Recently, we had the chance to chat with Stan Stalnaker about one of the foundational digital currencies, Ven. If Bitcoin started as the rebellious, unstable youngster of the digital currency world, Ven, in contrast, is the environmentally friendly adult with a savings account.
Ven was one of the early digital currencies. Stan formed it in 2007 as a way to reduce exchange rates and fees for sales made internally on Hub Culture. In the eight years that Ven has been around, Hub Culture has focused on growing a strong foundation for it as a stable, green currency that can operate within existing financial regulation.
To create a stable currency, Hub Culture decided to make Ven asset backed and rule-based. As opposed to a fiat currency that derives its value from trust in the issuer and supply and demand, an asset backed currency derives its value from its underlying asset. For example, when the United States dollar was a gold standard it could (theoretically) be traded in for gold and was thus an asset backed currency. In the case of Ven, the underlying assets are commodities, oil, currencies, futures, and other exchange-traded assets which are chosen by the Ven Central Reserve Board. However, while a central board choses the types of assets that underlie Ven, the board is not able to manipulate the price of the currency. An algorithm controls the price of Ven. This combination of (i) trust based on the knowledge that Ven always has the value of the underlying assets and (ii) a rule-based system for determining price creates a stable currency that is ant-inflationary.
Another difference between Ven and other digital currencies is that Hub Culture is attempting to write a “social contract” into Ven by making it environmentally friendly. Stan noted that governmental currencies have social contracts whereby the government issuing the currency also provides goods and services like roads and drinking water. New digital currencies, he explained, lack this social contract because they provide no social good other than as a mechanism of exchange. With Ven, however, a portion (usually 7%) of the assets that back it consist of carbon futures. Stan explained that as Ven scales, the asset basket that backs it will have to scale. This growth means more carbon futures will be bought. That increased demand for carbon futures could result in a higher cost for carbon futures and thus incentivize the lowering of carbon emissions.
Finally, Stan explained that Ven can operate within existing financial regulation. While Ven is currently used primarily in Hub Culture’s online and physical locations and for peer-to-peer transactions, Stan sees the future of Ven as much bigger than that. He explained that after years of careful growth and keeping Ven “squeaky clean,” Ven has been allowed on exchanges including Kraken and LMAX. Exchange listings mean institutions can now buy and sell Ven freely without any connection to Hub Culture. Hub Culture is also authorizing other payment processors, exchanges, and banks to use Ven within existing financial regulations. Currently, Kraken, LMAX, ValidSoft, AlternetSystem, UC Group, and PxyPay are authorized to use Ven. Ven is seeking to expand in the U.S., and Stan believes that Ven’s ability to fit into the proposed regulations in California, New York, and elsewhere is one of its strengths compared to other digital currencies, and proposed regulations will not its impede plans for growth.