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A

solution for today's global


financial fragility

















Written By: Lucas S. Cervigni
Edited By: Katherine Williams
Contributors: Gustavo Corradi Cid




Intellectual Property Registered in the UK, EU
and US
Fillings: 5686455, 1184534372A, IPO637217732

ISBN-13: 978-1545444863
ISBN-10: 1545444862








This paper is Property of BrickCoin
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TABLE OF CONTENTS

EXECUTIVE SUMMARY
The world needs a better, safer and easier
way for ordinary people to save and protect
their money from inflation. And we can
provide that.
Section 1.1 – The evolution from asset-
based currency to FIAT currency, and the
foundation for today’s financial fragility
What is Money?
Section 1.2 – Inflation and the inherent
downward spiral of debt-based currencies
What is a Central Bank?
Why FIAT money is debt
How debt leads to inevitable inflation
What do the economists say about the gold
standard and FIAT currencies?
Where does this leave the ordinary saver
and investor?
Financial control is in the wrong hands
In conclusion
Section 2.1 – Introducing Brickcoin, the
new cryptocurrency savings mechanism
Brickcoin is a new evolution in
cryptocurrencies
Brickcoin is NOT a new version of Bitcoin
Brickcoin is a commercial venture, not a
philosophical attempt to create a new
monetary paradigm
Section 2.2 – Regulation and Brickcoin
Why real estate?
Crowdfunding regulatory frameworks
Section 3.1 – Management and
administration of Brickcoin
How does Brickcoin work?
Who gains from Brickcoin?
Who manages Brickcoin?
Summary of key user features of Brickcoin


EXECUTIVE SUMMARY

The world needs a better, safer and
easier way for ordinary people to
save and protect their money from
inflation. And we can provide that.

Savers and investors face a tough
choice in today’s financially unstable
world. Savings accounts and fixed income
interest accounts are not inflation-proof
and are stuck at record low levels of
interest. More complex investment
products such as hedge funds require
large initial investments, do not offer
ready liquidity and are vulnerable to
bankruptcy.

By comparison, debt-free real estate
has and always will have intrinsic
value, much as the old gold standards
did. We plan to use this to create a new
inflation-proof, secure but flexible
mechanism for ordinary savers to protect
their wealth.

We can provide savers with protection
from the intrinsic risks of currencies that
are supported by debt rather than real,
tangible assets.

We can provide unprecedented flexibility,
economy and ease of use, with the ability
to liquidate savings into cash instantly.

We can incentivize people to save.


Brickcoin - what is it?

Our solution is the innovative application
of blockchain – the game-changing
technology that is impacting on society,
business and government – in the
creation of an asset-backed digital
currency, the Brickcoin.

Brickcoin, so named because it is backed
by Real Estate Investment Trusts (REITs),
replaces the vulnerabilities of FIAT
currency with similar financial security to
the former Gold Standard, and uses this to
offer the growth potential of a robust and
healthy savings/investment mechanism.

How does it work?

By buying Brickcoin tokens, users convert
their FIAT currency into a stable and
protected digital currency that grows in
value in line with one of the most secure
investments in the world, real estate.

And by using blockchain’s crypto-
validation technology, management of the
Brickcoin’s supply and preservation of its
value are made both simple and secure, as
is the user-experience of savers buying
and selling Brickcoins.

Why do we need it?

With Brickcoin we can preserve monetary
value, incentivize growth in safer
investment activity and help more people
to grow their usable savings and in turn
better support global economies.

In this report:

This paper lays out the business case for
developing the Brickcoin concept.

Section 1: First we examine the financial
history that has led to today’s precarious
options for savers. We consider the
ultimate fate for FIAT currencies and the
trap they have laid that prevents today’s
savers from achieving prosperity and life-
time security.

Section 2: We then introduce Brickcoin,
looking both at the key aspects of the
blockchain technology that enables this
innovation and at the rationale for
choosing REITs as the secure asset for
backing this digital monetary mechanism.

Section 3: Finally we present the
practical outline – how Brickcoin works in
practice, which main actors are involved
and how they will be remunerated. As a
conclusion we present the foundations
that are already in place for initiating the
Minimum Value Project (MVP).




Section 1.1 – The evolution from
asset-based currency to FIAT
currency, and the foundation
for today’s financial fragility

Whatever your views on the strengths
and weaknesses of FIAT currencies,
there is an undeniable trend away
from trusting in the FIAT systems and
structures as a safe place to store and
grow one’s wealth. We will share some
expert views from both sides of the
FIAT argument in Section 2. Here,
however, we establish some relevant
historical context.


What is Money?

This paper’s proposition is evolutionary,
not revolutionary. We are not proposing
the whole-scale reinvention of currency
and banking. Instead we offer a modern
interpretation of a centuries-old tradition,
that of building wealth by acquiring assets
of solid and tangible value. And to
appreciate this fully it pays us to take a
brief look back at that tradition’s history
and evolution.

FIAT currency and paper money are not
to be confused. We have used paper notes
for centuries, and, before that, other types
of tokens that represented transferable
value and enabled trade to take place.
They did, however, remain tokens of
value, not items with their own intrinsic
value. Their initial purpose was to allow
traders to travel far and wide, buying and
selling, but with their root wealth –
typically gold or silver - safely locked up
at home. As we shall see, FIAT money is a
token-system but without a solid asset in
the safe at home, hence the need for new
asset-based savings and investment
systems.

