What is this GeoFlux currency that I propose and why should anyone care? To answer the first question as briefly as possible: GeoFlux is a conceptual global and universal cryptocurrency that is generated in a distributed way via basic incomes and reputation incomes. The answer to the second question is: Because it’s optimally suited for facilitating global and universal abundance.
Perhaps you won’t agree with that claim. In that case, I urge you to tell me why you disagree. If there’s a flaw in GeoFlux, it would probably be easily fixable during this early stage. Anyway, to judge GeoFlux, you need to understand the idea. For that purpose, I need to go a bit on a tangent, but afterwards everything should make much more sense.
The idea of GeoFlux
Near zero costs for copying digital goods
Perhaps the key insight to understand GeoFlux is that non-destructive copying is not the same as stealing. When people talk about “piracy” nowadays they are using a very inappropriate word. Copying information is cheap and doesn’t destroy the original. Whenever people copy and redistribute digital goods like music, movies, books, and software, they are not stealing, because the creator of those goods still has the original. So, if we use inappropriate words like “stealing” or “piracy” we are appealing to intuitions that are not appropriate to the novel case at hand. Instead, we need to figure out how to deal with the new situation we are finding us in, the situation that we can copy and redistribute certain goods at virtually zero cost.
Apparently it’s hard to grasp this situation properly. Otherwise, calling copying digital goods without permission "stealing "or “piracy” would be universally called out as bullshit. And we could have solved the problem already, if people had actually started thinking earlier about the near zero cost copying situation that has existed for decades. But no, there’s still talk about “piracy” and we now have to deal with the awkwardness of Digital Rights Management. DRM is a bad solution created as reaction to a blessing that was perceived as problem by some. The blessing is that we are technologically able to copy digital goods at virtual zero cost. Why would anyone see that as problem? Because you can’t make profit from goods that you sell for a price of virtually zero, when they initial creation actually costs you a significant amount of time, effort, or money.
Towards digital abundance
But what if it turns out that selling is simply the wrong way to think about digital goods? Why not give digital goods away for free? Well, obviously there’s a problem with that: How will the creators of those goods be compensated for the work of creating those goods in the first place? Now, if we tentatively accept that “selling” is not the right answer, we are on the right track. There are actually a couple of different potential answer that can make a lot of sense:
- Producers of digital goods (simply called “producers” from now on) get paid by companies, foundations, governments, non-profits, philanthropists, patrons, or via crowdfunding for producing digital goods
- Producers don’t sell the digital goods they create, but sell services connected to those goods
- People pay producers donations for creating digital goods
- Producers don’t get paid for creating digital goods, but make them nevertheless out of passion, and sustain themselves via other means, ranging from unrelated entrepreneurship, freelancing, day jobs, self-sufficiency, to universal basic incomes
All of these options are legitimate ways of being able to create digital goods without having to sell them. If those models were the only ones that were applied to create digital goods, all digital goods would be available for free. I call that situation digital abundance.
Artificial markets are inefficient
Contrast that with the artificial digital scarcity we currently suffer from, because we aren’t allowed to copy digital goods for free, because some parties still insist that selling digital goods is a good idea. At first glance, it seems reasonable to think that selling digital goods is a good idea, because their creation still costs something. We have become accustomed to think of trading regular goods and services as being normal, so it might seem natural to transfer that way of thinking to digital goods. By making digital goods artificially scarce through DRM and anti-copying laws, they seemingly get pushed back into the regular market system.
Now why exactly is that a real problem? It’s a problem, because it creates economic inefficiencies and makes all of us poorer as a result! What kinds of inefficiencies am I talking about?
- We opt for suboptimal software, when could use the best software for free
- Programmers cannot simply reuse the best code parts of any software for making even better software
- Artists cannot take the best parts of already existing art, music, or videos and make even better art
- Poorer people have less access to the best digital entertainment, thus decreasing their quality of life, which can affect their productivity negatively
- When people copy digital goods illegally, they often go through a lot of effort to do so – that effort would be unnecessary, if digital goods were free in the first place
- Creating DRM measures is an unnecessary expense
- Suing or even imprisoning people for copying digital goods creates unnecessary costs and stops people from doing actually useful work
To sum it up: We forfeit having a superior digital economy in which the quality of digital goods was much better, while nobody would have to pay for them (directly). Even if the total cost for creating all digital goods in a digital abundance economy was the same as in our current economy, the problem of the mediocre quality of our current digital goods would still remain. This is not an obvious economic problem, but it is a serious economic problem nevertheless! This leads us to a startling conclusion: A digital goods market economy is inferior to a digital abundance economy.
But if that is indeed true, why don’t we have a flourishing digital abundance economy already? The main reason is that we haven’t figured out yet how to make a digital zero marginal cost economy run smoothly enough. Also, most people still don’t realize that a digital abundance economy would be superior, so creating artificial scarcity is still legally supported, even though it’s actually detrimental to the economy.
The role of reputation
When thinking about how a digital abundance economy could be created, we should start with some reasonable basic principles:
- Digital goods should not be sold, but be made available freely.
