How do you create a financial system from scratch and start living a better life?

Like any programmer, I do not like poorly working systems. When I see then, I feel an irresistible desire to take them in my hands and make them right. For example, our entire global financial system is one, big, hell of a thing. There is an enormous field for optimization.

Dear bankers, macro economists and financiers, please don’t be in a hurry to reach for the “close tab” button — this is not ignorant nonsense; well, maybe just a little.

It’s 2016, and the majority of the world has Internet access, although banking is available on a simple mobile phone without the Internet (e.g. M-Pesa). At the same time, our entire financial system is still at the level of the last century. Visa, SWIFT, clearing on the third day after the transaction, interbank transfers taking 2–4 days, business days, fees, and the commercial banks themselves — what is all of this for? Well, I do understand that it used to make our life easier before. But that was a good two decades ago, when Internet and mobile communications coverage was barely noticeable.

However, they are all useless now. Banks are just getting our money… while creating woes for us. The commercial banks alone receive nearly $1 trillion in net profit annually. This is just the tip of the iceberg: if you remove everything that has outlived itself and add innovation, you can safely count on releasing $5–7 trillion annually. It is about $1,000 per person every year. For poor countries, this $1,000 per year is salvation from poverty and a chance for a brighter future.

Still, I would hold on before giving out $1,000 to everyone; it is not very far-sighted. The released funds can be spent on the development of technology. It is not long before the happy day when machines will do our job. Street cleaning, building, routine office work, etc. — all of this can be done without people.

If $7 trillion per year is spent on supporting innovative solutions, in the very near future all of us will have guaranteed income that will allow us to work just for fun on some creative tasks. Working for money will be a thing of the past, just like slavery.

I hope it is clear that the current inefficiency of the financial system pushes the happiest day far in the future. We need changes that will bring our carefree life closer, where technology will do our job.

The changes will be invisible, quiet, and smooth. The majority may not even notice them.

So, what should be changed and how to do it?

1. Commercial banks are no longer needed

They currently exist only because they managed to penetrate every area of our lives, and nobody seriously wonders why they are here. They do not do anything so complicated that top management should receive tens of millions of dollars.

Each country has a central bank. I promised I wouldn’t write nonsense at the beginning of this article, so I won’t say we do not need a central bank. Central banks must persist, as we want a smooth, peaceful and revolution-less upgrade.

Central banks can now perform all the functions of commercial banks. Representatives of the central bank reading this article might exclaim in horror: “But how are we going to cope with all this? The central bank is not designed to do this!” Please, do not panic, everything will be fine. I could have agreed with you 20 years ago, the idea would have been really insane at the time. But now it’s different time and we have different technologies. Read on, I’ll make things clear.

Any citizen will be able to have an account with the central bank and get a card. There will be credit and debit accounts. Likewise, all companies must open their own accounts with the central bank.

One small innovation that will change the world. Data on transactions should be in the public domain. Only central banks will know whose operations they are, but the cash flow will be visible to everyone (like with Bitcoins). If cash is abolished (those who do not have a card will be able to transfer money through a mobile), we will have several trillions of dollars per year from this innovation, as transnational organized crime and corruption won’t be able to exist, they will simply become a thing of the past like pirates did. Anonymity will persist, don’t worry — everyone will be able to spend money secretly from his wife or parents, but will be unlikely to succeed in buying drugs (or at least it will really complicate the lives of drug dealers, arms dealers, etc., as they will have to make payments with something physical, such as gold).

2. Taxes

Nobody likes them, and some even want to abolish them. But since I promised not to write nonsense, I will not talk about the abolition of taxes. You do the math: let’s say taxes are not collected, who will pay to maintain an army, a health care system, who will pay pensions? Of course, armies can be dissolved, but what if some decide not to dissolve them and start conquering others?

I call for tax reduction by optimizing the system of taxation and accounting. In the US, the costs of accountants make up 137 billion per year. In the world, this figure could reach $1 trillion per year. All of these people service an inefficient financial system of the last century.

Our taxes will be collected automatically. Armies of tax officials will become obsolete.

