Abstract
The modern monetary systems encourage the competitive behavior which damages our environment. However, the Distributed Ledger Technology (DLT) has the potential to implement monetary systems with functionalities that encourage behaviors that benefit the environment. Therefore, the research question of this paper is: is the DLT the most efficient technology to implement a monetary rate based on entropy? Entropy is the most economical of all the physical laws of nature. Entropy reflects that energy and matter are degraded and dissipated, respectively, by their use and non-use due to the irreversible passage of time. An Entropic Monetary Rate could be considered like the Silvio Gesell´s Oxidation Rate, however, the first rate has a greater scope and a solid support based on the principles of physics. This theoretical research compares the scope of the implementation of an Entropy Monetary Rate through DLT, paper money and digital money. The main contribution of this work is to reflect the effectiveness of the DLT to apply an Entropic Monetary Rate with the purpose to replicate the natural functioning of the environment to the entire monetary system.
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Own translation.
Satoshi Nakamoto published the first specification of the Bitcoin currency protocol in the document "Bitcoin: A Peer-to-Peer Electronic Cash System", in an email list in October 2008, weeks after the Stabilization Act Emergency Economic System has rescued the United States financial system from collapse. In early 2009 he made the first transaction of the Bitcoin protocol (Catalini and Gans 2017).
The concept of crypto currency was first described by Wei Dai in 1998 under the name B-Money, on the cypherpunks email list. The original document is available in www.weidai.com/bmoney.txt. Wei Dai's proposal involved using cryptography, a branch of mathematics that allows mathematical tests to be created that provide high levels of security, to control monetary issuance and transactions rather than a centralized authority. Previously, Chaum (1983) had already advanced the idea of digital money set up using a trusted central server to avoid double spending.
For example, MIT created its own research center called "MIT Cryptoeconomics Lab". For more information you can visit its website on https://ce.mit.edu/.
Bitcoin is used in monetary practice as a means of payment, but it does not constitute a monetary system as it is not used as a unit of account. Once it succeeds, it can be a monetary system and incorporate the value reserve function (Blanc, 1998).
Catalini and Gans (2017) state that although the utopian vision of this technology estimates the elimination of intermediaries, they ensure that this will not be so, but that it will be more likely to change the nature of intermediation. Regarding Bitcoin, Catalini (2017) minimizes the degree of trust that parties must deposit with each other when making transactions.
Own translation.
This rate is also known as a circulation bonus or demurrage, which comes from the railway. In the past, if a client left a complete carriage without unloading inside their properties or in a tax deposit, they were charged a rate for the oversight of the wagon. The same is currently happening with container rental (Lietaer 2005). In Latin America, this is known as oxidizing money, oxidized currency or sealed money. Gesell does not specifically use these concepts in his work, but these expressions are often used by Spanish-speaking connoisseurs of Silvio Gesell's theory (Hirota, 2012).
Own translation.
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Georgescu-Roegen is the first economist to analyze the relationship of thermodynamics and especially entropy with the economy, hence it is one of the main benchmarks of the ecological economy. Georgescu-Roegen is respected to some extent by the Orthodox school, because he was a pupil and disciple of Schumpeter and considered by his friend and Nobel prize winner in economics, the Orthodox Paul Samuelson, as the erudite among the erudites, economist among the economists (Carpintero Redondo 1999).
Own translation.
In theory, to hack a Blockchain network it is necessary to possess 51% of the data processing power of the network.
There are two types of DLT depending on access: permissioned ledgers (restricted) or unpermissioned (without restriction). The DLT unpermissioned does not have a single owner or a central legal entity, therefore, any agent or entity may enter and perform any function. A system without permission works without legal rules, as its rules are defined in a programming code used for the entire network. In contrast, the permissioned DLT belongs to one or more owners and conducts restricted operations that agents or entities identified, so it is a limited consensus. Restricted systems are governed by legal instruments, for example by a contract between the network code owner and users. This makes its regulation more feasible by imposing legal obligations on its owners (Lehdonvirta and Ali 2016).
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Federico José Camargo is a PhD candidate in Economic Sciences from the National University of La Matanza (UNLAM), graduated from the Amartya Sen Program (UNLAM) and Public Accountant (UNLAM). His research areas are monetary systems, sustainable development and sustainability, ecological economics, Blockchain and Distributed Ledger Technology.
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Camargo, F.J. The effectiveness of distributed ledger technology to replicate the entropic behavior of nature. Evolut Inst Econ Rev 17, 361–378 (2020). https://doi.org/10.1007/s40844-020-00178-x
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DOI: https://doi.org/10.1007/s40844-020-00178-x