financial

⚡️A Town on ₿itcoin

Imagining the massive benefits for a town economy ran on Bitcoin⚡️

Tuckedito

10 Feb 2023 • 15 min read

By: James

💬Table of Contents

👋🏻 Purpose

We want to leverage strong and thoughtful money to create thoughtful decisions to build a strong community. Along the way, we will educate individuals and businesses on the inclusivity of the Bitcoin network. We hope this leads them down a rabbit hole of learning that helps put thought back into decisions.

At the same time, we can extract value from all over the globe and inject it into the local community. We will do this using the natural interest rates of the lightning network. We will use Fedimint to cut out middlemen. This will incentivize businesses and customers to join the growing community tab.

My idea will be broken out into three sections.

💡 Idea
💸 Incentive
♻️ What We Can Change

My thought process was "how", "why", and "what", so I've listed the sections in that order instead of the traditional "what", "why", "how".

Why?

Since I started learning about Bitcoin it has always been the "how". I just wasn't sure of a way to apply it, until I heard about Fedimint. Being a small business owner and interested in the Strong Towns philosophy, I think often about the local community. Fedimint tied everything together so I knew it was the "how". Once that clicked, I start to think about "what" it could change. The "why" was already there because the "why" is always incentives. Fedimint has impeccable incentives since it is built on Bitcoin.

💭 Things to Think on

If you want some background on how we think about money, check this article. It states some core beliefs and could give some perspective for the rest of the article.

💡Idea

Here's a high level illustration of the idea. If this is not clear I am up to any suggestions and recreations. This article is just a first go of it, so there is plenty to improve upon. If anyone sees errors or inconsistencies, please point them out.

twitter or instagram DMs work

Idea Summary

🏘 Businesses

Change in a community should start with the small businesses within it. They are the most impacted by change, so they are likely to care about it the most. I believe the people making decisions on behalf of the community should have skin in the game.

I would like to see a town change for the better, by putting decisions in the hands of the small businesses. I believe those that hold the incentives to do better are the most likely to do better.

🤠 We can do it on Bitcoin!

We create a Fedimint federation where the small business owners are guardians. The federation is used to bring outside capital into the town, and keep inside capital within the town.

As the guardians they hold the keys to the funds in the federation and they are responsible for the hardware that runs the Fedimint nodes. The Fedimint nodes validate transactions within the federation. The guardians are incentivized to act honestly because the reputation of their business is on the line.

Along with the Fedimint nodes, the town will have a lightning gateway node. A trusted person or group will run this node. The purpose of this node it to facilitate transactions with parties outside of the federation. These parties are anyone using the lightning network, so they can be anywhere around the globe. Lightning enables fee-free global transactions without third parties or exchange rates to worry about, for anyone in the community who uses it.

🏦 Why a federation?

Businesses can be in control of the funds as they are the guardians. They are able to validate everything.
A Federation keeps holdings and spending private.
Possible on bitcoin but not with fiat.

👥 Customers

Next come the customers. The businesses are the first impacted by change, but the customers are not far behind. Customers are the network affect that the businesses need to start a self-reinforcing feedback loop (see graphic below).

We assume many customers of the local businesses are members of the community. Assuming that, they'd likely love to see it flourish. When customers hear that paying in lightning helps the town bolster it's infrastructure, they'd be more inclined to join the federation. Simply spending in Bitcoin would help start to build the network effect.

Here's another incentive for customers to spend. The businesses would offer a % savings for payments made via Fedi or lightning. This % savings could be equal to whatever the businesses are saving by not paying credit card fees.

Once the customers join the federation and start spending, what I'd like to call the "Open Tab Effect" begins.

The more customers join, the more businesses join the Federation & add discounts for lightning purchases, the more businesses in the federation means more discounts available, the more customers join. Both customers and businesses follow the incentives.

Why the "Open Tab Effect"? When customers are pegging into the federation they can use that fm-BTC anywhere that accepts it. It's like having an open tab everywhere. The more options for these ⚡️ discounts, the more likely a customer is to join. It's like a rewards program for an entire community.

