Description

Title

P2P Social Currency for Renewable Energy Economy

Release

0.71.0

Author

Marc Fawzi, Evolving Trends

Main

Purpose

Money is one of the fundamental elements of today's society.

Changing how money is created and how it's used will fundamentally change society.

Motivation

We have just watched our monetary system take a dive from the 110th floor (see: global economic meltdown 2008)

Prior to the collapse, very few people questioned the design of the economy.

The mantra "if it ain't broke, don't fix it" was still prevalent, despite clear signs that we were headed for a credit bubble.

Very few people felt that it would lead to the unraveling of the economy, and very few people think that now, even after the world's economy has seen tens of trillions of dollars disappear overnight.

But for those who have seen the emperor naked, there is a real sense of urgency and purpose in questioning everything, from how money is created to how it's used.

The model described herein offers fresh views and insights in this area, with the hope of stimulating people to think different, and, hopefully, take some of these ideas and experiment with them in their communities, or join us in our game experiment (see: Model's Context.)

Model's Context

This model of a P2P Social Currency may be viewed as a "thought model" or design pattern for the emerging renewable-energy-driven P2P Economy.

One of the key enablers for the *P2P Economy* is the requirement that the individuals (or peers) within it are connected to each other via the Internet (or some Internet-like network) and that all transactions within the economy are conducted online.

The P2P *Energy* Economy adds the requirement that individual peers must be able to generate their own energy as well as be able to sell their excess energy to other peers, using a distributed electric grid (reference: P2P Energy Production.)

P2P Energy is economically and technically realistic in the context of peer-produced renewable energy, i.e. where electric energy can be generated at home from solar energy, wind energy and bio-fuels.

The goal, for the time being, until the P2P Energy Economy becomes a reality, is to turn this model into a game where competition is guided by the provable proposition that "the more you share, the more you have" and where players are enabled to make socially, ecologically and environmentally intelligent decisions.

Model's Scope

This model redefines the system (or the ‘environment’) for the creation and use of money, which changes how money behaves, and which in turn changes the nature of system (or the ‘environment’), while keeping the nature of money the same, i.e. as a carrier of potential energy and information, and while raising the value and utility of the information carried by money, by making the information explicit.

While the definition of money as a "carrier of potential energy and information" may represent a new way of looking at money, this author believes that it's the most natural definition of money in the context of the P2P Energy Economy (see Model's Context.)

Model’s Axioms

Axioms

The following are non-universal axioms (i.e. starting truths for this model)

1. Money is a carrier of both potential energy and information, and as such it carries both potential energy and information in every transaction.

2. Money does not grow on its own, i.e. cannot derive value from itself over time, i.e. 'interest' is not possible.

3. Most people would be willing to make interest-free loans in return for credit points that rank them higher as sellers.

4. Most people agree on what constitutes socially, environmentally and ecologically intelligent judgment, e.g. less toxins in food and water, more clean energy, less waste.

5. Enough people exist who would exercise socially, environmentally and ecologically intelligent judgment when purchasing goods and services.

6. Enough people exist who would differentiate themselves by having complete transparency in their social, ecological and environmental judgments.

7. Enough people exist who wish to grow their wealth and prosper.

Meta Axiom

This is an axiom concerning the collection of non-universal axioms in the preceding subsection.

1. Most participants under this model (i.e. most peers) are aware of the Model's Axioms and operate with the same assumptions, as constrained by the rules explicit in this model.

Model’s Propositions

The following are the main propositions of this model:

1. Direct the flow of money towards socially, ecologically and environmentally intelligent producers of goods and services.

2. Enable a model of money creation where the value of money is derived from energy (i.e. allows the conversion of energy surplus in the system to new money which is then converted to more goods and services, i.e., higher productivity, and higher economic growth) and where the process for money creation is both simple (in that it's driven mainly by the economy's capacity to grow, based on increase in available energy) as well as transparent (in that everyone can verify the process.)

3. Enable a model of the economy that promotes sustainable, abundant and cheap energy, which should in turn enable higher productivity and drive economic growth.

4. Enable a model of the economy where in order for peers to grow their wealth (comparatively speaking) they have to share it (by lending their money to others.) In other words, "the more you share, the more you have."

P2P Social Currency

Original Idea

If we had a networked, programmable currency then I could tell my money to exchange itself only for goods/services that are made by vendors who care about the planet AND who have donated to my chosen candidate for President.

