Here are my questions: The proposal wants to make it so that people can create limitless funds. But monetary value can only come from something that has a set value. So there must be intrinsic value to this money.
Isn't it about 4 in the morning where you are ? Should you not be asleep ?
Ok, I think you probably do understand most of it - it's just that we maybe draw slightly different significances form the implications. Lets go right back to basics:
We are 2 people who live in the country in a brand new economy. No money exists yet. We need to work together to build our economy, so I am going to build us a house each and you are going to work the land to feed us both while all this gets done. Only thing is we need a way to measure each other's work cos we don't quite trust each other and we don't have anything to exchange while the work's going on in order to "keep a tally" of each of our progress towards their respective goals. You might be more lazy that me but still get the work done. So we agree on a medium of exchange that abstracts out the respective goods and services (grain in your case, bricks in mine) and we invent a notional unit called the "stooshie" and value 2 houses = 2000 stooshies and 1 year's worth of food supply also = 2000 stooshies.
We both credit each other with 2000 of these stooshies. At the same time, we debit a third, money supply account, with -4000 stooshies to represent the fact that no goods of services have been supplied yet. (i.e. no economic activity has taken place, so although we both have 'money', the overall money supply balance is zero).
Since you are the only other guy in the economy, I'm going to give you a chance and credit with you with 1 unit of "REPUTATION". What that means is that I'm going to give you 1 weeks credit line to grow my food before you have to supply me it, so I'm going to give you 50 stooshies in advance. If at the end of the week my food doesn't appear, I'm going to dock you some REPUTATION points and only give you 3 days credit so you'll be under more pressure the following week.
You do the same in return (cos we have two flow scripts running - one for the working the land and one for building the houses). You'll start off by paying me 50 stooshies to lay 120 bricks. I don't get another 50 stooshies from you until I've layed those 120 bricks and similarly you can adjust my REPUTATION level to compensate for my productivity and inimise your risk of me not delivering on the weekly advance.
************ Important Point ************
This is the bit that I'm not sure about - maybe Julio & Oscar can clarify, but it's they key that makes the whole thing work. My understanding is that:
EITHER
When I pay you the 50 stooshies for 1 weeks food, I think what happens is that -50 (minus 50) from the money supply account gets destroyed because by paying you 50, I've endorsed to the economy that work has been done. So by you creating a week's worth of grain and me endorsing that work (by paying you) we were mutually able to bring into existence a net 50 stooshies. The reduction in the negative balance of the money supply account therefore represents the amount of work done in the economy.
OR
The -4000 balance remains in the money supply account and when the contract closes (we both have our houses and we’ve both been fed for a year) there’s some agregate reconciliation with the money supply balance that cancels it our (coin destruction algorithm). Anyway, it doens’t matter as the principle is the same but it would be good to clarify what happens in that case.
Hopefully it’s clear thoughm that the reason the labour needs to be monetised is because halfway through the year we might have done disparate amounts of work and want to trade our relative credit status. Lets look at an example (I’ll assume the first of the two cases above just for continuity):
******** 6-month stock take ********
Tante managed to supply 25 weeks worth of food for us both but tok always to Fridays off to enjoy some of that fermented grain so only managed to lay 2160 bricks (18 weeks worth). Our flowmoney economy would look like this:
TANTE FLOW ACCOUNT
Opening Balance: +2000
-----------------------------------------------------
Paid to tok for 2160 bricks laid: -900
Received form tok for 25 wks food supply: +1250
-----------------------------------------------------
Closing balance: 2350 STOOSH
TOK FLOW ACCOUNT
Opening Balance: +2000
-----------------------------------------------------
Paid to tante for 18 wks food supply: -1250
Received form tante for 2160 bricks laid: +900
-----------------------------------------------------
Closing balance: +1650 STOOSH
AGGREGATE MONEY SUPPLY ACCOUNT (Possibly 2 separate accounts, 1 house building, 1 land working)
Opening Balance: -4000
-----------------------------------------------------
Trade value tok —-> tante: +900
Trade value tante —-> tok: +1250
-----------------------------------------------------
Closing balance: -1850 STOOSH
So just by looking at the aggregate money supply account, and regardless of how lazy each of us are or how much partying I do, we can immediately see that 2150 STOOSH worth of work has been done in our the flowscript economy. Further, the flowscript economy has alsi adequately measured our relative contributions to mutual progress and rewarded each of us accordingly.
Since I was a bit lazy, I we don’t know if we can continue because you might not trust me for the second half of the year. We can check that by looking at my REPUTATION flag because that’s something that you have control over.
******** 12-month stock take ********
At the end of 12 months if we both did all the work the situation would be this:
TANTE = +2000 STOOSH
TOK = +2000 STOOSH
MONEY SUPPLY ACCOUNT = ZERO
HOWEVER !!! Although we both have 2000 STOOSH in our accounts something is wrong because we’ve also got both got houses so some double accounting has happened somewhere. I think that’s because what’s missing is that the 4000 STOOSH that originally got dumped in our economy is “backed” on a full reserve basis by 4000 STOOSH that came from the original source of the STOOSH.
In our notional economy we may have used some shells from the local beach so now we can take the shells back and return the beach to its original state since the flow money served its purpose and we now have our houses.
RESULT !!
************ Conclusion *************
I hope this example shows that you can’t do anything without flow money - at least not anything new that didn’t exist before. With stock money you can only do exchanges - i.e. pay for something that already existed with something else that already existed.
What Dash would do is provide the basis for flowmoney economies like this. Dash would not itself be created out of thin air or destroyed, but it would form the capital base for such mini-economies.
IMO, it’s a bit like bank lending but with some absolutely profound, humungous, ground breaking differences:
[1] - the liquidity creation process is in the hands of the people who need it, not the people who don’t (tok and tante in the example above)
[2] - it’s a full reserve system, not fractional because you need the Dash to form a full reserve capital base for any new flow money (thats why it has a potentially huge favourable impact on the value of Dash itself) - I think
Maybe the guys can clarify. I don't really care if it's full or fractional w.r.t. Dash because the flow money is backed by the labour transaction anyway. There are some questions about the denomination of the flow money though that I'm not sure about
[3] - the decentralised, automated monetary rules of the system ensure that only as much new money ever gets creates as economic activity. No more no less so it’s not printing money out of “thin air”
Thats just my take so far - hopefully it’s a starting point in mutual understanding between us and Julio & Oscar, but the potential I can see is massive because it taps into a route for adoption that fiat does not currently exploit. (Cannot exploit)
