Tuesday, November 29, 2016

Going away with money and making a currency that counts to unity always.

Going to the beginning of the problem and taking a different way to solve it, instead of money and currency.


Note: Money Vs Currency

The difference is not money (gold and silver) has value, and currency doesn't have. Actually, they both don't have any value, as it doesn't serve our need. The real difference is we can't create money with time and effort.

To take the decision now, we need to understand the past and break the reproducible patterns that don't work in the past, to have a better future.

Require (something) because it is essential or very important rather than just desirable
Need is something that is required for us to thrive. Our actual needs are the concrete object like food, clothing, mobiles, computers, services like education, electricity, water, air and endless list.
Some of it like air and water, which doesn't require any exchange (we do sell purified water), as they are sufficient in amount and we get it least effort.

It is something that you wish/desire and it's not necessary for thriving of a species. It's about ignorance. Greed and ignorance make you misuse of resources, wasting resources, polluting the environment for pretty gains.

Need and greed may look similar, but they do the opposite thing. One helps you to thrive, other leads you to extinct.

Whether it's to fulfill your need  or greed, all requires time and effort (with exception to air and water, at least for now because we are going on polluting it). We need to work for it, to fulfill it, we need to spend time. But the problem is an individual can't do all the work to attain its need/greed. To make the system efficient, a different person take a different task, all working towards each other need/greed.

So here the term exchange comes into play. If person A is working to produce pulses, and person B is working to generate clothes. A can give some pulses to B and B can give some clothes to A, and the result is both of the need is taken care of.

But this exchange system has many problems. The most important problem is it's not portable, can't be stored easily and are not countable.

So here money: gold and silver coins came to play.
They are made of same sizes to make it count. They are fixed in numbers, as you can't produce it by using your time and effort.

Money became an interface of exchange. For example, person A doesn't require clothes, but person B requires pulses, so person B (who is producing clothes) can give some gold or silver coins instead of clothes to person A, and take pulses from A. As gold is storable and portable, person A can use it for buying other things later with other persons.

Because the total amount of gold in nature is limited, we got another problem. Our population was growing. We need an efficient way to distribute the money, which requires further division of gold coins. So finally  cheaper copper, nickel and paper notes were born. But the problem with it is, you can produce it by using your time and effort. We have the printing press that can make a nearly infinite number of notes. So, a number of paper notes or amount of digital money (which doesn't require any effort and time even to produce it) to be made available in the market remains in hand of govt of different countries. So all our economy comes down to faith or trust in government.

In an inter dependable economy within different countries, if any one country breaks the rule, the impact will be seen around the whole world.

The mechanism is well explained in the video.

If you increase the number of currency, the prices will rise as the resources or supply are limited. The price I mean, the amount of currency you need to exchange an object that has value. So increase the number of currency will lead to inflation, and a decrease in number will lead to deflation when the market starts sensing it.

Seven stages of Empire about wealth transfer.
The video also explains why gold always wins at last.

The videos also talk about credit cards, how currency is created when you make a loan.

So what's the solution?

Here are some of the ideas. No reasons why it won't be practical in the world of technology and internet.

We need a global market (may be a country to get started), with everyone having an account in it, where we can do real product exchanges. As you can see all the trouble started with unable to do concrete product exchanges directly. At that time, the interface was a portable money, here interface is the global platform (a website, API etc) where we can make direct product/services exchanges.

We already have the platform like amazon or Flipkart, snapdeal (as in the case of India), but these platforms still use money as an exchange.

So, what the currency here. Again the currency is a count. But the important thing is total amount is 1 or 100%, that never grows in the count. Even if you take a loan, total amount should be always one.

But the algorithm work is to divide the 1 into fractions and assign it to products and services.
Assignment of prices will be based upon demand, the supply of products and services and should be more equitable.

It will also make universal basic income possible.

This algorithm will be bit complicated and should be based upon local market and global market.