1. Commodity money

The oldest form of trading was bartering
– the simple exchange of goods. But if the
desired goods were not immediately
available (perhaps crops that had not yet
matured), an interim token of value was
needed instead. Early tokens were
themselves other commodities – items
that preserved their own value until
needed to complete the next barter. The
shekel is an example, first used in
Mesopotamia (now Iraq) around 3000BC
and represented as a specific weight of
barley. Commodity currencies soon began
to give way to token currencies such as
coins.

2. Metal coins

By c.1000BC, small bronze items in the
shapes of domestic tools were used in
China as a forerunner of the coin. Within
three hundred years, the first minted
metal coins were being produced in India,
China and the Aegean. However, there
was no common standard and no shared
valuation of the metals used until the
discovery of the touchstone assaying tool
that enabled any soft metal to be tested
for purity.

3. Gold and silver

Gold, being a soft metal and in scarce
supply, became the favourite choice for
coinage, offering a measurable and
consistent value. Silver was also popular
in many European countries but during
and after the Crusades gold became the
norm.

Early metal coins were valued on the
basis of their weight, an indication of the
quality of the metals. But, as countries
standardized their gold coin manufacture,
the coins began to be regarded as a unit of
value as well as a unit of weight, an
important moment in the evolution of
money.

4. Credit and Bills of Exchange

In the late Middle Ages, European trade
was expanding at a rate that required a
system of credit, one which happened
also to take a big step towards the
introduction of banknotes.

Bills of exchange, or trade bills, were
exchanged for goods as a promise of
payment in the future. The seller would
then present these bills to a merchant
banker either in their own town or
elsewhere and redeem them for money.
Alternatively the seller could in turn use
the bills as currency to purchase other
goods direct.

5. Promissory Notes and early
reserve banking

By the early 1600s, wealthy merchants in
England stored their gold in the Royal
Mint. But after Charles I of England’s
confiscated this as a forced loan,
merchants began to store their gold
instead with the goldsmiths of London.
They paid a storage fee, and were issued
in return with a receipt a promissory
note.

Over time, the goldsmiths developed their
service by relending on behalf of the gold
depositors. While these loans were
repayable over a long period, the original
promissory notes were payable on
demand and hence could be used as a safe
and convenient form of money, the
forerunner of the banknote. And as gold
deposits were relatively stable, they could
be relied on to support the integrity of
this currency system.

6. Banknotes

Banknotes emerged as a formalized
version of promissory and other forms of
credit note. China having first started to
use printed notes in the seventh century,
the Song Dynasty government, some 500
years later, realized the economic benefits
of printing and controlling paper money.
In Europe, the first proper banknotes
were those issued by the predecessor to
the Bank of Sweden, Stockholms Banco, in
1661.

In England some of the great goldsmiths
had evolved into early forms of banks and
begun issuing their own paper banknotes.
Then, in 1694, the Bank of England was
granted sole rights to issue banknotes, a
move copied by the US’s Federal Reserve
Bank much later in 1913.

These early banknotes remained,
however, a representative rather than
independent form of money, the value
continuing to rely on the partial backing
of gold and/or silver.

7. The Bretton Woods
Agreement and the Gold
Standard1

1
Figures taken from:
https://www.thebalance.com/what-is-the-
history-of-the-gold-standard-3306136 accessible
March 2017
By 1933 the US held the world’s largest
gold reserve, President Roosevelt having
ordered all US citizens to surrender their
gold in exchange for dollars. Eleven years
later the global impact of this
accumulation led to the 1944 Bretton
Woods Agreement whereby all currencies
(of the agreement’s member countries)
were valued by one single standard, the
value of gold in US dollars ($35 an ounce).

The immediate effect of this was that
most countries now regarded the US
dollar as the global currency and pegged
their own to its value. As in the centuries
before, holders of paper dollars were
entitled to redeem them for gold, and for
as long as the US held more gold than
there were US dollars in circulation
globally, it could always meet the
demand. But by 1970 this surplus had
reversed dramatically. Now there was the
risk that its gold could no longer back up
the dollar.

In 1971, experiencing huge inflation
during which banks increasingly began
redeeming their dollars for US gold, the
US effectively ended the gold standard by
changing the value to $38 dollars an
ounce. And in 1976 gold and the dollar
were completely divorced from each
other, leading to other countries
beginning to print more of their own
currencies again.

8. FIAT currencies

Since 1971 and the effective ending of any
objective valuation standard, all major
currencies in the world are FIAT
currencies – printed notes that rely on
their issuing governments declaring their
legality and trying to control their value.
FIAT money can enable the transfer of
value – trading goods and services,
acquiring possessions that have an
independent value – but, lacking a
backing asset other than debt (see Section
1.2 below), the printed notes are not in
themselves of any value. And, as we’ll see
shortly, the governments have relatively
little control over this value. That’s the
privilege of the central banks, discussed
below.


9. What next?

It is remarkable that, after centuries of
effective asset-backed monetary
systems, nearly the entire world now
operates a FIAT system. This means
that almost everybody’s wealth is
measured by a standard that exists
only because governments declare its
legitimacy. Many economists see this
as a fundamental flaw that will lead
ultimately to financial collapse, an
argument explored in detail in Section
Two below.






Section 1.2 – Inflation and the
inherent downward spiral of
debt-based currencies

The background to this paper’s
argument can be expressed in a single
sentence:

FIAT currencies are a financial illusion
managed by central banks, tricking
savers into believing they are
accumulating wealth when in fact the
value of their money is continually
decreasing thanks to inflation and debt.

This is a strong statement and needs
examination and justification, as well
as some counter-argument to provide
a balanced field for discussion.

