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The value of 10 NXTs

Introduction

What is the value of 10 NXTs?, you may ask. This article might give you an answer. Let’s start off with a short dialog though.

“What is the value of $10?”, the teacher asked his class. “$10, of course”, a student responded quickly.

“Try to explain it without using $10”, so the student rethinks and replies with a grin: “10 times $1, right?” But the teacher is still not satisfied: “Well, what is the value of $1 then?”

Another student joins in the discussion: “$10 is worth whatever you can buy with them”.

For one thing, this short conversation illustrates the fallacy which many people fall for when they try to understand what the value of their assets and disposable income is; for another, it succinctly shows the way in which people commonly understand the value of a monetary unit, for example the US Dollar: the value of $1 simply being the amount of goods and services one can get in exchange for $1 (in other words: its purchasing power).

One might then ask: how do you measure the value of a dollar? The simple but unsatisfying answer is: it’s the amount of goods and services you can buy with it. A more complicated, but equally unsatisfying answer (because of its reliance on other artificial constructs), involves exchange rates, Treasury notes and foreign exchange reserves. The value of the US Dollar, like any fiat currency, therefore depends on factors seemingly far removed from people’s lives. For the reasons put forward in the next section, it remains difficult to understand the real everyday value represented by the US Dollar even if one uses it many times each day.

Goods and Services

One big problem with using goods and services to demonstrate the value of a fiat currency is their lack of interchangeability: whereas one dollar bill is entirely interchangeable with any other dollar bill, different goods and services (although they may cost the same) are not of course interchangeable. This lack of interchangeability makes it impossible to ascertain whether, say, 10 bottles of beer (purchased for $10) is a better or worse measure of fiat value than, say, 5 loaves of bread (also purchased for $10). In effect this is the same issue facing government statisticians who have to choose which items to include in the average consumer’s notional shopping basket for the purpose of measuring changes in a country’s consumer prices index.

A related problem is that the precise nature of numbers gives an appearance of certainty to things which don’t actually possess it. Thus, people fail to understand either the real value of $10 or the real value of ‘5 loaves of bread’ which are in practice both as imprecise as each other: dollar bills, although they are interchangeable, have no intrinsic value in themselves, only in terms of what they can buy; however, the things that can be bought with dollar bills, although they do of course have intrinsic value in themselves, are not interchangeable and therefore have no dependable utility as a measure of value.

The lack of preciseness can be ascribed to the lack of a measuring tool which serves in a replicable way to measure the value of something no matter where, when and by whom it is bought and sold. The nearest thing available is the market price expressed in units of fiat currency. However, the market price of something is not necessarily the same as its value. Although an important indicator of value, the market price only tells us the minimum amount that people are prepared to pay, but not the maximum amount (i.e. their willingness to pay). Moreover, due to external factors, under- or overvaluation might occur – i.e. short term prices may be too low or too high compared with the long term average.

The need for a measuring tool, as described above, would quickly become evident were you to go into a grocery shop and ask the price of something. Such a question would definitely produce different answers depending on whether the shop was located in North America or in Asia (leaving aside the question of conversion rates). Repeating this experiment 10 years from now would also result in different outcomes. Furthermore, businesses adjust the prices of their products to better meet the requirements of their trading partners or customers on a deal to deal basis.

Given that observation, we can ask the question how are prices created and how do they change? That is a field of ongoing study which is outside of the scope of this article. Prices are the result of complex social interactions, political considerations, emotions and even the technological progress. In the remaining part of this article, we will discuss what the value of a NXT is.

Transactions

When using the Nxt platform, all you need are NXTs. You can buy goods and services on the Nxt Marketplace, you can buy assets on the Asset Exchange, you can buy brands, cast votes and much more and all you need to have are NXTs. Those tokens are the default currency unit of the economy platform: Nxt. With them, you can buy a variety of native Nxt objects as well as user-generated content, products and services. However, we still have the same imprecise definition of the value of 10 NXTs as we have with $10.

