Fath: A Reflexive, Egalitarian Monetary Protocol
Whitepaper v. 0.9.7 “Instrumentality of mankind”
Models of currency issuance
Following the global shift to fiat currencies and widespread decimalization in the 1970s, the dominant model of currency issuance became one where value enters circulation not as capital, but as debt. Under this model, central banks inject liquidity at the top of the economic hierarchy - primarily into financial institutions - who then distribute it downstream through interest-bearing loans.
This system entrenches a structural imbalance. Even when we exclude corruption, fraud, or bureaucratic inefficiencies, the essential function of the fiat system implies that ordinary people, enterprises, and local economies are the final bearers of inflationary cost. When large institutions fail, governments intervene. When individuals fail, they are fined, bankrupted, or evicted.
Moreover, each round of money printing not only dilutes currency value, but paradoxically requires those least in control of issuance to pay the cost of their own devaluation. This misalignment between value creation and emission fundamentally destabilizes economic equity - and corrodes long-term resilience.
Modern Model of Currency Issuance
1. Private Credit Creation
When a commercial bank issues a loan, it simultaneously creates a new deposit in the borrower’s account.
This deposit becomes new purchasing power in the economy.
As the loan is repaid, the money is destroyed.
Interest payments become income for the bank and remain in circulation, spent through operations or distributed as profit.
2. Government Deficit Spending
When the government spends more than it collects in taxes, it injects net financial assets into the economy.
Central banks credit bank reserves, increasing private sector deposits.
These funds enter circulation without requiring repayment.
Taxes later remove some of this money, but not always entirely.
This system is inherently pro-cyclical: private debt growth fuels booms, while deleveraging leads to recessions. Government deficits can stabilize these cycles, but money creation remains structurally tied to credit and discretionary fiscal policy.
Emission in Proof-of-Work
In PoW-based cryptocurrencies such as Bitcoin, emission is algorithmically encoded and non-discretionary. Block rewards are distributed at regular intervals to miners who expend computational energy. The system does not function on debt, but exclusively rewards capital-intensive infrastructure and technical capacity.
This model introduces another form of hierarchy: while emissions are direct rather than loan-based, they are accessible only to those with sufficient hardware and energy resources. Ordinary users receive nothing from protocol-level issuance, even if they contribute to network security through their activity or hold a substantial portion of tokens.
More critically, PoW emissions are not correlated with value creation. Supply issuance follows a pre-set path - irrespective of economic throughput, adoption, or utility. This disconnection between supply and real-world productivity leads to deflationary tendencies and potential economic stagnation, particularly when scaled to national or global monetary systems.
Emission in Proof-of-Stake
In PoS networks, validators are rewarded with newly issued tokens for maintaining consensus and security. Many protocols allow delegated staking, whereby users assign their tokens to validators in exchange for a share of the reward. But again, participation in emission is capital-dependent - only those who hold and stake tokens are eligible.
This reintroduces plutocratic dynamics: the more you have, the more you receive. Delegation flattens some inequalities, but centralization still accrues around validators and dominant pools. As in PoW, the user base at large does not receive protocol-level issuance, and systemic inflation disproportionately affects non-stakers or smaller holders.
Though less resource-intensive than PoW, PoS remains disconnected from economic output. Emission is determined by block production rather than network productivity. And since validators often liquidate rewards to cover costs, these emissions regularly exert downward pressure on token price - creating systemic inefficiencies.
Introducing Fath: Emission by and for the Network
The Fath mechanism emerges from this critique. It is not simply an alternative to PoW or PoS - it is a complete reimagination of monetary issuance, aligned with Humanode’s foundational ethos: equal participation, biometric uniqueness, and economic reflexivity.
Where previous models reward energy or capital, Fath rewards the network itself. It asks: How much value was created this epoch? and adjusts supply accordingly. Its emission mechanism is direct, universal, and proportional.
Fath is built upon two foundational tenets:
Proportional Distribution: All newly issued tokens are distributed directly and equally proportionally to every wallet in the network, based on their holdings. There are no privileged recipients - no validators, no stakers, no whales. This means that every participant benefits from network growth in exact relation to their share of the supply.
GNetP-Oriented Supply Adjustment: The Gross Network Product (GNetP) - the total economic throughput of the Humanode chain - determines whether new tokens are minted (inFath) or burned (outFath). If the network has demonstrably grown in productive output, issuance increases. If activity contracts, supply contracts. The system reflects real value creation - nothing more, nothing less.
A Two-Phase Architecture: Transactional → Extended GNetP
To ensure both precision and pragmatism, Fath operates in two developmental stages:
Phase I – Transaction-Based GNetP
Initially, GNetP is calculated solely by total transaction fees paid across the network during a defined period. If the total fees increase from one period to the next, the system considers that a net-positive creation of value and initiates inFath. If fees drop, outFath is triggered.
This creates a self-regulating economic pulse, where supply responds directly to network usage and utility, without requiring discretionary intervention.
Phase II – Designated Account Expansion
As the Humanode ecosystem matures, GNetP measurement expands to include Designated Accounts (DAs) - a novel concept unique to Humanode.
Designated Accounts are user-created and user-defined, requiring no approval or gating from governance bodies. By opting in, a user marks an account as a DA, explicitly declaring its use for productive or commercial activity: operating a dapp, issuing a token, running a service, or contributing to public goods.
All transactions routed through Designated Accounts are added to the GNetP calculation, enriching the protocol’s ability to discern real economic contribution. Over time, GNetP becomes more nuanced and representative - not only reflecting base network usage but also ecosystem-level value generation.
To maintain integrity:
DAs may be subject to automated validation criteria to detect sybil loops or circular flows.
Statistical filters and governance tools will refine what qualifies as meaningful economic activity.
Participation in DA designation is fully voluntary - empowering users, not gatekeepers.
Emission and Rebalancing in Practice
Let’s say GNetP rises by 4% over an epoch. Fath then mints 4% of the total token supply and distributes it evenly, proportionally to every wallet according to its balance. If GNetP falls by 2%, a symmetric 2% of the supply is burned across all wallets.
There is no central controller, no validator discretion, and no political override. The algorithm adjusts the monetary base with mathematical symmetry and collective fairness.
Toward Reflexive and Sustainable Economic Models
Fath seeks to solve a centuries-old problem: how to issue currency in a way that is fair, adaptive, and resistant to manipulation. Its design introduces:
Responsive Issuance: Anchored in actual economic throughput.
Universal Distribution: Removing barriers to receiving benefits from growth.
Voluntary Participation: Letting users signal their own economic roles.
Integrity by Design: Algorithmic symmetry instead of discretionary control.
The introduction of Designated Accounts brings Fath one step closer to mirroring real economies. By weaving economic participation directly into the protocol, Humanode builds a network where humans - not capital - define the future.
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