What is a Central Bank?



“A central bank, or monetary authority, is
a monopolized and often nationalized
institution given privileged control over
the production and distribution of money
and credit. In modern economies, the
central bank is responsible for the
formulation of monetary policy and the
regulation of member banks.”2

So, a central bank manipulates the supply
of money and the interest rates. And with
this is has it two crucial roles – 1) as the
only legal printer and issuer of banknotes,
and 2) as the ‘lender of last resort’,
lending money to help keep smaller
commercial banks afloat when in trouble.

A central bank also ‘regulates member
banks through capital requirements,
reserve requirements and deposit
guarantees, among other tools’, and
‘offers much greater financing flexibility
to the central government by providing a
politically attractive alternative to
taxation.’

Hence, central banks create rules and
make decisions that impact financially on
everyone. Sometimes they do this in line
with government policies; sometimes
they go against them. They are supremely
powerful.

http://www.investopedia.com/terms/c/centralba
nk.asp - accessible March 2017
But they also have one supreme
weakness. The money supply they control
is FIAT money. This means that they deal
in debt, not in assets.

Why FIAT money is debt 3

Peter Joseph is a visionary film-maker
(known for his Zietgeist film series) and a
proponent of a resource-based global
economy. At its root lies the logic that by
producing only what we need, and
creating financial systems that exist solely
to enable this, we eliminate poverty and
deprivation without sacrificing
entrepreneurialism.

What has this to do with FIAT money?

Joseph draws on some authoritative
sources for his argument, including the US
Federal Reserve Bank’s own work,
“Modern Money Mechanics4”. In essence

3
Derived from: Zietgeist Addendum; Peter Joseph;
2012;
https://www.youtube.com/watch?v=HbvCxMfcKv
4&t=924s, accessible March 2017
4

https://archive.org/details/ModernMoneyMecha
this describes the FIAT-based fractional
reserve banking system whereby when a
bank lends outwards, it actually increases
its assets as a consequence. This
contradicts both logic and the natural
law; across maths, science and nature,
there exists the striving for balance – loss
is balanced by gain. So how can a bank
gain assets by giving them away?

The answer is that those assets do not
really exist. Joseph offers a simple
illustration summarized thus.

1. The US government needs to
borrow 10 billion dollars and
approaches the Federal
Reserve.
2. The Fed agrees to supply this
in exchange for 10 billion
dollars of government bonds.

But what are these government bonds?
The answer is pieces of printed paper that
claim to have a value – 10 billion dollars
of value. And the Fed actually purchases
these using its own pieces of printed
paper, Federal Reserve Notes. So:

nics accessible March 2017



3. The Fed issues 10 billion
dollars of Federal Reserve
Notes in exchange for the
government bonds.
4. The government deposits these
Reserve Notes in its bank
account, at which point they
become legal tender money.

In other words, 10 billion dollars has
been created from 10 billion dollars’
worth of government bonds.

But these government bonds are not
assets; they are debt, an IOU, a promise to
pay that money back to the Fed.

Meanwhile, the newly-created 10 billion
dollars sit in a commercial bank. See what
happens next:

5. The commercial bank’s
reserves have just increased by
10 billion dollars.

Now, as Modern Money Mechanics states:
A bank must maintain legally required
reserves, equal to a prescribed percentage
of its deposits.

And it clarifies that this percentage is
typically 10%. So, the bank must retain
only 1 billion of these new dollars it has
received. What happens with the rest?

6. The other 9 billion dollars, now
regarded as an excess reserve,
can be used as the basis for
new loans to commercial bank
customers.

But that 9 million dollars doesn’t exist. It
is the government’s IOU; a debt. And
Modern Money Mechanics has more to
reveal:

“Of course [the banks] do not really pay out
loans from the money they receive as
deposits. If they did thus, no additional
money would be created. What they do…is
to accept promissory notes (loan
contracts) in exchange for credits (money)
to the borrower’s transaction accounts.”

So, the money-machine gets to work
again:

7. Let’s say that someone now
walks into the bank to borrow
the available 9 billion dollars.
And let’s say that they take that
money and deposit in their
own bank. That second bank
must put aside 10% for its
reserves - 9 million – but can
then create 8.1 billion’s worth
of new loan capacity.

And so it goes on.

But this all comes back to one thing.
Whilst in the distant past there was
indeed some real money at the root of all
this trading and lending, the new ‘wealth’
created on the back of it has grown out of
all proportion.

And all this new money has nothing to
do with an increased demand for
goods and service; there is no
economic growth driving this money-
creation.

This is the weak link in this whole
process, what Joseph refers to as “a
hidden tax on the public”5 – or, in simpler
5
Derived from: Zietgeist Addendum; Peter Joseph;
2012;
https://www.youtube.com/watch?v=HbvCxMfcKv
terms, inflation. And this needs closer
examination.

How debt leads to inevitable


6
inflation

“The fractional reserve system of monetary
expansion is inherently inflationary.”
Joseph explains this as the outcome of an
ever-expanding supply of money without
a corresponding expansion of goods and
services in the economy.

The toxic combination of increasing
amounts of non-asset-backed FIAT money
with no corresponding increase in real
economic growth ultimately leads to
unsustainable inflation. Eventually a
tipping point is reached. And while the
catalyst may vary, the outcome is always
the same – hyperinflation and banking
collapse, as illustrated by recent history.
Here are just three examples:

4&t=924s, accessible March 2017


6
Derived from: Zietgeist Addendum; Peter Joseph;
2012;
https://www.youtube.com/watch?v=HbvCxMfcKv
4&t=924s, accessible March 2017

Iceland’s banking collapse, 2008

Bank failure is described as ‘the closing of
an insolvent bank by a federal or state
regulator. Banks close when they are
unable to meet their obligations to
depositors and others’7.

