What is KRNC? How is it different from Bitcoin?

KRNC is a new blockchain protocol. Like Bitcoin, it uses cryptography to create a form of scarce "digital gold." The difference is what that digital gold is used for.

In Bitcoin, digital gold is used to create a new currency, which competes with government currencies like the Dollar and the Euro. If Bitcoin replaces government money, then billions of people could see their savings destroyed, since they won't own any Bitcoin. However, purchasing Bitcoin today is risky, because it hasn't yet been able to achieve widespread acceptance as money. If Bitcoin succeeds, it will make a small number of early adopters rich, but if it fails then people who buy Bitcoin today could lose everything.

In KRNC, digital gold is used to protect the value of the money that everyone already owns. Nobody is forced to take a risk by purchasing new money: everyone who has money in the bank is issued digital gold for free. This is a modern version of the "gold standard," which once guaranteed the value of all money using physical gold. The gold in KRNC is digital rather than physical, but the basic concept is the same: the value of existing money is protected by using a scarce resource to limit the quantity of money that can be created in the future.

The flaw in the traditional gold standard was that it worked on the honor system. Physical gold was locked in vaults by Central Banks, and everyone had to take them at their word that all the money they printed was backed by the necessary quantity of gold. The system collapsed in the 1970s, when Richard Nixon broke the U.S. government’s promise that the dollar was “good as gold.” Everyone who thought they owned gold-backed dollars discovered that they actually held an empty promise from the government.

KRNC uses blockchain technology to ensure that this “un-backing” of the money supply will never be repeated: digital gold is controlled directly by the public – not a Central Bank – and it is transferred alongside the electronic dollars whose scarcity it protects. It’s like an upgrade to the monetary system. Today, dollars aren’t backed by anything. With KRNC, they’ll be “weighted” with digital gold.

What are USDf and USDw? How much are they worth?

USDf is a measure of the quantity of digital gold that will be issued to the owner of one U.S. Dollar. The "f" stands for "forked," a blockchain term whose meaning is similar to a "fork in the road." Just as there are two branches of a road after a fork, there are two components of a dollar after KRNC: the original unbacked dollar (USD), plus the digital gold that guarantees its scarcity (USDf.)

USDw is a unit of account that represents the combined value of the unbacked dollar and its digital gold. The "w" stands for "weighted." This can be understood as a metaphor for the fact that gold is heavy, but "weight" is also a computer-science term for voting power. On the KRNC blockchain, votes are weighed in proportion to ownership of digital gold, which keeps the system verifiably secure and decentralized.

We won't know the exact value of USDf and USDw until they are being used in commerce and listed by exchanges. However, by definition, the value of one weighted dollar is equal to one unbacked U.S. Dollar plus one USDf of digital gold. One USDw is therefore more valuable than either one USD or one USDf – it represents the combined value of the two together.

Is KRNC compatible with currencies other than the U.S. Dollar?

Yes, KRNC's Proof-of-Balance technology can be used to issue digital gold to the owners of every electronic fiat currency. This FAQ focuses on the U.S. Dollar in order to explain the technology in simple and clear terms, but there's nothing about the KRNC protocol that limits its use to one fiat currency. We hope to bring KRNC to the entire world, so that no country is left behind in the transition to blockchain-weighted money.

For example, everyone who holds one EUR in a bank will be entitled to receive one EURf – the quantity of digital gold needed to provide cryptographic "weight" to that Euro. When one EUR and one EURf are transferred together, they represented one weighted Euro, a EURw. The EURw is analogous to one USDw. However, the value of the two units of account is different, since their underlying components are distinct: one represents a Euro plus one EURf of digital gold, the other represents one USD plus one USDf of digital gold. The exchange rate between the EUR and USD will continue to float based on supply and demand, but the value of one EURf to one USDf will remain constant, because they each represent fixed quantities of digital gold.

That last point is critical. On the KRNC blockchain, all digital gold is comprised of the same underlying cryptographic "material," and different units of account are simply different amounts of that material. For example, if one EUR is worth $1.10 USD when the KRNC protocol is initiated, then one EURf will represent 1.1 times as much digital gold as one USDf. Someone who owns one USD and one EURf would be able to use that digital gold to create one USDw and would have 1/11th EURf of digital gold to spare. The ratio between USDf and EURf will not vary, even if the exchange rate between the USD and EUR changes, because digital gold is designed to protect the scarcity of the money supply.

