Community Currencies and the Need for More Altcoins - Nicholas Fett

all right buffakorns next up i'm excited to introduce nicholas from teller he's going to be coming to us today talking about community currencies and the need for more altcoins nicholas how's your day been hey it's been good thanks for having me yeah we're super excited to hear today so i'm just gonna give you the floor and let you jump in cool yeah i know excited to get started okay all right can you guys hear me okay and then how does the presentation look good it can sound good cool awesome so uh as i said uh my name is nick fett um today i'm gonna be talking to you guys about community currencies um namely you know it's super interesting following that last talk he was talking about why different ledgers are needed and i'm going to be talking about why different currencies are needed and why different tokens are needed and how it can actually be just a super cool thing to get the whole space started um obviously um i'm also going to go over kind of what these might look like on ethereum and and what we're doing about it um first uh so kind of why i'm talking about this i'm i'm an economist by training but i also run i'm the cto at teller teller is a decentralized oracle on top of ethereum so if you need off chain data in your smart contracts you can use teller we have a bunch of bounties up we have a booth in the castle so come over and visit us um or go hack on a hack on us but that's actually not why i'm here today uh we actually just launched a new product which is called chorus and chorus is our protocol for community currencies uh namely what we do is we create stable coins that have flexible monetary policies and i'll kind of get into what that entails but mainly i'm going to try and keep it much more broad and talk to you guys a little bit about just kind of community currencies competing currencies and why these are a good thing and why how the space and ethereum and kind of the broader crypto space can really just utilize these to to start growing okay so what's the the purpose of different currencies like why do we want to do it uh you know obviously we're we're making some money if you guys get it it's a joke we're making money um but you know we we want the idea that you can have a money that's not run by a state so that's whenever i talk about state-backed currencies these are us dollar euro japanese yen people with militaries have currencies um but things like bitcoin things like trb which is tellers token um these smaller currencies which you know these are these are things that aren't backed uh by these states and the other purpose you know this talk kind of in general which you should really think about it as is how do we get cryptos to compete again as a currency um you know bitcoin once used to be used to to buy pizzas um how do we kind of get back to that and compete with the us dollar as a currency you know creating a stock on chain or a bond is is cool but having currencies is something that's really powerful um and how do we sort of get back to that and the main tool i'm going to talk about is just the the use of flexible monetary policies namely using inflation so whenever i talk about monetary policies it's a just kind of how your how your cryptocurrency or how your currency is set up what that sort of incentivizes and how you can use actually inflation and printing money to help your community namely gain network effects and incentivize certain things versus other things uh so to talk about kind of the history of um having more than one currency it's super interesting actually because uh both the left and the right you know u.s political spectrum here um have been pushing for non-us dollar so the right calls these competing currencies so what you'll have is you know this has been coming up for a long time uh the libertarian wings have argued that the us government shouldn't control the money supply it's just a bad way to go because you should allow competing currencies because they believe that there's way too much inflation what we need to do is actually just enable anyone to have their own currencies because what's going to win out is obviously gold and silver and hard metals so that's why we need competing currencies and then on the left you have this other thing called community currencies and this comes from the belief that um so corporations and governments have the run who run kind of the currency and the banks um they're they're not incentivizing the right things so we need to create say local currencies that we can have you know say a denver currency to promote local sustainability and we can promote our goals rather than the goals of these giant interests who control it uh both are kind of pushing for the same change in law that we would need you know allow competing in more than just the us dollar well this is where crypto comes in uh we can actually now do this and so you're like okay well the right and the left both like it wise why isn't this a thing um so there there is a debate uh about whether or not you want multiple currencies so um if you know most people would probably recognize it used to be a debate back in the day was whether or not we're going to have more than one altcoin whether it's you know bitcoin is going to be the only crypto or whether they're going to be more than just bitcoin and i think we're beyond the stage i think we can uh actually say that we're going to have more than just bitcoin now uh but even just in in the the real world um the the argument would go that well we should have one global currency if you have one global currency there's a whole lot of efficiency gains like every single person on the planet can you know use the exact same currency it's gonna you're not gonna have the petro dollar system where the u.s gains a whole bunch of uh just purchasing power due to the fact that they have a strong dollar it'll sort of be more equal and everything everything will be hakuna matata um the the other argument or kind of the problem with that i would say would just be that uh you you lose a lot whenever you have whenever you're not sort of using money properly um and i'm gonna kind of talk about ways that you can use money to to lead to things but the idea of monetary sovereignty monetary sovereignty is whenever you have the ability to print money um you know so probably people who are watching this who are over in europe probably know a whole lot about monetary sovereignty because whenever you join the eu you give up monetary sovereignty you now no longer have the ability to just print your currency at will um and there's there's some good things and there's some bad things about this so you know if you have the ability to print money uh namely we've we've sort of had a really hard time this past year with the pandemic um it would be cool if you could print money to pay people stay at home might be a valid reason to print money and everyone could get on board with it if you don't have monetary sovereignty you can't do