Monetary Tools and Controls

The GoodDollar White Paper
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GoodDollar: A Distributed Basic Income
Overview
Background
The GoodDollar Basic Income Economy
Value Adoption and Network Effect
Monetary Tools and Controls
Smart Contracts
Distribution & Impact
Monetary Tools and Controls
To optimise 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, and will be determined by the GoodDAO (see Governance). We trust that these controls will be managed by the GoodDAO to optimise the performance of G$ and the GoodDollar basic income economy for all stakeholders. 
The monetary tools and controls are as follows:
Expansion Rate 
The leverage rate that represents the market capitalisation of G$ relative to supported cryptocurrency locked in the GoodReserve. It indicates the annual rate that the reserve ratio is reduced. For instance, if the expansion rate is set to 10% annually 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, by the end of year two - 0.81, and so on (Equation 3).
Transaction Fees 
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, the fee structure is designed so users that spend greater amounts of G$ will contribute marginally more to the collective pool, assuming those individuals have more real-world wealth. While initially the GoodDollar protocol fee will be set to zero, this may be changed as we foresee fees being used to fortify the ecosystem or potentially create more basic income to be distributed. This, however, will be determined by the GoodDAO once it has been established. Note that fees, if and when implemented, will not be used to fund the operational budget of the GoodDollar project or enrich the team in any way. 
Exit Contribution
For all Basic Income Claimers there is a percentage fee, called an exit contribution, for converting G$ into supported currency by selling G$ back to the reserve. The Claimer receives supported currency minus the cost of the penalty, encouraging circulation in G$ and creating a natural tension that reduces the tendency to “cash out.” 
Referrals Reward Program
To encourage adoption, GoodDollar users are incentivised to onboard more users into the economy. The referrals reward program is a smart contract that allocates a percentage of newly minted G$ coins to be distributed to reward users that invite other people to register. The value of this parameter will be decided by the GoodDAO.
Fixed Supply
GoodDollar will have a fixed supply of 2.2 trillion G$ coins. The amount was chosen in symbolic reference to the United States CARES Act that, in March 2020, approved a $2.2 trillion relief package for US citizens and businesses in response to economic fallout from the coronavirus pandemic [37]. G$ coins are 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 is a solution that 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 the value of $1,000 today. Therefore, if you had $100 in the 1950s, you would have been better off spending that money versus keeping it under the mattress for 70 years, as $100 in the 1950s had much greater purchasing power than today. Inflation is managed by central banks to increase circulation and decrease hoarding. In contrast, deflationary assets are those where purchasing power increases over time. Bitcoin, which has a fixed supply of 21 million, is a good example of this; if you owned one bitcoin 10 years ago and stored the private key under your bed, it would be worth multiples more today [38]. This creates a natural incentive for vendors to accept deflationary currencies for goods and services.
However, In order for G$ to serve practically as a currency suitable for commerce, it must function with relative price predictability. The monetary policy accounts for this. G$ is 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 as G$’s market capitalization grows and it is widely held and adopted by users will G$ minted no longer be fully collateralized by the reserve. This is the point at which price volatility may be introduced, but timed to a point of adoption where it will remain stable enough for commerce. The GoodReserve will accept a stable cryptocurrency to back the GoodReserve. This means that initially, G$’s price will move in direct correlation with the stable asset, which is predicted to be minimal. The decline rate of GoodDollars minted is modifiable and selected by the GoodDAO. To reduce volatility, the GoodDAO can elect to limit the reserve ratio. These tools are designed to create stability for the currency, therefore encouraging price predictability.
When the GoodReserve smart contract has minted all 2.2 trillion G$ coins, the daily pool of basic income to be distributed to Claimers will come from network fees as described above.

[37] TechCrunch, March 2020
[38] Investopedia, April 2020 
Value Adoption and Network Effect
Smart Contracts
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Contents
Expansion Rate
Transaction Fees
Exit Contribution
Referrals Reward Program
Fixed Supply