# An Introduction to Tagion

## Tagion Whitepaper
Theis Simonsen, Kristian Vestergaard, Carsten Bleser Rasmussen,
Tobias Ambs-Thomsen, and Richard Kastelein, October 2019
## Introduction
In a world where new technologies are transgressing borders, legacy financial systems still chain us to traditional currencies and uniform yet disparate and incomprehensive banking models.

As the Internet has already transformed many other industries, a new kind of disruption is now finally confronting the shortcomings of current international pecuniary systems and legacy banking networks, ready to challenge models in the global financial industry that has not changed in decades.

But this time, it is not just the Internet alone.

The new and radically different concepts behind cryptocurrencies and underlying ledger technologies are fuelling a new wave of Fintech that has ushered in a new era for all financial and monetary systems.

These new systems, platforms, and protocols are powering the next generation of economic infrastructural technology. They are poised to bring as much change as the Internet did for a plethora of other industries, such as newspapers, TV, retail, music, mobility, etc.

However, technical hurdles, governance shortcomings, and pricing volatility have been critical roadblocks to these nascent financial instruments from becoming commonplace and have hindered mass adoption in many cases. This is still the early days. And it’s ‘[Blue Ocean'.]( https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/)

## Scope
The purpose of this white paper is to provide an overview of the ideas and main features of Tagion. For reasons of context, an overview of the history of the global financial industry is included.

Additionally, a full technical yellow paper is available for an in-depth description of the networks' technical and governance features. This paper provides solutions to problems with the current ecosystem and legacy technology networks that have yet to be addressed substantially.

## Table of Content
- [An introduction of Tagion](#An-introduction-of-Tagion)
- [Introduction](#Introduction)
- [Scope](#Scope)
- [Table of contents](#table-of-contents)
- [Introdusing Tagion](#Introducing-Tagion)
- [Money](#Money)
- [Ledgers, Banking and Money
– History and Overview](#Ledgers-Banking-and-Money-History-and-Overview)

## Introducing Tagion
Tagion is a monetary system with revolutionary protocols. It has the potential to replace legacy banking systems and trigger a paradigm shift in the current financial ecosystem.

The purpose of Tagion is to create a sustainable economic world. This can only happen with a serious alternative to the current fiat systems (government-issued currencies that are not backed by a physical commodity, such as gold or silver, but rather by the government that issued it).

Tagion is a democratic monetary system with the currency Tagions. A complete monetary system enables essential banking services such as transactions and exchanges.

With its unique governance model, Tagion hands the money power back to the people with a system that is both democratic and socially fair.

In the current fiat systems (e.g., Euro, US Dollar, or Yen), the money is issued and guaranteed by a central authority such as a central bank that controls the system. Essentially this means that a small group of actors manage the given monetary policy - and are in the tempting position of using the system to their benefit or the benefit of incumbents. It is not a new problem:

“The problem with fiat money is that it rewards the minority that can handle money but fools the generation that has worked and saved money” — Adam Smith, 1723-1790

Today it is not even the state that controls the issuing of money. Instead, central banks print more money for commercial banks, and the commercial banks leverage the money with fractional banking by creating credits and imposing debts on lenders.The Federal Reserve is an example of such a central bank.

Yet, the general public holds the risk with this economic strategy, and the public has to step up when the system comes short of [liquidity.](https://www.irishtimes.com/business/economy/bank-bail-out-estimated-to-have-cost-state-41-7bn-sayscomptroller-1.4035332) A good example of this was the latest worldwide financial crisis. Taxpayers pay for the banks' failed attempt to earn huge returns by controlling the money-issuing function in society. It is social injustice - [Robin Hood turned upside-down.](https://www.jstor.org/stable/j.ctt183h0cz.5)

[Money should be democratized again and seen as a common resource for all.](https://www.jstor.org/stable/j.ctt183h0cz.)
Tagion will play a substantial role in removing the conflicts of interest in the current financial system and returning the money power to the people.

The Tragedy of the Commons is an economic problem where every individual has the incentive to consume a resource at the expense of every other individual, with no way to exclude anyone from consuming. It results in overconsumption, under-investment, and ultimately depletion of the resource.

Elinor Ostrom won the Nobel Prize in Economics for proving an alternative governance model and disproving the Tragedy of the Commons through this.

Her solution is called the Self-governance of Commons, which she proved is a more efficient way of governing a common resource. [Self-governance of Commons needs a governance system built to serve the resource users and ensure no conflicts of interest between the system's actors and owners.](https://www.nobelprize.org/prizes/economic-sciences/2009/ostrom/lecture/)

The Tagion governance model is designed and built in adherence to these principles.