So, in order to assign prices to product and services (price discovery) and make the algorithm work we need to feed it with inputs variables of supply and demand.

Knowing the supply is easy, mostly a quantitative measurement.

But demand is complicated, because demand is what affect mostly to the prices, and also future of the supply. Leaving some basic demands, demand is most often based upon perception. It's a qualitative measurement.

To know the demand/perception, people should crowdfund some amount of money for the projects whose product or services are not available yet.

What about loans?
Here we require the help of the bank, that decides the reliability of the person. Same way it's done now.
Usually, people make a loan for buying expensive products or invest in businesses and bank gives them a loan and sometimes creates money(currency).
If it's a big loan, the idea should be big. So it can be done by crowdfunding.
For small loans, money can be given from deposits instead of creating more currency.
Sometimes bank can give a big loan, but it has to go the stringent criteria that it will create the necessary impact, such initial loans to telecom operators for installation of their equipment, till it becomes sustainable. Again it should only be given from bank deposits, not from tax.  Should be done by govt permission.

Only default amount can be kept for longer time. If more amount of money is present in the wallet it will go to the deposits and becomes unusable by the person. To get your money back you need to go the bank based upon the policy. It's also applicable to loan holders.

This keeps the all the money in usable form, without the need of creation of new money.

What about govt run projects? Should taxes be there?
Govt work is to make right policies and bring ideas that help the community as a whole. They can collect tax from us for govt run projects. But transfer they do to the service provider should be online.

Also, what about subsidies that help the expensive product to thrive initially till its cost go low (e.g. solar panel)?
It can be paid through taxes.

What about monthly salary govt/private sector give?
Basic free services like education, railways, roads can be paid by using taxes. The government should take only those services that are basic necessary.
A private company can pay the employees by the money of service users.

So, we have 4 kinds of money here, used for exchanges, deposits (savings), loans, taxes.

There is another problem, we need a reward and punishment mechanism for deposits and loans i.e. interest. If we don't reward for deposits, people will not come for it. If we don't punish for loans, everyone will go for it.

We need an optimization algorithm that disallows creating any money due to loans and deposits.
We have two kinds of deposits, short term and long term. Short term (term should be not more than six months) deposits shouldn't be used for giving loans. If time goes beyond six months, you lose the liability of anytime withdrawal. All large withdrawals, loans, and loan deposits should be done in cycles of time so that we have enough deposits in the vault. If you don't have deposits, don't give a loan. We can't make the withdrawals random.

A simple simulation for students to go through about loan and deposits https://github.com/amiyatulu/bank/blob/master/deposits_loan.py

Also, interest rates for deposits and loan can be different and should be based upon whether we want to increase or decrease the total deposits in the vault that is unusable. If total deposits become more, manipulate the interest rates, so that people make more loans. Keep the money circulating.

The ratio of deposits and loans must be more than one. Taxes should go directly to govt account, where money is distributed to employees and service provider. Taxes account and big loans  should come under auditablity all the time. Also, money can be stored for a longer time in tax account.

So, all these require a testing with simulations by proving real data inputs to understand how the market will work.

We already made API for currency. But it only requires API for all services and products, whether govt or private sector all should be integrated with the API similar to present e-commerce API. Money should be paid to the services they give as an individual and company (company again transfer money to individual for the services they give). Services do change with time, so data should be updated in it.

To make everything accountable, we need 4 core principles: responsibility, explainability, accuracy, auditability, and fairness.

All these can be achievable by this method as all data are available to us.

We have only ONE available for division, so divide it efficiently.

So what's the purpose of money/currency?

Its purpose was to "work" for serving each other need (not greed). But with time this "work" is getting done by automation through computers and factories. So, with time the purpose of money should also change, as we have not done it or if we will not do it, we are facing its consequences or also face its consequences in future. Because all money gets concentrated with people that run these factories and common people are left without any purchasing power.

Upgrading our skills/work to meet our current or future need is most important. So better policies and investment is required for it. We can't allow our education to remain same if our work that we need is changing or has changed.