I can be as particular as I want and my money should do the figuring out of whom to pay itself to, based on rules I supply, and based on information it can access about the parties I’m trading with.

Another example for networked, programmable currency is to enforce rules on the spending of a daily/weekly/monthly amount of my own money that I let my kids use (luckily no kids yet) so they don’t buy food that contains unhealthy ingredients.

The new networked, programmable money should abandon the idea of paying interest on borrowed money. There is so much debt in the system that it will take decades to get rid of it and return the economy to normal functioning. The interest on debt is like bad cholesterol. While it fattens the economy, it ultimately clogs the global economic arteries and can lead to economic failure, as it has done (see: global economic meltdown 2008.)

If you lend money to someone you should be able to get your money back and get “peer credit” points that would replace today’s “hamster wheel” concept of credit rating, which was designed to encourage people to buy money with money, e.g. buying $1,000 for $1,110, which is punishing to borrower.

Instead of being rated on your timeliness in paying back money borrowed + interest, you should be rated on how much you’ve lent others. This way people can dictate that their money is to be exchanged for goods/services only from providers with N “good will” points or more.

Maybe a good place to try this P2P currency (or “Money 2.0″) would be in an online virtual world?

Follow-up and Clarification

I should add a clarification here that the conditions/rules imposed on the exchange of this new money (as defined in this post) do not last beyond the singular transaction. In other words, if I restrict my money to spend itself on organic food only, the grocery store that sells me the organic food will no longer have those rules imposed on the money I paid to them. They can enforce their on rules on it, whatever they may be, and then use it to buy stuff with, and so on…

As to the 1-dimensional value system that is imposed by the current definition of money, i.e. the numerical (or “price”) value, I think it is only a matter of time before this value system goes from being 1-dimensional to N-dimensional. The reason the value system that is imposed by the current definition of money is limited to just the numerical dimension, i.e. price, is because it is assumed that people do their own research/homework when trading with others and make their decision to trade based on that. What I’m suggesting is for the new money to have more than just a numerical value for a value system, i.e. other values that are programmed/re-programmed into it by every user of that money, thereby allowing the automation and streamlining of trading decisions.

The key argument here, besides the point about the need to abandon “interest,” is that the value system that is ‘explicit’ in the definition of money is 1-dimensional, i.e. the “price,” or numerical value, and there is no excuse for having this 1-dimensional value system when we have computers, the Internet and the ability to implement an _explicitly_ multidimensional value system as the basis for a new currency for the future P2P economy.

Renewable Energy Currency

The Origin of the Idea

A very interesting idea suggested by Michel Bauwens of P2P Foundation is to connect this new money from to renewable energy that peers are able to produce locally and sell to other peers (reference: P2P Energy Production.)

Explaining The Idea

This currency model is based on the simple idea that cheap abundant energy leads to higher productivity and higher productivity leads to the growth of the economy.

Unlike gold, which derives most of its value from its scarcity not from its utility, energy, which derives its value from its utility, increases in value (not price) as it becomes more abundant and cheaper. Having said that, the immediate value of unused energy is zero, so in order to maximize the use of available potential energy it must be interchangeable in all its different forms, including but not limited to physical work, virtual work (computing), creative work, emotional work, mental work, biological work (e.g. food synthesis), and other forms of work. That is to say that tokenizing the potential energy is necessary for its flow in an economy. Hence, the role of money in this model as a carrier (or tokenizer) of potential energy as well as a carrier (or tokenizer) of the information associated with each exchange.

There is a movement towards a SmartGrid that allows individuals to produce electricity to power their homes and then send the extra capacity to the grid for others to use, and get paid for the energy they send into the grid (reference: P2P Energy Production)

The idea for P2P energy production will take some time to mature but there are already localized implementation of Smart Grid that allow businesses to play the role of a small electric utility.

Taking the Smart Grid further, we say that since solar energy is abundant then why not connect this abundant resource (that anyone can produce) to new money creation. Meaning: if I can produce 100MegaWatts and push that into a ‘Peer Grid’ then the ‘Peer Bank’, which can print virtual Peer Dollars, would pay me 100 Peer Dollars or whatever amount, based on how much each Watt of energy goes for, which gets cheaper and cheaper the more energy is pushed into Peer Grid.

