Monetary Tools and Controls

The GoodDollar White Paper
Gooddollar.org
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GoodDollar: A Distributed Basic Income
Overview
Introduction
The GoodDollar Basic Income Economy
Value Adoption and Network Effect
Monetary Tools and Controls
Smart Contract Architecture
Distribution & Impact
Monetary Tools and Controls
To optimize the utility and impact of the GoodDollar basic income economy, there are a set of monetary tools to manage and modify the protocol. These tools are designed to create a monetary policy that rewards all G$ holders -- a system entirely under the stewardship of the GoodDAO (see Governance). We trust that these controls will be managed by the GoodDAO to optimize the performance of G$ and the GoodDollar impact economy for all stakeholders.
The monetary tools and controls are as follows:
Expansion Rate 
This is the leverage rate that determines the market capitalization of G$ relative to the supported cryptocurrency locked in the GoodDollar Reserve. It indicates the annual rate by which the reserve ratio is reduced. For instance, if the expansion rate is set to 10% and the year begins with a reserve ratio of 1, then by the end of the first year, the reserve ratio would be 0.9, 0.81 by the end of year two, and so on (Equation 3).
Conversion
This is the process that enables users to exchange G$ for CDAI and vice versa. Since the GoodDollar Reserve is essentially an automated market maker (AMM) that works on a bonding curve, the amount of G$ minted or burned depends upon how much collateral is added or removed from the reserve. When user buys G$s, the tokens are minted, when they sell, the tokens are burned. Users who buy G$ receive a matching number of G$X tokens as a reward for their purchases, which can be used to reduce their exit contributions when they choose to sell G$ (see below).
Transaction Fees 
The GoodDollar protocol includes a fee structure designed to charge a percentage of the transaction sum on peer-to-peer transactions. Unlike other tokens that enforce flat-rate transaction fees, GoodDollar fees are structured in such a way that users who spend greater amounts of G$ will contribute marginally more to the collective pool, based on the assumption that such individuals have more real-world wealth. While initially the GoodDollar protocol fee will be set to zero, this may be subject to change in future, as we foresee fees being used to fortify the ecosystem or potentially create more basic income for distribution. Any such changes will be determined by the GoodDAO. It is important to note that fees, if and when implemented, will not be used to fund the operational budget of the GoodDollar project or to enrich the team in any way.
Exit Contribution
This is a fee charged to any member of the GoodDollar ecosystem who converts G$ into supported currency by selling G$ back to the GoodDollar Reserve. The seller receives supported currency minus the cost of the penalty, encouraging circulation in G$ and creating a natural tension that reduces the incentive to cash out.
Marketing Referral
To encourage adoption, GoodDollar users are incentivized to onboard more users into the economy. The marketing referral tool is a smart contract that allocates a percentage of newly minted G$ coins to reward users who invite other people to register. The value of this parameter will be decided by the GoodDAO.
Max Supply
GoodDollar will have a max supply of 2.2 trillion G$. This amount was chosen in symbolic reference to the United States Coronavirus Aid, Relief, and Economic Security (CARES) Act that, in March, resulted in a US$2.2 trillion package designed to offer relief for U.S. citizens and businesses from the economic fallout of the coronavirus pandemic [35]. G$ is designed to expand commerce users and, as previously discussed, be widely adopted in key pockets over time. There are several reasons why we believe fixed supply will support GoodDollar’s adoption.
Inflation refers to the decrease in the purchasing power of a currency over time. For example, the purchasing power of US$100 in the 1950s is estimated to be equal to that of US$1,000 today. Therefore, if you had US$100 in the 1950s, you would have been better off spending that money rather than keeping it under the mattress for 70 years, given its gradual loss of purchasing power. Central banks manage interest rates with an eye to maintaining an optimal level of inflation: one that is neither too fast nor too slow. In periods of declining prices -- or deflation -- purchasing power increases over time. Bitcoin, which has a fixed supply of 21 million, is a good example of this; if you owned one bitcoin 10 years ago and stored the private key under your bed, it would be worth multiples of its original value today [36]. This creates a natural incentive for vendors to accept deflationary currencies for goods and services.
However, In order for G$ to serve practically as a coin for commerce in countries all over the world, it must function with relative price predictability. The monetary policy of the GoodDollar impact economy is designed to take this into account. G$ was initiated as fully collateralized by another currency (with a Reserve Ratio of 1). The currency begins at the highest liquidity level, where for every G$ issued, there is a supported crypto asset backing it in the reserve. Only when G$’s market capitalization grows and it has become widely held and adopted by users will the G$ minted no longer be fully collateralized by the reserve. At this point, price volatility may be introduced, but timed to a point of adoption where it will remain stable enough for commerce. The GoodDollar Reserve will only accept a stable cryptocurrency as collateral. This means that initially the price movements of G$ will mirror those of the stable asset, which are predicted to be minimal. The decline rate of minted G$s is modifiable and will be controlled by the GoodDAO. To reduce volatility, the GoodDAO can elect to limit the reserve ratio. These tools are designed to promote stability in the currency, thereby increasing price predictability.
When the GoodDollar Reserve smart contract has minted all 2.2 trillion G$s, the daily pool of basic income to be distributed to those making claims will come from network fees as described above.

[35] TechCrunch, March 2020
[36] Investopedia, April 2020
Value Adoption and Network Effect
Smart Contract Architecture
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