By participating, the customer will provide lightning node liquidity to the gateway node that we spoke about earlier. Imagine they lock in .01btc/$229 (at current exchange rate) and get the equivalent fm-BTC to spend within the federation. Well now that can be used as liquidity until the customers spends all their fm-BTC.

What about businesses that are customers of other businesses? Well it could work both ways for them. If the local water company is accepting lightning, both local businesses and customers are likely their customers. The network effect for them is enormous. The businesses have now become customers within the network and can experience customer benefits as well. Less fees, no banks, instant settlement, quicker cash flows....there are many advantages.

Now what happens when the federation members start to notice the money in their pocket losing value in relation to that in the federation as Bitcoin proves itself to be the black hole that all global wealth gets sucked into...😉

💸 Incentive

All of these were mentioned above, but here they are written out cleanly. Incentives are key so we must be clear about what they are. Attractive and well-aligned incentives drive productive projects.

If the money isn't broken, the incentive structure isn't broken and we can build strong towns.

🏘 Businesses

Hold a hard asset and gain yield. Local business would pull capital from all around the world and make it available in the local community.
Infrastructure decisions for themselves. Business helps local community while, helping community in turn helps their own business.
No more money to credit card companies.
More spending due to the Open Tab Effect.
Federation makes it easy for community members to donate.
Less fees, no banks, instant settlement, quicker cash flows.

👥 Customers

% savings on lightning purchases.
Know a portion of their purchase will help build local community.
Convenience provided by the Open Tab Effect.
Diversify asset holdings.
Help people around the world by using a global network.

♻️ What We Can Change

Let's give a local community global benefits

Providing the opportunity to bring money and innovation from everywhere, into a local community, is an opportunity that a few inventions have enabled. The printing press, telegraph, telephone, and most recently the internet, made this possible. Each one made it easier than the previous. With this increased access to money and innovation came economic shifts.

I've heard many people say that these innovations shifted us into a "global economy". I understand where they're coming from, but I question the validity of the statement. I believe the commonly used phrase, "Money is the lifeblood of an economy" to be true. I speculate that most who speak about having a "global economy" also believe it to be true. My question to them is how can we have a global economy without a global money?

For something to truly be global..

Everyone needs to have the choice to use it. No matter who they are or where they are they should be able to use it.
Not only should they be able to use it, but it needs to be immutable. The same rules need to apply no matter who the user is, where they are, or when they are using it.

A mathematical function is global. Anyone can use it whenever they would like, and the rules and results are the same.

The currencies that we use to drive the global economy now are not global money. They are fiat money. They are forced upon some and exclude others. Either you have to use them, or you can't use them.

Yes, Bitcoin is the only global money. It is a global money because it's built on it's own monetary network. A network that anyone can access but no one can change. Please reflect on this statement and realize that no other money on earth offers these two simple features. If we want to have and maintain a global economy we need to choose Bitcoin because it is the only true choice we have. Bitcoin is a global money because it is a choice.

Choosing Bitcoin brings innovation to the money itself. Innovation on Bitcoin is happening all over the world all the time. Every innovation helps every user of the Bitcoin network. We can benefit from those people outside of our local community who are working on making our money smarter, faster, and more efficient. It has an inherently global network effect.

When the internet created the global economy of today, there was no money on earth that had inherently global features. (Physical gold has some global features, but is too slow to facilitate a global economy and not accessible for everyone). When Satoshi created Bitcoin, he invented the first global monetary choice.

Bitcoin brought the innovation of choice to our money. We now can have a global economy because we have a global money.

Let's make community economies circular

To develop a circular economy spending needs to be convenient. Large brands often win over local small business because of convenience and price (which they are able to provide due to their economies of scale). If we could cut out middlemen, maybe small businesses could compete.

The Open Tab Effect could create that convenience, while creating massive savings.

If we had a businesses like the local water and electric companies using the network, imagine the transactional savings. Both citizens and businesses need to pay these companies. They also need to pay each other. All monetary value is transferred between parties within the same network. No more 3% taken by a third party for every single transaction. No more mailing in bills or setting up your credit card for online payments. It could be as simple as a qr code sent to your account to approve the charge amount. We can cut out leeching credit card companies and put the savings back into the community.