Peer Energy Bank

New money is only created by "Peer Bank" when the P2P energy production capacity becomes larger than the currency in circulation (i.e. more energy than there is money.) This surplus energy is stored by Peer Bank and new money is issued to the peers in return for the energy, who then use the money to purchase goods and services, invest in appreciable assets, or lend to others. The stored energy is used to meet the new increased demand for energy created by the resultant growth in economic activity. In other words, energy surplus in the system is converted to money which is then converted to economic growth which then consumes the surplus energy, and so on.

Peer Bank does not have power over how newly created money is distributed. The distribution of new money is orchestrated by the collective process of peers selling their excess locally generated energy to Peer Bank, i.e. on first come first served basis, during the times when there is an energy surplus in the system. Peer Bank stores that surplus energy and pays the peers with using newly created money.

At the start of the economy (as a process), Peer Bank would create new money in return for energy supplied by the participating peers, so it creates new currency that it gives to those peers. Then peers start trading using that currency, and when new energy surplus exist then new money will be produced.

In addition to creating new money to match surplus in energy supply and enable higher productivity, Peer Bank also acts as a financial hub for peers selling and buying peer-produced energy from each other.

Peer Bank does not have power over when to create new money or how much to create. Under this model, the decision to print new money is automatically triggered when measurements from Peer Grid indicate a surplus in the energy production capacity within the system.

Therefore, the power to drive the economy rests with the edge (the peers), not with the center. Peer Bank is an open, process that follows the edge, not the center, which is why it is referred to as "Peer" Bank rather than Central Bank.

To reiterate this key point, Peer Bank is an open, peer-informed, distributed process, not a central bank.

The "Bank" part of the "Peer Bank" name refers to the storage of energy, not the currency itself.

As a side note, the actual name for Peer Bank is, as the section title reads, is Peer Energy Bank, but since people are bound to reduce the phrase to "Peer Bank" for brevity and effect, the name used throughout this document is Peer Bank.

The Value Creation Model

When the peers have more capacity to produce energy than is consumed directly by other peers, i.e. when there is a surplus of energy in the grid, Peer Bank (the open, automated, distributed process) converts that surplus energy to new money (e.g. 1 peer dollar for 1kW), which is then converted by the peers to goods and services, loans and appreciable assets (including revenue generating ones), all of which lead to an increase economic activity, which then uses up the surplus energy, in a continuous cycle. The money invested in appreciable assets (including revenue generating ones, e.g. farm land) grows with the growth of the economy, which has the effect of expanding the value basis for the economy, which is not derived from energy directly but from land mass, which grows with the growth in population, which in turn requires more energy (to utilize the land and support the growing population.) So as the value basis for the economy expands (i.e. as the land increase in utilization density and volume), in correspondence with the growth of the population, the economy should continue its steady growth.

When we say that land mass is the value basis for the economy (under this model) we mean the following:

As population of people grows the land mass (density of usage and volume) has to grow, too, and so land even unused is guaranteed to provide an increasing value basis.

So land mass provides a stable, always-increasing value basis.

By contrast, the value basis for energy is tied to its use, so as usage goes up and down in times of high and low economic productivity its value (and price) goes up and down, and that's why land mass (the utilization density and volume of land encompassed by the economy not the value of land), which increases with growth in population, not energy, is used as the value basis for the economy.

This value basis for an economy should not to be confused with the "value of an economy," which is defined per the given valuation model.

The need to reduce the currency in circulation is not present in this model because the value basis for the economy is not derived directly from energy itself, which can overflow beyond all possible use in the short term, leading to overflow of currency in circulation beyond what's usable in the short term, and is not derived from interest, which can go up and down also overflow beyond society's ability to pay it in the short term, creating a vacuum of cash (see: global credit crisis 2008), and is not derived from the level of economic activity, which can go up and down, but from the land mass (mass = utilization density * volume) encompassed by the economy, which grows as the population grows, requiring more energy and enabling higher output, ad infinitum (or till the available land mass is fully utilized.)

Peer Credits

Why do we need to lend? Because we need money to flow in the system, like blood flowing in our veins. Lending is needed to keep money circulating, in addition to the circulation of money through the exchange of money for goods/services. That’s because in order to create or buy goods/services people need money and lending allows people to have more money than they can have from their labor. The problem with “interest” being the incentive for lending today is that it’s used to derive more money for the lender, which has nothing wrong with it, but it comes at the expense of the borrower, which is problematic at best.

