In this series of articles we will outline our plans for the creation and marketing of a unique cryptocurrency called ZimCoin (ZZC). Our intention is to initially connect two very disparate forms of money to each other:
• The now defunct Zimbabwe Dollar (Z$), printed in 27 denominations ranging from $1 to $100 trillion.
• The leading cryptocurrency BitCoin (BTC) (market value exceeding $1 billion USD).
We do so by establishing a currency “peg” between the Z$ and the BTC. We can also link Z$ to other cryptocurrencies such as LiteCoin, NameCoin and PPCoin. Concurrently, we will be developing ZimCoin as its own unique form of cryptocurrency, utilizing the same open-source cryptographic protocol that serves as the backbone to BitCoin.
What does it mean to peg a currency? Investopedia explains: Currency pegs allow importers and exporters to know exactly what kind of exchange rate they can expect for their transactions, simplifying trade. This in turn helps to curb inflation and temper interest rates, thus allowing for increased trade. Wikipedia continues: A fixed exchange rate is usually used to stabilize the value of a currency against the currency it is pegged to. Another Wiki reference expands: The central bank of a country remains committed at all times to buy and sell its currency at a fixed price.
How do we establish this peg? We do so by constructing a virtual banking system that maintains sufficient reserves to back up the peg. At launch, we will possess in excess of One Quintillion Zimbabwe Dollars – Z$1,000,000,000,000,000,000. One quintillion equates to one trillion multiplied by one million. (one trillion dollars explained statistically or portrayed visually) The illustration above depicts one trillion dollars in $100 bills stacked on pallets.
We think the idea of a peg will carry tremendous appeal with BitCoin enthusiasts because it will help to further legitimize and stabilize their investment and belief in virtual currency.
Our central bank sets the peg and backs up BitCoin with $Zimbabwe currency. Therefore, “X” number of BTC can always be exchanged for “Y” number of Z$. Regardless of fluctuations in BTC market price, its value relative to Z$ dollars will always remain the same. For instance, if our peg were: one BTC equals one hundred trillion Zimbabwe Dollars (or its equivalent), whether BTC were traded for $30 or $300, it would always equate to Z$100 trillion. Thus, we have established a fixed rate of exchange.
The idea is far from novel. Many currencies have, at one time or another, been “pegged”. Typically, a government, in league with its central bank, establishes a fixed rate of exchange. For decades, the Hong Kong dollar was pegged to the U.S. dollar at 7.75 HKD to 1 USD. By so doing, they stabilized the HK currency while greatly expanding international trade capacities. The Central Bank of Hong Kong guaranteed the viability of the peg by maintaining sufficient foreign reserves to back up their peg and any demand placed upon it.