<aside> <img src="/icons/library_purple.svg" alt="/icons/library_purple.svg" width="40px" /> This document lays out foundational information about how Lumina’s banking system will work, and why we've chosen it over other existing monetary systems
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The common economic issues caused by conventional monetary systems prompted Lumina to look into alternative methods for banking, currency and monetary policy.
Conventional banking systems generally have a federal reserve which loans money to commercial banks, which dramatically increase supply through fractional reserve lending. This means loaning out people’s deposits. This means banks always have less cash than the amount of money in existence. Disadvantages • Allows 3rd parties to create currency • Allows fractional reserve lending • Allows risky investment banking • Allows manipulation of stock markets • Allows use of false Triple-A ratings • Allows shady banking practices • Requires government to insure deposits in-case of bank failure • Creates currency out of thin air And do so, all outside of the government's control. These actions can and have caused multiple economic collapses. Cases have proved over and over that corrupt bankers always win at the expense of the general populace and government.
Commodity currencies means currency that is backed by a commodity. While this may seem good in theory, there are great disadvantages that come along with the concept. They will be described below. Disadvantages • Requires large sums of commodities • Limited commodity equals limited currency • Government cannot “print” money to survive • Government can collapse if taxes are not enforced • Banking becomes economically unviable • Commodity values fluctuate • Bank runs can occur • Hoarding becomes more common • Can’t create more currency without commodity supply • Outside the control of Government • Requires 100% reserve ratio • Robberies can destroy reserve ratios which may cause bank runs
A cryptocurrency is a decentralised blockchain that stores transactions in the blockchain history. It’s a safe but slow method of currency transaction. Governments can use cryptocurrency but it defeats the whole purpose of the decentralised aspect of cryptocurrencies.
Disadvantages • Well funded organisations can hack cryptocurrency • Can’t create more supply • Near-impossible to tax • Near-impossible to regulate • Incredibly slow transaction rates • Allows a black market • Allows tax evasion • Very high volatility • Too unstable to be viable • Banking becomes economically unviable • High energy usage • Made to be decentralised, but winds up centralised to increase speed
As no existing monetary system fulfilled the needs of Lumina, we set out to build our own. Our goal was to create a monetary system with:
We opted into using fully-digital currency with a state-run bank. This means there is no physical cash, no 3rd party banks, and the government has full control over the monetary system.
Our currency will be called Aura (Ѧ). and the state-run bank called Lumina Bank
The advantages of Lumina monetary system are covered below.
It can enable the banking system to create trustworthy credit scores and increase the volume of loans while maintaining economic stability.
At first, these benefits weren’t obvious, but using Lumina banking, currency and economic system, our nation obtains by-product effects and various immunities. Some of the hidden benefits of our system are:
<aside> <img src="/icons/thought-alert_purple.svg" alt="/icons/thought-alert_purple.svg" width="40px" /> It's important that Lumina’s currency has a tangible value, this section outlines how we will achieve that.
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This question is one of simple supply and demand, specifically, how can we engineer a demand for the currency and increase its usage and ubiquity.
Currency stability is where the prices of goods and services remain at a stable price. A currencies stability is determined by the stability of supply and demand for the currency.
Lumina will maintain the supply of our currency by carefully controlling all Government spending (injections) and through various currency withdrawal. There’s a few ways we plan to back the value of our currency, firstly, we need a list of products, services, commodities and resources in demand.
In the city we are building, we will have an abundance of available land that would be put on sale for citizens to purchase, with Aura, or foreign currencies (which would be exchanged into Aura prior to purchase).
Provided that there is a demand for land, there will be a demand for Aura.
As a lot of land purchases will naturally happen with foreign currency, citizens that hold Aura will be able to exchange it for foreign currencies, which they can use to buy products not available in Lumina, removing the risk of holding a currency with low utilitarian benefit.