- Producers of digital goods should be rewarded in proportion to the value they create.
The second principle open up the question of how the value of digital goods should be measured. We can’t resort to market values, because digital goods should not be traded on a market, but available freely for everyone. So, we need to think about something else.
There have been many proposals to measure the value of digital goods in accordance to their consumption or use. That would of course require measuring that use properly, which is a non-trivial problem. Additionally, it’s not clear how usage data should translate into financial rewards. Would that approach require to create a national public institution for each type of digital good? And how should their budgets be determined?
Fortunately, things become easier when we measure the value of digital goods in accordance to their appreciation by consumers. Value is subjective after all, so why not let the consumers decide directly? That is what happens with donation-based approaches. Consumers reward the producers directly via donations, according to their own preferences.
However, there is a peculiarity about this kind of donation-based digital goods economy: The monetary reward for a digital good is not only roughly proportional to its appreciation, but also to the disposable income of the donor! Those who possess little disposable income are effectively excluded from active participation in a donation-based digital goods economy, while the rich have a disproportionate influence on it.
So, if we want a system in which reward for digital goods is only proportional to their appreciation, we need to think about something else. We need to focus on a more “pure” form of appreciation: Reputation. If reward was directly proportional to reputation alone, then we would have a reputation based economy. How could such an economy work?
Reputation based economies
The most prominent example of a fictional reputation economy is presented in Cory Doctorow’s book Down and out in the Magic Kingdom (available for free). In that science fiction novel there is a reputation score called Whuffie. Those who have a lot of Whuffie can afford almost everything, while those who have little Whuffie can only afford the bare necessities. It’s not clear how the Whuffie system works exactly, though. While Whuffie seems to represent public reputation pretty well, it less clear how Whuffie fits into economic transactions.
This issue became apparent to when when I tried writing a science fiction story on my own. In the end, I had to develop my own reputation system, which is now called Quantified Prestige (QP). It took me quite a while to figure out an important principle: Reputation does not get used up by economic transactions. That means, you can’t “spend” your reputation points on purchasing goods and services. Instead, reputation points are unaffected by that. It wouldn’t make sense for your reputation to get lowered by something which isn’t related to anything that granted you that reputation in the first place. Reputation is primarily the reflection of how people perceive your skills, and not so much what kind of stuff you buy.
So, how do you get your groceries in a reputation based economy? Of course, one could start thinking about elaborate schemes for allocating goods and services, but there’s one ancient invention that serves that problem remarkably well: Money. People should use money to buy physical stuff. It makes a lot of sense, because physical stuff is scarce, while digital goods are not.
But how do reputation and money relate to one another? It certainly can’t be the case that reputation is identical to money, because reputation should not be transferred in the way that money is transferred in an economic transaction. You shouldn’t be able to trade reputation with anyone. Being able to do that would devalue the meaning of reputation. Instead, reputation should be the source of money. Reputation should generate reputation incomes, which are proportional to the (positive) reputation of a person. That is the core idea behind the GeoFlux currency.
How GeoFlux will work
GeoFlux is a cryptocurrency connected to a universal, global Quantified Prestige network. The QP network dynamics define a Prestige score (simply called “Prestige”) for all users of the network. Now, the basic idea is that GeoFlux is generated by Prestige: The more Prestige you have, the more GeoFlux you get per year. As its name suggests, GeoFlux is a flux currency:
- A flux currency is a digital decentralized currency, a cryptocurrency
- Flux currencies have conditional demurrage, meaning that above a certain amount of money you have in that curency, everything above that will be automatically devalued by a specific percentage per year
- Flux currencies allow for continuous transfers of money over time, unlike current currencies which require discrete transfers
The mathematics that make GeoFlux work are described in the Quantified Prestige documentation, in which a currency called Fluido is described (Fluido was the initial name for what I now refer to as flux currencies).
It is important to note that GeoFlux has two systems that limit inflation of that currency. First of all, the rules of QP enforce the constraint that the average user cannot get more than 12 000 GeoFlux as reputation income per year. Secondly, above a certain threshold, GeoFlux get removed from the system by continuous devaluation. If you have “too many” GeoFlux on your account, the amount above the threshold gets reduced by 5% (or whatever number is best adjusted to global economic growth rates) per year. This conditional demurrage mechanism creates a limit to the number of GeoFlux than the average person can possess without exchanging GeoFlux with other entities (assuming the default values for the GeoFlux system that limit lies at 540 000 GeoFlux).
Global universal basic income in GeoFlux
GeoFlux has an integrated basic income. The two ways that GeoFlux are generated are basic incomes and reputation incomes. With the default values, everyone would get 12 000 GeoFlux per year as basic income, and a variable number of GeoFlux as reputation income (with the average user not getting more than 12 000 GeoFlux per year as reputation income).
Why should people get such a high universal basic income in GeoFlux? Because a pure reputation based economy would most likely have a very high degree of income inequality, since most of the reputation would be concentrated on “superstars” in their respective fields. Since too much inequality is a really bad thing, there needs to be a mechanism that reduces inequality. And a high basic income is a very simple and very effective mechanism that does just that.
