Brain Dump #3 - Is $BANK Money?

Brain Dump #3 - $BANK is Money

:rotating_light::rotating_light::rotating_light: NOTE :rotating_light::rotating_light::rotating_light:
These views might be radical. I’m not even sure if I fully believe what I’m writing. But it’s an important conversation that we need to have.

  • Introduction
  • Is BANK Money?
    • Medium of Exchange
    • Unit of Measurement
    • Store of Value
  • Making BANK Money
  • Conclusion

Introduction

$BANK is money. This concept is fundamental to the evolution of BanklesDAO. I am starting to see the beginning of an economic engine that BanklessDAO will rely on to operate and generate content.

In my blog post (^ required reading), I framed a market where goods and services were exchanged using $BANK. Projects, initiatives, budgets, Guilds, and bounties all fit nicely into an operational cadence that relies on the supply and demand of skilled laborers.

For the market model to actually work, $BANK needs to function as money, these ephemeral units of value that swap hands. And because the social layer decides what is and what is not money, $BANK is money if we make it money.

Is $BANK Money?

The short answer is that it’s up to us. $BANK is money if we choose to make it money. But right now? No, it’s not.

There are three functions of money:

  1. Medium of Exchange :white_check_mark:
  2. Unit of Account :white_check_mark:
  3. Store of Value :x:

Medium of Exchange :white_check_mark:

The exchange of goods and services in markets is among the most universal activities of human life. To facilitate these exchanges, people settle on something that will serve as a medium of exchange—they select something to be money. - Source

Over the past couple of weeks, BanklessDAO has organically begun to use $BANK as a medium of exchange. For example - bounties. The idea of bounties has been floating around for some time. The concept is that work can be into small tasks and parceled off based on bidding price, denominated in BANK. Nothing particularly novel here.

For example, when I needed an editor for the two blog posts I had written, I issued bounties for 100 BANK. I paid both @nonsensetwice for the first article and @gno.thyself for the second.

Screenshot 2021-05-24 182525

Taking this further, these bounties are public for anyone to claim and receive payment for. Visualized, my two bounties would look like:

Along with the tip bot that @AboveAverageJoe integrated earlier today, I think we can agree that $BANK is a medium of exchange.

Unit of Account :white_check_mark:

Money serves as a unit of account, which is a consistent means of measuring the value of things. - Source

This logic for this is the same as with #Medium of Exchange

Store of Value :x:

The third function of money is to serve as a store of value, that is, an item that holds value over time. - Source

This is where things get interested. Interestingly enough, $BANK is not a store of value. Why would it be? If we’re exchanging BANK for goods and services, why not just use ETH or DAI? There’s nothing special about BANK. It can’t store value.

Could you imagine if we forced everyone that transacts with BanklessDAO to use BANK for no other reason than because we said so? We’d alienate everyone!!! No. Propping up value with arbitrary rules is just a ponzi scheme.

Right now, BANK is a governance token. It doesn’t even really have a price. Sure, it’s on Uniswap, but TVL under 50K USD? You can’t say anything meaningful about price with that type of liquidity.

Making $BANK Money

If we could make BANK a store of value, we would have a strong core at the center of our internal economy - Bank as Money. It would allow us to have an internal economy that accepts payment between projects, guilds, members, committees, and likely external parties as well.

To inject BANK with value, we need to create compelling mechanisms for people to want to hold BANK. Here are just a few possible methods that we can use:

These methods overlap well with @0x_Lucas 's forum post on how we should orient for each season:

Distribution

This can be used to fund public campaigns like writing and meme competitions, Rabbithole Quests and even more altruistic initiatives like funding public goods through Gitcoin. Generally the goal with distribution campaigns is to open up the doors for anyone to earn BANK via participation and become a key contributor.

Membership Perks

But beyond basic Discord access, the community can expand the benefits to really anything. Working on a new product and want to give members early access? Perfect. Have a coffee company and want to give discounts to members? Great!

Conclusion

The point I want to make here is that BANK can be money. Money is an emergent property and we are seeing its first buds in BanklessDAO. And, if we want to reinforce the market model we are seeing form with Guilds, BANK has to be considered money.

