Inv/Sav Wallets and the Role of Financial Intermediaries in a Digital Currency

34 Pages Posted: 29 Jun 2014 Last revised: 6 Aug 2014

See all articles by Massimo Morini

Massimo Morini

Algorand Foundation; Bocconi University

Date Written: July 21, 2014


In order to evolve beyond bitcoins, which are still speculative, volatile and small in terms of market cap, cryptocurrencies need decentralized financial intermediaries.

In this work we first show that one fundamental role they can take regards price stability. The Economist and the Center for Financial Stability focus on the importance of regulating money supply for stable prices in a digital currency, and designs a cryptocurrency where money supply is regulated to match money demand. This first proposal, however, has a limitation: the mechanism for stable prices implies that the amount of money in every account is continuously modified. This way the instability of prices typical of bitcoins is transferred to accounts, so that the purchasing power of savings is still less protected from inflation/deflation than in standard fiat currencies.

The solution is to give wallet owners the freedom to choose how much they want to be affected by changes of money supply, by introducing two types of wallets: Inv wallets and Sav wallets. Money in Sav wallets is protected from instability thanks to the presence of Inv wallets, that take the risk, and the reward, of being the target of changes in money supply. This role of channel and cushion for monetary policy is taken by banks in fiat currencies, and is needed also in digital currencies, where it can be taken by decentralized financial intermediaries. This is a starting point to analyze the other roles that financial intermediaries can have in a digital currency, linking the ownership of Inv wallets to proof-of-stake validation of transactions and to lending.

The appendix explores the possibility of currencies indexed to property prices registered in a block chain.

Keywords: price stability, Bitcoin, financial intermediaries, monetary policy

JEL Classification: E31, E51, O33

Suggested Citation

Morini, Massimo, Inv/Sav Wallets and the Role of Financial Intermediaries in a Digital Currency (July 21, 2014). Available at SSRN: or

Massimo Morini (Contact Author)

Algorand Foundation ( email )

1 George Street
20144 (Fax)

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136

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