Category: Units

Currency Brands, Units and Reporting

In the same way that each entity is free to issue its own currency according to its self-determined limits, an entity may also assign a preferred unit of reference to its currency brand measurements. An entity may also invent its own currency unit, or simply adopt more common units such as its own brand of dollars, hours, etc. Independent entities may even choose the same terminology for their units, but assign different meanings and ways of measuring those units. With this ‘freedom of expression’, a valid concern arises regarding the difficulty of evaluating different currency brands when independent floating exchange rates are used among a huge variety of currency units.

Satconomy addresses this concern through the implementation of common reporting units, a sort of reference standard units that market participants could use to compare the currency issuance and use of different entities. In as much as the self-reporting of an entity’s activities is voluntary, the use of a particular reference or reporting unit is also voluntary. However, an entity ultimately benefits in voluntarily reporting its activities using reference standard units.  A trustworthy entity does not have anything to hide and must open its books to market participants who wish to evaluate its practices. This is not to imply faultlessness on the part of an ‘open’ entity, but one that is simply honest about its own capacities and limitations, able to point to its successes and mistakes with equanimity.

In addition, such openess must be expressed directly in an easily understood context, a fact that highlights the importance of using common reporting units. Even though an entity is free to use any unit for its currency brand, market participants would surely appreciate being able to evaluate a currency brand against easily recognizable reporting units. The easier it is to evaluate an entity’s currency brand and activities, the more likely it is to gain widespread acceptance in the market.

Lastly, the entities that are involved in a transaction must agree on what measurement value to report as expressed in the reference standard units. Both parties in a market transaction must report matching quantities of cancelled debits and credits. This parity in reported value is most easily tracked and validated by market participants and analysts through the use of common reporting units.

Advertisements