Goals & concessions

In Web3, network money is the network's own coin. The network money is responsible for operating the network, meaning it needs to always be available for people to use to pay for their usage of the network. Network money has a number of goals it needs to achieve and a number of concessions it can make.

Goal - Reliably incentivise node operation

One of the most important functions of network money is to create a sustainable economy where node operators can be reliably paid using the network money. The security of the network is influenced by the number of node operators that maintain the network and how decentralised those nodes are across the globe. It is an ongoing priority for the network to reliably incentivise node operators so that the network remains secure and fully operational. Node operators benefit from network money having a moderately stable price as this reduces the risks around not being paid enough to properly maintain a node due to sudden price changes. Creating ongoing demand for the network money should help with creating a more stable price. Wealth taxes could also help as they would lead to more reliable income that can be used to subsidise the operational costs of running a node.

Achieving this goal should mean that node operators are always reliably paid by the network money. The network money needs a relatively stable price as this makes the incentive to operate a node more predictable. If nodes are properly incentivised the trust in the network should continue to increase over time as users will be able to verify the income that node operators receive and that the network has been running continuously without any problems.

Goal - Minimise governance complexity

Web3 networks could be adopted at a global scale and provide value to a large number of different countries and communities. This means a very large population of users could end up using and relying on a single Web3 network for their day to day lives. A large user base increases the need for simple governance structures for maintaining that network. The first reason this is important is due to the cost of decision making becoming extremely high. For instance, if 1 billion people used the network and they each needed to participate in a governance decision the cost of a governance process would exceed $1 billion if the time required by each person was worth only $1. The second reason is the complexity of these decisions would introduce attack vectors. These decisions could have a large impact on some or all of the users that rely on that network. Pushing complex governance decisions onto a large population of users will make it more risky that the decisions lead to suboptimal outcomes. Web3 networks will need to minimise the governance complexity wherever possible to reduce the operational burden and to reduce the number of potential systemic failures that could occur due to poor decision making.

Achieving this goal would mean that only the necessary governance decisions are pushed towards the global community of users that rely on the network. If possible the network would be fully automated and self correcting. The network needs to focus on reliability and security if it is going to be adopted at a global scale. Minimising the governance complexity will contribute towards achieving that outcome.

Goal - Strongly disincentivise hoarding

Users rely on the availability of the network money to pay for fees and taxes when using the network. Hoardable money means people are not punished for holding the network money and leaving it idle in their wallet for long periods of time. Hoardable money commonly leads to wealth concentrating into the hands of a few people due to it being a superior asset when compared to deteriorating goods and services. Money that can be easily brought out of circulation and hoarded means less money is available for transacting in the network. If a Web3 network wants to become a public utility for the benefit of society it will want to ensure that the network money is being productively used and not hoarded, as hoardable money can result in growing concentrations of wealth. Wealth concentration could eventually compromise the governance of the network as the network money can be commonly involved in determining voting power. Web3 networks can avoid this problem of hoardability by adopting demurrage via a wealth tax. The wealth tax will need to be high enough to disincentivise the hoarding of network money over the long term.

Achieving this goal should mean that network money is not hoarded. When people receive the money they are incentivised to productively use it as financial liquidity, to buy goods or services or to invest it in business ventures. A constant flow of network money should help with preventing money cycles from happening which is due to many people hoarding money at the same time.

Goal - Optimise a financial liquidity incentive

The purpose of a financial liquidity incentive is to generate longer term demand for the network money over the long term and to create increasingly efficient markets that can create a network effect for the ecosystem. This incentive helps to partially resolve the issue of constant sell pressure for the network money which is caused due to the incentives of demurrage money. Network money is highly suitable for facilitating exchange and being used as financial liquidity. Network money would be used productively and likely would also be the most reliable and secure form of money in the network.

Achieving this goal would mean that deep liquidity is available across the network's financial markets. The network money could become a globally preferred form of money for facilitating token exchanges. Web3 networks will compete against one another to attract the most liquidity into their network as possible. Those that are most effective at implementing this incentive could become the most preferred destination for hosting and exchanging tokens based assets.

Goal - Achieve global adoption

Token based assets could represent any physical or digital asset. The Web3 market will be highly competitive as networks need to compete with each other to attract as much assets and liquidity onto their network as possible. Networks that don’t achieve enough global adoption and scale will likely get outcompeted by those that are highly focussed and effective at attracting as much liquidity and assets as possible. More assets and liquidity should help to create more efficient financial markets.

Achieving this goal will help with maximising the amount of liquidity and assets that people can use across the network. More assets and deeper liquidity should help with making the network more sticky due to the ease and efficiency of the market. Liquidity, assets and users should be more likely to stay with a network that fulfils all of their needs, that has aligned incentives and that always operates as expected.

Concession - Adoption of other mediums of exchange

Network money needs to be incredibly reliable and secure if the network is going to be adopted at a global scale. If the network money wanted to compete as a medium of exchange it would need to consider factors such as price stability and how the supply is updated to accommodate changes in the economy. The problem with this is that it would be very difficult to create a single medium of exchange that can function well for the entire population and for every community use case. Some economies would outgrow others and the requirements and preferences for some countries and communities may differ from others. The governance complexity and cost of making changes would also be astronomically high. These complexities do not need to be handled by the network money. The network money can focus entirely on maintaining and operating the network itself and ensuring that it is always available for anyone to use. Network money needs to be widely available, reliable and secure. Minimising the responsibilities for network money where possible can help with achieving this outcome. Web3 networks introduce the possibility for people to create as many token based forms of money as they want to. A truly open and permissionless market is created for mediums of exchange to compete with one another. This is the second reason why network money doesn’t need the responsibility of being a widely adopted medium of exchange. A third reason is that competing as a medium of exchange would mean less network money would be available for financial liquidity and transaction fees. This could create an opportunity for another network to incentivise deeper and more efficient financial liquidity. Network money would be more effective at facilitating token exchanges if it is able to focus on this key responsibility over trying to be responsible for too many things. A final reason that token money is a more desirable solution for mediums of exchange is it enables a community to create the exact form of money that functions in any way they want it to and that will be governed how they prefer. Token money is completely context and environment specific. Many forms of token based money can be created to handle the responsibility of being a medium of exchange.

Concession - Lack of localised price stability

If network money isn’t trying to be adopted as a medium of exchange it is less concerned with trying to maintain stable prices when compared to all of the available assets or goods and services that might be available across the world. If the number of users, goods and services continue to increase there might be a need to adjust the money supply to not cause ongoing price changes. Introducing these supply change mechanisms could be risky and very expensive to govern on a global Web3 network. Instead of worrying about external price changes the network money could focus on generating ongoing and stable demand for the money inside the network and keep the monetary policy as simple as possible to reduce any systemic failure risks or excessively high governance costs.