that uh you need the central bank somewhere else to do it so you know if your country is all for printing money but other people are more stingy you're not gonna get some money printed uh but there's also bad you know we all know you know one of the big reasons like the libertarian wings wanted to start crypto was that uh inflation is used in a lot of ways to kind of just for private profit so it goes to a few people and not towards others and the historical reason for inflation is is war um you want to go attack some other country if you if you didn't have the ability to print money for it what you would actually have to do is go tax your citizens which you know nobody's really gonna want their taxes raised so you can go attack some other country uh but if you can just print money uh it leads to it's your ability to go fight a bunch of wars overseas and sort of have these perpetual wars and so that's a bad thing um i think there's just a few pieces here about maybe we can actually start using some of the competing currencies ideas to where we don't support those currencies that's we don't like but so that kind of gets into the the idea well do we want flexible money you know isn't isn't fiat already flexible um and yes it is um but you you can think of community currencies and monetary policy in two senses so a there's inflation which we're going to talk about and what you can use those inflations for but it's also how it's structured actually has um has an impact on the way that your society functions so the the classic tale from community currency advocates is the tale of the 11 rounds um so i'll tell this story quick it's um there's a there's a traveler and he he's sailing from island to ireland and he lands on this one island and there there's a group of people who's never seen the outside world for thousands and thousands of years they're still on the barter system so you know one person gives uses chickens another person he pays chickens for bread for coconuts for fish and there's no money and it's super inefficient and the travelers like this this just has to go um so he goes to the people that's what we're going to say for easy math there's there's 10 people and he says hey listen guys uh this isn't the right way to do it i'm going to give you each 10 rounds so we're going to we're going to give you each 10 coins and you guys are going to use these as money and it's going to be great and they're like cool this makes sense uh we see how this could work um and he says hey but you know since i'm giving you this phenomenal innovation uh what you're actually gonna have to do is you're gonna have to give me some interest so i'm gonna give you each 10 rounds but you got to pay me back 11 at the end of the year and uh they say okay and then they start going and there's some gains but hopefully you can see the problem with it um so if there's 10 people and he gave each of them 10 rounds that's 100 rounds but they each have to pay back 11. that means they would have to pay back a total of 110 rounds which doesn't exist so what what's what gives and what it actually leads to is this this is a debt-based money system this is what we have and it leads to competition uh namely the one way that everybody could pay it back is well if one person goes out of business um now you can pay it all back so now you've basically baked in competition because you're trying to pay this back and and that's might not be what you want to go to the other way that you can do it you can have growth this is why in most modern economies you always have to have growth whether you inflate your way to growth or not because the money system doesn't handle shrinking well because if you let's say you bring 20 more people onto your island and they each take out loans for 10. now those people can pay it back and this is this is kind of the situation we're in is you have a money system that that incentivizes just constant growth and constant competition and and you feel it you know that that's what you feel kind of in the current economy and that you might want something different so uh so the next piece if you have you know how it's structured that that's really important and how you structure your currencies but the next big piece about monetary policy is inflation um note whenever i talk about inflation um there's kind of two pieces about the definition and everyone in the crypto space just uses them interchangeably and i'll probably you'll probably catch me doing it but inflation is actually how much the price level increases uh this is different than the supply growth rate of money so how much the money supply is growing so for those who have been following the you know the prince or gober uh memes and the federal reserve you know even during the 2008 pandemic they doubled the money supply but as far as you guys know the price level did not double um and the reason is is that you can print a whole lot of money and if it just goes and sits in somebody's bank account you don't get any inflation it can also go sit in somebody's bank account who invested in the stock market and the stock market goes up but you don't really get any inflation so the two are correlated um but you generally don't they're they're not one-on-one um and a lot of people may have heard the term deflationary currency so like bitcoin as a deflationary currency so if you have a fixed supply 21 million and demand is rising what actually happens is the price uh the price of your currency goes up which means the price level of everything else goes down um this is actually bad for a currency um you know maybe some really hardcore libertarians might disagree um but the general idea that price levels fall um it has some consequences to it namely if you know that your money or your bitcoin is going to go up in value you don't want to spend it as a currency uh it's really easy to to see that and you know if you just want to hold and that's fine but it's not a currency you're not sort of spurring the economy by spending it if everyone just wants to hoard these things for themselves um so that that's one big issue the other one is that certain prices don't fall so this is you know keynes had his famous sticky wage theory and uh it's it's basically that if you know a lot of some things come down in price like say the prices of tvs or something those you can lower in price pretty easily but it's really hard to lower somebody's wages it's also really hard for people to accept things like their house going down in value so there are reasons you may not want prices to fall the other piece of inflation you should also whenever i say the term inflation you should think of inflation as a tax inflation is a tax on holders so if you want if bitcoin's kind of the classic example that i'll keep going back to because i think everyone sort of understands how it works uh bitcoin does have inflation uh the inflation is the mining reward um so you have there's there's two kind of ways to pay for security and bitcoin you can either have fees which