The disproportionate growth in size of
three of Iceland’s privately-owned
commercial banks, against the backdrop
of the global financial crisis of 2007-08,
led to the largest banking collapse in
economic history of any country relative
to the size of its economy.

By 2007, Iceland’s external debt had
reached €50billion, or more than 7 times
its GDP. Meanwhile, ready access to credit
in international financial markets had
enabled three privately-owned
commercial banks in Iceland to amass
assets valued at 14.437 trillion Kronur,
more than 11 times the size of Iceland’s
GDP.

With the international crisis deepening,

www.investopedia.com accessible March 2017


7
investors began to regard Iceland with
increasing suspicion, fuelling a sharp
depreciation in the value of the Icelandic
Krona. The huge size of the country’s
financial system compared to the size of
its economy meant that the Central Bank
of Iceland was not able to act as ‘lender of
last resort’. The three private banks
failed.

The outcome was widespread banking
crisis, with emergency laws introduced to
give control of financial institutions to the
Financial Supervisory Authority and new
banks founded to take over the domestic
operations of the three failed banks.
However, severe economic depression
took hold as the national currency
continued to fall in value and GDP
dropped by 10% between 2007 and 2010.

The impact was felt far beyond Iceland’s
boundaries, with some 400,000 British
and Dutch savers losing their money
invested in Iceland.

Argentina and hyperinflation

Hyperinflation can be defined as:
‘extremely rapid or out of control
inflation…a situation where the price
increases are so out of control that the
concept of inflation is meaningless.’8

There are numerous examples of
hyperinflation during the 20th century,
amongst which the most sustained is
perhaps that of Argentina.

Although one of the world’s richest
countries in the early 20th century,
Argentina was badly hit by the Great
Depression when demand for its
agricultural commodities dried up. What
followed was an era of growing debt and
military interventions to create new
governments, marked by a brief
prosperity after WW2 before the return
of soaring inflation due to commodity
prices crashing once again.

Inflation in the early 1950s hit 40% as
real wages plunged. However, a
succession of military and democratic
governments failed to stabilize the
economy and by 1976 inflation exceeded
600%.

www.investopedia.com accessible March 2017


8
Following the Argentina’s defeat against
the UK over the Malvinas in 1982, civil
government was restored and, with it,
swelling payrolls for public officers but,
crucially, without increased revenues. It
has been estimated that in 1989 only
30,000 of 30 million Argentines paid any
income tax.

The government’s response to the crisis
was to print money. However, the country
still struggled with an average inflation
rate of 300% between 1975 and 1990,
with 1989 seeing an unprecedented rate
of 5000%. Control was only finally gained
when the Argentinian peso was anchored
to the US dollar.

The collapse of the Lehman Brothers
bank

“Too big to fail” was a widely-used
mantra to describe commercial banks
such as Lehman Brothers – a mantra that
proved all too inaccurate.

Lehman Brothers’s failure in 2008 is
famously linked to its massive
investments in subprime mortgages,
misleadingly tagged as ‘secure’. And the
strategy behind this, for borrowing short
term to lend long term, was itself a
violation of basic banking principles that
proved fatal.

The bank’s bankruptcy, the largest in US
history, led to the disintegration of the
credit market and the global meltdown,
the repercussions of which are very much
still felt today. And despite the extent of
the deliberately inaccurate reporting of
their ‘secure’ subprime mortgage-backed
securities, the fundamental imbalance
would inevitably have proved
unsustainable in the long term.

What do the economists say about


the gold standard and FIAT
currencies?

This paper does not attempt to resolve
the ongoing dispute about FIAT
currencies – whether they will eventually
collapse or will continue to support global
economies – but it is valuable to note the
general arguments on both sides.
And in the context of Brickcoin it is
essential to consider the impact of the
inflationary cycle on the ordinary saver,
something that some leading economic
models overlook.

First let’s consider a simple balanced
comparison: The Gold Standard versus
Fiat Currency.

At the root of this paper’s proposal lie the
pros and cons of gold standards versus
FIAT currencies. And there are indeed
both benefits and disadvantages in both
systems as Jason Fernando summarizes in
his short article9:

‘Proponents of the gold standard often
claim that it encouraged governments to
behave in a fiscally responsible manner,
preventing them from excessively
devaluing their currency through the
printing of new money.’

In other words, governments were
required to maintain an adequate
resource of real asset – gold – to balance
their international payments and honour

9
Jason Fernando;
http://www.investopedia.com/articles/forex/051
215/gold-standard-versus-fiat-
currency.asp#ixzz4QY05h5t3 accessible March
2017
conversions of paper money into gold.
There is a persuasive logic to this
mechanism for preventing bad policy and
risk-taking. Yet today there is not one
single gold-based currency in the world.
Why?

‘On the other hand, one of the most
common arguments against the gold
standard is that it unnecessarily restricts
governments’ ability to perform economic
stimulus during recessionary or
depressionary times.’

Numerous factors between WW1 and
WW2 put the classic gold standard under
strain, and it was arguably only the
Bretton Woods agreement of 1944, basing
all national currencies on the US dollar,
itself pegged to a fixed gold price, that
allowed the gold standard to continue.

