current value of the property.

Using the MyCHIPs protocol, you post all the records necessary to fully document the value of the property. In addition to the trust deed and appraisals, you might also include copies of sales contracts and/or county tax valuations. The more information you provide, the better others will be able to evaluate the value of the collateral you hold in trust, and the higher the quality of the CHIPs you can therefore issue.

Based on your quality rating, the market will have a natural demand for these new CHIPs. For example, imagine you only issue about 70 CHIPs for every 100 CHIPs of real market value of assets you hold. That would certainly be attractive to the CHIP market, and so people would respect your CHIPs as a reliable store of value. But if you leverage 100% of the value of your security, that would result in a much lower quality rating so others might be less interested in your credit.

Your reputation could be improved if you have a larger portfolio of diversified properties. It would also help if you have been in business for a long time and have a good reputation for being financially responsible.

This process of certifying credit using real collateral could also be done by individual participants on their own behalf. Once issued, the newly created CHIPs could be used to buy the collateral real estate itself, assuming you had a reasonable down payment to “chip” in. Imagine being able to simply create your own home mortgage from scratch. No banker required!

Alternately, you might leverage an existing property you already own outright, just to create credits for spending on other things you may want to buy. This is a way of converting existing assets to fungible money so you can slowly convert one kind of asset into something else you may need more.

This is how we gradually replace a job presently being done by a centrally managed, overly regulated, government sponsored monopoly. We replace it with thousands of independent entrepreneurs who all compete to provide the best pricing and most reliable service possible.
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