Decentralized Monetary Feedback Using Consumption-Triggered Token Supply
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Solution Overview
Problem
Existing monetary systems, both centralized and decentralized, fail to align money supply with consumers' consumption of goods and services, leading to inflation or deflation and economic instability.
Innovation Solution
An endogenous decentralized monetary system using blockchain and cryptocurrency, with a governance token for decision-making and a currency token for purchasing, where new money supply is triggered by consumer purchases, and adjusted through interest rates and incentives to maintain economic stability.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Device complexity
If money supply is determined by centralized authorities or distributed participants independently of consumption, then monetary system control is simplified, but disconnection between money supply and consumers' consumption occurs leading to inflation or deflation
Solution Approach 1:
The patent implements a feedback mechanism where new currency token supply is automatically triggered by consumers' purchase transactions. Each purchase event generates new money supply through smart contracts, creating a closed-loop system where consumption data directly feeds into monetary policy decisions. This eliminates the need for centralized authorities to independently determine money supply while preventing disconnection between money creation and actual economic activity.
Solution Approach 2:
The monetary system performs self-regulation through automated smart contracts that issue new currency tokens based on verified purchase transactions. The system serves itself by automatically adjusting money supply in response to consumption patterns without requiring external intervention from centralized authorities or distributed participants, thereby maintaining economic stability while simplifying control structure.
2Reliability
If new money supply is triggered by consumers' purchases, then connection between money supply and consumption is established, but system complexity increases due to decentralized decision-making
Solution Approach 1:
The patent replaces complex human decision-making mechanisms with automated smart contracts deployed on a blockchain network. These self-executing contracts automatically issue new currency tokens when purchase transactions are verified, eliminating the need for complex centralized policy-making processes or coordinated distributed participant decisions. The mechanical automation of money supply adjustment based on consumption data maintains economic stability while actually reducing operational complexity.
3Adaptability or versatility
If governance token is distributed to retail merchants and participants, then decentralized participation in monetary affairs is enabled, but token distribution equity challenges arise
Solution Approach 1:
The patent implements preliminary distribution of governance tokens to retail merchants and system participants before full system operation begins. This pre-distribution establishes the decentralized governance structure in advance, allowing participants to engage in monetary affairs from the outset. The preliminary action phase includes allocating tokens based on criteria such as merchant participation levels and early system contribution, thereby enabling decentralized participation while managing distribution complexity through predetermined allocation rules.
Data Source
AI summary
A method is provided for an endogenous decentralized monetary system. The method comprises a governance token with limited issuance, a currency token with unlimited issuance, a target exchange rate between the currency token and a fiat currency, a standard interest rate credited to holders of the currency token, indicators of inflation or deflation of the currency token, compensation for merchants' exchange loss, mechanism for crisis detection and self-stabilization of the currency token. New currency tokens are originated from rewards to consumers, merchants, and payment gateways, whenever consumers transactions/consumption are performed. The money creation is endogenous to the consumption of widely distributed consumers and is separated from borrowing and lending activities. Smart contracts automatically adjust consumer reward percentages, merchant reward percentages, and the interest rate according to a predetermined policy cycle until inflation or deflation is stabilized within a 2% exchange rate range from the target exchange rate.