It used to be if you wanted to post a public ledger someplace you would just go down to Al’s store and say “hey Al, just put it on my tab”. Cheap, easy, and didn’t take much effort or resources to do. Things have changed.
The question remains about what the easiest, safest way to post a world wide public ledger is and additionally how can enough value be built by it so that people will want to use it and how can you make it fair for everyone both early adopters and those who come after?
If you use something like Bitcoin investment dollars are going partly to pay a bunch of miners to maintain the block chain using very expensive high tech equipment and massive amounts of energy as well as rewarding market speculators who buy and sell. The early adopters get paid very well but at this point it is hard to pay for purchased equipment and power. Using a proof of stake (PoS) type coin the holders are moving the block chain without specialized equipment and much less energy. In both cases you are rewarding people for maintaining a public ledger who may or may not choose to support it if something better comes along.
PoS coins are a much more efficient way of maintaining the ledger yet when it comes to creating a valuable resource that people want to invest in, unless there is some foundation paying for and building new stuff the coin holders tend to trade amongst themselves and the communities are slow to grow because people are rewarded as bag holders. Plus no one wants to give away a resource that may turn out to be very valuable later or put time and effort into it when the outcome is unclear.
The Gifting Economy
There are many people willing to spend time and energy on something just for the joy of thinking it may be of benefit. The open source software movement is a prime example of how each persons smaller contributions can create some bigger value.
We have to be willing to both give and receive. If we never receive we will not be able to help ourselves or others if there is a need. Most of us are not in a place where we can always give away our time and effort without getting some value in return.
I propose that we try to build a coin or design a system that takes advantage of this and works with gifting as part of the reward for maintaining the block chain.
The Cryptocoin Union
There are hundreds of different cryptocoins now. Because of the nature of open source software and the licensing of the code many projects have sprouted up with very little differences between them. The technology is less of a limiting factor than building the community support needed to promote the project.
Because of how easy it is to trade these coins around many speculators tend to play pump and dump and drive the values all over the place. People who are not savvy investors can get caught up in all the promotion at the launch of the coin and drive the price up only to find that the rate of coin production or payouts to miners is so high that the market can not be sustained at a reasonable price.
Coins that are not in it for the long haul can get slowly abandoned as the founders pull out their efforts, sell their holdings and move on to start other projects.
Under these conditions it is very difficult to make good investment choices and it is hard to bring value to the system as a whole. Many have realized this and some rating systems have started to sprout up. If you think of all these coins as one big very unusual monetary system for wealth storage the next logical step to me is to encourage better disclosures, ratings and cooperation between the coin communities so that investors can make much better decisions with less risk.
Some type of tracking and auditing would be helpful to encourage the type of activities that create long lasting value in the coins. Building a gifting economy that works between all the cryptocoins could therefore be helpful in promoting the growth of the entire virtual banking system.
Problems in Gifting
I believe it was Bill Gates that once said something like how it was more difficult to give away wealth effectively than it is to create it in the first place. You can imagine that if he offered up a big pot of a billion dollars and said: “you can anonymously take as much cash as you want from the pot but you have to give half of what you take to someone else and help promote the US dollar” things might not work too well. The first in line for the reward, killerJA could take the entire pot and pay half to someone else a killerJB who might turn out to have the same identity as killerJA. KillerJA could waltz off with all the cash while all time bad mouthing the US dollar as pirateBillyBob and funding nefarious activities with it which serve instead to drain value from the currency. Welcome to the anonymous decentralized nature of cryptocoins.
It is very easy for people to post a newbie account into a cryptocoin giveaway area and write a very convincing story that could result in a large reward. If you do this enough times with different newbie accounts one user can effectively take most of the giveaway making a big pot for him or herself. Unfortunately there are many ways of scamming people when dealing in an anonymous community, so many in fact that the real need often gets overlooked and we spend much effort wastefully – this is a lost opportunity cost that we all pay.
It is not any easier in the world of the traditional cash economy. Giving fiat currency (cash) to people on the street comes with a host of problems that can create issues. Even regular payments of workers in some countries can also place them at risk depending on the level of stability of the region, and a large gift that is not repeated could cause more trouble. Gifting can bring the stigma of making people feel dependent and not worthy. To build an effective gifting economy we need to avoid these things.
I would be really nice to find a way to encourage cooperation, personal growth and economic stability through gifting and having a public record on the block chain can help us do this by identifying users with the value they create. For example by gifting coins to me to support this blog you can be assured that at least the coins are going to support the efforts that you can see that I have made so far on the blog. (Unless of course my word press blog gets hacked, so I might start signing my tip accounts publicly on the block chain when I can as a double check) 😉
Cryptocoin Gifting Tracking
I’ve been working on a spreadsheet to help outline my idea for tracking gifting and using it to encourage value building. See: Pay it Forward Spreadsheet. Obviously we can’t use a publicly editable spreadsheet to track this type of thing once things get started. The system could also be used to offer up bounties for distribution in a coin community with some very general guild-lines that specific community member could use to get rewarded for work done while other anonymous members could be rewarded for making sure the work was done well.
The system could work by gathering top level donations from an individual or the coin community to be distributed to the givers and the receivers. The giver agrees to give a certain amount to the receiver if certain obligations are met (this could be something to be done or something already done). The amount the giver can request is determined by the terms of the top level pot and a percent of the coins the giver holds. For example it might be split into many smaller amounts to be distributed by several addresses on the basis of which giver mints the next block, (a kind of second block reward is the paid from the donation pot if funds and verified the contracts are in place for proof of stake coins). Once the receivers obligation is met the giver gives him the top level donation amount by marking the contract payable and as a result of his efforts gets a reward too from the top level pot. Each transaction request from the top level donation pot can be verified before the funds are open to be moved, thus there can be two parties verifying that the funds are being distributed correctly. Contracts between the giver and receiver would cancel after a period of time too if they were not filled so that the original top level pot could be accounted for correctly.
There maybe some government regulations driven by big money institutions that might wish to crack down on the gifting economy if it becomes popular – who knows, people are strange. I would suggest using simple block chain contracts on one of the newer coins with the one who gives paying out the cost of the contract. If they become popular perhaps a web application could be designed someplace that shows all the currently available contracts. At present, as far as I know the US tax law allows a certain amount of gifting without penalty, however, I’m not a financial or legal adviser.
I hope you can understand the basics of what I’m thinking after reading the previous post, this description, and looking at the spreadsheet. I know that this can never be made 100 percent safe from abuse, my goal is more to help keep the honest people honest and make it easier for them to play along with the game in cooperation than it is to milk the system for freebies. After all, who are we to really judge the situation someone is in – it is a very difficult call, there are many very hard places to be in the world right now. I’ll be trying to build a block chain contract and web application for this but I have many things I’m doing now. If your interested in this please feel free to do it, I’d like to see if it could work. I believe the first coin community that really starts to do this right for a decentralized coin could potentially build a lot of value very quickly and others may follow… GET READY! GO!