Grok liquidity

How the participants can create sufficient Groks

Since anyone in the region can open a market account (ReeComm membership is not a requirement), and offer goods and services on the marketplace, we must ensure sufficient Grok liquidity to adequately facilitate transactions. For example: Alice would cut Bobs hair, Bob would repair Cindys bike, and Cindy would sell Alice her used stereo – but none of this happens if none of them have previously acquired a Grok creation facility.

Such scenarios would be the "price" if the means for bringing Groks into existence were too restrictive; yet if they are too lax, the system may be abused and come into disrepute. In order to satisfy both requirements we have conceived a number of possibilities to provide sufficient liquidity if and as need be, none of which compromise the principle of having to put something in before you can get something out:

1. Providing a creation facility for deposited certificates of joint-ownership.
2. Allowing trade of national currency for Grok creation rights of the corresponding amount.
3. Allowing other financing mechanisms or items of value, e.g. Coop Shares, to be deposited (or accepted without deposit) for a creation facility.
4. Providing a creation facility in recognition of work performed for the ReeComm (but in total perhaps not more than the difference between total ReeComm value and deposited certificates of joint-ownership).
5. Allowing the optional formation of small groups within the market community – affinity groups – whose members mutually guarantee each others creation facility. This principle is also known as co-responsibility.
6. Providing a creation facility for a deposited silent partnership (assuming the ReeComm is open for dormant equity holdings). Note that silent partnerships may be of a volume way beyond sensible limits on creation facilities, in which case an individual agreement between the ReeComm and the investor should provide a mutually satisfying solution, e.g. provision of nursing and health care in old age.

Creation facilities

In conventional terms a creation facility is simply a credit facility. So now you sort of know what we mean – except that conventional terms do not apply here, because this is not a conventional system. Conventionally, if an account has a negative balance it is "in the red" or "in debt", which is an unpleasant association. In contrast, when a Grok account has a negative balance it means that a member who has already earned that right, by giving something of value to the ReeComm, has now provided another member with Groks in return for their goods or services.

Only members who deposit securities get a creation facility, and Groks even then only come into actual circulation when such a member performs a purchase. The deposited security – which by definition must be present since no Grok creation facility is allotted without one – will ultimately be called on if a member with a creation (negative) balance cannot or will not bring their balance to zero (in order to close the account). A creation facility based on Coop Shares will prove an exception to this rule if national law forbids them being deposited.

We will illustrate this principle by going into detail on four possible yet very different types of security:

a) Joint-ownership certificates

The owner of a trade account can get a creation facility for her account by depositing joint-ownership certificates of the CPO as security. For each certificate deposited, her creation facility is extended by 1000 Groks. Certificates which have only been partly paid for cannot be deposited.

It is possible to act as guarantor for another participant. In this case, the guaranteeing participant deposits joint-ownership certificates of her own for the trade account of the other participant. This procedure does not require any vetting or approval, it is decided solely by the two participants.

The depositing of the joint-ownership certificates for the trade account is noted in the certificate register of the CPO. The certificates are barred from sale for the duration of the depositing.

A note of caution: Your national law may possibly prohibit value papers from being denoted in anything other than national currency. If that is so and you wind up with joint-ownership certificates denoted in pounds or dollars then do be aware that the intention of the concept to provide a stable value for these certificates could not be met – and the long term of them will almost certainly mean a large loss in real value due to inflation. So in that case you may want to incorporate an "inflation buffer" into the amount of Grok creation facility which you accord for them, e.g. 800 rather than 1000 Groks.

b) Creation rights

A member may trade national currency for Grok creation rights of the corresponding amount. The rights then translate to an actual creation facility – but keeping "rights" and "facility" as two separate ideas allows rights to be sold or bequeathed [in part] to another member, implying a corresponding transfer of [that much of] the creation facility.

Note that while creation rights, once existing, can be sold for Groks or national currency, they can only be created via trade for national currency – otherwise participants could simply convert their earned Groks into rights and thus avoid the circulation safeguard fee, allowing Groks to be misused for storing value.

Two notes of caution:

• The amount of rights sold by a ReeComm should be limited to its capability to invest the influx of national currency.
• You should be legally safe if you trade a non-transferable creation facility for national currency. Yet if you adopt the scheme of transferable rights converting to an actual creation facility, as outlined above, then you have created an assignable value paper and as such may fall under your national regulations for such financing instruments. Therefore, please get good legal advice and consult the pertinent authorities to ensure that you don't run foul of the law!

c) Activity Points

The activity point system has been suggested as a method of deferred payment for work performed by initiators and staff during the start-up phase of the ReeComm (and conditional on the success of the ReeComm). As a creation security, Points would be transferred to a reserved personal account of the member, and their Grok creation facility increased by the same amount (assuming Points are par in value with Groks).

d) Affinity Groups

The option of affinity groups provides a mechanism which is oriented towards a future commitment rather than to past earnings.

An affinity group is a small group of members within the market community, who mutually guarantee each others creation facility, e.g. with 50 Groks per person. For a group of seven members each would then get a creation facility of (7 - 1) x 50 = 300 Groks. If a group member defaults then the debt is apportioned equally to the other group members accounts.

Affinity group formation should be completely optional and left to private initiative of the members, who would have to present a form signed by all members to the organisation team in order to have their creation facilities extended. Further details can be left to each ReeComm – but we do recommend that you consider these points:

• If a group member leaves the market community, e.g. moves out of the region, how should this be handled? Must the creation facility for the remaining members be reduced? Should the member opting out nominate a replacement member? Should a positive balance be distributed to the remaining members?
• Should individual group members be able to opt out unilaterally, provided that no other members have currently used more of their creation facility than would be covered by the guarantees of the remaining members?
• Should a group be allowed to subsequently take on new members and thus further extend the credit limit of each member?
• Should one person be allowed to be a member of more than one affinity group? If so, should there be a limit in terms of affinity groups or total Grok obligations?
• At what point can a member be adjudged to have defaulted on a debt – and by whom?
• What support and advice does the community want to offer members on the formation of affinity groups?

Note that the formation of affinity groups is a non-trivial exercise from the viewpoints of psychology and personal growth. We suggest that you take this into account and actively raise awareness on the issues involved before the groups are formed, e.g. by talking about them at the information event required for admission to the market community.

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