American investor and philanthropist Stanley Druckenmiller and Federal Reserve chair runner-up Kevin Warsh are looking into ridding cryptocurrency industry with one massive problem: volatility.
Bitcoin has a fixed supply, so, when demand for it increases, its price goes up. The same is also true when the demand drops. The pair has started a cryptocurrency project called Basis, which aims to keep a stable value of $1 by increasing and shrinking supply.
“It does it in a way that’s actually analogous to how central banks grow and shrink the money supply to also maintain price stability,” said Basis CEO and co-founder Nader Al-Naji. “What we’re trying to do is make cryptocurrency useful,” he added.
Bitcoin varied dramatically in the last 12 months, and have decreased by almost 50% since its peak of $20,000 in December, as per data from CoinDesk. This volatility is what made paying salaries in bitcoin virtually impossible, according to Al-Naji.
“If the price goes down, you’re going to miss rent because that one bitcoin isn’t worth very much,”Al-Naji said. “If it goes up your employer is also going to be upset because he feels you’re being paid too much.”
Al-Naji left his job as Google engineer last year to found Basis with Lawrence Dio and Josh Chen.
Bain Capital Ventures spearheaded the $133 million private investment, which is also the firm’s first cryptocurrency token purchase. Other investors include Alphabet’s GV venture capital division and Andreessen Horowitz.
Druckenmiller and Warsh have both criticized bitcoin for its volatility.
In December, Druckenmiller said in an interview that bitcoin cannot be used as a medium of exchange “because you can’t do transactions, particularly retail transactions with this kind of volatility”. He went on to add that he did not own any share of the cryptocurrency.
Warsh, on the other hand, said in March that cryptocurrency “price volatility significantly diminishes its usefulness as a reliable unit of account or an effective means of payment”.
Warsh, however, added that, “a new generation of cryptocurrencies is on the horizon, some of which might possess more of the attributes of money, better satisfying bitcoin’s founding purpose.