Social networks + LETS = New horizons of development

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Any economies in the world are relatively closed trading systems that serve the interests of the community members in which they work. Otherwise, LETS (Local Exchange Trading System) is a system for streamlining the exchange of goods and services between community members. Money acts as a lubricant in these systems. The most understandable example to us is the economy of any country.
Communities can be of different sizes, from a nation, to residents of one village or users of one Internet resource. And for each such community, its own monetary system can be created that best meets the needs of all residents of this system.

The whole article describes the creation of local economies based on existing or newly created social networks, and also tells what benefits this gives users and how social networks themselves can earn. In essence, this is a description of a new method of monetization for any socially oriented services.

For those who are interested in the topic, but the text seems cumbersome, you can see the materials in graphical form.

So, let's get started

The rapid development of social services, supported by increased attention of investors and the general expectation of a miracle, has led everyone to prepare for the great future of social networks and others like them. They come up with a lot of new chips, a huge number of new technologies are created. And according to the assurances of the profile press, just today, looking through the window (both virtual and quite real), you can see the steps of the inevitable Paradise based on IT technologies.
Actually, all this is very inspiring and compelling to believe that in a couple of years everything will be even more interesting and cooler than described in the most daring NF novels of a decade ago. However, gray everyday life brings us back to the earth: for the most part, geeks use the achievements of progress, although the penetration of broadband access has made us all closer, but nevertheless the average user only looks at the pictures in the world of the Big Internet, and His Majesty was and remains the surest way to monetize advertising content.

I offer the noble public an alternative way, but how else can I make money on social networks.
It’s all about building local economies on the basis of existing social networks (LETS systems, more about what it is and how it works is described here or a full collection of articles on this topic systems/100263770043225 ? v= ).

To begin with, a few basic concepts:
Community - any virtual or territorial community of people, united by common values, interests; The community is capable of producing and consuming various goods and services through the forces of its participants.
Money is a certain universally recognized equivalent in which a certain community a) evaluates the benefits; b) makes transactions with benefits; c) accumulates wealth in order to someday later to acquire benefits, but for now stored in monetary terms.
Resources - any tangible and intangible assets (time, technology, human capital and much more) but not money in the form of a hard currency. Although it is very possible to evaluate all these assets in monetary terms.

Often a paradoxical situation is observed in many communities: there is a sufficient amount of all necessary resources for the production of goods and services demanded by the same community, but at the same time there is a shortage of banknotes as a lubricant between all participants in the production process and as a result the puzzle does not add up. There are all components of the product (unsatisfied demand, contractors, technologies and materials), but the participants in the process cannot agree on how to produce and redistribute, because everyone is used to the “invisible hand of the market”, but with a lack of money, the mechanism simply does not start and that's it in search of scarce money remain moderately hungry.

Conclusion, let's create local money for existing communities.

And here's how it works: On the basis of any existing community, a separate social network is created (or an add-on on an existing social network) whose purpose is the exchange of goods and services between community members. Each person entering the LETS system indicates a list of goods and services that he possesses and is ready to share, as well as a list of goods and services that he needs. In this form, it looks like a classic system of auctions or other advertising services. But in addition to the search system and the information between contractors, we add a few more innovations:
1. The system of karma and reputations (it was worked out very clearly and in detail on E-bay)
2. Domestic currency for transactions that is completely unrelated to “global” currencies (rubles, dollars and derivatives thereof in the form of EPS). The issue and management of this money are governed by the three principles “New coinage”, “Demurrage” and “Separation”

"New Chasing". Each new member of the community indicates a list of their own resources (goods and services that he is ready to offer to the community) and the resources he needs. Since this new user does not have a reputation or fame within the community, it is a) difficult for him to sell his resources; b) nothing to buy strangers. To resolve this situation, the coinage mechanism is launched: in any economic system, it is possible to calculate the amount of money necessary for the system to operate fully (for example, each user needs 100 coins so that they can constantly circulate in the system to satisfy the need for working capital). For each new user, these same 100 coins are minted (naturally in electronic form), but they are transferred to the user only when he sells his goods and services in the system.
The whole scheme looks like this. A new user, publishing his own resources or seeing the requests of other users about the resources they need, finds himself a buyer / customer. The provider provides the service, the consumer receives it, but the system pays for the entire transaction (within the limits of funds issued for this user).
As a result, the supplier receives money for his own purchases and reputation, the consumer receives the goods, but he must fairly evaluate and write a review, and the system receives an increase in the money supply and a new active user of the system. It is only necessary to provide protection against fraud, allowing only users with a high level of reputation and only in fixed limits to participate in such transactions on the part of the consumer (a ratio of 50/50 paid independently and at the expense of the transaction system).
The second principle is Demurrage. Money in such systems can act solely as a means of evaluation and means of calculation, while the function of accumulating money must be eliminated in every way. To do this, a fee for using money is introduced in the form of a regular tax on the money in the user's account. Monthly (weekly or even daily) a fixed percentage of available funds is deducted from each user account, the size of this write-off is a matter of field experiments, but it should stimulate the bulk of the users not to accumulate these funds, but spend them on consumption within the system. Most likely, this tax will range from 12% per annum (1% per month) to about 60% (1% per week).
In fact, each user has the opportunity not to pay this tax at all, having spent all the funds by the known date of tax payment.