So how do we get there? Well, we start by continuing to use BANK for internal commerce

  • 100 BANK for a translated newsletter.
  • 100 BANK to edit my blog post
  • 500 BANK to design a podcast thumbnail image

At this stage, BANK is still valueless. No one will sell the BANK they’ve earned, because all of us believe it has future value. To anyone outside of BanklessDAO, we may as well be using 100 trillion Zimbabwe dollar notes.

As we progress along seasons, we’ll start to inject value along the way. We’ll introduce membership perks, seasonal subscription perks, dividend payouts, etc. And once we’ve created the infrastructure that will continually increase demand for BANK, then we can say, BANK is Money.

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The question of utility is a good one. There’s a lot we can do with it, but I think we’d need to let go of or expand the concept of it being just a governance token. That seems to be the general sentiment.

I’d be down to discuss where the collective wants to go with it

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I definitely think it is/can be a money. I have always loved the idea of incentivizing the different contributions and being paid out in $BANK.

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Money is an instrument people agree to focus attention on. Continue to focus. Continue to increase value/reputation.

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I’m glad you aren’t even sure you believe what you wrote. 2/3 A+ Great job!

1/3 $Bank is a store of value. $Bank is not milk it will no go bad and become worthless. Bank is backed by Ethereum’s security. This means it could have an infinite shelf life. The lack of liquidity or price being low doesn’t invalidate $Banks core value its just a way to roughly measure it.

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From my perspective - we should all want to make $BANK money, yes?

PROS-
-Increases value and utility of $BANK (of which we are all holders), and helps preserve that value
-Gives us more power as a DAO to do things, and to incentivize people to do things for us.

CONS
-??? (I’d love to hear what the cons are - I’m sure they exist, I Just cant think of them).

As to how we go about making $BANK into money. I’m not sure. Money is a collective delusion that the group buys into, so I think it really is as easy as all of us in the DAO deciding that it is money. It doesn’t work if only a number of us treat it that way, but if a critical mass of members start treating it as money, then it is money (even to the non-believers, who will satisfied enough to use it as such because they know the believers believe, if that makes sense.)

Also interested to hear feedback and debate on that.

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I agree that $BANK should be money and used as the internal currency within the DAO. If you want to purchase services from the DAO, it should be in $BANK.

Maybe we can even go so far as accepting $BANK in our stores (e.g., the merch shop).

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Great post and I like your opinions.
In my opinion, once $BANK is used as a reward, it becomes a utility and when the utility could be used to obtain other services then the token can be viewed as money.
The only major immediate problem of considering $BANK as money is the possible lack of use (in addition to governance), because in this case there would be a constant sale of the token on the market and a loss of value. to counter it, initially the creation of a small economy could be enough, in which each member of the community has the possibility to earn and spend the $BANK on services or products that may interest them.
Therefore, in addition to using them as incentives and rewards, giving the possibility to spend the $BANK internally (in the dao shop, in the nft factory, etc.) would allow to circulate the tokens within the community in order to direct them as little as possible towards the markets.
Furthermore, selling some goods and services of value exclusively in $BANK, could incentivize others to join the DAO to obtain these exclusive benefits.

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Consider that the utility of BANK in these early seasons is actually pretty dependent on the tokenomics. Rather than worry about making BANK an appreciating a store of value, my opinion is that the DAO should prioritize keeping the nominal USD price of participation somewhat stable in order to achieve critical mass and adoption of the DAO. This could be done by new issuance (or burning) of tokens or by changing the amount of BANK required to join (or both).

Let’s say a meme goes viral and the demand for BANK from new members spikes, exceeding the available UNI supply. In this case, the price will appreciate too fast and it will become very expensive to obtain the necessary BANK to participate. This would hamper growth and potentially cause a negative perception that Bankless is a scam or is gouging newer entrants to the DAO. I think this is a real risk in the early seasons.

On the flip side, if anything were to cause a significant number of members to exit the DAO and mass dumping of BANK occurs (for example, the end of this bull cycle or a significant game-changing regulation is put into effect), an opposite scenario occurs and the market is oversupplied with BANK tokens - everyone holding loses nominal value.

