Rocket Docs

What are Synthetic Commodities?

What are Synthetic Commodities?


Traditional Commodity money is subject to supply and shocks; fiat monies can be manipulated by central monetary authorities. A “synthetic commodity” base money consists of something that lacks non-monetary value, yet is absolutely scarce. Unlike other forms of synthetic commodity money, Ramifi has a positive growth rate with a real dollar value peg.

According to the standard definition “commodity” money consists of some useful article of trade, that is, something that has a use other than that of being a medium of exchange, and that is also naturally scarce, in that it commands a positive value in equilibrium, which (assuming competing suppliers) is equal to its marginal cost of production.

The disadvantage of fiat money relative to commodity money rests precisely in the fact that its scarcity, being thus contrived, is subject to change. A matter of deliberate policy only, it is subject to adjustment at the will of the monetary authorities or governing legislature. Consequently although a fiat money can be managed so as to not only preserve its purchasing power over time, but also so as to achieve the greatest possible degree of overall macroeconomic stability, there is no guarantee that it will be so managed, and market forces themselves (as distinct from political ones) offer no effective check against its mismanagement.

This is then, where a synthetic commodity like Ramifi, can be tried as a useful and functional alternative to both fiat and commodity money. Through innovative solutions like Ethereum's network and the virtual machine, a "smart" contract can provide mathematical supply adjustments based on its real market value, with a resting equilibrium point at the value of a dollar. This account for dollar value gains traction over time as the real dollar is subject to inflation.

Edit this page on GitHub