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Jax.Network Blog

New monetary economics

by Maryna Trifonova, Head of Content at Jax.Network

Money has always been considered a flexible concept that often reflects the pace of human development. From ancient gold coins and seashells to modern-day banknotes and digital assets, transformation is mind-blowing. It’s even hard to imagine what awaits us in another thousand years but perhaps the very basic principles for the future of money are already here. All we need to do is to cultivate an open s̶o̶u̶r̶c̶e̶ mind.

Finding ideal money

John Nash started to introduce the concept of “ideal money” back in 1954 and described it in detail in Southern Economic Journal (2002). The paper gained a lot of popularity and has been discussed till today. In simple words, “ideal money” represents the type of currency that remains insensitive to inflation, so it allows for conserving value through the years as in a reserve currency and stimulating domestic and foreign trade as in a standard measurement.

It’s interesting to note that John Nash is also suspected to be hiding behind the mysterious pseudonym of Satoshi Nakamoto. The theory gets its basis from the fact that the Bitcoin protocol looks similar to “ideal money”. In fact, all similarities were described by Travis Patron in his famous book called “The Bitcoin Revolution: An Internet of Money”.

Economists claim that generally accepted qualities of good money should be general acceptability, portability, indestructibility or durability, homogeneity, divisibility, cognizability, and stability of value. Out of all the qualities, stability is probably the most important one and that’s exactly the quality that Bitcoin lacks. Its price volatility deters people from using it as a means of payment on a daily basis. That leads us to the hypothesis that a stablecoin may become a good candidate for ideal money.

Energy standard

Jax.Network introduces a whole new monetary system based on the energy standard. Our stablecoin JAX is issued on the shard chains only when there is demand for them. It means that miners have to decide when they want to burn their BTC and JXN rewards to mint JAX. Assuming that miners are profit-motivated, they only do that when it is beneficial to them. Besides, the money supply of JAX, although theoretically unlimited, can’t grow above the cost of energy and the productivity gains observed in the hardware mining equipment.

For the general understanding of this new monetary economics, our readers should remember that the main indicator of the performance of such an energy-standard system is the hashrate of the network. We assume that if the economy is performing well, then there should be an increase in the hashrate. If the economy is stagnant, then the hashrate should also be stagnant. If the economy is receding, then there should be a decline in the hashrate.

In our system, although monetary supply is not capped, scarcity is managed through three strong economic forces:

  • i) Miners are profit maximizers, they will not mine new coins, if they do not profit from them. They invest according to their maximum hash power constrained by electricity costs and mining equipment costs. Block reward is operating costs-driven and not time-driven like on Bitcoin. This has a dramatic consequence on the supply mechanism. With the reward being not fixed, each mining pool will adjust its supply according to their respective cost structure, the quantity of coins produced by other firms, and the demand side;
  • ii) We internalize the opportunity cost of mining by enforcing a new mechanism at the protocol level: miners have to forgo their BTC + JXN block reward if they want to print JAX;
  • iii) We apply a K-coefficient to adjust the monetary supply that can be minted in the current epoch. This parameter is directly linked to the aggregated hashrate across all shard chains.

Our energy-standard monetary system is based on the cryptocurrency economics which is very young itself. We acknowledge that the field still needs to mature and find solid ground. However, we hope that our ecosystem of products will become a facilitator for mass adoption of this energy-based system.

Don’t miss any announcement by subscribing to our social media accounts:

Official Website: https://jax.network

Twitter: https://twitter.com/CommunityJax

Facebook: https://www.facebook.com/network.jax/

Telegram Channel: https://t.me/jax_network

Official Group: https://t.me/jax_chat

LinkedIn: https://www.linkedin.com/company/jax-network/

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Jax.Network provides the technological infrastructure for a decentralized energy-standard monetary system. Our blockchain is anchored to the Bitcoin network and issues two digital currencies JAX and JXN.

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