With Bitcoin, the counterweights of miner and user interests prevent anarchy and provide automatic governance, whereas a purely peer-to-peer monetary system such as the TENDER would be subject to attack without a specific governance system. To meet the overall TENDER economy objective of being fair to all participants, the governance or consensus system cannot have any conflicts of interest.
Pacio takes the trustful part of the real world and transfers it to the system. The economy uses two layers of trust:
- Governance is executed by the parties that have the greatest interest in a functioning network.
- The system allows direct (fiat) money transfers between parties that trust each other. Example: a fan donates to her favourite YouTuber.
With this system, we can support trustful relations.
With Bitcoin and other blockchains, protection from attacks is created through the fact that attacks are very expensive and that those who could perform attacks most easily have a financial incentive not to do so. However, this makes the whole system expensive, whereas the Pacio objective is low costs with superior performance. Thus, Pacio takes the “expensive” variable out of the game and replaces it with indirect incentives for users to take care of the system, combined with penalties up to exclusion for anyone who acts maliciously.
Governance – deciding about emissions
Given the strong incentives for attackers, an automatic algorithm to control the dynamic money supply for a non-volatile currency would be exposed to attacks. Thus, Pacio has opted for manual control by users who are incentivised to maintain system stability. This form of governance is less predictable for potential attackers and thus less susceptible to manipulation. It is also adaptive to unknown risks and new challenges which might arise.
This decision means that the economy needs a governing body, but one where the parties comprising it have an interest in a stable transfer economy with a liquid currency – “The dollar shall go round and round and never stop”. It is Pacio’s assumption that economic enterprises which have a stake in the economy via deployed apps will have the greatest interest in such a system as stability, security and longevity are among the best features they can offer to attract and retain customers.
Thus, in the TENDER economy, the governing body consists of application developers or entrepreneurs who participate in the economy, one nominated entity per app, with a finite number of members at a time. As numbers grow, a delegation system will be introduced to keep the economy manageable. If the interested number of eligible developers is higher than the available positions, members could rotate by poll.
Example for emission policy:
The price of the TENDER rises. Council members can vote to increase the money supply. When the price stabilises, they can vote to pause new emissions or reduce (destroy or burn) the increased supply or part of it as is deemed appropriate.
The result: This approach of governance by application developers creates stability, which is in the interest of all participants of the network. This is better than in fiat economies where “stability” is controlled by central banks which can have different incentives than the users of the currency.