If any individual country begins to suffer a hyperinflationary crisis, the rapid increase in the supply of its unweighted currency will increase the global demand for digital gold, since citizens of that country will want the scarcity of their money to be cryptographically guaranteed. If you are lucky enough to live in a country with a responsible Central Bank, you may not be worried about hyperinflation, but you should still expect that the digital gold you receive in KRNC will be valuable, since it can be used to protect people’s savings in less fortunate regions of the world.

How will payments be made in crypto-weighted fiat?

There are three ways of making payments with USDw.

First, we hope that USDw will eventually be integrated into the payment systems that the world already uses and trusts, including debit cards, mobile wallets, and wire transfers. To make this possible, commercial banks and credit unions would hold USD and USDf while issuing transferable claims on those assets in USDw. When those claims are issued as blockchain tokens, they can serve the same use cases as "stablecoins" like JPMCoin or USDC, except with the added benefit of inflation protection.

Second, before USDw is added to incumbent payment rails, it can be transferred by executing two parallel transactions: one in unbacked USD, the other in an equal quantity of USDf. The USD can be transferred using whatever electronic payment method the parties prefer; even physical methods like cash or checks can be employed. The USDf can either be transferred on a custodial platform or settled directly on the KRNC blockchain.

Third, if the parties wish to perform a USDw transaction entirely on the KRNC blockchain, then the USD component of each USDw can be replaced with a quantity of USDf equal in value to one USD. The quantity of USDf necessary to provide equal value to one USD will depend on market prices, so a payment made using this technique could grow or diminish in value relative to USDw if the extra USDf are not converted back into USD. To protect merchants from price volatility, we anticipate that exchanges will offer the option to "lock in" the appropriate USDf-to-USD rate at the time a payment is initiated.

Where can I buy KRNC's native asset? When is the ICO?

The whole point of KRNC is that you don't have to buy anything. You own digital gold in KRNC automatically if you have U.S. Dollars (or other fiat currency) in your bank account. The best way to participate in KRNC is to keep your government-issued fiat money in your bank account. All you have to do is sign up here and you'll be able to claim your digital gold as soon as KRNC launches. If you want to help out your friends and family, share the link with them to make sure they claim their digital gold as well. It's a free way to help them protect the value of their savings using blockchain technology.

What is Proof-of-Balance? Is it different than Proof-of-Work and Proof-of-Stake?

Proof-of-Balance is a new Sybil-resistance mechanism employed in the KRNC protocol. It's based on the same state-replication algorithms as Proof-of-Stake, but it adds a secure bootstrapping mechanism that exponentially increases the security and speed that those algorithms can achieve on a permissionless network. To understand how Proof-of-Balance works, it's important to distinguish between the two functions that Proof-of-Work serves in Nakamoto consensus. First, Proof-of-Work is used to bootstrap the initial ownership of money within the protocol. Second, Proof-of-Work is used to update the state of the ledger with transactions that transfer money to new key pairs. Proof-of-Stake can perform only the second of these functions, so it was never actually a full replacement for Proof-of-Work. After cryptographic money has been assigned to key pairs, then Proof-of-Stake enables that money to be transferred, but unlike Proof-of-Work it doesn't actually provide a mechanism for bootstrapping the initial distribution of money within a protocol. That is why existing Proof-of-Stake protocols either start out with Proof-of-Work mining or simply auction stakes to the highest bidder in an ICO. Proof-of-Balance is the first complete replacement for Proof-of-Work: it allows parties to reach consensus about the initial ownership of money on a decentralized ledger and for the state of the ledger to be securely updated. Conceptually, Proof-of-Balance resembles a "hard fork" of the commercial banking system: everyone who has U.S. Dollars or other fiat currency in online banking during a designated period in the past is assigned corresponding money on a self-governing blockchain. The relative weight that these assets receive in KRNC's consensus algorithm is fixed in proportion to the exchange rates that existed at the time of the fork. An adversary would need to control trillions-of-dollars worth of bank deposits in order to unlock 51% of the available voting power in Proof-of-Balance. That does not guarantee that the assets will remain that costly to acquire once a liquid market exists, but it means that Proof-of-Balance has the capacity to deliver more than 10,000x the security of the prior state of the art.

What are book-prize attacks? How does KRNC prevent them?

