Value Adoption and Network Effect

Traditionally, the value of a currency is derived from two sources: a reserve of another asset that serves to collateralize and buy back the currency; and, secondly, through intrinsic value as a medium of exchange and store of value. G$ coins are backed by a reserve system (the GoodReserve Smart Contract) thus allowing immediate liquidity and convertibility with the underlying assets, and are designed to gain value through user adoption.

We believe GoodDollar’s usage will gain acceptance according to the following theory of change:

  1. The requirement to claim G$ coins on a daily basis creates a natural filter to disincentivize those who perceive claiming G$ as not “worth the effort”. This means Claimers will be users who perceive G$ coins as “worth it.” We call this Proof of Need (see UBI Equilibrium and Proof of Need).

  2. Communities across the world suffer from “money scarcity”, or a hole in the money supply that leaves them without tools for collaboration and commerce. This can happen at a nation-state level where the fiat currency is unstable or untrusted, or on a local level, in recession-strapped neighbourhoods.

  3. In communities where there are limited tools for collaboration, there is a rapid adoption of new currency tools [36]. We believe that the Proof of Need filter will lead to geographic clusters of daily Claimers in these regions.

  4. Referral marketing strategies will encourage GoodDollar adoption to happen in community clusters. Eventually, as the adoption of G$ grows due to online and offline network effects, a critical mass will be reached. We believe that bottom-up, peer-to-peer marketplaces conducting commerce in G$ will emerge.

  5. As community purchasing power in G$ increases, local vendors and merchants will be pressured to adopt it in exchange for goods and services. As G$ is liquid from day one, we can envision it operating as a complementary currency alongside fiat currencies in these clusters. This will accelerate adoption and network effect.

  6. In turn, merchant acceptance of G$ will lead more people from the local and surrounding economies to buy/claim G$ and start accepting it as a medium of exchange.

[36] Lietaer, B., Dunne, J., Rethinking Money: How New Currencies Turn Scarcity into Prosperity, January 2013