There is, though, another element that plays an important part in helping to determine the value of one NXT. NXTs are not only relevant to pricing goods and services but also to paying for transactions. Transactions are the most basic native objects you can buy with your NXTs. They are and will be omnipresent in the Nxt platform. At the time of writing, 1 NXT is worth 1 transaction (in most cases). Thus, the value of 10 NXTs is the ability to buy 10 standard transactions, like those described above. That basically means if you have n NXTs in your wallet, you can buy n transactions from the network.

We can describe an experiment to measure the price of a transaction in Nxt. The price for a transaction – also called a fee – has a minimum at which the network accepts the transaction. It is encoded in the social contract enforced by the Nxt network and its current implementation can be found at the repository. This experiment can be repeated irrespective of who you are or where you are. It can only change over time if the network agrees to change. From this point of view, the minimum transaction fee is the most equal and transparent price we have; independent of your location and yourself.

Given that tool, we can now measure how much a good or a service on the Nxt Markeplace is worth in terms of transactions. When we pay somebody 25 NXTs for his service, we are in effect enabling him to perform 25 further transactions and we can do 25 transactions less than we could before.

When analyzing the calculation of the minimum transaction fee, one can recognize a correlation between the minimum fee and the size of the transaction. However, the correlation does not apply whilst, as is currently the case, the relevant coefficient is set to zero. It is assumed that in future versions of the Nxt protocol, the network will decide to raise this coefficient in order to better reflect the actual expenditure of verifying and propagating transactions of a specific type through the network. Still, the process of price setting is visible and verifiable and equal among all people using Nxt. There are many possibilities regarding how to agree on these coefficients and other constants which make up the minimum fee. However, this is a problem which needs to be addressed in another article.

Conclusion

value-of-nxt

Each NXT represents the ability to buy exactly one standard transaction which gives us a precise tool to measure how much worth a good or a service would be. Instead of asking how many NXTs does it cost, you might equally well ask: if I buy this good or service how many fewer transactions will I be able to carry out (i.e. how many transaction performances will it cost me)? Similarly, the seller, instead of asking how much NXT can I get for this good or service can just as well ask: if I sell this good or service, how many more transactions will I be able to carry out (i.e. how many transaction performances is my good or service worth)?

Thus, 10 NXTs are worth 10 transaction performances or the goods and services you can get for them in exchange.

This article is also available in French.

Nxt – for Financial Experts, Local Groups and Cryptofans

From block height 330000, Nxt features a mechanism to create your very own currencies to give you the financial freedom you deserve. We call it the Monetary System.

  • Your Own Currency System
  • Store of Value
  • Controlling the Currency’s Usage

Not a financial expert, a local group initiator or a crypto-expert?
Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.

Your Own Currency System

There are a large number of local or community currencies in existence around the world today; most of them being geographically based (in towns, cities and regions, for example: Berkshares in the US and Chiemgauer in Germany). The currency founders issue a certain amount of currency units for use within the community. Some local currencies take the form of units of time, called ‘hours’; others comprise units of currency pegged to the national currency and named after the locality in which they are used. Some are paper based, some are digital and others comprise a mixture of the two.

Setting up a digital local currency system requires extensive know-how of cryptography, a stable server infrastructure and a support team. Unfortunately, the expense and difficulty of meeting these requirements means that many local currency schemes either never get started or are restricted to being either wholly or partly paper based and therefore unable to reach their true potential.

Nxt offers an easy and comprehensive approach to creating your own digital currency without having to expend resources on any of the aforementioned issues. Nxt uses modern cryptography, has a growing server infrastructure and an active development and support team.

Store of Value

Unlike other currency systems in which users’ wealth is reduced by the continual or sudden expansion of the money supply, currencies based on the Nxt platform can be designed to act as a store of value. For their new currency to function as such, its founders need to back their new currency by locking (in effect, keeping on deposit) the equivalent value in NXT. NXTs always have intrinsic value as they function as the fuel that powers the Nxt network.

Users are able to leave the system at any time by redeeming the corresponding amount of locked NXTs for their currency units. In case the currency’s utility is reduced by external factors, users can quit anytime because of this integrated safety mechanism. Such devastating external factors could be fraud, war etc.