The amount of issuance and the participation requirement may need to be regularly adjusted or even algorithmically determined, since we don’t have good information on how fast the DAO will grow. It might also be nice to be insulated somewhat if there are shocks to the system.

To me the tokenomics should be loose and easy when the DAO is growing fast and get progressively tighter as the membership curve slows or drops. A constant minting schedule (perhaps through staking) could be one way to issue new tokens (airdrops to holders or minting new BANK to incentivize projects are others). If we are going to grow this thing to a billion unbanked, I believe we need to expect that the DAO will grow a lot and a large demand for BANK is coming.

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Really interesting topic, it may sound very early but it might be one of the core fundamentals for the success of the DAO.
In my opinion the idea that it can be money if we want it to be is only a first step. If DAO members don’t see it as money, no one will. So yes we must keep imagining ways to make it money (perks, exchanges of services) between ourselves. But we should not see it as a store of value too much for the moment, cause we need that energy, that dynamism of moneys in general, when a store of value is something you want to never spend.

A second step I would see is for Bank to become money in our interactions with the outside world, meaning we must make it so that if we want to work with a DAO (and they need to be compensated), they’ll be super happy to be paid in Bank. But also if an organization (whatever it is) wants to work with the DAO, for example sponsor a podcast series, have their brand on an NFT from the Bankless factory, or just some BtoB consulting, like they want to have a user research study on a bankless topic, they want to implement a defi strategy for their capital, they want to launch an nft project that makes sense etc… They should consider it normal to buy Bank to work with us, and maybe accumulate Bank in prevision of all the future collaboration, cause they’ll know they’ll need some to have us work on this article, this research, or that report. Just like some companies buy BAT in advance cause they know they’ll run ads on a long period on the Brave browser.

The third step will be to see Bank become a money for everyone, like the average investor who would see it as a way to get exposure to the crypto media industry, or to show support but with a more detached way (doesn’t necessarily want to know what’s the DAO, or even follow the DAO’s work on a regular basis and get any perks).
Bank could find its place in crypto indexes as an uncorrelated asset (eth & defi on one hand, bank on the other). Legacy portfolio managers who don’t get most tokenomics might see in Bank a more traditional kind of investment as a media vs a protocol. This buy pressure would let us use the treasury to fund work and projects that would make more people see Bank as a good money (those getting paid with it) and as a good investment (those who DCA into it).

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BANK is money when you are paying for services or goods with BANK as long as both parties agree with it, then BANK is money.

BANK is money because you can exchange it for other tokens in exchanges. We are just starting, give it some time.

I also agree that we should have a price list for common tasks/services so everyone knows what to pay in BANK and review it periodically to account for changing conditions.

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I love the post, and agree with the overall initiative as we need to drive the value and use of $BANK internally and in relationship to other tokens, DAO’s and platforms.

For that it has to be useful to us AND others.

So we need an internal economy(tip bot, bounties… interpersonal trade?) and on ramps for others to obtain and use $BANK, not just as a speculative investment.

My thoughts:
I think $BANK is money and also a store of value, as it has a valuation, both represented in terms of the amount people are willing to pay others for work done, and in relationship to other denominations (ETH, USD).

I think that this economic function is not inherent to ANY money, but something assigned to it socially. $BANK has had it assigned to by nature of being an ERC-20 token which is accepted and valued socially.

My perspective is that the economic function of storing value, is a relational function that is largely socially defined and in relationship to supply and demand. This is still quantifiable(best example is how much $BANK you can buy for $ETH), although not exact as disparities happen between those that value $BANK more or less.

I think we need to think about the DAO as a sovereign digital nation, with our own denomination that we need to use, as well as a startup company seeking to increase revenue(both on chain and off).

Economic post incoming.

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I like the ideas you propose here, if only for different options for us to work with $BANK.
That similar to the Federal Reserve, we have the capacity to burn and issue, which can influence the valuation of $BANK.

I don’t think we would want to manage the valuation of $BANK to $1 usd, although it’s a great point that we want to make sure that the ability to join the DAO is always available.