Some of the questions I have is, how it will affect the prices of the usual commodity like food, electronics, and other essential things. We can't make it dynamic (at least it never grows) because it will impact the psychology of the people. As GDP or supply increases (again the count grows), the prices should come down, as the total count of currency is 1. If the demand and supply reach equilibrium the prices will be stable. And I find no reason why some will decrease the supply if all data of demand is available except in the case of calamity. In this way, we will get a predictable pattern, and always know what is happening to the demand and supply chain. But if we increase the count of money or sometimes demonetize it with respect to increased GDP or other factors without knowing how much money to increase, it becomes completely unpredictable for people to make a decision and they will always take bad decisions which will be chaotic for the nation. Trying to do a simulation with about 50 people to test the result and how it can be done in an efficient way.

Tuesday, November 22, 2016

Future of Money: Removing the negative impacts of money

Just got an idea, we have two types of money, one required for short time for doing an exchange and other for storage.
Name it: Exchange bitcoin and Storage bitcoin

A centralized server (bitcoin bank) to generate bitcoin money who will keep track of money.

Exchange bitcoins will come with an expiry date of one/two month. After bitcoins, are expired you have to reactivate your bitcoins from the centralized generator using your valid identity.

In this way, money will remain accountable, can't be misused by anyway and money also can't be concentrated.

Also, you can get bitcoins for storage (storage bitcoins), which can never be used to buy services or goods, you can get the storage bitcoins from bitcoin bank exchanging your exchange bitcoin. Storage bitcoins will be tagged with your identity, so you can't exchange it with anyone. Only you can exchange it through bitcoin bank to get exchange bitcoin.

Also no chance of hacking, freedom of p2p exchange. No problems at all.

What do you think about it?

Friday, November 18, 2016

How to make India cashless economy in limited time and solve cash crunch?

Some of the steps that need to be taken:

1) First, inform retailers and shops to use eMoney wallets such as SBI Buddy for taking payments. Also, people to pay with these wallets. It's the MOST IMPORTANT step.
Informing is not an easy step, it requires the support of media, all politicians, and volunteers .

Digital money transfer through IMPS also costs about Rs 24 per transaction. This has to be completely removed. Transfer costs should be same as that of payment gateways.

There is another problem: server load. Are our bank servers ready to make such a huge amount of transaction? How many transactions a bank server per minute can make?
I think it has the limited capacity now because transaction fails many of the time, also we don't get OTP.

So in order to solve the server issue we need to distribute the load among different apps. With a limited number of transactions possible per an hour.

A merchant should install all the apps together to get money, just like merchants who do mobile top-ups.

We have two types of apps one: Issued by banks and others are third- party apps such as paytm. All should be used.

People should do top ups on more than one different apps and pay the merchant accordingly. Also, guidelines and limitations for apps should be given. Like you can transfer up to Rs.25000 in a calendar month when you are using Paytm.

Tell people how easy it is to use these wallets. I checked the SBI Buddy, its super easy, just entering the mobile number and MMID or account number, IFSC code will do the job.

But some of the technical steps need to be taken before getting started, such are linking the account, passwords which can be done by the help of volunteers

But if the retailer is ready of accept money through eWallet, people will know it and make the payment through it.  SO THE FIX SHOULD BE STARTED FROM MERCHANT OR SHOPKEEPER SIDE.

Also if you are transacting more than Rs 100, and have smartphones, eWallet should be a must. Even for a small transaction. This will concentrate the small denomination notes towards the poor people who actually require it.

2) What about people who don't have smartphones?

Most retailers already have smartphones. There are some students who are not given smart mobile phones. Also, housewives who don't use smartphones. They are usually financially ok, so no need to subsidize them for phones. Information is enough for them, that retailers are accepting money through eWallet. Then they will find the way to buy phones and make the payment.