Book-prize attacks are a new exploit against Proof-of-Work and Proof-of-Stake protocols, which were formalized for the first time in the KRNC technical paper. They are a cousin of Sybil attacks, which allow the security threshold of a permissionless blockchain's consensus algorithm to be violated by a Byzantine adversary without employing pseudo-spoofing. Every consensus algorithm requires an honest majority (or supermajority) of voting power to be held by honest (i.e., non-Byzantine) agents in order to guarantee liveness and safety. The security of a permissionless protocol – which anyone can join – depends on the axiom that a majority of all agents are honest, and that therefore a majority of the votes weighed in consensus will be cast by honest agents. This assumption is violated in both a Sybil attack and a book-prize attack. The difference is the mechanism employed by the Adversary. In a Sybil attack, the Adversary registers extra identities and uses them to rig the outcome of consensus. In other words, even though the majority of the agents participating in the protocol are honest, the majority of the votes will be cast by the dishonest agent executing the Sybil attack. In a book-prize attack, the Adversary does not need to register any extra identities. Instead, it biases the composition of the set of participants by, e.g., recruiting agents it has corrupted to join the consensus protocol. The exploit is named after a real-world example of this strategy being used to alter the outcome of a prestigious literary contest in the Netherlands. The results of these two attacks are effectively identical, so they were previously conflated in computer science. However, they actually represent completely different vectors for introducing bias. In the terminology of statistical inference, a Sybil attack is a form of non-sampling error while a book-prize attack is a form of sampling error . This distinction is important because the technologies that have traditionally been used to prevent Sybil attacks – like Proof-of-Work and Proof-of-Stake - make protocols more vulnerable to book-prize attacks. Because they impose verifiable costs on all protocol participants, they decrease the fraction of the population that chooses to participate, making it easier for an Adversary to rig the outcome by flooding a protocol with corrupted agents. Proof-of-Balance is the first technology that delivers protection against both Sybil attacks and book-prize attacks. It uses recent advancements in signaling theory to prevent Sybil attacks without forcing agents to invest computing power or money. Because participating in consensus is free, the set of agents that will rationally participate is large enough to guarantee a statistically representative sample of the total population.

What are pseudo-transfer attacks? How does KRNC prevent them?

Pseudo-transfer attacks are a new exploit against Proof-of-Stake protocols. They were first formalized in the KRNC technical paper, which used them to demonstrate that Proof-of-Stake protocols are unable to replicate Bitcoin's security guarantees. In a pseudo-transfer attack, an adversary transfers its stake to new cryptographic addresses that it secretly controls. This allows for the external appearence of decentralization to occur without any actual alteration in voting power. By employing this technique, the initial set of participants in a Proof-of-Stake protocol can invisibly retain their control of the protocol for an arbitrarily long period of time. An Adversary can covertly pay the cost of a 51% attack when the protocol is in its infancy, then engage in "intertemporal arbitrage" by performing a double-spending years later, once users have naively trusted the protocol with billions of dollars. Bitcoin and other Proof-of-Work protocols are not vulnerable to this exploit, because they do not rely on a fixed quantity of voting power that can be monopolized. Instead, as new agents choose to participate in consensus, the total quantity of hashing power in the network grows, so that the power of early participants is verifiably diluted. An attacker is always forced to pay the present cost of a 51% attack, not a heavily discounted cost based on an earlier period of time, before value had accrued on the blockchain. Proof-of-Balance uses a similar approach to prevent pseudo-transfer attacks. When new agents join the protocol, they are issued transferable voting power in proportion to their past bank balances, and the total quantity of voting power in the protocol expands. The influence of the initial set of protocol participants is thereby diminished, in a manner similar to Proof-of-Work. In Proof-of-Work, this expansion can continue indefinitely, which creates what economists refer to as a "free-entry condition." The present set of protocol participants can never verify that they will remain in control of the protocol in the future, since the arrival of new agents with additional hashing power always has the potential to oust them from power in the future. This prevents incentive compatibility, since it may be rational for agents to permit double-spending in the present if they do not expect to remain in power in the future. Proof-of-Balance solves this problem by making the free-entry period temporary. There is a window in which new agents can join the protocol can unlock extra voting power, but once enough time has passed to give everyone a fair chance to participate, the window closes. From that point forward, Proof-of-Balance functions like Proof-of-Stake, except it has far greater security, since it has been "booted" using a procedure that eliminates the risk of pseudo-transfer attacks.