In other words, “interest” rewards lenders and punishes borrowers. What we need is a replacement of interest as an incentive for lending. Something that would reward lender without punishing the borrower.

"Peer credits" are credit points that are given (by some central registry of credits) to peers who lend money to other peers, based on how much they've lent to others and/or how many peers they've lent to. These peer credits can be used in two ways:

1. Lender becomes a producer or seller of goods and services. In this case, his/her credit points will be used to rank them as sellers, so when people search for a certain product (imagine a P2P community search engine) they will show up higher in the search results the more credit points they have. This means that instead of interest, i.e. time value of money, we move to a peer production value of money, or in other words, the value of what can be produced with N peer dollars and M degrees of access to the [online, P2P] market. So lending, under this model, allows the lender to accumulate credit points that give him/her a larger access to the market. A key consideration for the lender is to balance how much he/she lends vs how much they invest in the production of new products and services. Gaining the largest possible access to market, through accumulation of credit points, is of little use if lender does not invest in increased production of goods and services. This is no different than the balance needed today between investing in production vs marketing.

2. Credit points earned through lending are also used by lender when borrowing, so you can borrow up to an amount that is determined by how many credit points you have accumulated (through lending), as adjusted downward (for borrowing only) based on the amount of money in loans they've yet to pay back.

Peer Credits achieve a few important things:

1. Allows lenders to be rewarded without using interest

2. Motivates lenders to become producers of goods and services (i.e. to become more than just a lender, which is consistent with the vision of a P2P economy where everyone is both consumer and producer)

3. Allows lenders to build credit for borrowing up to a given amount based on how much they've lent others, as adjusted downward (for borrowing only) based on the amount of money in loans they've yet to pay back.

Since there is no "interest" under this model, the "time value of money" is basically eliminated and there are only two ways to achieve comparative economic advantage: accumulating credit points (through lending) and investing in appreciable assets (including revenue producing assets.)

The current idea for Peer Credits assumes an online community where each peer interacts with other peers and Peer Bank via a P2P client, which has a search function built into it. It’s through this search function that sellers/producers are ranked, based on their peer credit points. If, however, at some point in the future, online search engines (like Google) subscribe to this peer credit scheme then this model can work globally, not only within the confines of an online P2P community. Having said that, the peer credits model also depends on the existence of p2p energy generation and distribution infrastructure (reference: P2P Energy Production)

Peer Credits: Lenders

The incentive for lending, under this model, is based on the assumption that in the P2P economy everyone is a buyer and a producer/seller (of goods and/or services), and the idea is to give lenders credit points that rank them higher as sellers (similar to seller's ranking in Google search, which does affect seller's profitability.) The number of credit points a lenders gets is based on how much they’ve loaned.

Peer Credits: Borrowers

The amount a borrower can borrow from lenders (collectively) is directly tied to the borrowers peer credit rating, which is the number of credit points they have accumulated through lending, as adjusted downward (for borrowing only) based on the amount of money in loans they've yet to pay back.

Borrowers under this model are not permitted to use assets as a collateral for loans to be taken over by lender in case of borrower defaulting. This is intended to prevent asset price bubbles, e.g. due to speculation or economic expansion and contraction, from affecting the value of money (see also: Energy Price Regulation.)

Since credit points can only be obtained via the act of lending, this model should encourage people to keep lending in order to increase their peer credit rating to be able to borrow more when they need to, e.g. to buy appreciable assets, as well as to be able to sell more good and services, which gives them more money to lend, which in turn allows them to increase their peer credit rating, and so on.

Since borrowing is the most leveraged means for growing a peer's holdings in appreciable assets (including revenue generating assets), i.e. wealth, and for growing peer's production of products and services since, which in turn brings more money that can be lent to others to increase peer's borrowing capacity, and so on, and given that loans are interest free, it's not expected that peers would stop borrowing.

If the borrower does not pay the borrowed amount after the grace period they'd get credit points deducted. When a defaulting borrower pays back the loan they regain the credit points they had lost, and after that they are free to gain new credit points, by lending others, which enables them to borrow more as well as sell more goods and services (see Peer Credits: Lenders.)The ease with which people can generate money through the local production of energy (by pumping excess locally generated energy into Peer Grid and receiving the then-equivalent in Peer Dollars) should make it relatively easy for borrowers to recover from negative Peer Credit rating.

