Convergent Economics FAQs
We recently chatted with Alejandro Machado (https://twitter.com/alegw) whom Achill had met at the ETHBerlin hackathon. He raised some sharp and provocative questions about the economics of our approach, so (with Alejandro’s generous permission) we decided to turn our conversation into an FAQ:
Q: Why would someone create their own personal cryptocurrency?
In order to create a digital asset that represents goods and services that only you can provide! You could say that 1 of your coins represents the value of a video call with you. If you actually honor your commitment to accept 1 coin for a call, the market can trade that resource. It can find a price that reflects the future expected value of 1 hour of your time.
Q: I’m afraid the order book for that market will be very thin though?
That is the problem our technology is meant to solve. We use bonding curves (automatic market makers — i.e. a smart contract that always buys and sells at a certain price that depends on the current demand). So even if only hundred people make up the community of your token, it already is immediately liquid and has a price without being listed on an exchange.
Q: Can my token be listed on an exchange?
Yes! Your token is on the public Ethereum main chain and it can be traded freely by anyone who buys and holds it.
Q: I still don’t see the benefit in charging in my own coin rather than a coin that’s readily accepted by a lot of people.With which I could buy a variety of goods and services.
If you connect your coin to a service / utility that could increase a lot in value, your coin could appreciate.
Q: I could just charge higher amounts of money in coins that other people readily accept?
True but that way no one can benefit from discovering your growth early. If I find someone whose 1 hour is not yet highly valued, but I am sure that it will be in high demand in the future, there is currently no way for me to monetize this discovery. Regular money can buy me the hour now. The personal coin allows me to buy a claim on the hour in the future.
Q: There’s no way to enforce that I do indeed provide my services in exchange for my coin?!
Totally. But the market price will react to the expectations of your trustworthiness. Only those coins which the creator can credibly commit prove in some publicly observable way that she honors her coin will accrue value.
Q: OK this is an interesting idea to toy around with, but markets operate at a much larger scale. There’s only ever a handful of people who know me personally and the value I’m bringing?
True, most personal coins would probably not be in strong economic demand. But in the end we are all the center of our own universe so even though my personal currency might not yet matter much on the market, it already matters a lot to me as an individual with certain aspirations. A lot of people actually do end up having a large scale influence that has market value — the others dream of it.