What makes KRNC faster than prior permissionless blockchains?

The speed advantages that KRNC provides are derived directly from its superior security. Because Proof-of-Balance verifiably limits the maximum fraction of adversarial voting power to much lower levels than Proof-of-Work or Proof-of-Stake, it allows transactions to be confirmed exponentially faster. This is true for two reasons. First, in any chain-based consensus algorithm, the number of blocks that have to be observed before finality can be guaranteed with a given probability (e.g. 99%) depends on the maximum fraction of voting power controlled by an Adversary. Proof-of-Balance ensures that the overwhelming majority of voting power is controlled by honest agents, which eliminates the long delays that are required in Proof-of-Work and Proof-of-Stake. Second, because Proof-of-Balance delivers excessive security, it can be combined with extremely aggressive sharding techniques. In Proof-of-Work and Proof-of-Stake, there is no security to spare, so techniques that increase throughput by only receiving confirmations from a small fraction of all validators cannot be employed without jeopardizing the fundamental reliability of the blockchain.

What is asymmetric Sybil resistance? Why does it matter?

Asymmetric Sybil resistance is a new discovery with the potential to transform the field of permissionless Byzantine consensus, much like the discovery of asymmetric encryption transformed cryptography in the 1970s. Legacy technologies like Proof-of-Work and Proof-of-Stake are symmetric in the sense that whoever expends the majority of computing power or financial resources can violate liveness or safety. This is commonly known as a "51% attack." In effect, control of the blockchain is auctioned to the highest bidder. If the Adversary's "attack budget" is greater than the combined "defense budget" of all honest protocol participants, then the Adversary can break the protocol. Proof-of-Balance is asymmetric in the sense that, even if the Adversary spends more money than all honest protocol participants, the blockchain can still remain secure. It achieves this by adapting a recent advancement in signaling theory, which has never before been applied to computer science. Specifically, it replaces handicap-based authentication with cue-based authentication, so that dishonest signals are verifiably costly, but honest signals can be transmitted at zero cost. The result is a permissionless blockchain protocol, Key Retroactivity Network Consensus ("KRNC"), with exponentially greater security and performance than the prior state of the art.

Weren't there problems with the gold standard? How will KRNC avoid them?

Yes, there were several problems with using physical gold to restrict the supply of money. To understand how KRNC avoids these problems, let's review the three major shortcomings.

The first problem was that the gold standard worked on the "honor system": the U.S. government promised to maintain adequate reserves of gold, but that promise was broken in 1971 by President Nixon, who announced that the U.S. did not have enough gold to back all of the money it had issued. KRNC solves this problem by issuing digital gold directly to the owners of fiat money, so that no physical gold has to be stored at a Central Bank. Instead, when payments are made, digital gold is transmitted alongside the electronic dollars whose value the gold protects.

The second problem was that the supply of gold was unpredictable, since the rate at which usable gold was extracted from the earth could suddenly increase due to the discovery of new deposits or invention of new mining techniques. In KRNC, the supply of digital gold is specified in computer code on the world's most secure blockchain, so the factors that affected the supply of physical gold are not relevant.

The third problem, according to many economists, is that the gold standard prevented governments from using monetary policy as an economic stimulus. Other economists disagree and argue that it is dangerous to print money that is not backed by gold. KRNC offers a prudent middle path, which minimizes risks to the global economy without committing to either of these theories. Central Banks will remain free to expand the supply of unweighted money as a form of economic stimulus, but if they abuse this power by printing too much new money, then economic agents can protect themselves by demanding payment in money weighted by scarce digital gold.

How is the development of the KRNC protocol being funded?

KRNC uses a simple and fair funding mechanism. For every 1 USDf of digital gold that is issued to the owners of USD or other fiat currency, an additional 0.05 USDf of digital gold is issued to the company founded to create the KRNC protocol, Krnc Inc. In a typical Proof-of-Stake protocol, the corporate developer starts out owning 100% of the blockchain's native asset, and it pre-sells those assets to investors. We believe that's unfair and insecure, since it centralizes power in the hands of a small number of people. The funding mechanism for KRNC is designed to ensure that Krnc Inc. will receive less than 1/20th of the digital gold in the KRNC blockchain. More than 95% of the blockchain's native asset will be issued to the public for free in proportion to ownership of fiat money.

