Time based currencies are hardly a new idea. The concept at its core, is simple. A time based currency remunerates people for their work according to the time they work in order to produce a good or a service. This work/hour unit is equal to all other work/hour units in the system. Now ChronoBank.io is looking to use this concept coupled with blockchain, to change access to labor around the world. Under the ChronoBank model, anyone will be able to hire anyone else around the globe and pay that individual for hours worked through a stable cryptocurrency.
ChronoBank draws its inspiration from Upwork and Uber. This means that the project will aim to be decentralized and will act to eliminate middlemen in the relationship between potential employers and the labor market. To do so it will rely on a series of mechanisms and blockchains, while keeping the currency in the system stable. The following are some of ChronoBank’s basic characteristics:
- Reliance on multiple blockchains through the creation of Dapps on Ethereum, Waves and NEM blockchains.
- Time based money transactions will be completely dominated by users – P2P principle – making banks redundant.
- The value of the ChronoBank token – Labor Hour token or LH – will be pegged to average national wages. This mechanism aims to reduce volatility and inflation.
- High liquidity, linking the LH token to stable prices in fiat currencies. Users will be able to transact knowing that the LH will maintain its value vis-à-vis major world currencies – USD, EUR, GBP and AUD for instance.
- The whole architecture of the LH token is supposed to preclude the high levels of volatility that other cryptocurrencies suffer from – like bitcoin or Ether.
- Simple to use with one click transactions.
- Blockchain guaranteed transparency.
- ChronoBank plans on launching a debit card that will allow users to access their funds instantly and with ease.
- Remuneration level of users will be determined by a reputation scheme.
The time based token system that ChronoBank proposes is promising, but it also has a few drawbacks. First and foremost is the lack of clarity regarding which average wages will be taken into account in order to determine the value of LH. In a blockchain powered decentralized system, currency resides online. However, geographical location and political borders play a central role in determining labor costs. Freelancers receiving LH for their labor then, will either be paid according to the average hourly wage of the jurisdiction in which they live, or will in turn be paid according to the average wage of some other place.
This generates a system that could perpetuate inequality by encouraging companies to seek the cheapest labor and draining demand for labor from developed countries to developing countries. If the wages are determined by the local average wage, then no one will be able to verify where the source of labor really comes from, which also makes the system prone to the perpetuation of inequality.
Who Determines the Average Wages?
Then there is the issue of decentralization. In a purely decentralized system, anyone can charge anything for a good or service, and the market will determine the amount of demand at that price. ChronoBank proposes a decentralized network in which central authorities will become the driving factor that determines the price of labor – as long as LH is based on average wages in any country where there is a legal minimum hourly wage.
Is the LH Token Stable and Inflation Resistant?
This leads the system into the next set of wage related problems. It is no secret that the purchasing power of the average wage in most developed countries, has suffered a great degree of attrition in the past decades. This is part of the problem that economists define as stagnant wages. ChronoBank’s LH will therefore be a subject of this wage stagnation as long as it is directly linked to average wages in any given jurisdiction.
This would lead to de facto token inflation. Workers in the ChronoBank system will have to demand higher wages to keep up with purchasing power attrition where they live. Part of the problem is due to the fact that a ChronoBank worker will produce globally and consume locally. If that worker is located in a country like Venezuela for instance – where inflation is around 475% a year – the LH tokens that worker earns today, may well be worthless in a year’s time. Therefore the LH token will be subject to inflation at least indirectly.
ChronoBank is Still a Great Idea
Every system has drawbacks. ChronoBank may have to adjust its system to achieve its goals, but it is still a great idea. In principle, connecting labor around the globe to companies or organizations that need the services, without having any middlemen can serve as a powerful development tool. ChronoBank however might be more successful if it decentralizes the value of its LH token completely, and if it clarifies how exactly will it calculate LH values.
Additional Information about ChronoBank
- Australian company Edway Group is the founder of the ChronoBank project.
- ChronoBank’s ICO will take place in December.
To join the ICO and to find out more about ChronoBank, visit the official website.