Ecosystem Stability Mechanism
No crypto or fiat economy is sustainable unless specific mechanisms are engineered into their architectural DNA to create gradual resistance against transnational economic cannibals, socioeconomically destructive weaponized wealth concentration and ecosystem-killing market manipulation. For these reasons, one of the most important components of the Gini architecture is Gini’s automated Ecosystem Stability Mechanism (ESM). The ESM performs the following critical functions:
- Value Streams. The ESM’s Value Streams System ensures that all ecosystem participants are rewarded for their valuable contributions to the Gini ecosystem.
- Dynamic Transaction Fee System. The ESM ensures that all transaction fees are automatically reduced as the Gini currency value appreciates against other major fiat currencies. This ensures that stakeholders are not penalized for using Gini in real-world commerce just because their Gini currency appreciates. (Note: Transaction fees on the Gini Network are much lower than other major cryptocurrencies. The fees exist primarily to prevent malicious attacks on the network and to ensure ecosystem sustainability. See: Why are there transaction fees?)
- Treasury Funding. The ESM provides the minimum level of Gini funds to the publicly auditable Gini Treasury. This ensures that the nonprofit Gini Foundation is always solvent and sufficiently staffed to manage the Gini Network and effectively build new features that are requested by the Gini Community. The Treasury is also the primary funding source for the Gini Community Pool, as described on the Value Streams page.
- Gini Index Sentry. The ESM’s Gini Index Sentry monitors the Gini Index of the Gini ecosystem and automatically and gradually creates structural resistance against high concentrations of Gini wealth to prevent any whale or cartel of whales from dominating the Gini ecosystem. (More on this below.)
- Market Exchange Sentry. This automated sentry monitors the decentralized Gini Market Exchange, watches for malicious and/or abusive market behavior, and anonymously throttles the transaction speed of Gini accounts that engage in such behavior, which protects the market from harm.
Now, let’s discuss specifically how and why the ESM performs the functions summarized above.
Value Streams. Like the Bitcoin Network and all other serious cryptocurrencies and banks in the fiat world, the Gini Network must charge some kind of transaction fee to prevent malicious attacks and to be economically sustainable. However, unlike other cryptocurrencies and the fiat banking system, instead of distributing the fees to only a tiny number of Bitcoin miners or the largest shareholders of gigantic banks and corporations, Gini’s ESM distributes the fees more equitably throughout the Gini ecosystem. (What is "equity"?)
Given the indisputable fact that a sustainable community must exist to create sustainable value in any ecosystem, the Value Streams System is the most equitable, sustainable, and rational way to manage a money supply. (The concept of community-driven value is explored in much deeper detail in the Gini book.) Thus, the ESM executes all the Value Streams functions, which automatically, equitably and sustainably distribute wealth and purchasing power throughout the ecosystem according to the Value Streams parameters described on the Value Streams page and Gini's sustainable monetary system principles.
Gini Index Sentry. Recall the Gini Index is the gold standard in Economics, which is used by the IMF, World Bank, many NGOs, and virtually all governments worldwide to measure the concentration of wealth within each country’s population. The Gini Index enables us to measure the concentration of wealth in the Gini ecosystem, too, but we do something more useful with it: Enforce money supply best practices by ensuring that our ecosystem’s Gini Index never exceeds 25% for too long.
To accomplish this, whenever the Gini Index Sentry detects that the Gini ecosystem has exceeded the 25% threshold, it automatically triggers a very gradual Ecosystem Stability Fee (ESF) on any Gini account that is in the top-1% of Gini currency holders. This ESF is charged on a daily basis at 0.0274% per day. The ESF continues to be automatically and gradually collected from the top-1% of all Gini accounts until the Gini Index falls below 25% again.
Is the Ecosystem Stability Fee a Wealth Tax? No, it’s an ecosystem stability fee, which is a form of community-funded protection against the kind of malicious and reckless whales who have destabilized and destroyed many fiat and crypto economies and nations throughout the history of capitalism. If any Gini stakeholder accumulates such a large Gini fortune that they push the Gini Index above 25%, that means they have become a systemic risk to the entire ecosystem. Thus, the top-1% of Gini stakeholders have a shared responsibility to contribute the daily 0.0274% ESF to protect the ecosystem from potential instability and harm until the Gini Index falls back below 25%.
The ESF Codifies, Systematizes, and Enforces Ecosystem Stability and Cooperation. The tiny ESF reduces the incentive for whales in the Gini Community to act selfishly. It also helps to reduce the risk of all other stakeholders suddenly losing their purchasing power due to a few disruptive whales thrashing around the Gini ecosystem. These systemic features also serve as gentle reminders about Gini's purpose: Protecting human rights; sustainable and equitable wealth creation and distribution; and maximizing the broad-based, wealth-generating potential of real-world commerce. The ESF is a rational, economically viable, and justifiable trade-off that helps to achieve those goals, which are essential to ensure the long-run viability of any socioeconomic ecosystem.
