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. Therefore, transactions are not taxed with the money utilization fee known as interest.

MONEY 2.0 can be implemented by market participants (bottom-up approach) to be used instead of traditional bank money. Since there is no obligation to use it, MONEY 2.0 must be better than bank-issued money.

MONEY 2.0 can be converted to traditional bank money – the exchange rate is determined on the market.

 
Administration

An administrator verifies the identity of new members and makes sure everyone follows the rules. As the rules need to be enforcible by law, full membership is restricted to anyone who can be taken to court. Transactions to non-members can be processed via guest accounts (lacking the right to issue money) or other mediums of exchange.

To pay for the costs of administration, MONEY 2.0 needs to be sufficiently funded (via traditional bank money, if necessary). For this purpose, the central office levies fees from the participants. While collecting fees on a per-transaction basis also renders bogus transactions impossible, levying a proportional balance fee covers the costs of defaulted promises.

 
Money Creation

Even though MONEY 2.0 is issued by different participants, the money created is not distinguishable.

Money can be issued within the money creation limits granted by the currency administration. Money creation limits are equivalent to the value of goods and services that each participant can bring to the market in three months’ time. If participants fail to settle their accounts by performing equivalent service, the outstanding amount is eventually paid from the system account – the account holders then owe payment 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 strictly separated.

Participants who require more cash than they are allowed to issue can borrow it from other participants. To give a loan, market participants can either lend their savings to potential borrowers directly, or use a savings bank as an intermediary, which will pay them interest and keep the difference to the actual lending rate as profit.