If a borrower is eligible for an amount to borrow, per their peer credit rating, but no lenders (collectively) exist to lend the money, which is only likely to happen if the amount the borrower wants to borrow is larger than the amount available (collectively) from all available lenders. In that case, the borrower would have to lower the amount they want to borrow.

Peer Credits: Producers/Sellers

When peers search for a certain product (imagine a _P2P community_ version of Google search) the seller/producer with highest number of credit points will show up higher in the search results for that product. Given that sellers/producers accumulate credit points through lending, this means that instead of interest, i.e. time value of money, we move to a peer production value of money, or in other words, how much a peer can sell of a given product, where their credit points directly affect their sales.

Peer Credits: New Entrants

A great way to start up the peer credits system is to give credit points to new entrants (to the community) who invest in local energy production infrastructure, e.g. energy generator and connection to Peer Grid.

The amount of initial credit points is given once per peer and it varies based on the output capacity of the p2p energy producing infrastructure that the given peer invested in, up to a certain limit (see Anti-Dumping and Anti-Monopoly Caps ...)

Peer credits points are useful when borrowing money or selling products and services. They rank borrowers/sellers higher and allow them to borrow/sell more.

More on P2P Social Currency

Affinity Matrix for P2P Trading

The Affinity Matrix allows the explicit definition of a multidimensional value system, or set of criteria that represent the buyer’s social, ecological and economic values as applicable to the seller, the product or service (i.e. the ‘thing’) and the given transaction.

The value system is 3-dimensional and consists of seller’s values, thing’s values and transaction’s values.

See: Buyer-Seller Affinity Matrix: Multidimensional Value System for P2P…

The affinity matrix applies only to goods and services.

The definition of goods and services under this model do not include money, i.e. peer loans, because the specification of a numerical value by the buyer (i.e. what they're willing to pay) would, in the case of money, be equivalent to buying money with money as that would be equal to ‘interest.’ Another reason that the affinity concept should not be applied to money (i.e. peer loans) is to avoid putting any constraint on borrowers and to make sure that everyone can borrow up to the limit corresponding to their peer credit rating (see Peer Credits: Borrowers.)

The definition of goods and services under this model do not include energy, except where the energy consumer is unable to tap into Peer Grid and is forced to buy energy directly from another peer. The reason energy is not considered a general service is because the price of energy and the rate at which a peer is allowed to turn into energy into money must be regulated (dynamically, with respect to demand/supply and the cost of energy production) for this model to work properly, and the only way to regulate the price is to have Peer Bank act as the financial hub for the sale of energy by one peer to another. When that’s not possible, i.e. when the consumer cannot access Peer Grid, they may pay higher price for energy, so those cases need to be minimized. In other words, everyone should have the ability to tap into Peer Grid, regardless of their location.

The buyer’s multidimensional value system, which can be applied by the buyer as a selection filter/criteria for the seller, the product or service, and the transaction, is programmable into the money for each transaction. This way, the buyer’s multidimensional value system becomes represented as explicit information carried by the money, which includes the numerical value of money to be exchanged. This information, with the exception of the numerical value of the money, goes to blank state after money has been transferred from the buyer to the seller, which allows for the programming and transmission of new information.

Money can be programmed with the buyer’s multidimensional value system (which is applied to the seller, the thing being purchased, and the transaction itself) but only when the money is being stored for specific future transaction, or when preparing a transaction to buy something, or when transmitting a transaction to some middle man, who can then modify the buyer’s multidimensional value system, as agreeable to buyer, to negotiate and execute the transaction.

If we think of money as a carrier of potential energy (the potential energy the buyer gives to the seller of things they want to have or the energy the lender gives to the borrower) as well as information (the criteria for giving the energy to the seller or borrower, then money becomes a tool, like any other tool, and, while it can be abused, if we frame it as a tool and enable the buyer to use it intelligently, with transparency required on the part of the seller, then most people will use money more intelligently than they do today.

Having said that, there can be a law (outside this model) that forbids the buyer from discriminating against the seller based on race, country, etc.

Clarification to Affinity Matrix

The purpose of the affinity matrix is not to determine how much a buyer gets charged by the seller for the given product or service.