With the Tagion system, a cryptocurrency, Tagions, is introduced.

Tagions are noncollateralized money, meaning that the currency is not pegged to other currencies or assets and is thereby fully independent from other monetary systems.
As Tagion is an independent monetary system where Tagions are issued and guaranteed by the Tagion network that its users own. In short, the system users are also the owners meaning there is no conflict of interest.

In the Tagion network, the authority is decentralized to the nodes that maintain and operate the network by a democratic governance mechanism. The supply of money is constant in the beginning and later in the process, to be taken over by algorithms that use intrinsic variables as inputs to control the money supply to support a liquid market and trust in the value of Tagions.

Tagion is owned and controlled by its users and is open and technically accessible to everyone. The source code will be open-source, and Tagion will be seen as a common good.

In a 1984 interview, Friedrich Hayek said:

“I don’t believe we shall ever have good money again before we take the thing out of the hands of the government. We can’t take it violently out of the hands of the government; all we can do is, by some sly roundabout way, introduce something that they can’t stop.”

And in Free Market Monetary System, he noted that:
“...the monopoly of the government of issuing money has not only deprived us of good money but has also deprived us of the only process by which we can find out what would be good money. We do not even quite know what exact qualities we want … because we have never been allowed to experiment with them. We have never been given a chance to find out what the best kind of money would be.”

It resembles what Bitcoin and other new monetary systems and Tagion strive to solve. Take the money power back to the people who work in the economy and depend on its reliability, making it democratic and socially fair.

We call Tagion the world's first genuine democratic monetary system due to its governance model. The purpose of Tagion is to create a sustainable economic world.

A trusted peer-to-peer network like Tagion can have a limitless impact on the financial industry. Imagine people sending money to each other, exchanging currencies, or trading in financial exchanges across borders lightning fast with nearly no cost and in total privacy. It will increase overall business efficiency to the benefit of all participants in the system. This was one of the primary objectives of early innovators and adaptors of the first decentralized networks.

### Banking the unbanked
Globally, 1.7 billion people remain unbanked and excluded from the financial system, making them unable to make digital payments or manage wealth. Tagion is non-discriminating and allows everyone with internet access to be in a monetary system and access all essential financial services.

### Remittance market
The average fee per transaction is 7.03%, seen across the globe, according to the World Bank's Remittance Prices Worldwide (RPW), and if the transaction goes through banks, the fee reaches 10.53% on average. - a solid margin that allows new players to build lucrative business models.
For providers of digital banking services, Tagion offers a network that removes the expensive dependencies of traditional mainframe-based banking systems and makes it possible to provide cheap, instant, person-to-person digital transfers.

### Create a network of online exchanges
Currently, there is a significant exchange market for cryptocurrencies. Unfortunately, there is no better alternative for carrying decentralized exchanges than smart contract technologies, such as atomic swaps. New technologies like DEX, Tagion’s decentralized exchange, will catapult this business into a different league.
As Tagion is open source, current exchanges and new players can trade fast, secure, and at low fees. At the same time, the DEX will allow everyone to make exchanges between supported cryptocurrencies with no go-between.

### General use
Tagion provides people with a trusted non-national currency – the money system is owned by the participants.
The extremely low transaction cost enables new business models such as, e.g. content subscriptions, where a user would only need to pay per line read in an online article.
Banking would not be fractional anymore because banks cannot create money any more. They would need to be fully solvent. It means savings accounts would start to pay interest rates again, as money would have actual value based on the backing of the people using the system.
Lending can be facilitated in a borderless economy. As money is not leveraged anymore, all the complex regulation that is used to secure the solvency of banks would become irrelevant. In order words, banks would not be able to lend out money they don't have anymore. Even peer-to-peer or peer-to-pool lending becomes a real option as long the credibility and collateral challenges are solved.
Imagine markets without the intervention of central banks, as we have them today, where both stock and state bonds are bought up at large by the central banks to "support" the market. By which they, in reality, destroy normal competition and market pricing. Furthermore, markets on market terms would mean that bursts and bubbles would be limited.

## Money
We will start at the very beginning to provide context and fully highlight the issues that Tagion solves.

[Money was created to solve the problem of the double coincidence of wants.]( https://www.economicshelp.org/blog/glossary/double-coincidence-wants/)Bartering works well when both parties have something the other wants. But money removes the need for the correct goods and services to swap when they don't. By using money, the need for a double coincidence is eliminated.

