Gencoins - A Virtual Currency We Introduced at our Summer Program

₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩ ₩₩ ₩ ₩

The Gencoin (₩) is a totally fake virtual currency run by us, Shaashvat Sekhar and Shaunak Das Sharma, students in the Bitcoin & Blockchain course at GSS 2019. The currency was launched at the beginning of the third and final week of the GSS. The Gencoin started as an idea for our Open House project, to be run only as a game for the parents who visited at the end of the camp; after some more thought, we realised that having our very own currency during the Genwise course would make our experience even more special. So we launched the Gencoin on the 13th of May , 2 weeks into our 3 week course...

The currency consisted of Blue, Green and Red Gencoins. The reason we had 3 different sets was to have an exchange between them and to understand the demand for each and to add the element of trade, somewhat like how it works in real cryptocurrencies. Students were given 10 blue and 5 green Gencoins, to start with; redcoins were introduced later in the week.

The workings of the system are listed below:

All students get 10 ₩Blue and 5 ₩Green to start with
Every evening there is an auction to sell ₩Blue for Chocolate and ₩Green for a slightly more expensive Chocolate.
The instructors, RCs and TAs could give their ₩ to students for anything they wanted done. Be it a math problem in class. A dare. A challenge. A task. Or just appreciation.
The students could trade between themselves. ₩ for something physical in return, or ₩Blue for ₩Green.

The simple rules when followed, built a complex economy.

Essentially, students had the incentive to do good in exchange for Gencoins, and they would attempt to obtain the maximum Gencoins possible. But you might ask, why would they want something with no value? And how did we ensure that our currency kept its value?

For all currencies, only if there is supply and demand ,the currency can have value. Thus, the first thing to do was to stabilize the supply-demand match. Because Gencoins are a pseudo currency controlled by us, the number of Gencoins we created was fixed. i.e. no addition to the number of coins at all. We did this by only allotting a small number of coins to each instructor and an even smaller number to each student, with no way for instructors to get more coins. As mentioned before, the instructors would give out coins to people who completed tasks, similar to cryptocurrency mining in which people who solve hard math problems earn more of the coin.

To create demand, we decided to keep auctions in the evening where people can sell their coins for chocolates in exchange. But even chocolates can lose value over time. So by the middle of the week, we offered a prize of a set of earphones and a speaker (the two were separate items). The earphones could be obtained in an auction of both green and blue coins combined while the only way to get the speaker was in a lucky draw of red coins, and hoping the coins you own get picked.

Now, as we had to sell different number of goods at auctions and different types of goods, we decided to experiment with different auction mechanisms. We experimented with English Auction, Dutch Auction & Multi-unit auction.

To increase chances of winning auctions at cheaper prices, different sets of students started coming up with different strategies to win prizes and share the prize.

Trading all ₩Green for ₩Blue (or vice-versa)

Pros- Monopoly in ₩Green/Blue
Cons-
You won't be able to buy anything in an auction of the other currency
In a mixed auction you won't be able to compete with someone who can bid iIn both currencies

Giving all coins to one person in a group

Pros-
You will end up almost always winning the chocolate auctions
Your team will most likely win the larger prizes as well
Cons-
A prize like earphones/ speakers cannot be distributed between members of a group

Now at this point you must be asking, is the coin something physical that you actually trade? Or paper notes? Or an app? The answer is none of them. In fact, there is really no currency at all! The whole system is based on a record of transactions kept track of using a database on a laptop. Therefore, to make a transaction people have to inform either Navin Sir (course facilitator), either of us (Shaashvat/Shaunak), or Oshin (our TA). Slightly inconvenient, but it meant people will really think before making a transaction.

The most interesting thing we found while running this system is that an exchange rate got set up immediately. We always found it difficult to understand how an exchange rate just automatically happened but now it's easier to understand how it only depends on what the people in the market want and how exchange rate is so clearly connected to demand and supply.

Through this experiment, we learnt complex economic and psychological concepts that we could never have learnt any other way, like how people always want money, even if it has no value. Like how supply and demand changes the value of a currency drastically, the way people actually think in a market. The extreme difference between a market in which people buy the normal way vs an auction. As well as how people will form teams just to win, even if they won't get any reward.

To conclude, a silly idea that we had for an open house project ended up turning into a full fledged currency and we hope that it will continue long after we are gone.

Thank you, (& we <3 gen₩ise)

Shaunak and Shaashvat (the supercool creators of the Gencoin)

PS: it is now the last day of our Program, and gradually, without any central planning, two power centers have emerged to win the GenCoin auctions...