Ultimately, the need for governments to
be able to stimulate economic recovery by
printing money led to the final downfall of
the gold standard. And this need remains
stronger than ever today, suggesting that
any return to a gold standard is
impossible.

Yet some argue that it is the FIAT system
itself that has fed this need – hence a
vicious cycle with no solution.

In support of FIAT currencies

It is easy to heap all the blame onto the


FIAT system, and easier still to talk of
financial Armageddon as the system
finally collapses. But some economists are
convinced that this ultimate collapse is
not at all inevitable.

Clem Chambers, in his Forbes.com article,
“Why Doomsters Who Predict The
Collapse of Money are Wrong”10 agrees
that the world experienced a near-fatal
financial meltdown in 2007/8. And he
acknowledges the widely-held view that
FIAT money can only continue to
decrease in value as more and more of it
is created, increasing the widely-believed
risk of terminal collapse:

‘The doomsters see a collapse of so called

10
Clem Chambers:
https://www.forbes.com/sites/investor/2013/04
/29/why-doomsters-who-predict-the-collpase-of-
money-are-wrong/#5427648e1aef accessible
March 2017
fiat money, i.e. money as we know it and an
economic and social breakdown will
follow. Gold and bullets are to be the only
currency.’

Yet he argues that this continual
depreciation is fine. It will not lead to the
ultimate collapse of the system. Instead
we should focus on diluting the debt that
co-generates this phenomenon:

‘The key is to be positioned for the
denouement of current economic rescue
attempts. The solution is the dilution of
debt, through the devaluation of money.
The governments of the west will not run
out of money. That’s impossible. What will
happen to rebalance the debts of the U.S.
and Europe is what we need to focus on.’

However, Chambers goes on to reach the
only intelligent conclusion – that in a
world of ever-increasing supply of FIAT
money the only way to grow real wealth
is to invest in real assets:

‘If you believe the developed world is going
to get into a tail spin, it won’t be that fiat
money will disappear. Instead there will be
much more of it about.
The question therefore is how to play the
outcome of cash flooding everything.

You can do worse than look back to the
seventies to see what happened and use
that period as a model of what to do. The
answer isn’t to prepare for Armageddon. It
is to invest in inflation linked assets
producing index linked yield.’

It is worth noting how persuasively this


pro-FIAT philosophy endorses the very
investment and savings mechanism that
Brickcoin aims to provide.

And those ‘doomsters’ that Chambers
talks of?

Writing in 2010, David Galland of Casey
Research talks of the FIAT currencies
being in “the race to the bottom”11. And he
compares this to the contrasting
constancy of gold, a limited resource that
has all but been mined out, leading to its
continued stable value.


11

https://www.creditwritedowns.com/2010/10/th
e-fiat-currencies-are-headed-into-crisis.html
accessible March 2017
Galland explains that this race is being
run by competing governments as they
struggle to respond to extraordinary
levels of debt built up over generations of
political and economic incompetence:

‘[The misguided politicians] now believe
that the best approach is to devalue their
currencies against those of their trading
partners. This is in the hopes of gaining a
competitive commercial advantage for
their export products on global markets.’

And it is this cycle of continual
devaluation that must, at some point,
come to an end. There must be a terminal
moment at which this self-defeating race
delivers full-blown economic suicide.
There can be no winners in this
international competition:

‘There’s a long and growing list of
countries that have either recently
intervened or are currently trying to force
their currencies lower. In fact, in addition
to Japan, both South Korea and Brazil have
just announced what are essentially
exchange controls on money coming into
the country from foreigners. By raising
taxes on foreign investments in their bonds,
they hope to reduce the inflow of foreign
purchases, which otherwise help keep the
local currency strong.

This race to the bottom cannot end well.’

Where does this leave the ordinary


saver and investor?

To see why this matters not just to
governments, corporations and banks but
to everyone and every society whose
ongoing existence is in any way
inextricably linked to having money, let’s
start with a very simple illustration.

If you want to buy a house in the UK with
a deposit of, say, £30,000, you start
saving, often years ahead. But by the time
you have accumulated your £30,000, the
price of your target house has gone up.
And any interest earned on your savings
pot will certainly not have kept up with
the rise in property values. In fact, it is
likely that the value of each of those
30,000 pounds has itself gone down due
to inflation. The value of FIAT currency
can never keep up with inflation.

To appreciate the scale and reality of this,
let’s return briefly to the arguments put
forward by Peter Joseph12:

‘Mathematically, defaults and bankruptcy
are literally built into the fractional
reserve system. And there will always be
poor pockets of society that get the short
end of the stick. An analogy would be a
game of musical chairs, for once the music
stops someone is left out to dry.’

He clarifies this as the transfer of true
wealth from the individual to the banks:

‘If you are unable to pay your mortgage,
[the banks] will take your property. This is
particularly enraging…because the money
that the bank loaned to you didn’t even
legally exist in the first place.’

Joseph also cites a 1969 Minnesota court
case with immense potential implications.
A Mr Daly, facing the foreclosure of his

12
Derived from: Zietgeist Addendum; Peter
Joseph; 2012;
https://www.youtube.com/watch?v=HbvCxMfcKv
4&t=924s, accessible March 2017

home by the lending bank, challenged it
on the basis that the money loaned to him
was never in fact the property of the bank
but rather a promissory note. The bank’s
president had to admit that the money
and credit were created through
bookkeeping entries, saying: “Only God
can create something of value out of
nothing.”

Joseph explains that the legal implication
of this landmark case is that any money
borrowed from the bank is effectively
counterfeit, as the bank never had the
money as property in the first place.