Maybe we issue a $sBANK, which would be a stable coin BanklessDao token, pegged to $1usd…

This may be a requirement(?), especially as we get involved in the defi ecosystem and if we create defi products or different financial instruments.

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./sits in the dissent chair

If I’m honest, I’m not a huge fan of the idea of $BANK becoming money. While I would personally stand to greatly benefit from it accumulating real value, I feel that a governance token that is also trying to be a capital asset token or ‘money’ token is operating at cross purposes to itself.

I think the issues mStable has had around its MTA token are the reason I’m wary of this development. For those not aware, mStable’s MTA is their governance token. You stake it in their gov contract, and you are issued vMTA, which decays over time based on how long you choose to lock it up. You vote with vMTA.

However, locking up the MTA is also used to ‘boost’ your earnings in their Save contract, and their feeder pools. You’re not rewarded in more of the underlying asset, but rather in more MTA.

So we have cross purposes: MTA’s value is continually driven downwards because of the issuance rate and lack of DeFi utility. This continued downward pressure on the price erodes the returns on locking it up for Save and LPing. This makes ‘investors’ in the MTA token unhappy, and they complain about it in the discord continuously.

On the governance side, the generous issuance is great, because it enables more ‘governors’ to partake in voting. The token is inexpensive, so it makes it easy to acquire a stake. All DAOs strive to have as broad a pool of active voters as they can. Were it a ‘pure’ gov token, I’d feel like MTA is ‘doing it right.’

Rolling this all up, I’m skeptical that turning $BANK the gov token into a capital asset is going to serve its underlying purposes. I feel like $BANK should have an internal set of DAO-specific uses. For capital asset, I’d prefer a separate token tailored to investors or hodlers, who have different motivations and requirements than the DAO members themselves.

Well, no. Really, I would prefer to just use ETH, because that’s what ETH is supposed to be for, right? I feel like the tripart thesis of ETH is best exemplified by Bankless DAO using it exactly how we pontificate it should be used.

Ξ.000002

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I like the idea of $BANK as a reward token. New projects could submit proposals to the treasury and receive a $BANK grant which can be used as bounties to complete jobs for the project.

Having it tied to a monetary value, i.e. advertising dividends, could lead to some unintended grey areas for taxes or future regulatory issues. Perhaps keeping it as a utility token that can be redeemed for some sweet, sweet swag / NFTs might be a good start. I’m thinking more along the lines of Pachinko winnings than actual money rewards.

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I agree that we shouldn’t manage the issuance to create a USD peg or stablecoin. There would certainly be regulatory risk associated with that schema. We could simply lower the required number of BANK as the price of the token appreciates in order to keep membership affordable. However, if we get a large influx of new members to the DAO, there is still a possibility that there won’t be enough to go around, especially if current members don’t want to sell or provide liquidity and reduce their voting power.
We want to be able to respond quickly if an adverse scenario does occur which causes the price of BANK to fluctuate out of the bounds of what the DAO considers acceptable. Making a proposal to change the amount of tokens floating about and/or changing the amount of BANK required to participate might be a contentious issue if put to a vote and would certainly require at least a few days to implement. Maybe that’s okay for now, but I still think it would be good to discuss the scenarios and at least have a plan of how we’d like to respond when an event does occur.

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This post really resonated with me. I think the MTA example is quite useful, and there are probably other gov token projects we can review and learn from to fine tune the tokenomics for BANK to best serve the DAO’s mission.

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@tomahawk, @trustindistrust.eth, and @tesa_daa I’d love to hear your thoughts on my ideas at:

I can think of a couple of cons that come to mind.

Firstly we should be mindful of the collective bias we all share, that BANK becoming money increases our wealth. While our primary goal is for masses to go bankless.

From a pragmatic scene, I can’t see the majority of tokens being money in the future crypto economy. Living in a banlkess society, it would be easier to just use DIA(any stable coin) for day to day transactions (medium of exchange) and eth as Ultra sound money (store of value). Having many moneys is not only inconvenient but also confusing for outsiders who we’d like to embrace the bankless life style.

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I’m catching up on all the conversation. I haven’t caught up to the Discord conversation, but that’s next.
Thanks everyone for commenting. All of your comments were a genuine pleasure to read!

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