Thus, using the “Separation” of the created economic system, which consists in the fact that the number of users, and, accordingly, the money supply, is limited and the main goal of the created local economy is to serve and stimulate all the internal trade and production processes of this community. We get a full-fledged LETS-system that solves the following problems:
1) Working capital deficit is eliminated as a concept, and the use of “New coinage” actively involves new participants in the system, at the same time building their reputation and acquaintance with other members of the community;
2) The introduced payment for money, on the one hand, stimulates the active economic activity of all its participants, and, on the other hand, eliminates inflation;
3) The introduction of user communication outside of virtual social networks allows, on the one hand, to improve the quality of life of all members of the community, and on the other hand, giganticly increases the loyalty of each individual to the social network on the basis of which such functionality is implemented. As the network is being transformed from a means of communication to a means of earning and direct communication with other members of the community, and on a fundamentally new level. This is a direct implementation of the principle of "game".

Features of the LETS-systems:

1) The system should be local and include members of one limited number of the community, according to preliminary estimates from 500 to 10,000 participants, united by some collective goals or values. For example, residents of one district or city (to provide each other with services and mutual assistance in household matters) or united in a club of interests (professional or other organized communities). Accordingly, local money is of interest only to people living or working within the functioning of this system. It does not make sense to go into it for an individual purchase or sale, since the security in the currency that each participant receives is goods or services that are created by the participants in the system themselves. And being outside this system, the cost of this collateral is approaching zero.
At first glance, this is a limitation, but if you look closely, this is a huge advantage. Outsiders will not initially enter the system, and all transactions will be conducted between people sharing common principles. This is described in more detail in a separate article, Local and Global.

2) Limitations on the size of transactions. LETS-systems are focused on serving domestic needs, providing various kinds of services for individuals, supplying goods, mainly non-industrial production, etc. For making expensive purchases, this mechanism is poorly suited, for example, you can’t buy a car with local money, but with the consent of the parties, it is quite possible to pay for renting an apartment or even a trip.
Partially, this restriction can be mitigated, while expanding the functionality of the system by introducing the possibility of various payment options:
a) fixed payment in local currency;
b) post-factum payment in local currency (the size of the payment is determined by the payer upon satisfaction of the goods or services);
c) partial payments in global (rubles, EPS) and local (domestic) currency;
d) compensation payments the fee for raw materials is taken in global currency, and the “work” in local currency.

4) Due to the fact that the money supply is limited, as well as all economic activity is concentrated inside, most transactions will be concluded within the community, but still there may be situations when some people want to exchange local currency for global money and vice versa, accordingly, an exchange platform on which anyone is needed will be able to exchange the earned local currency for exchange and choose the courses that are most suitable for themselves. Using a similar exchange mechanism will ensure liquidity for all users entering and leaving the system. In order for there to be no speculation in exchange rates, it is enough to introduce a fixed percentage from the transaction that will not be difficult for ordinary users who make one-time transactions, but deadly for speculators.

5) Since no local community can satisfy all the needs of its members, simply because it is local and very limited in territory and resources, it is reasonable to provide for the possibility of cooperation between various LETS systems in order to exchange goods and services produced internally.
Any user can produce their own product or service and sell it to members of their own community, but with the proper level of infrastructure development and the existence of many different LETS, it is quite possible to expand their sales and consumption markets outside of the “native” LETS.
Counterparties can be searched within all communities united by common standards, and if the requests of the service provider and its consumer match, the system automatically converts one local currency to another through exchange mechanisms. Thus, the money supply of both systems remains unchanged, but services and goods flow freely between the systems. The main thing is that there would always be liquid supply and demand for domestic currency.

Now how can all participants in the system make money on this or how to get a WIN-WIN situation
Users of the system receive an environment in the framework of which they can freely exchange goods and services through the intermediary of a newly created currency for this. The whole system is struggling with solving the problem of cash shortages and stimulating domestic trade. The key task of the system is to provide maximum comfort for this environment for users, as well as to ensure its safety from foreign markets;
System administrators receive an additional service, for their own customers, which will increase their loyalty and tie to the system. But more importantly, it will make it possible to earn real money from operating this system: LETS is able to generate tax payments (money usage fees) and the percentage charged for currency exchange. Both of these payments are received in local currencies and thereby the administrator generates some surplus of these funds. It can either be sold to users of the system themselves through exchange mechanisms, or you can buy goods and services within the system with this money and resell them in the outside world for global money. For example, with local money, it’s quite possible to buy the attention of system users and subsequently sell them to advertisers,

Thus, the crossing of LETS systems and social networks will create an entire layer of the economy, which at the moment, due to lack of attention, is in its infancy. The question is who first steps on this field and implements the new principles of interaction between people. These principles will turn social networks and the Internet as a whole from an advertising platform into a full-fledged tool for people to create new products.

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