The fact that GeoFlux is global should help to reduce global inequality pretty rapidly. Thus, it would contribute to eliminate hunger, and absolute poverty. It would also support developing nations to get up to speed faster, so that they can contribute to the global economy more effectively.
How does GeoFlux facilitate a flourishing digital abundance economy?
Creators of digital goods would get Prestige for creating them and giving them away for free. This Prestige would translate into an income in GeoFlux. There is no need to ask for donations or sponsoring. Giving away digital goods for free suffices to generate an income, if those goods are actually appreciated by consumers. Also, the basic income portion of GeoFlux enables everyone to become an effective producer of digital goods.
GeoFlux versus Bitcoin
But how would GeoFlux actually obtain its value? Basically, it would be valuable because it’s like bitcoin in some respects, but superior in others. GeoFlux shares the property of being a global cryptocurrency with bitcoin. So, let’s compare both cryptocurrencies. Let’s start with bitcoin, because that’s the most popular cryptocurrency right now:
- Bitcoin is limited to a maximum of 21 000 000 bitcoin ever existing. That makes it an extremely deflationary currency. It also makes it very attractive as a storage of value.
- Bitcoin suffers from a certain degree of fluctuation, because it’s mainly used as object of financial speculation.
- The value of bitcoin is mainly based on the public acceptance of bitcoin.
- There is very high wealth inequality in the bitcoin economy, because the early investors grabbed a large fraction of all bitcoins without selling them to newer participants in the economy.
- GeoFlux is essentially limited to 540 000 GeoFlux per person. That still makes it somewhat deflationary, but less so than bitcoin. It’s still an excellent storage of value, if you manage to stay below the devaluation theshold.
- Conditional demurrage encourages participants to lend GeoFlux to other people at low interest rates.
- Like bitcoin, the value of GeoFlux comes from public acceptance of GeoFlux, but GeoFlux has some advantages that should increase its public acceptance:
- GeoFlux reputation incomes legitimate the value of GeoFlux
- Its integrated basic income makes it fair and more equal
- Everyone would want to join the GeoFlux economy, because they would otherwise miss out on the universal basic income
- Overall, GeoFlux is better suited for stimulating the economy than bitcoin
- GeoFlux allows for continuous currency transfers
Why should people buy GeoFlux instead of bitcoin?
That’s a very crucial question. If GeoFlux was less attractive than bitcoin as cryptocurrency, it would be a failure. So, why exactly should people prefer to buy into GeoFlux rather than bitcoin?
The basic idea is that GeoFlux enables a more social and overall better performing economy. So, an investment into GeoFlux is an investment into a better future. As such, transparently buying GeoFlux would be seen as socially beneficial act, and grant a lot of positive reputation to the investors. I call those who invest publicly into GeoFlux for such reputation-motivated reasons sponsors. Investing as sponsor bears a double advantage: Firstly, you probably get some Prestige for investing into the GeoFlux economy, especially at the early stages. And secondly, until the value of GeoFlux stabilizes, the likely increase of the value of GeoFlux will mean that the initially purchased amount of GeoFlux will soon multiply in value.
The launch phase
At the launch of GeoFlux, visionary sponsors would have to do the first step and purchase some GeoFlux. When people see that intelligent sponsors are buying GeoFlux, other investors will anticipate that the value of GeoFlux will rise over time, as it gets accepted more widely. This will define a modest starting value of GeoFlux, which should rise rapidly, especially when GeoFlux reaches the attention of the public. It will probably be a rather turbulent time for the value of GeoFlux, as speculators will enter the market to capture some of the value increase of the new currency.
The intermediary phase
After a few years, a real ecosystem around GeoFlux will emerge. Sponsors and speculators will still invest into GeoFlux, but now the new currency will also start being accepted by actual merchants, because the value of GeoFlux will have been established. This should create increased trust and interest into this new currency.
New businesses will emerge that count on the value of GeoFlux. Those businesses could give away digital goods for free and count on the Prestige that thus GeoFlux they gain to at least cover their expenses. Instead of investing in those businesses directly, investors could buy into the general GeoFlux ecosystem by purchasing GeoFlux and let the people decide which businesses are good enough to flourish in the new free digital goods economy.
The advanced phase
By now, the value of GeoFlux may have already stabilized. Speculators cannot easily expect to make gains from purchasing GeoFlux, so this group will become less prevalent in the ecosystem. Instead, sponsors and regular users will stabilize the value of GeoFlux. Even though the relative value of sponsoring will have reduced somewhat by now, sponsoring GeoFlux will now be seen as relatively reliable way of making an investment with a modest long term gain through the increase of one’s reputation. In this advanced phase, GeoFlux will be a serious contender to other conventional currencies and cryptocurrencies. As more and more people will realize that GeoFlux can boost the future economy, public support for that currency will rise, and acceptance will become nearly universal.
In the long run, the advantages of GeoFlux over bitcoin should give GeoFlux a definite edge. If the value of a (crypto)currency is mainly based on its public acceptance, then GeoFlux would eventually become more valuable than bitcoin. The global economy could run only on GeoFlux, and it would flourish by doing so.