So why does the practice continue?

That is far too big a question for this
paper. Nevertheless, the legal case aptly
illustrates how our modern banking
system means that the ordinary person’s
current wealth and financial viability
relies on shadow money, not real assets.

And for that ordinary hard-working
person, their real-life experience is the
loss of their own money’s usable value,
now and looking ahead into the future:

‘Money has value because people believe
that they will be able to exchange
this money for goods and services in the
future. This belief will persist so long as
people do not fear future inflation or the
failure of the issuing agency and its
government.’13

In other words, as soon as governments
fall, banks fail and inflation spirals due to
what is broadly seen as financial mess,
that belief evaporates.

And it is already happening as people
increasingly predict a diminishing
future for their money.

The dependable and safe savings
mechanisms of the past, driven by the
near-double digit interest rates, are
consigned to history books. Today, the
sense of increasing inflation, driving
down the real value of the money that
people hold, makes them want to get rid
of it before it becomes worthless.

The world order of the last century,

https://www.thoughtco.com/why-paper-
13

momey-has-value-1146309 accessible March


2017
where banks dictate the structure that
steers the economic and labour markets,
is being replaced by one determined by
the reluctance of ordinary people, down
at the bottom of the chain, to continue
engaging with it. Profitable deals remain
on the table unsigned as the value of the
profit to be paid in the future is so
uncertain. Business activity declines.

And inflation causes ‘all sorts of other
inefficiencies, from a café changing its
prices every few minutes, to the
homemaker taking a wheelbarrow of
money to the bakery. If citizens lose faith in
the money supply and believe that money
will be worth less in the future, economic
activity can grind to a halt.’14

And this is why we must rethink who
controls our finances, and why.

Financial control is in the wrong


hands

Governments and central banks do not

https://www.thoughtco.com/why-paper-
14

momey-has-value-1146309 accessible March


2017
manage money in the interests of
ordinary people and long-term social
sustainability. They manipulate supply
and value for short-term political and
commercial gains.

Another strong statement, one of ours –
but here is a simple, strong independent
argument to back it up15:

‘The theme is clear. Fiat currency failures
occur when governments irresponsibly get
into a vicious cycle of debasing the money
supply and creating massive inflation. This
monster eventually gains a life of its own
and can’t be controlled. This is a disaster to
an economy.

Governments never seem to learn that the
fundamentals of a strong economy require
a commodity backed money supply.
Otherwise the temptation for politicians to
debase the currency to fund wars, social
programs, and public works with fiat
currency is too great.

Also, the leaking of moneys seems to go
15
http://www.financial-planning-
techniques.com/Fiat-Currency-Failures.html
accessible March 2017
hand in hand with currency debasement.
When huge sums of money are being
printed the difficulty of tracking the money
increases significantly. Too much money is
siphoned off to political graft and
unscrupulous people.

Like bad cooks, politicians can’t seem to
figure out the correct mixture of financing
to:

• Help people who work hard to have
the opportunity to prosper if they do a
good job, and fail if they don’t.

• Provide adequate food, shelter,
housing, and medical assistance for the
very young, the very old, the very sick
and the very crippled.

• Not leak huge sums of monies to the
growing number of freeloaders.

• Not leak huge sums of moneys to
political corruption.



In conclusion

Ours is not an argument for
fundamentally redesigning our social
construct along left-leaning wealth-
distribution guidelines. Instead this is a
serious, commercial and economic
argument that recognizes how the
conscious choice to ignore the aspirations
of ordinary working people undermines
the entire viability of a functional
economy.

We say that it has to be possible to create
a profitable system that is immune from
the selfish interests of a few shareholders
and, instead, preserves the hard-earned
wealth of people at all levels of society.

Hence the solution, a new asset-based
currency paradigm to re-energise and
strengthen our economies, must be
one that appeals first and foremost to
those whose small but vital
investments will make it happen.

And this is what we now go on to describe
in Section 2.

Section 2.1 – Introducing
Brickcoin, the new
cryptocurrency savings
mechanism
Brickcoin is a new evolution in
cryptocurrencies

There has been a great deal of interest and
innovation in launching new
cryptocurrencies since the original concept
first saw light in the form of the Bitcoin.
Unlike most, however, ours is not an
attempt to rival or supplant FIAT
currencies.

What it is: Brickcoin is a savings scheme
backed by a non-inflationary asset,
commercial debt-free real estate, to
deliver stable capital preservation. As a
cryptocurrency, it enables savers to
convert their money to and from
Brickcoin tokens using the full security
and convenience of blockchain
technology.

Where it sits: Brickcoin will be the first
cryptocurrency that truly bridges the gap
between a) the necessary reliance on the
FIAT currencies and b) the asset-backed
wealth-creation opportunities that are
often out of reach for many ordinary
savers.

How it will earn trust: Above all,
Brickcoin will set new standards of
integrity to users and investors, and this
means addressing the intrinsic flaws of
the Bitcoin concept. So, before examining
each of these goals in detail, we need to
establish one fundamental fact:

Brickcoin is NOT a new version of


Bitcoin

To understand this, we must clarify the
fundamental shortcomings of Bitcoin as
the first cryptocurrency:

1. Bitcoin has failed to prevent
fraud and abuse

Bitcoin’s reputation has been sullied by
its use by criminals as a convenient way
to launder money.

Anonymity is built into the system,
allowing Bitcoin users to make
transactions independently and without
their identities being revealed. With
hindsight it now seems obvious that this
facet would be exploited by those needing
a secure but anonymous mechanism for
processing their criminal revenues.