Controlling the Currency’s Usage

Creating a new currency with Nxt could not be easier; all the hard work has already been done for you. You only need to specify which of the currency properties supported by the Nxt platform you want to be integrated into your new currency. These properties control how the currency can be used.

Two examples of these currency properties are the ability to trade that currency on the integrated currency exchange and the crowd funding ability. The latter enables the currency founders to increase the adoption of their new currency by having more people join the currency creation. This way, the freshly created currency units are distributed automatically. Another way of performing crowd funding is described here.

Further Reading

Nxt wiki: Monetary System
https://bitbucket.org/JeanLucPicard/nxt/issue/136/monetary-system
Monetary System help desk: https://nxtforum.org/nxt-monetary-system-helpdesk/

nxt-monetary-system

You need more? ;-) Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.

Nxt – The Economy Platform For Everybody

Nxt features cryptographically secured payments, a marketplace and a messaging and voting platform:

  • Secure Online Banking
  • Secure Shopping
  • Encrypted Messages
  • Voting, Elections and Surveys [coming in 1.5]

Secure Online Banking

Nxt is an advanced system for online banking which secures your deposits through modern cryptography. All you need is a strong password and you can start making or receiving money transfers.

The default user interface was designed and built using modern Web technologies, which enable you to have access to your account at any time from anywhere (Smartphone, Tablet or PC).

Secure Shopping

Besides secure online banking, Nxt also provides an integrated marketplace. Equipped with a powerful tagging system and search capabilities, the marketplace already offers many goods and services from people from all over the world. As a buyer, you can provide feedback to the seller in case you are unsatisfied or to express your gratitude for a fast and smooth purchase. If something goes wrong, you can even get a refund.

Web-based interfaces like FreeMarket can provide easier access to the integrated marketplace, highlight featured products and much more. Please note that all centrally managed Web applications, like FreeMarket, are free to filter the data on the blockchain or to alter its appearance in order to provide a smoother user experience and to comply with the requirements of their particular jurisdictions.

Encrypted Messages

You can transmit encrypted messages with Nxt to protect sensitive information. Only the intended recipients can decrypt them, as guaranteed by the applied encryption technology.

Voting, Elections and Surveys

‘There are three kinds of lies: lies, damned lies and statistics’. Everybody understands the meaning of that quote.

Nxt makes this a thing of the past. Just create a new survey for your next project, product or final thesis. Being secure, encrypted and consensus-based, the voting platform ensures that the results are aggregated, analyzed and presented ready for use in such a way that guarantees their integrity and reliability.

Further Reading, Clients and more

Available on http://nxt.org/ and http://test.nxter.org/

[The latest release of the Nxt Reference Software (NRS) is 1.3.4.]

You need more? 😉 Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.

Nxt – The Economy Platform For Professional Traders

Nxt features an integrated exchange in which many different kinds of assets and currencies are listed for sale. We call it the Asset Exchange.

  • Secure and Minimal Cost Trading
  • Market Making
  • Dividends, Suffrage and Capitalization for Shareholders [coming in 1.4 and 1.5]

Not a trader? Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.

Secure and Minimal Cost Trading

Since the global financial crisis, we all know that the banks and regulatory authorities in our home countries cannot ensure that our money is 100% safe. This lack of trust is driving the wider adoption of cryptocurrencies as a medium of exchange. However, even exchanges for cryptocurrencies are no exception here; a notorious example being Mt. Gox, which jeopardized its customers’ funds because of its technical, security-related and financial shortcomings.

Again, we trusted the competence and integrity of the people who are in charge of these centralized exchanges. Such risks, however, simply do not arise when trading on a decentralized exchange as integrated in Nxt. Moreover, in addition to the security guaranteed by its decentralization technology, the exchange executes your orders for a minimal fee.

Web-based interfaces like SecureAE provide easy access and further tools to manage your portfolio on the integrated exchange. Please note that all centrally managed Web applications, like SecureAE, are free to filter the data on the blockchain or to alter its appearance in order to provide a smoother user experience and to comply with the requirements of their particular jurisdictions.