Is KRNC deflationary like Bitcoin? Who controls its monetary policy?

The initial supply of USDf in the KRNC protocol is limited to the quantity of digital gold required to guarantee the scarcity of the world's existing fiat money. In practice, not all of the digital gold will be claimed in time by its owners, and the unclaimed digital gold will be destroyed to maximize the value of the remaining stock. After the KRNC protocol is introduced, Central Banks will continue to issue new unbacked fiat money, but the owners of this new money will not be able to unlock free digital gold. If they want for their money to be cryptographically weighted, they will need to barter or purchase some of the existing stock of digital gold. Like other aspects of the protocol, KRNC's monetary policy will be determined through on-chain governance, using a meta-protocol that weighs votes in proportion to ownership of digital gold. We anticipate that the protocol will operate with low or no inflationary subsidies, because KRNC's Proof-of-Balance technology exponentially lowers the cost of transaction validation compared to Proof-of-Work and Proof-of-Stake.

How does KRNC lower transaction costs? What does this mean for users?

KRNC employs two mechanisms to lower costs. First, it uses a new security method – Proof-of-Balance – which eliminates the costs imposed on validators by Proof-of-Work and Proof-of-Stake. Transactions can be recorded and verified using cheap consumer hardware, but that is not the major source of overhead for transaction validation. Instead, permissionless blockchains are expensive because legacy technologies force validators to expend computational or financial resources to demonstrate that they are not "sockpuppets" controlled by an attacker. Proof-of-Balance replaces these handicap-based systems with zero-cost permissionless authentication, radically reducing the economic overhead of creating new blocks. Second, because Proof-of-Balance also offers exponentially stonger security guarantees than legacy technologies, KRNC can tolerate far more aggressive "sharding" than prior blockchains. Sharding is a technique that allows an increase in throughput in exchange for a potential reduction in security, since transactions are assigned to only a subset of validators. The excess security in KRNC is effectively "convertable" into greater throughput, which increases the total space available for transactions. Collectively, these two mechanisms make it affordable to use a permissionless blockchain because (1) it costs less to produce blocks and (2) there are more blocks available. They can reduce or eliminate the transaction fees that prevent Bitcoin from being used for small payments. Lowering the cost of decentralization also expands the range of applications that it will be practical to run on the KRNC blockchain in comparison to platforms like Ethereum that rely on handicap-based authentication.

Is KRNC designed to eliminate Central Banks or replace sovereign currency?

No, it's designed to complement them. The world's existing monetary system isn't perfect, but for almost half a century the post-Bretton Woods system has prevented a global economic depression. It would be reckless to suddenly replace the incumbent monetary order with a cryptographic protocol. Even if such a protocol were to offer theoretical advantages, the risks posed by a rapid transition would be unacceptably high. However, it would also be irresponsible to pretend that Central Banks are infallible. They are run by human beings, who are tasked with one of the most awesome responsibilities in history. Even the staunchest Keynesian economists admit that there is a chance that Central Banks could make a miscalculation that will plunge the world into a hyperinflationary crisis. Worse, if governments prove unable to manage their growing budget deficits, the pressure to strip Central Banks of their power and begin massive inflation of sovereign currencies will intensify. No one knows when the present system will implode, but it clearly is not sustainable indefinitely. If such a collapse happened today, there would be no fallback system other than physical gold or "digital gold" like Bitcoin. Billions of people would see their unbacked fiat savings destroyed. The resulting social instability could destroy governments and claim countless lives. In a world replete with nuclear weapons, there is no limit to the harm that could be caused by a repeat of the runaway inflation of the 1930s.
KRNC was created to prevent that worst-case scenario. It uses blockchain technology to provide a backup mechanism for the global monetary system: one that does not involve a massive transfer of wealth or the creation of new private currencies. The protocol is engineered to support commerce in crypto-weighted fiat currency, which has two components. One is unbacked fiat money – like the U.S. Dollar or the Euro – the other is digital gold whose supply schedule is governed by the KRNC blockchain. KRNC can be considered a high-tech return to the gold standard. Technically, its hybrid structure mirrors the price stability of the symmetallic monetary standard, in which base money is defined as a meta-resource composed of silver and gold in a specified ratio. It may also be compared to the political diversification of risk provided by a bicameral legislature or the separation of powers among multiple branches of government. In the world after KRNC, Central Banks will retain the flexibility to pursue monetary policy by issuing unbacked fiat currency. However, if their use of this power inadvertently triggers an economic disaster, the world will not be left helpless. The owners of crypto-weighted fiat will retain their digital gold, and that gold can provide the foundation for rebuilding the world economy.