The original Bitcoin deliberately sits
outside any regulatory framework,
meaning that its users are not bound by
the same rules that govern banks and
other financial structures. And where
attempts are made to penalize fraudsters,
law courts struggle to decide whether or
not Bitcoin is actually money, leading to
the dropping of at least one legal case
against money-launderers16.

2. Bitcoin’s inbuilt operational
autonomy has inadvertently
allowed ambitious independent
parties to gain strategic
influence over the exchange and
value of the currency


16

https://www.theregister.co.uk/2016/07/26/pon
zi_bitcoin_case_kaput/ Accessible March 2017
Abuse of Bitcoin is not confined to the
criminal world.

Bitcoin’s founding principle was that it
should be free of centralized control and
instead offer what is in effect a form of
digitally-driven financial democracy. Its
users were to have equal opportunity to
help maintain Bitcoin and derive financial
reward for so doing. However this has
been corrupted.

Sheer determination and ambition has
allowed Bitcoin ‘mining farms’ to evolve
especially in China where whole teams of
technicians strive to monopolise the
transaction verification that earns
financial rewards. Not only do they deny
this opportunity to individual Bitcoin
users, but they also enjoy unfair influence
over the entire currency mechanism,
undermining the fundamental aim of
being free from centralized control (see 3.
below).

3. Bitcoin’s deliberate avoidance of
centralized control robs it of the
reassurance of visible and
transparent management.

The final mistake in the Bitcoin model is
not a further abuse of its original
principles but a basic design flaw.

The endeavor to avoid the constraints of
centralized control brought with it the
need for randomly-allocated verification
processes (to ensure transactions were
valid and supported by adequate finance).
As far as is possible, the original system
was automated, using encryption and
computer code to prevent fraud.

This effectively robs the system of an
essential layer of confidence in the form
of accountable, hands-on and regulated
audit and management.

Brickcoin is a commercial venture,


not a philosophical attempt to
create a new monetary paradigm

Bitcoin was designed to be a self-
sustaining alternative monetary system; it
was not created as a commercial venture.
By contrast, our own initiative, Brickcoin,
aims from the outset to appeal to
commercial investors and operational
partners; the core
commercial/operational opportunity is in
providing a new and attractive savings
service.

To attract these investors and partners
made skeptical by the experience of
Bitcoin, Brickcoin must be visibly
managed by experts, and conform to
independent regulation that can expose
any fraud committed by those same
experts.

In other words, it must offer more than
just the conveniences of crypto-
technology and the freedom from
governmental and bank-controlled
inflationary policy. It must guarantee the
tightest financial regulation and
professional management.

As we will now see, both the
administration of Brickcoin and the asset
that backs it, real estate, offer this.


Section 2.2 – Regulation and
Brickcoin

The regulation we speak of is what
delivers dependable accountability in the
management of savers’ money. It is what
will help people to trust in Brickcoin and
choose to put their money into Brickcoin.
And it comes from two principal sources –
the choice of backing asset, and the
existing regulatory framework that has
grown up around another relatively
recent financial phenomenon –
crowdfunding.

Why real estate?



Unlike other assets used to back new
and emerging cryptocurrencies,
commercial, mortgage-free real estate
is a robust and regulated asset that is
protected from FIAT’s increasing debt
and inflationary cycles.

Asset-backed cryptocurrencies already
exist. Innovators have taken the Bitcoin
and created from it the ‘coloured bitcoin’.
This continues to use the underlying
blockchain infrastructure but deals only
in marked or ‘coloured’ bitcoins that
represent, in digital form, the value of a
real asset. Examples include Chromaway,
working with the Estonian bank, LHV, to
create a cryptocurrency backed by a
certificate of deposit.

However, these innovations continue to
focus on cryptocurrency as an alternative
to FIAT currency. Hence to succeed they
must compete in the same currency dog-
fight as dollars, euros and pounds and be
vulnerable to the same debt-based
inflationary cycles. We approach
Brickcoin from a distinctly different
perspective – to preserve the value
inherent in our savers’ FIAT money
through whatever inflationary cycles and
devaluations occur in the future.

We want our savers to buy Brickcoins
with their FIAT money so that, when they
choose to convert them back into FIAT
money, it will give them back the original
value saved in full, plus any growth. We
want to help them to fight the inevitable
devaluation of FIAT currencies and store
their wealth safely for the future.

So we want to create the most stable
cryptocurrency possible; and this
means choosing a reliable, stable and
regulated asset to back it – commercial
real estate.

Mortgage-free commercial real estate is a
scare asset. Being scarce ensures healthy
supply-and-demand ratios that in turn
stabilize value. If prices begin to fall,
demand kicks in immediately and the
market quickly recovers.

Regulated REITs (Real Estate Investment
Trusts) already exist to provide
investment opportunity in this robust
asset. We can make use of these.
Furthermore, we can pick and choose
between consolidated assets (existing
property that is already let) and
development assets (new property under
construction). This allows us to offer two
types of Brickcoin.

Brickcoin Saver and Brickcoin Growth

Brickcoin Saver, backed by consolidated
real estate, allows savers to enjoy steady
modest growth as the market values rise.
Brickcoin Growth, backed by the
development portfolios, comes with more
risk (for example if a construction project
runs out of money) but offers more
growth for the longer-term investor.

Crowd funding regulatory


frameworks

The regulatory control of REITs is only
one half of the regulatory framework
required by Brickcoin. The other half is
the regulation of the central entity that
manages the administration of Brickcoin,
and we have the solution to the problems
that regulation have so far posed to
backed cryptocurrencies.