Will the ESF Scare Away Some Whales? Possibly, but the foundation of every stable economy is a strong middle class, not whales. The ESF is a tiny and temporary fee that does not significantly impact the fortune or quality of life of any whale, but the ESF is just enough to incentivize Gini whales to behave responsibly or find another crypto home. Anybody who is rich enough to be a whale can invest their wealth anywhere they want, but if they want to participate in the Gini ecosystem, they need to respect our unique commitment to creating the most stable, equitable, and sustainable crypto economy that protects human rights and maximizes the broad wealth-generating potential of real-world commerce. The trade-off for these benefits is some restrictions on whales. We welcome whales and minnows alike, but we understand Gini may not appeal to all whales. That’s OK.
Market Exchange Sentry. The Market Exchange Sentry monitors and prevents abuses in the decentralized Gini Exchange. This topic is discussed in more detail on the Gini Decentralized Exchange page.
Where Do the ESF Funds Go? The ESF funds are automatically deposited into the publicly auditable Gini Treasury account on a daily basis until the Gini Index falls back below 25%. Like all Gini Treasury funds, the ESF funds are used to recycle wealth and purchasing power back into the ecosystem and to subsidize the nonprofit Gini Foundation's ongoing operations, which are necessary to build and support the features and systems requested by the Gini Community. Unlike the secret and opaque accounts of most public and private organizations on Earth today, all Gini Treasury fund balances will be published publicly on the GiniFoundation.org website after the Gini Treasury is fully activated.
To understand how the ESM is enforced on the Gini Network, let’s first review how cryptocurrency accounts and their corresponding payment addresses are created in all modern cryptocurrencies today.
Hierarchical Deterministic (HD) Wallets/Accounts. Like any modern cryptocurrency wallet software, the Gini Account Center software (and the upcoming PC-based version) enables Gini stakeholders to generate any number of addresses to use in their payment transactions; and all those addresses are child addresses of each wallet/account’s master public key. This functionality is well-established by the BIP32 protocol. (Here’s the simple summary and a more detailed official BIP32 technical spec.) Thus, a single Gini account can generate an unlimited number of payment addresses with BIP32.
Important Questions About Enforcing the ESM. At this point, some technically savvy people might be asking themselves: How do we effectively enforce the Gini Index and ESM features? How do we hold abusive market players accountable for their actions in the decentralized exchange? How do we create and enforce all these ecosystem stability and accountability features? Good questions . . . and we have developed some good solutions.
The Anarchic Status Quo. Today, virtually all cryptocurrencies are designed to allow anybody to create an unlimited number of anonymous cryptocurrency accounts to bypass any kind of accountability. Based on our polling and lots of anecdotal evidence, the crypto anarchy that exists today is ridiculous from the perspective of the vast majority of humans on Earth who simply want a secure, stable, and mature ecosystem to use their cryptocurrency in real-world commerce. But the puritanical ideology of the dominant cryptocurrency projects today has driven the crypto markets toward anarchy for the past 10 years. In many cases, this anarchy has spawned innovative projects, but it’s also one of the biggest reasons why all cryptocurrency markets today suffer from so much dysfunction and manipulation.
Transcending the Anarchic Status Quo. If Gini blindly followed the status quo, the ESM would be impossible to implement because any Gini whale could simply create 1,000 new accounts and split up their Gini funds across all their accounts to bypass the ESM features. This is why we have developed a unique cryptocurrency account management system that guarantees privacy and anonymity while also enabling the ESM to anonymously hold stakeholders accountable when they engage in abusive market behavior. The Gini system uses the well-established BIP32 protocol for HD account creation and unlimited payment address functionality, but we use cryptographic zero-knowledge proofs to anonymously attach each stakeholder to a limited number of accounts so they can’t bypass the ESM features. (The precise number of accounts allowed will be based on community feedback and decentralized governance.)
Nobody Needs an Infinite Number of Bank or Crypto Accounts. We know it feels good to have no accountability to anything or anybody, but the vast majority of humans just want a simple, stable, and secure crypto alternative to the toxic and unsustainable fiat banking system. They don't feel any intense impulse to create dozens of crypto wallet accounts to play shell games with their cryptocurrencies. In fact, nobody needs an infinite number of cryptocurrency accounts just like nobody needs an infinite number of bank accounts. All humanity needs is a simple, stable and secure way to buy/sell crypto and spend it at merchants that will accept it in real-world commerce. The crypto anarchy that exists today is not necessary to liberate humanity from the toxic banking cartel, it’s not necessary to protect privacy and human rights, and it’s not necessary for any aspect of real-world commerce.