What does it mean that KRNC is "biomimetic"?

Biomimetics seeks to improve on human designs by learning from nature. Reverse-engineering natural systems makes it possible to learn the secrets of what are essentially "alien technologies" produced through billions of years of evolutionary optimization. Even the world's most powerful supercomputers cannot replicate the real-world selection processes whose results are visible in the natural world. As a result, biomimetic techniques have already produced revolutionary advancements in numerous fields, from aviation and aerospace to AI and pharmacology. KRNC is the world's first biomimetic blockchain protocol. The zero-cost signaling techniques that allow it to provide thousands of times the security and performance of past systems are directly related to the signaling methods that organisms like tigers use to communicate the reproductive fitness of males without costly handicaps. This is not merely a loose, flowery analogy: the formal mathematical models used to validate the design of the KRNC protocol are extended versions of the models that biologists use to study animal communication. The application of these models to computer science required many modifications and technical innovations, but the core mechanisms remain intact.

What is the "handicap principle"? What does it have to do with blockchains?

The handicap principle is a hypothesis that was proposed by biologist Amotz Zahavi in the 1970s, according to which the reliability of a signal depends on its verifiable cost to the signaler. For example, Zahavi believed that male peacocks grew oversized tails because such tails were disadvantageous – only the strongest males could afford to pay the associated fitness penalty, which made tail size a reliable signal of fitness. In the 1990s, formal mathematical methods from game theory were used to validate Zahavi's intuition. The handicap principle became recognized as a widespread phenomenon, whose role extends beyond biology. For example, when male humans spend exorbitant amounts of money to buy "bottle service" at nightclubs, they are effectively "handicapping" themselves in order to demonstrate their financial resources. It is not entirely clear whether computer scientists were aware of the handicap principle when they designed Proof-of-Work systems, but those systems represent yet another clear example of handicap-based signaling. Agents are forced to expend computational resources in order to prove the quantity of resources they have available. Proof-of-Stake require the expenditure of a different resource – money instead of computing power – but they also are based on costly handicaps. The only difference is when the cost is incurred: in Proof-of-Work, the cost of handicaps is perpetual, whereas in Proof-of-Stake it is an upfront cost that does not have to be repeated to produce new blocks. It has become a myth in the cryptocurrency community that the handicap principle is a universal law of nature. This has been employed by influential commentators to justify the waste inherent in Bitcoin's Proof-of-Work system. However, it is objectively false. Handicap-based signaling is one method of reliable communication, but it is not the only method. That insight is one of the core breakthroughs behind KRNC.

What is cue-based signaling? How is it employed in KRNC?

Cue-based signaling is an alternative to handicap-based signaling. Like a handicap, a cue is a trait that communicates information because it is costly to fake. The difference is when and why the costs are assumed. Handicaps require new costs to be assumed for the purpose of signaling. Cues rely on costs that are assumed for non-signaling purposes, which can then be used to convey information at zero added cost. For example, male tigers rely on cue-based signaling in order to communicate their reproductive fitness to female tigers. They grow as large as possible to maximize their effectiveness as hunters, not for the purpose of sending a signal. However, female tigers are able to determine the fitness of males by observing their stature, since the males who win the competition to maximize their size are the fittest. Unfit males cannot "spoof" the signal by growing larger; all male tigers are naturally engaged in the same competition, which is what makes its results informative. The "cue principle" is less well known than the "handicap principle", because it was recognized much later by biologists: handicap-based signaling was proposed in the 1970s and formalized in the 1990s, whereas the first general model of both handicap and cue-based signaling was published in 2018. KRNC is the first protocol to adapt cue-based signaling to computer science. Instead of forcing participants in a consensus protocol to handicap themselves by expending computational resources or money, it allows authentication to be performed at zero added cost by measuring the resource expenditures that they have already performed in the past. These expenditures are recorded in their ownership of fiat money: acquiring money is the competition that all economic agents are already engaged in, which makes it too costly for an adversary to "spoof" ownership of extra money.