The abuse of Bitcoin by money launderers
was made possible by the lack of a
regulatory accountability and the
anonymity of modern internet
technology. With backed
cryptocurrencies, however, the financial
regulatory bodies in different countries
regard these as assets or titles. As such,
they must fulfill expensive and complex
compliance with the bodies’ own
regulations. This has slowed down their
evolution.

We plan to avoid this hurdle by using a
newer form of regulatory framework, that
developed in the past three years
specifically for equity crowdfunding.

Equity Crowdfunding comes in two
varieties – loan-based and investment-
based – and allows people and businesses
to raise money from the public to support
a business, project, campaign or an
individual. Regulation followed hot on the
heels of the initial emergence of
crowdfunding due to the unease of, for
example, the UK’s Financial Conduct
Authority:

“It is very likely that you will lose all your
money. Most [crowdfunding] investments
are in shares or debt securities in start-up
companies and will often result in a 100%
loss of capital as most start-up businesses
fail. Most debt securities on offer through
such platforms are issued by start-up
companies and can result in capital loss if
the businesses fail.17”

However, we are not using crowdfunding


17

https://www.fca.org.uk/consumers/crowdfundin
g Accessible March 2017
in this way – we simply need to adopt the
regulatory framework that is evolving
around it to protect our savers and to
regulate due processes.

The UK’s regulatory framework covers
both loan-based and investment-based
crowdfunding. As we shall see shortly,
this makes it especially suitable for
Brickcoin’s twin function – as an inflation-
proof savings scheme and as an
investment-and-growth opportunity.
Adopting this framework will also
facilitate essential processes such as:

● Carrying out online registration
that complies with the different
regulations of each country
● Being able to negotiate fees in
private exchanges that can make
use of the blockchain P2P
technology.

Above all, using the world’s most
respected crowdfunding regulatory
frameworks guarantees the integrity of
the Brickcoin project, both to those
parties investing in it and to the most
important participants, the savers
themselves.
Section 3.1 – Management and
administration of Brickcoin

How does Brickcoin work?



Brickcoin is a new mechanism for
ordinary savers for whom a complex
investment scheme is either not a choice
or not an option. It gives them access to
the core benefits (inflation-proof stability
and steady growth) of a robust and debt-
free scheme without being required to tie
up large sums of their capital for long
periods. Brickcoin allows savers to gain
access to existing REITs to put aside and
protect even just small amounts of money
while enjoying full liquidity.

Key aspects of Brickcoin:

● Brickcoin is a savings token
bought with traditional currency
or digital currency.
● A brickcoin represents an
investment in a piece of
commercial debt-free real estate.
● The real estate is held as part of a
carefully-selected REIT.
● The degree of risk represented in
the REIT is reflected by the
corresponding value of the
brickcoin token.
● Brickcoin is kept in a digital wallet,
and all transactions are fully
managed and validated by the
blockchain technology.
● Brickcoins can be bought and sold
easily – instantly or within one or
two hours allowing for blockchain
validation processes.

Who gains from Brickcoin?



The returns available from Brickcoin
depend on the type of Brickcoin18 and on
the status of the saver:

Ordinary savers buying Brickcoin Saver
tokens do so in order to convert their
FIAT currency into a stable form for as
long as they wish. The incentive is capital
preservation and capital growth. They do
not receive any REIT dividends.

Speculative savers buying Brickcoin

See Brickcoin Saver and Brickcoin Growth, Why


18

Real Estate (Section 2.2 above)


Growth tokens do so in order to speculate
on the increase in value of the REIT’s
portfolio of new, emerging real estate.
Although they also do not receive REIT
dividends, they benefit from the enhanced
increase in the value of the Brickcoin
Growth token.

The other benefiting parties are:

Trusted third parties (see below) whose
services support the day-to-day
management, administration and security
of Brickcoin, and for which they receive
professional fees.

The selected REITs who receive an
annual management fee, a percentage of
the asset, deducted from capital
appreciation (or, if no appreciation, from
the value of the fund).

Who manages Brickcoin?



The key actors

The Manager: Responsible for the daily
operations of the company.
● Main duty is to add or remove
Brickcoin tokens from the supply
in the market in order to stabilize
the value.

The Custodian: A bank responsible for
holding the cash of Brickcoin holdings
and the REITs’ certificates.
● Interacts daily with the Broker
(below) and the Manager
● Reports to the Auditor (below)
● As directed by the Manager,
instructs the Broker in the buying
and selling of REITs.

The Broker: A Securities Brokerage
Agent, usually a bank, with license to act
as a Broker in the Stock Exchange.
● Buys and sells REITs as instructed
by the Custodian.

The Auditor: One of the ‘big four’
(Deloitte, PWC, EY and KPMG).
● Supervises and registers the issue
of Brickcoin
● Issues monthly audit certificates.

The Compliance Officer: Daily operation
to supervise and assure full compliance
with regulations.

Summary of key user features of
Brickcoin

● Brickcoin is a savings token
bought with traditional currency
or digital currency.
● A brickcoin represents an
investment in a piece of
commercial debt-free real estate.
● The real estate is held as part of a
carefully-selected REIT.
● The degree of risk represented in
the REIT is reflected by the
corresponding value of the
brickcoin token.
● Brickcoin is kept in a digital wallet,
and all transactions are fully
managed and validated by the
blockchain technology.
● Brickcoins can be bought and sold
easily – instantly or within one or
two hours allowing for blockchain
validation processes.