Market Making

Nxt enables the creation of markets for a potentially unlimited range of assets and currencies. These are the things you can trade for profit on the integrated exchange:

  • NXTs
  • shares issued on Nxt
  • other kinds of assets
  • currencies based on Nxt [coming in 1.4]

Dividends, Suffrage and Capitalization For Shareholders

Nxt provides the necessary tools to interact with shareholders:

  • the ability to declare dividends [coming in 1.4]
  • enabling shareholders to participate in important decisions [coming in 1.5]

Further Reading and Development Resources

Available on http://nxtinside.org/

[The latest release of the Nxt Reference Software (NRS) is 1.3.4.]

You need more? ;-) Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.

Nxt – The Economy Platform

This article series is intended to help you understand Nxt and how you can use it to reach out to your customers, partners, friends and acquaintances.

Nxt is a non-profit initiative which is supervised by many experts in the fields of finance, economy, cryptography, mathematics and computer science. Having access to such a competent community and strong technological basis will enable you to attain your goals without having to trust and pay for expensive third party services.

usecases_nxt

 

Nxt provides a decentralized platform which allows you to conduct various financial, economic and social interactions.

@Everybody

  • Secure Online Banking
  • Secure Shopping
  • Voting, Elections and Surveys
  • Encrypted Messages
  • more…

@Entrepreneurs, Indie Artists and Companies

  • Crowd Funding
  • Sales and Distribution
  • Brands
  • more …

@Professional Traders

  • Secure and Minimal Cost Trading
  • Market Making
  • Dividends, Suffrage and Capitalization for Shareholders
  • more …

@Financial Experts, Local Groups and Cryptofans

  • Your Own Currency System
  • Store of Value
  • Controlling the Currency’s Usage
  • more …

Conclusion

Many more possibilities await you when starting with Nxt.

For further reading, tips and support, please consider visiting nxtforum.org.

There are also several videos for you to watch on nxter.org which explain the key elements of Nxt.

Nxt – for Entrepreneurs, Indie Artists and Companies

Nxt features tools for entrepreneurs, artists and companies to manage their ventures:

  • Crowd Funding
  • Sales and Distribution
  • Brands

Crowd Funding

Going to start a new project but haven’t yet got the required funding? Or, perhaps you have an idea for a new product but you are not sure of its prospects for success and therefore need a stronger financial buffer.

Crowd funding has never been easier. Using the simple ‘Issue an Asset’ menu, you can quickly create an asset related to your product or service which others can then purchase, thereby demonstrating their support for your project. Thus, you receive both the necessary funding for your project, valuable publicity by virtue of your asset’s listing on the integrated exchange and a sense of the likely extent of your project’s appeal.

Furthermore, you will also be able to use the Nxt platform (starting from version 1.5) to ask for your assetholders’ help to make strategic decisions by using the voting platform.

Sales and Distribution

If you already have a production-ready product or a ready for delivery service, the integrated marketplace makes it even easier to develop your customer base, for example, by offering discounts to build customer loyalty.

In order for your customers to find your products, Nxt allows you to mark them with up to three custom tags of your choice. Your customers can also leave valuable feedback for you after they have purchased something from you.

Among the first people to use the Nxt marketplace were artists selling their pictures, writers selling their articles and books and independent musicians (so-called ‘Indie Artists’) selling their songs. Besides creative industry products, domain names, vouchers, properties and much more are for sale on the marketplace right now.

Brands

Being cool and memorable are the essential attributes of brands these days and your goods and services deserve such branding as well. With Nxt you can reserve a unique branding for your products and use it for marketing purposes. In Nxt, brand names are known as ‘Aliases’.

If you do not want to use your brand name anymore, you can simply list it for sale or release it for public use.

Further Reading and Resources

Available on http://nxtinside.org/

Not pursuing a venture or an artistic project?
Have a look at Nxt – The Economy Platform to find out what else Nxt has to offer.