Basic Principles

MONEY 2.0 is digital account money. Tabs for all accounts are kept centrally (typically on a computer), much like in traditional banking. There are no paper bills or coins.

MONEY 2.0 is a medium of exchange. Rather than being issued centrally (as is typical for bank money), MONEY 2.0 is created automatically when market participants trade goods or services. Unlike in the traditional money economy, the transaction is not taxed with the money utilization fee known as interest.

MONEY 2.0 can be implemented by the market participants (bottom-up approach) as a replacement for traditional bank money. Since MONEY 2.0 is accepted on a voluntary basis, it must be superior to traditional money in order to succeed.

MONEY 2.0 is convertible to traditional bank money – the exchange rate is determined by supply and demand.

 
Administration

The central administration verifies the identity of new members and makes sure everyone follows the rules. If necessary, the rules need to be enforced by law – membership is therefore restricted to anyone who can be taken to court. For transactions to non-members, participants can draw on guest accounts (without the right to issue money) or other mediums of exchange.

MONEY 2.0 needs to be sufficiently funded (via traditional bank money, if necessary). The central office levies fees from the participants to cover the costs of administration. To prevent bogus transactions, part of the fees needs to be collected on a per-transaction basis. Additionally, the administration levies a proportional balance fee to cover the costs of defaulted promises.

 
Money Creation

Although MONEY 2.0 is issued by different participants, all the money created is equal and not distinguishable.

Participants may only overdraw their accounts up to their money creation limits. Money creation limits are granted by the currency administration against proof of sales and income – they are equivalent to the value of goods and services that each participant can bring to the market in three months’ time.

Anyone issuing money is required to perform equivalent service and settle their account within three months. If participants don’t fulfill their obligations, the outstanding amount is eventually paid from the system account. The account holders then owe the outstanding amount to the central office, which can collect it like a regular unpaid bill (demand note, and ultimately legal action).

 
Savings and Loans

In MONEY 2.0, currency administration and credit business are entirely separate.

Participants who need more cash than they can issue have to borrow it from other participants. There are two options for arranging a loan – market participants can either bear the default risk themselves and lend their savings to potential borrowers directly, or a savings bank acts as an intermediary, paying flat interest rates to money-holders and keeping the difference to the actual lending rate as profit.