are so you have people who are transaction doing these transactions they would pay fees on it okay that would work um but if people you know why are you using bitcoin well it's actually not you know the current narrative is that it's not supposed to be for transactions so why are you punishing these people it's supposed to be a store of value so who should be paying for the security well the people who are using it as a store of value should be paying for it uh and that's the people who are just holding it um so how do you tax the people who are just holding it and you print money um it's kind of an equal tax on everyone who's holding it and that's that's how you do it so um if you can use inflation to you basically punish or tax holders and then you give it towards something else and that's what i want you to think of whenever you're you know how can we sort of design community currencies using monetary policy so we can take advantage of the tools of say countries to use inflation uh and then also put it somewhere so what bitcoin does is it puts it towards security uh this is in the form of mining reward but what you can also do is you can use these monetary policies for other things so you can think you can print money and you can put it towards a dev share so that's actually what teller does um our whole team we didn't print any tokens at the beginning we just give ourselves inflationary rewards and that's what we pay for it other things you can do so usage this is you know this is like what yield farming is uh basically if you're using our protocol we're gonna print money to to get you to use it and and this is really powerful because in the past if if you wanted people to use your protocol right at the beginning what you would have to do is you would actually have to have money so you would need some vc to give you money and then you would have to actually pay them that's really hard to get a bunch of money up front but now what you can do is you can have the system where if people think it's going to be used in the future you can print money and pay them with it and this is how you bootstrap usage and all of these things is how you bootstrap it so bitcoin how did how do you bootstrap security in bitcoin you know there's how do you get people to start mining and and doing these things and the reason how you do it is you print money you know bitcoin's inflation rate right at the beginning was absurd and that's a good thing uh it obviously worked out for him and lastly you know maybe maybe you do have something how do you incentivize people for just holding it you give them staking rewards so you just pay people for holding it and you can do these things with inflation um you don't have to it just ruins kind of the whole people's mindset so you know same with like development so it's really hard to get people to pay for open source development saying like just donate here nobody does that um it's much easier if you just say like hey if we get usage on this thing your token's going to go up in value but by the way we're also printing money printing these tokens to pay for development people are okay with that um it just has a better feel um and you know so this is other sort of problems and how we can kind of go after it you know if one big problem in cryptocurrency is the idea that you have too many free riders um so you you know sometimes these tokens will get a bunch of people who just buy the token and they sit there um nobody does anything there's no development the developer fund is gone it it's time for a custom monetary policy where you have more inflation and if you're not actually doing something you sort of get weeded out um another thing uh too much activity so you know i think you could argue like on ethereum right now you could drastically lower the inflation rates because you know mine if if there's so much security like i think some people have made the argument that bitcoin and some of these other proof-of-work coins are actually way more secure than they need to be you should you should be lowering the inflation rate um you know in the last one kind of a poor community or if there's different pieces you don't like or as a community you don't like you can structure inflation into those that you do like so you know if if you look at some communities that say are too many free riders or you know they're sometimes you know i know ethereum did a good job with this with kind of um the difficulty bombs and making sure that your miners don't control your network completely but you can have inflation to sort of weed them out um these are some things that you can do and not saying you should um but yeah so these are some things that you should do whenever designing kind of your own custom currency i know i'm running short on time so i'm just going to kind of fly through the next few um so why not bitcoins currently you know we want more of them we want more things with flexible monetary policies um i put stability and stored value so we chorus it creates these semi-stable coins so you would actually back it with bitcoin and then you could have a monetary policy on top of it you want more pieces with flexible monetary policies because if the the more communities you have doing their own flexible thing the more network effects you create the more chances you have to create something new and that's really what we want to get at here and the last thing why not kind of just stable coins um you know like yes you could use die as a currency or yes you could use some of these other stable coins usdc but there's no monetary sovereignty so if you're like what are you trying to create you know just use the dollar if you're trying to do a currency you want you want the community you want the currency that you're using to fit your values you want it to fit what you're trying to create and fit your community and have the inflation going towards your community and that's whenever you kind of create something good so anyway i have a few examples here um kind of the one i'd like to touch on is just you know if you're an early stage startup and you need to subsidize usage um you can create you know what chorus allows you to do is it allows you to create a fixed supply governance token um but you then can lock it into a contract and have a currency it's easy to spend and cheap to spend and then the inflation actually can go back to your users so you can bootstrap usage and i think that's that's one of the more powerful things here so anyway uh maybe i got time for a question but i know i got on early so i can hop off um thanks everyone for listening um go to chorus.

teller.org thanks nicholas that was awesome and full of some fun controversial ideas people in this booth often don't want to hear about taxing and and uh whether or not we should be creating our money so thanks for mixing it up a little bit sometimes i think we really need to talk about that stuff rather than avoiding the ideas cool yeah thanks for having me it was fun and i'll see you guys in the castle