It’s purpose is to direct money from the given buyer to those sellers with whom he/she has the largest affinity, for the given product. And it’s not independent of the product. As a buyer, you’d declare your social, ecological, environmental and economic values which get matched against the seller’s values, in those dimensions, but you’d also declare the thing’s (good or service) values (e.g. if the thing is “cucumbers” then you specify ‘Organic’) and the transaction’s properties/values.

The idea is to have the potential energy and information that's carried by money flow in the direction of society’s social, ecological and environmental values. To do this, money that's allocated to the purchase of some product, e.g. I have $20 to spend this month on cucumbers, has to carry more information than just the numerical value (price). Making the information multidimensional (i.e. seller’s values, thing’s values, transaction’s values) and explicit enables people to make intelligent decisions as to whom to buy from (e.g. a farmer who cares about the environment, soil, chickens, etc or one who doesn’t), what to buy (e.g. organic, no hormones, etc or, alternatively, whatever fits the buyer's price range) and under what terms of transaction.

The affinity matrix effectively directs money flows in sync with society's social, ecological and environmental values, and it does so by adding value dimensions for the thing itself, the seller and the transaction, i.e. not just the numerical value of the thing itself, so that people to move from being price driven to socially/ecologically/environmentally responsible.

Having said that, the affinity matrix requires that standards for transparency (on the part of producers) exit and are followed. For example, all packaged foods sold in the US must carry a label indicating all ingredients. Organic producers have a certifying organization that certifies their farming processes, and so on. The more such standards exist and the more they're followed (e.g. by law) then more realistic this idea becomes.

More on Renewable Energy Currency

Anti-Dumping and Anti-Monopoly Caps for Energy Production

There may need to be a cap put in place on how much energy a given peer can produce so as not to allow one party or few parties to pump so much energy into Peer Grid as to bring energy price down for all other producers. Maybe a maximum on the amount of energy you can pump into the grid per day has to be calculated based on demand.

The energy cap per peer (e.g. per day), which is calculated based on demand, is needed to prevent a given peer from pumping dramatically more energy into the grid and taking a disproportionate share of the market, which starves off smaller producers, creating more dependence on the biggest producers, which does not support sustainable abundance as the biggest producers can always fail (also see: Energy Price Regulation.)

Sustainable abundance can only come from the whole (from all peers producing energy) not from one peer or one set of peers producing so much more energy than everyone else.

There probably also needs to be an anti-monopolist provision (in the model) to disallow emergent master-slave behavior where one person or entity end up running a colony of P2P energy producing peers and taking up a larger share of the energy market than they should.

Energy Price Regulation

The price of energy is set dynamically by Peer Bank, using an open, automated, distributed process, that takes into account both the current supply and demand for energy as well as the cost of energy production. The purpose behind regulating the price of energy is to allow the price to go down continuously as the cost of energy production and transport goes down, while preventing speculative boom and bust cycles, due to changes in supply and demand, from making the price of energy go up too high (in periods of high demand) as to make energy unaffordable or drop too low (in periods of low demand) as to make energy production economically unfeasible. The operative word is: too high or too low. In other words, the price will still be driven by supply and demand but will remain just above the cost of production to make energy production a profitable activity.

The reason for regulating energy price in this way, based on both supply and demand as well as the cost of energy production, is to make sure that the model supports sustainable abundance (of energy), not unsustainable abundance, which ultimately leads to scarcity (also see: Anti-Dumping and Anti-Monopoly Caps ...)

Achieving Comparative Economic Advantage and Building Material Wealth

Since there is a cap on how much energy (per hour) a peer can pump into Peer Grid and since everyone who can produce energy is likely to maximize their contribution to Peer grid to make money, it is unlikely that significant comparative economic advantage can be achieved by one peer over others using energy production alone. The peer will have to compete for credit point (Peer Credits) by lending money to others and then use those Peer Credits to position themselves higher in the list of sellers for whatever good or service they produce (or resell). Another longer term way of achieving significant comparative economic advantage is to put money earned into assets that tend to appreciate as the economy grows, e.g. land or real estate (including revenue-generating land, e.g. farm land, leased land, and revenue-generating real estate.)

Hoarding and Saving

Since interest does not exist in this model, money will not grow on its own as it does today, e.g. sitting in a bank. Given that, the only other reason to hoard money is security. But given that money loses its value if it’s not growing (relative to the value of appreciable assets which should grow under this model proportional to increased productivity) hoarding money is harmful to the person doing the hoarding (in that their money will lose value) and is therefore expected to be a rare issue.