3. Lending

I have a great idea. Let’s reset all loans and nobody will owe anything! Just kidding, it’s nonsense. A thought like “what if my mortgage was lost, and the house is mine?” comes to many. Unfortunately, if you reset the loans, it will lead to a global catastrophe. If everything is much easier, we can say that when you repay your mortgage, you do not pay the bank, but those who built this house — the workers and manufacturers of building materials. The bank is only an intermediary in this transaction. If all the loans were reset, the majority of banks would go bankrupt within a few days, except the ones the central bank immediately supplied with liquidity. All inter-bank lending and settlements would stop. A full-blown crisis, a drop in GDP, rising unemployment and deflation of assets would begin.

What will the credit process be under these new conditions? The loan applications will be checked by the algorithm. The loans will be issued by the central bank. Commercial banks should turn into rating companies. They will check loan applications after the algorithm check. If the loan is repaid, the bank makes a profit, if not — it makes a loss. The central bank will just have to specify several parameters of the algorithm in the scheme, and that’s it.

4. Visa, Mastercard, Paypal, etc.

Their task is to simplify our lives. But we will have the accounts with the central bank, with cards, and credit accounts. We just won’t need these companies. Everything would be simple and easy without them.

5. Uniting the central banks into the shared network

Central banks must be independent, but at the same time they need to share information about the transfer of funds. Each central bank needs to know how much money another central bank issues. Blockchain use offers itself. We will have a node = central bank.

6. Alternative to QE

If every citizen and organization has an account with the central bank, quantitative easing can be replaced with a lower threshold for loans in the algorithm, or with an increase in the amount of funds on the credit account (credit for any needs) of all citizens, or even with crediting all citizens some amount of money. In the latter case, it is a real boost to a slowing or recessing economy.

What is happening today? Central banks inject a lot of money… which is simply deposited in banks. Banks hold the money in the deposits without forwarding it to the real economy.

Our scheme is different. All citizens of the country receive a lump sum of $100–10,000. They go and spend it with pleasure. The economy receives orders, sales and jobs, while the state collects taxes.

7. Smart contracts

Ethereum is a brilliant invention, but it is isolated from the financial system. There are no accounts for citizens and organizations. You won’t be able to sell your house in Ethereum with one click of the mouse or provide the central bank with tools to manage national currency.

But we do need smart contracts per se, and we will introduce them to the core of our new financial system.

Transition period

It is hardly possible to immediately replace the old financial system with the new one. By the way, let’s refer to the new financial system as DayLight. The old system and DayLight have to exist simultaneously for a while; I think the transition process will take 5 years.

Let’s start?

Money supply should appear inside the DayLight. I think the best option would be to credit the first 100 million people in the US $1,000, different currencies in different countries, of course. This is so-called “helicopter money”. Or it can be distributed evenly to all citizens of each country. Central banks will take this decision.

In the beginning, everyone will try to exchange all the money from the DayLight for fiat money. After all, it will take some time for the market to accept DayLight. During this time, the central bank should ensure the exchange of money from DayLight for fiat money, but under certain conditions. To maximize the benefit to the economy, the central bank must change the DayLight money for fiat money to local companies only. Thus, when a citizen receives $1,000 in the DayLight, he or she has to spend it on the purchase of products from a local producer, for example, as only a local producer can exchange it for fiat money from the central bank.

When companies are able to buy materials for their production, pay taxes and salaries with DayLight money, the Central Bank will no longer need to guarantee the exchange of DayLight money for fiat money. From that time, the old money may be withdrawn from circulation. This is how smoothly DayLight will replace the current financial system.


As a result, we can get rid of many intermediaries: commercial banks, VISA, Mastercard, SWIFT, as well as the armies of accountants, government officials, etc. If the DayLight is used by all of the central banks in the world, the crime rates will also fall sharply.

The problem with the trillions of dollars that flow away to offshore accounts will resolve itself. That means that the states will get a lot of money in the form of additional taxes. We just need to ask our government to multiply funding for innovative projects, and you can relax and watch how technological advance makes our life better and better.

If my thoughts seemed reasonable to you, please share this article with your friends.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.