In ['Money and the Mechanism of Exchange' (1875)]( https://www.amazon.co.uk/Mechanism-Exchange-William-Stanley-Jevons/dp/1514369745), William Stanley Jevons famously analyzed Money in terms of four functions:
* A medium of exchange
* A common measure of value (or unit of account)
* A standard of value (or standard of deferred payment)
* A store of value
By 1919, Jevons's four functions of Money were summarised in the couplet:

'Money's a matter of functions four,
a Medium, a Measure, a Standard, a Store...'

Though money is thought to pre-date known history (Livestock, are the first and
oldest form of money), the first traces of money that appear in our recorded history
are from ancient Egyptians (2750–2150 BC) - who measured the value of goods
with a central unit called shat, which was linked to gold.

In 13th B.C China, Cowrie Shells (the most widely and longest used currency in history) were used as currency, and eventually, gold and silver replicas of the shells led to the first coins.

Salt was also used as currency in human civilization. Hence the word salary derives from the root word *sal*. In ancient Mediterranean cultures, salt was highly valued, and its production was legally restricted in ancient times, so it was historically used as a method of trade and currency. The expression not worth his [salt]( https://www.phrases.org.uk/bulletin_board/17/messages/514.html) stems from the practice of trading slaves for salt in ancient Greece.

Paper money took hold in China in the early 12th century when the government took responsibility for issuing and managing paper money and coins.
Muslim economists in the 7th–12th centuries brought tremendous innovation to the Dinar currency, including the earliest uses of credit, cheques, promissory notes, savings accounts, transactional accounts, loaning, trusts, exchange rates, the transfer of credit and debt, and banking institutions for loans and deposits.

Europeans did not see paper currency until the 17th century when paper money was first introduced in Sweden in 1661. And on March 10, 1862, the first United States paper money was issued.
However, seeing that paper money has no intrinsic value, there was nothing to stop issuing authorities from printing more than they had gold or [specie]( https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/economics-terms-andconcepts/specie) to back it with. And because it increased the money supply, it increased inflationary pressures.
Hence, by 1900, most industrialized nations were on some form of the gold standard, with paper notes and silver coins constituting the circulating medium.

Today there are none. Fiat (Latin for Let It Be Done) [currencies](https://en.wikipedia.org/wiki/Fiat_money) are the global standard. Today we live in the age of enforceable legal tender meaning the refusal of "legal tender" money in favor of some other form of payment is illegal.
Much criticism has been given that fiat money has no intrinsic value. Still, that argument is historical, based on the history of gold and silver, and leads to the view that scarcity is good - often accomplished with gold or silver.

This is false reasoning, e.g., gold coins’ value is not the value of the commodity of gold, but the value of what the gold money represents, which becomes apparent over time. Perhaps gold keeps its intrinsic commodity value, but it cannot be used to buy anything in the future. The same goes for money backed by gold. The commodity gold can be valued on its own but cannot secure the value or act as a unit of measure of the currency because the currency represents all goods, not only the commodity of gold.

Money backed by or consisting of scarce resources can - on the opposite - slow an economy because of the scarcity of money, where the money is bound to a commodity when it should represent all goods.

Money is not intrinsic in itself; it merely measures the relative value of all the products and services it represents. Money should be seen as a social phenomenon.

People must trust money, can be honored in trade and maintain its value - while its actual value can vary over time. One should look at it as a trust in the system or trust in the authority behind the [system.](
https://www.jstor.org/stable/j.ctt183h0cz.5)

Money qualities or properties are important independents of which stand you may have: Money should be readily transferable, globally acceptable, and a store of [value.](https://www.jstor.org/stable/j.ctt183h0cz.5)
Moreover, we think, and others as well, that money should be non-political meaning and that money should have the same value no matter who owns them and what they have been spent on.

Transactions should be non-traceable and money anonymous. Otherwise, they can be used politically and for discrimination, not allowing global adoption and freedom for the user.

In 1983, the first seeds of a new era were sewn. The American cryptographer [David Chaum](https://en.wikipedia.org/wiki/David_Chaum) conceived the first centralized, anonymous cryptocurrency called [ecash](https://en.wikipedia.org/wiki/Ecash), followed by [DigiCash](https://en.wikipedia.org/wiki/DigiCash) in 1990. But things took a massive turn when in 2008, the decentralized cryptocurrency was born. Released as open-source software in 2009 by Satoshi Nakamoto, Bitcoin entered the fray.
And things began to change.