How Exactly Do Zero-Knowledge Proofs Work? With zero-knowledge proofs and the BIP32 protocol, the Gini account management software creates an HD account (aka HD wallet) for each stakeholder, which enables each stakeholder to generate unlimited payment addresses for a limited number of accounts. Each of these accounts is attached to a piece of verifiably unique information that anonymously confirms the stakeholder’s unique humanness without actually disclosing their identity to the Gini Foundation or anybody else. The unique sample is digitally hashed (encrypted), which is a unique mathematical output that anonymously represents a unique stakeholder on the Gini network without disclosing any of their private information to the Gini Foundation. Zero-knowledge proofs might seem like magic, but they are a well-established cryptographic tool that intelligence agencies and governments have used in top-secret environments to protect the privacy of secret agents for nearly two decades.
Humanity Can be Liberated Only by Transcending the Status Quo. Limiting the number of accounts that stakeholders can create based on zero-knowledge proofs is the only realistic way to simultaneously create truly private cryptocurrency accounts, automatically enforce the ESM features, and automatically hold abusive stakeholders accountable for their actions within the ecosystem. This unique combination of features is essential to liberate humanity from the toxic banking cartel, create broad-based and sustainable wealth, and to protect transaction privacy in real-world commerce.
We have received several questions about the ESM, but they all basically boil down to these questions:
Why do I need to provide my phone number? Isn't there some other way to verify that I'm a unique human? How do I know my phone number will not be linked to my Gini wallet?
Gini is Serious About Privacy. Before we answer the questions above, it's important to understand how serious Gini is about privacy. An entire chapter of the Gini book is dedicated to the crucial importance of privacy and how no other human rights can be protected without the human right to privacy. There's a vivid segment of our Gini Documentary video about the importance of privacy. There's the GiniVerify Service we're building to create a more private ecosystem. And we've published other technical concerns about the inadequate privacy of Bitcoin and other cryptocurrencies today. So, we are as committed to creating a truly private cryptocurrency as any of the privacy fanatics in the crypto world today. However . . .
Privacy Alone is Not Enough. Privacy is useless if you live in an anarchic hell-hole full of corporate tyranny and political despotism caused by the hyper-concentration of wealth and perpetually destabilizing currency manipulators who destroy the integrity of your political and economic systems. It should be clear that privacy is not the only thing that matters in life.
Privacy is Not All-or-Nothing. We are building the Gini platform and the privacy features in phases because nobody can build all these things overnight. The technology that makes private cryptocurrencies possible is continuously evolving and we will adopt the best privacy technologies as they emerge, in addition to our own innovations. Thus, we are committed to building the most private cryptocurrency possible, but privacy must always be balanced with the goal of creating systemic integrity, stability and sustainability.
We are not linking anybody's personally identifiable information to their cryptocurrency wallets. The purpose of the ESM's human verification process is to verify a person's unique humanity, not their unique identity. Your identity and your humanity are totally different things. To accomplish the goals of the ESM, Gini's automated Human Verification System only needs to verify that you are a unique human.
Why Use Phone Numbers? Currently, for various technical reasons, a hashed phone number (e.g.: 555-555-5555 => c6d93dd6a266f33038af03534ab8192f) is the best way for the Gini system to automatically verify a person's unique humanity, which is why we are starting with this approach. Only the hash is stored and compared with other hashes, not the phone number. Highly respected tools like the encrypted Signal instant messaging app (recommended by Ed Snowden) use phone numbers for similar reasons. However, Gini and other privacy-focused projects are also working on privacy-protecting decentralized ID systems based on Zero-Knowledge Proofs (ZKPs), which are built with homomorphic encryption. ZKP-based systems will eliminate the need for phone number hash verification.
Hashing phone numbers, passwords, credit card numbers, and other information is a well-established practice to preserve privacy and anonymity. If a hash is unintelligible and impossible to reverse-engineer within the lifespan of the universe, then we are not linking personally identifiable information to any Gini stakeholder's wallet. We are simply creating a mathematical link between a person's unique humanity (in the form of a unique hash) and their cryptocurrency wallet, but there is absolutely no realistic way to reverse-engineer that link to discover the person's actual identity. If that was possible, then the entire Internet and virtually all major electronic security systems would collapse because they're all dependent upon unbreakable hashes.
The short-sighted impulse for immediate perfection is the enemy of progress, both for Gini and for humanity in general. We understand that some people don't want to allow their phone numbers to be used in any kind of automated human verification process, even if the phone numbers are hashed and completely anonymous. However, hashed phone numbers are the most practical way for us to launch the Gini Platform, protect our stakeholder's privacy, start building a truly egalitarian and sustainable ecosystem, and start raising broader awareness of the unique principles that guide Gini's long-term development. As soon as another reliable way exists to verify a stakeholder's humanity without phone numbers, we will adopt it and the Gini system will no longer need phone numbers.
Every Journey Must Start Somewhere. We have built a strong foundation and we have a clear path forward. We hope you will join us on this important journey.
Gini is doing important work that no other organization is willing or able to do. Please support us by joining the Gini Newsletter below to be alerted about important Gini news and events and follow Gini on Twitter.