Bitcoin mining would be the next step to enhancing this circular economy. Creating the money used in the community economy with the energy of that community. But, we won't follow Alice down that rabbit hole today.

Let's put thought back into decisions

No more decisions should be made in the dark. If we create a community of small businesses owners to consult for decisions, they will be more thoughtful. They will have their reputations on the line when making decisions for their town. Not to mention, the financial incentives to do what's economical.

I have seen firsthand that this needs working on. I am in a group with other local small business owners. We meet once a month and discuss what's going on. One of the members is on the council of a nearby township. At our meeting they brought up that the township was proposing to replace plastic bags with paper bags. This was going to happen at a township level. The reason for this action was "because it's better for the environment". When questioned about it, it was clear that this decision was made without any due diligence served. There was no understanding of the economic impact or any environmental research (other than we know this is true because it's just known). What struck me the most was the businesses affected by this weren't consulted.

To me, this is a decision made without much thought. In my mind I started to extrapolate and envision how often this happens all across the country. People making decisions that affect others, without having skin in the game themselves. I know it's hard to involve everyone, but it seems like something that can be worked on. More questions need to be asked.

Let's eliminate the Growth Ponzi Scheme

This concept comes from the Strong Towns organization. The basis of the idea is that, in America, we grow too fast. Towns approve projects because of attractive growth in the short term. The problem is, the cash flows over the life of the project don't pay for the initial investment.

Many projects are funded by outside investment, as a way to preserve their time and energy. Many towns in America are operating at a negative without realizing it because their time horizon is too short. This should be no surprise as the United States as a whole is doing this.

If we focus on thoughtful decisions and have honest money we can have sustainable growth. (By honest money I mean money that's not constantly devalued.) Sustainable growth is thrown around too often. Sometimes it's actual meaning is glossed over. I define it as growth that can be supported by the time & economic energy available. Money=Time+Energy, as we stated in our beliefs about money.

When the money is devalued our time and energy are devalued. This means saving becomes impossible. Because we cannot save, we must grow, with the hope (usually an unrealistic one) of creating something that will preserve the value of our time and energy. If we had money that couldn't be devalued, we'd be more conscientious of approving economically viable projects. The incentive driving this decision is that we could save and have more value in the future, knowing our money would preserve our time and energy. It is an option other than growth.

The adoption of honest money could work wonders in the future. Donations to Fedimint would attract capital from honest actors. Actors wanting to see real changes in the community not attracted to impossible yield. Down the line the savings from keeping money inside the community will equate to increased profitability. With that increased profitability, a town can be more selective with outside investment, choosing investments that create actual sustainable growth.

Let's increase adoption of a fair, trustless, global money.

“Bitcoin is for billions, not billionaires,” - Lyn Alden

Fedimint + local business is the best way to generate Bitcoin adoption. It's a ground up revolution. Local business owners are part of the community. When we spend money at small local businesses both the spender and receiver benefit. As a third layer solution Fedimint can scale Bitcoin to billions of users. If we have 100 users in a federation, every user can transact globally using one lightning channel.

As mentioned earlier, imagine this in unbanked communities. They are able to transact with each other within the community instantly. They also can transact with any other communities using Bitcoin (hopefully everyone at some point). They capture benefits from every other financially established country working on the Bitcoin network.

The world adopting Bitcoin as the global money would be a huge improvement for people everywhere. Fedimint and Lightning is the way to do this. Fix the money, fix the world.

🙏🏻Thanks for Reading

The next step will be to develop a plan to put this into action. There are many problems to solve and functionality to work out to get it there.

Along with that we will need a way to present that action plan to a community. I figure if a presentation template can be made and open-sourced then people can pitch it more easily in their community.

If your interesting it helping, let us know twitter or instagram DMs work.

If you're interested in learning more about Bitcoin, Lightning, or Fedimint, I've listed some educational content below.