Given that, under this model, there are only two ways exist for achieving significant comparative economic advantage and building wealth, which are:

1) accumulation of Peer Credits (through lending) combined with production of goods or services, and/or

2) investing in assets that appreciate, e.g. land or real estate (including revenue generating land and real estate), gold, water rights, etc

peers are more likely to lend their money or invest it in appreciable assets, both of which are good for growing the economy.

While hoarding money is useless, saving money is always legitimate for establishing a buffer for normal and unexpected expenses. However, since anyone can gain credit points by simply lending money to others, and since borrowing a large amount is, by design, faster than saving up for it, and since money sitting idle doesn’t grow and loses value relative to appreciable assets, accumulating a large sum of money is generally considered hoarding, which, as stated above, is expected to be a rare issue.

Peer Credits vs. Demurrage

The harm from excessive accumulation of money is felt mostly by the individuals who hoard money rather than lend it, invest it in appreciable assets or use it to produce goods and services. That is because, given there is no interest, money will not grow on its own, and if it does not grow it will lose value relative to appreciable assets, which go up as productivity goes up due to abundance of cheap energy. Applying demurrage (with or without redistribution) only forces peers to convert their money into gold or hide it. Making excessive money accumulation disadvantageous (by simply eliminating the concept of interest) relative to investing the money in appreciable assets or infrastructure for producing energy, goods or services is the right way of dealing with the expectedly rare cases of money hoarding.

People generally run away from punishment and run towards reward. Demurrage is a form of punishment. Peer Credits are a form of reward. In fact, when people run away from punishment (even when used as a tool for good) they resort to all sorts of tactics, including lying, hiding facts (or money,) etc. That's why demurrage, which represents punishment (i.e. taking away of money) is a bad idea, while peer credits, which represent reward (i.e. giving of credit points), is a good idea.

Model’s Applicability

Off-the-Grid Communities

An "Off-the-grid community" is a community where members generate their own electricity without using the public electric grid infrastructure.

The assumption here is that the technology for p2p (or house 2 house) electric energy generation and distribution (reference: P2P Energy Production) exists in the desired form, e.g. the ability for the grid to store not just transport energy between peers (see: EESU supercapacitor patent,) and is accessible to the community in question.

If so, the second assumption is that there is willingness to develop and use a P2P software client for the community, which is used to conduct all transactions, and that's because both the "peer credits" idea and the "affinity matrix" idea require that. In short, the biggest assumption of the model is that all (or the majority) of transactions happen through such P2P software client.

So if those assumptions become valid at some point in the future or if they're valid from the start then this model can be applied to such communities.

While this may sound far-fetched for now, people's ingenuity and willingness to try new ideas combined with current trends in the areas of P2P energy and P2P economy almost guarantee that we will see such implementations.

Interoperability Model

Given that there are many efforts now, mostly under the radar, to define various community currencies, it is obvious to me that we will have many “currency models.” So the question becomes how to make all these models inter-operate, so that people can port their money out of one community into another, and so that inter-community trading becomes possible.

It is possible but it requires collaboration and, more importantly, orchestration.

I encourage those interested in defining community currency models to think differently and not follow ‘group think’ as that leads to reinforcing assumptions that maybe wrong. After all, even the geniuses who designed and evolved the current money system (sarcasm) were proven flawed in their assumptions.

Diversity of community currency models is not only essential it’s inevitable.

So there is definitely a need for an interoperability model that is thin and flexible enough to work with just about any currency model.

Feedback

Request for Comments

I’m an engineer by education, not an economist, and it’s about time for engineers (all of you out there) to take over from business people in shaping the economy. The economy we have today has been driven mostly by people with business degrees or economists with no appreciation of KISS, and we’ve seen how it has collapsed.

I believe there’s a sufficient level of cohesion and coherency in this draft to start designing a game (played by humans) based on this model.

I'm interested in your comments, insights, help, coordination, etc.

Readers Comments

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Collaboration

How To

The simplest form of collaboration is to provide feedback (see: Feedback.)

The next simplest step after feedback is conversation.

Once we start conversing we will get a clue as to how we can collaborate

Collaborators: Game Design

Dante, Xaskei, SeH

References

P2P Energy Production

External Links

"Renewable-Energy-Backed P2P Currency" on Evolving Trends (for comments)

P2P Energy Economy