Final thoughts & critical reflection

Aside from the shining promises of the fast-growing DLT industry, unfortunately there have already been far too many scams, get-rich-quick schemes, ponzi schemes, and pyramid schemes, and we definitely do not want to be another one of these. That’s why we’ve critically questioned every single design decision we’ve made thus far and will continue to do so as the project advances (feedback is always welcome!).

However, we believe that this technology has a lot of potential despite all of these overpromised, overhyped, and overpriced projects. Because of this, we have researched the first principles of the fundamental problem and meticulously drafted a whole new approach based on these principles.

We understand that we can only generate wealth for society by solving problems and creating value. Therefore, we believe that focusing solely on the price of a monetary good (e.g. by only promoting an impossibly high return on investment (ROI) as many cryptocurrency projects do) is extremely short-term thinking. Many of these price-focused DLT projects even have strong similarities to Ponzi schemes. But since prices of goods and services (including monetary goods) in the long term always approach their real value the greatest strategy to accomplish a considerable price rise in the long run is to focus on maximising value for users. That is why we have to focus on solving the fundamental issues described in First Principles of Trust and Money. Only in this way can we create added value and thus succeed in the long term.

Trusdee’s primary value stems from its capacity to be

1. the best protection of human rights, developing countries and the environment,
2. the best long-term store of value and digital assets,
3. the best global platform for exchange of value and digital assets, and altogether
4. the best platform for custom decentralised solutions

… ever to exist in human history. In addition to this, Trusdee will have all of the features mentioned in Leveraging the potential and more.

In addition to real and perceived value, user experience is one of the most important factors for the rapid adoption of a new technology. This is where all DLT solutions have failed so far (including Bitcoin, as adoption of a new technology should be much faster in the 21st century).

Therefore, Trusdee will not only create the highest possible added value, but will also do its utmost to provide a world-class user experience for everyone on the platform (users and operators). If we can achieve this, it will be a quantum leap forward for decentralised technology and will definitely accelerate global adoption.

There are also legitimate concerns about the high deflation and/or price fluctuations of fixed supply money systems. But in order to keep the price stable (which would also prevent high deflation), the money supply couldn’t be fixed but had to be adjusted all the time based on the demand of that money. Satoshi already addressed these concerns when Bitcoin was just one month old.

Sepp Hasslberger asked him:

It is also important that this limit be adjustable to take account of how many people adopt the system. If the number of users changes with time, it will also be necessary to change the total amount of coins.

Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula?

If there is no formula, who gets to make that decision and based on what criteria will it be made?

Satoshi respondes:

Indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don’t know a way for software to know the real world value of things. [...]

In this sense, it’s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes.

Satoshi correctly pointed out that a central authority is required to keep the price stable. And this is the polar opposite of what we desire, which is a high degree of decentralisation. As a result, price stability is not achievable at the outset, but will emerge on the journey to global adoption.

Satoshi continues:

As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.

But this raises some questions.

If the main focus of users is to get and hold a monetary good in order “to take advantage of the increasing value”, what will happen when the maximum number of users (e.g. all people on earth with an internet connection) is reached? Will users cash out (into their fiat currency) or will they keep it and start using it as money as intended? It will only truly succeed if users see it as superior money and refuse to exchange it for any other means of payment. They must start using it as a medium of exchange for ordinary transactions at some time. The sooner the better! The most significant way to attain that goal is to educate people on the project’s goals and objectives. That is one of the reasons we wrote this article.

As we are striving for global adoption, there are two separate phases of a new global money system: First the adoption phase and then the establishment phase. When we reach the establishment phase, the price of the money will be considerably more stable, and people will be able to and should utilise it directly as a medium of exchange for day-to-day transactions. However, the price will fluctuate significantly at times during the adoption phase. Because of the influx of people during this phase, as well as the fixed supply, it will also be a highly deflationary period. This deflation will drive adoption, but it will also encourage individuals to hold this money as an investment asset rather than using it as a medium of exchange. For this reason, it primarily serves as a store of value during this phase.

As adoption increases, deflation and price fluctuations decrease. Early adopters who made profits and wish to make use of it should not just cash out by dumping on other users, but rather borrow against their holdings highly over-collateralized. That is how they can continue to keep their money in Trusdee with a very low risk of defaulting (losing their share).

During the adoption period, one viable solution to the price fluctuations may be a stable coin with a technology similar to Dai, but with only Trusdee’s native money accepted as collateral. The minimum collateralization ratio should be relatively high at first and gradually reduced as the collateral’s market capitalisation hits predefined thresholds.

One question we definitely have to ask ourselves is whether there are any disadvantages or serious consequences when the identities of node operators are openly accessible.

The first thing to note in this regard is that not all operators need to reveal their identity, we’d just need a critical mass of identified operators to allow users to choose their trustees.

The main disadvantage of known and identified trustnet operators is primarily that it makes them easier to attack. This means that rich or influential individuals, organisations, governments, etc. could attempt to exert a targeted influence on these operators. For precisely this reason, a high degree of decentralisation is of the utmost importance in a trustnet. After all, it is virtually impossible to exert influence simultaneously on thousands of operators distributed all over the world, regardless of their identity being revealed or not.

In the event that a government should ban Trusdee, at least the following two possibilities exist:

• Users from the respective country could just select operators from different countries.
• Operators that make a lot of money have a high incentive to stay operators, so they could either:
  • host their nodes in other countries, or
  • leave the country.

Another critical success factor for the project is that it will be regarded as a commodity rather than a security in order to avoid government interference. And not just in a way that skirts the securities laws, but by actually not doing the things that the laws are designed to protect investors from. This means there will be no ICO, no premine, no VCs, no large token allocations to founders or any of the other shady tactics of all these semi-decentralised crypto projects.

Of course, we are aware that any project, no matter how decentralised, always has a highly centralised beginning (because it all starts with a thought in one person’s head). However, after a limited initial bootstrapping period, there will be no company, foundation or other legal entity to ensure the continuity of the system. This means that once launched, the project will rapidly move from its initial centralisation to a DAO-like structure, allowing it to organise and evolve completely autonomously, without the need for any sort of central authority.

We would consider the project a failure if we did not accomplish full decentralisation of the entire project (i.e. if one person or small number of people still had a significant influence on the system and its evolution beyond the initial bootstrapping phase).

More important than anything else we have addressed so far is the fair distribution of coins in any new money system. This is why we will dedicate a separate article to this vital aspect, in which we propose an entirely new distribution model.