How Groks come into existence
The nature of the Grok
The Grok is an interest-free user-emitted and secured currency. The Groks value is independent of any other currency; it has been designed to be completely trustworthy.
User-emitted (or user-issued) means that Groks are not created by any central authority, but rather by the participants themselves. They do this in our case by making use of a Grok creation facility, which they must first earn by providing something of value to the ReeComm.
In contrast to many other trading communities, this one does not give away a starting balance in the beginning, nor does it grant creation facilities without the members providing some sort of value or security for them. Failing that, a member can still first earn Groks and then spend them. The security requirement creates justified trust in the trade currency.
Curious why we suggest the outlandish sounding term Grok as the currency name? An FAQ links to the origin and meaning of the word – it will help you to grok the reasons for this!
Experience has shown that new or little-known ideas will be interpreted by people according to what they are familiar with. For example, if your bank account has a negative balance then this is something bad, it is a loan or an overdraft, something you owe to the bank. You're in debt.
But a negative balance on a Grok account cannot be classed as a loan, since there is no central authority creating any currency which could be loaned. Therefore a loan of currency in the classic sense is literally not possible. What one can say is that the account owner has currently received more value of goods and services from the market community than she has supplied, but that has nothing to do with a loan of currency.
In the Grok system, the users of the currency CREATE the currency themselves – at the moment they go into a negative balance to remunerate their receipt of goods or services. If no member does that, no actual currency even exists.
Since nothing is being loaned - but rather created - the conventional term "lender" also does not apply. To whom should it apply? No-one has lent any money to anyone to pay a bill, the person in obligation to pay the bill has simply herself created the money to pay it. Confusion may arise, when viewed from a conventional way of thinking, since each member of the marketplace has only one account. With a negative balance, the account owner has at that time created that many Groks, which are now a positive balance on someone else's account.
That is why we call a negative Grok balance a creation balance and a positive balance an entitlement balance.
This mutual credit mechanism is in stark contrast to conventional banking, in which some people or authority claim a monopoly on the right to create money, and then lend it to citizens as debt and for interest. With mutual credit people are simply creating the currency they need themselves – interest-free.
Perhaps you may now be feeling uneasy – the logic of the above may seem right but goes against common knowledge, or it can't be right because we've all known for all our lives that only banks can create money. But the stories we each tell ourselves about the way the world is, and what is right or wrong, are simply the ones we've been hearing all our lives, or the ones which belong to the general consensus. New stories can by nature never be as familiar as ones we've been hearing every day, but that doesn't make them wrong. For the moment at least, we ask you to try and keep an open mind.
Security, Liquidity, Account closure
To prevent abuse of the system we have stipulated that members must earn the right to create Groks, i.e. they must give something of value into the ReeComm, or deposit it, in order to have such rights assigned. Such securities may be: Deposited finance certificates, creation rights in trade for national currency, documentation of work performed for the ReeComm, or mutual guarantees of members in small groups.
The value of her securities limits how much a member can go into a below-zero balance – if she gives nothing, the limit is zero, if she gives or deposits little, the limit is small, for more the limit is correspondingly higher. But this limit, noted as an attribute of the Grok account, is NOT a credit limit, since no-one is giving money as credit. Rather it governs how many Groks the member can personally create – otherwise everyone could just create as many Groks as they need and nobody would do any work.
At the same time, it is necessary to ensure enough liquidity in the market community that trade is not stifled by lack of currency. For this reason we have foreseen a range of possibilities to acquire a Grok creation facility, such that a member can combine the methods provided and thus in sum acquire a fairly large yet fully justified mandate to create Groks.
If an account must be closed but has an open creation balance, then that member has taken more value from the Marketplace than they have contributed. But they have NOT taken more value out of the ReeComm than they have contributed – that's why we require the security. In such a case the security is called in, taken possession of, or exercised (depending on its exact type) in order to convert it to Groks and thus bring the account's balance to zero – only after which it can be finally closed.
Example of using a creation facility
Ms. Jones looks after the kids of Ms. Smith for 20 Groks. Both women have a zero balance on their trade accounts. Ms. Smith then uses her creation facility and transfers 20 Groks to Ms. Jones. The 20 Groks now being credited have been created right at this moment in time. If Ms. Jones now goes and buys vegetables for 12 Groks at the greengrocers, whose trade account balance then shifts from -150 Groks to -138 Groks, then the 12 Groks have disappeared from circulation again at that moment.
Since every Grok account starts with a zero balance, and the market participants themselves create the currency according to their own necessity, the Grok provides no impetus of its own when activities are balanced. It's very illuminating to compare that to the prevalent mechanism – we'll use a trivial example to make things clear: On a pristine market member A sells goods to member B for 20 units, and then B provides a service to A, also for 20 units.
- The Grok way
- Member B must have already provided something of value to the ReeComm and has received a Grok creation facility in corresponding value.
- Member B now uses her creation facility and transfers 20 Groks to member A.
- Member B now has a balance of -20, member A of +20.
- Subsequently, member A remunerates member B with 20 Groks.
- Both members again have a balance of zero, as pristine as before the market place was ever opened.
- The national currency way
- Remember that we are assuming a pristine market with no money already created.
- The central bank lends money to a commercial bank – for interest. Lending implies debt, that principal and interest must at some point be repaid.
- The commercial bank lends 20 units of this money to member B – for a higher interest. Again, lending implies debt, that principal and interest must at some point be repaid.
- Member B now pays the 20 units to member A.
- Member B now owes the bank 20 units plus interest, member A has 20 units.
- Subsequently, member A remunerates member B with the 20 units.
- Member A now has no problem; but member B has 20 units in her hand and owes the bank 20 units plus interest. So she repays the bank the principal and must borrow the interest from the bank to fully repay the loan – i.e. a new loan to repay...
- So whereas the commercial transactions are completed, the financial story is not – the currency is creating a pressure on the real economy.
Admitted, the above scenario is overly simplistic – interest received by banks and governments is actually spent back into circulation, so "even" a compound interest system could theoretically be run as a perpetuum mobile. Yet factors such as rewarding the amassing and hoarding of wealth do in effect lead to an exponentially expanding volume of money, with most of it accumulating in the hands of a rich few individuals and concerns, as current events bear witness.