Fractional Banking Not Allowed. Algorithmic Money supply
Tagion aims to bring trust back to the market and financial systems.
In the current fiat systems (e.g. Euro, US Dollar or Yen) the money is issued and guaranteed by a central authority such as a central bank that controls the system. Essentially this means that a small group of actors manage the given monetary policy — and are in the tempting position of using the system to their own benefit or to the benefit of incumbents.
It is not a new problem:
The problem with fiat money is that it rewards the minority that can handle money but fools the generation that has worked and saved money.
— Adam Smith, 1723–1790
Money Controlled by Central Banks
Today it is not even the state that controls the issuing of money. Instead, central banks “print” more money for commercial banks and the commercial banks leverage the money with fractional banking by creating credits and imposing debts on lenders. Yet, it is the general public that holds the risk with this economic strategy, and it is the public that has to step up when the system comes short of liquidity.
A good example of this was the latest worldwide financial crisis. Taxpayers pay for the banks failed attempt of earning huge returns by trying to control the money issuing function in society. It is social injustice — Robin Hood turned up-side-down.
Money As a Common Resource
Money should be democratised again and seen as a common resource for all. Tagion will play a substantial role in removing the conflicts of interest in the current financial system and return the money power to the people.
The Tragedy of the Commons is an economic problem in which every individual has an incentive to consume a resource at the expense of every other individual with no way to exclude anyone from consuming. It results in overconsumption, underinvestment, and ultimately depletion of the resource.
Elinor Ostrom won the Nobel Prize in Economics, for proving an alternative governance model and through this, disproved, the Tragedy of the Commons.
Her solution is called Self-governance of Commons, which she proved is a more efficient way of governing a common resource. Self-governance of Commons needs a governance system in place, where the beautiful part is that the governance is built to serve the users of the resource and to ensure no conflicts of interest between the actors in the system and the owners of the system. The Tagion governance model is designed and built-in adherence to these principles.
Introducing Tagion Currency
With the Tagion system a cryptocurrency, Tagions, is introduced. Tagions are non-collateralized money, meaning that the currency is not pegged to other currencies or assets and thereby fully independent from other monetary systems.
Tagion is an independent monetary system where Tagions are issued and guaranteed by the Tagion network that is owned by its users.
In other words, the users of the system are also the owners meaning there is no conflict of interest. In the Tagion network, the authority is decentralised to the nodes that maintain and operate the network by a democratic governance mechanism. The supply of money is constant in the beginning and later in the process, to be taken over by algorithms that use intrinsic variables as inputs to control the money supply to support a liquid market and trust in the value of Tagions.
Tagion is both owned and controlled by its users and yet, open and technically accessible for everyone. The source-code will be open-source and Tagion as a whole seen as a common good.
In a 1984 interview, Friedrich Hayek famously said:
I don’t believe we shall ever have a good money again before we take the thing out of the hands of government. We can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.
And, in Free Market Monetary System, he noted that:
…the monopoly of government of issuing money has not only deprived us of good money but has also deprived us of the only process by which we can find out what would be good money. We do not even quite know what exact qualities we want … because we have never been allowed to experiment with it. We have never been given a chance to find out what the best kind of money would be
— Friedrich Hayek
It resembles what Bitcoin and other new monetary systems including Tagion strive to solve. Take the money power back to the people who work in the economy and depends on its reliability, making it democratic and socially fair.
We call Tagion the world’s first genuine democratic monetary system, due to its governance model. The purpose of Tagion is to create a sustainable economic world.
The impact of a trusted peer-to-peer network like Tagion can have on the financial industry is limitless. Imagine people sending money to each other, exchanging currencies, or trading in financial exchanges across borders lightning fast with nearly no cost and in full privacy. It will increase overall business efficiency to the benefit of all participants in the system. This was one of the primary objectives for early innovators and adaptors of the first decentralised networks.