But the problem is with some very poor people.
One solution is to subsidize phones to the poor or bring an exchange offer or getting the phone through EMI.

If this policy is made, following problems arises:
a) How to identify those who don't have a phone?
b) Also, will phone get out of stock?

One method of identifying poor people is their bank account or income. But again it will create pressure on banks. It has to be done without the help of banks. Maybe BPL cards will do.

Will phone get out of stock? It can also require identification process, people who don't have actually smartphones.

In the first phase, people such as vegetable vendors, chai wallas etc. who sell products should be given smartphones.

Then in the second phase, it comes to the people who buy products, per family one smartphone should be allowed. It should be done by scarcity and demand in different phases.

3) Another problem is Internet package:
It can be solved by circumventing net neutrality. Traffic for using these apps must be free. It will not create a loss to the telecom operator, because, very small amount of data is used for the transaction, but it will benefit them, as they will get an immense number of internet subscriber due to more use of smart phones. Sometimes retailer can use more data, so daily limit may be kept for those who are using huge traffic through these apps.

These are the short-term measures that can be taken. In long run, further streamlining the process, such as improving the user experience of apps, upgrading servers and other problems that are faced by people can be done.

Thursday, November 17, 2016

Questioning beyond textbook exercises and making an own (alternative) hypothesis to explain. Is it allowed in our education system?

Hypothesis and Scientific Theory
Our education system problem: Teachers prepare questions and students answer it by learning  from explanation of the book. We don't teach our kids to question and also come up with their own hypothesis or explanation. In some generous schools, even though teacher encourages to question what student don't understand, but they are hesitant to encourage difficult questions that have no answers or questions that teacher doesn't know.

By this method, we are just stopping our kids to imagine or be creative.

So, let me go with the example, some very interesting questions that students asked in class.

1) Water and ghee, why does ghee floats in water?
According to the book, water is polar and ghee is nonpolar, so water repel out ghee and they get separated from each other. But why ghee floats in water? Water has the molecular weight of 18 g/mol, while ghee is a long chain hydrocarbon, its molecular weight is much larger than water.

Some of the hypothesis:
a) The density of ghee is less than water. But how? Check the molecular weight. Maybe spaces between hydrocarbon molecules are too large and water is too less because of hydrogen bonding.

b) Ghee floats in water due to buoyancy forces as a spoon of ghee can displace more amount of water than the weight of ghee.

But when a student asked this same question is school, the reply was "Itna pani main maat uchal"  : Don't jump so much in water. Don't remember the exact dialogue what teacher replied, but the teacher didn't answer it and also discouraged the student from questioning.

2) In case of osmosis, where does water flows

Some of the hypothesis:
a) Water flows from region of higher solute concentration to the region of  lower solute concentration because the region of higher solute concentration will be heavier as it contains the solute particle. (But when tested, the hypothesis is wrong. But the thing here is students are thinking, they are making their own logical hypothesis based on their previous experiences. Heavy objects push the lighter ones when kept one above other, so the student had thought this as explanation)
b) Water flows from region of higher concentration of water to region of lower concentration of water because of nature tendency to mix or entropy, but here another question arise:

3) Why there is nature tendency to mix? How will you explain it?

Maybe it's because of random pulling effect. When we add more water to a salt solution, the number of water molecules that pull the salt particles (ions) increases. So salt particles start getting distributed throughout the solution to form a homogenous mixture of lower concentration.

4) What will happen to the solubility if we add two solutes, e.g. sugar and salt in the water?

The book explains only about one solute, not about two. But if we add two solutes, the number of interactions increases i.e. interaction between sugar-water, salt-water, sugar-salt, salt-salt, water-water, sugar-sugar. The solubility of particular solute depends on strength of all these types of interaction now.

5) Why does freezing point decreases when we add a solute to the solvent?

As solute-solvent interaction is stronger than solute-solute and solvent-solvent in order to form a solution, some more energy is required to separate solute-solvent interactions. This reduces the freezing (melting) point.