Sweetbridge Rewards Use Case: Incentivizing the adoption of systems that remedy errors, fraud, and corruptionThe Sweetbridge accounting protocol, discussed in on the blog earlier this week, solves this problem in remarkable ways. It provides a real-time audit of all financial records, which makes corruption very difficult. Our accounting protocol is a triple-entry accounting protocol in which all accounting entries are sealed with cryptography and linked through a smart contract to a third entry. This provides continuous assurance with integrated identity, smart legal contracts, smart accounting treatment and payment rails all integrated into a single atomic transaction that can never be out of sync between counterparties and has reg tech built in.The problem that remains with an accounting protocol like this is the problem of adoption. In particular, how might a government incentivize those within their economy to use an accounting protocol like this that eliminates the potential for corruption?A recent study done by A.T. Kearney, commissioned by VISA, showed that 23% of the worlds global economy is in the shadows, meaning that it operates out of sight of government regulation and compliance. These shadow economies go by many different names, the grey economy, the black market, etc. But the result is the same. More than US$10.7 trillion of economic activity is unaccounted for and undisclosed to governments every year.What if we could pull this enormous sum of money back into the visible economy?That is exactly what can happen with the Sweetbridge accounting protocol. But, how could governments get members of their economy to adopt a system like this? In particular, why would bad actors want to join a system prevents the fraud from which they currently profit?This is the problem Sweetbridge rewards protocol solves.The rewards protocol aligns the interest of businesses with their customers, and potentially the interest of citizens with their governments like never before.Through the Sweetbridge rewards protocol, governments can use a reward, SWC cashback, to incentivize the behavior they want, in this case, the adoption of a new accounting system.In the most simplistic terms, the Sweetbridge rewards protocol rewards buyers who hold a stake in the network with cashback incentives when they buy in-network while rewarding both sellers and buyers with an asset, a reward token, that has a measurable NPV (Net Present Value). Because buyers get more cashback whenever the network grows and both sellers and buyers get more SWC whenever they contribute to network growth, the interest of both parties is the growth of the network.In governmental terms, governments could buy SWC which they then could sell to citizens and businesses who adopt the accounting protocol. Those businesses who now run their accounting through the accounting protocol and own SWC could get cashback on transactions they make with the government.In other words, the government could function as the “seller” in the Sweetbridge rewards protocol, while the citizens functioned as the “buyers.” The citizens would get the benefit of cashback on governmental purchases, fees, and taxes, while the government would get the benefit of earning SWC through proving economic growth, which they could then sell to citizens as an added stream of revenue. Since citizens get cashback in greater amounts whenever the economy grows, and because the government earns more SWC whenever they are responsible for the economy growing, the interest of both parties is the growth of the economy.The government would also get the added benefit of more and more businesses using the same accounting system for transactions in order to access rewards. This means that transactions can be transparent to the government while remaining private and protected from outside influence. The Sweetbridge system also enables, through our protocols, automatic auditing and the potential for automatic tax collecting. The more businesses using the Sweetbridge rewards protocol through a Sweetbridge empowered system or application, the easier it will be for governments to collect taxes.For example, let’s say, the government contributes 2% of taxes collected from SWC holding businesses to the reward pools. This 2% would be split evenly between the network cashback pool and the seller-specific pool. The businesses that hold SWC would get cashback from the network cashback pool, this would serve to effectively discount the taxes they paid. The government could take the seller-specific pool back for themselves or they could distribute this to businesses as additional cashback rewards.If the financial benefit received through cashback rewards for paying your taxes becomes greater than the benefit of keeping your transactions in the dark, through fraud, bribes, and back table dealings, more people will adopt the system and more money will come into the light and become taxable.Because any economic transaction always occurs between two or more parties, adoption of a blockchain accounting system, like the one Sweetbridge offers, quickly becomes more beneficial than non-adoption as more parties join. If you are a bad actor and the counterparties you transact with join the system, the transactions you have with them are going to be visible now through the system, whether you like it or not. As more parties you transact with join the system, more of your transactions will be visible. At a certain tipping point, if your transactions are already visible to the system AND there’s a financial incentive for you to join the system, it may be more beneficial for you to stop the illegal activity and join the system yourself than it is for you to continue the way you have in the past.No matter how good all of this may sound on paper, the realities of a government changing their tax system to provide cashback to citizens who hold a stake in the economy by way of a discount token are complex. Changing tax structures can be time-consuming, costly, and difficult. Towards that end, we believe there is a particularly compelling way for a government to adopt the rewards program and offer discounts on taxes without dramatically overhauling their tax system.One way that a government could test this system without needing to instigate dramatic tax reform is to sell SWC as an alternative to government bonds.Today, citizens and businesses buy government bonds as an investment in the government. In exchange for that investment, the government gives the bondholder interest on that bond. While there are many kinds of bonds, most are issued to cover large capital outlays for infrastructure or to manage shortfalls in revenue. This is a common way for governments to get revenue but it comes at the cost of debt.Debt, of course, is a future claim on money that is calculated in absolute terms (i.e., 3 percent annual interest on €1000 is €30). One of the dangers of debt is that where economic growth lags behind the predetermined interest rate, repayment of that debt is more expensive in relative terms, even beyond the cost of the interest.In contrast, a discount token sale has several advantages over debt financing by issuing a bond. Like debt financing, discount token sales have the vital ability to pull revenue forward into today’s economy. Unlike debt financing, however, the “repayment” of the obligation remains a fixed portion of future revenues, no matter what happens to the economy.Reward tokens, like Sweetcoin, have even more value in that they give holders unlimited, or recurring, right to receive cashback rewards on fees and purchases.In broad terms, a bond that offers interest has the effect of canceling out (or repaying) some of the taxes that the bondholder paid to the government. The bondholder gets money back from the bond, which effectively reduces the amount they give the government in taxes over the period of the bond’s life. This is at its essence a cashback system, but it is one that accrues debt for the government. The benefits to the bondholder are also not recurring and are delayed to the end of the life of the bond.The Sweetbridge reward protocol enables a way for governments to sell discount tokens that raise the same capital for the government that bonds currently raise, have a more immediate benefit for the coin holder in more immediate and recurring cashback on government purchases and fees (for example taxes), and do it all without the government accruing debt as they currently do with bonds.We believe this is a very compelling use case for SWC and we are actively pursuing a number of governments and government agencies to partner with us to further develop these ideas.If you think these ideas are compelling and you want to support our efforts to change economic structures for the better, you can join us by purchasing SWC at sweetbridge.com/join.Sweetbridge Rewards Use Case: Incentivizing the adoption of systems that remedy errors, fraud, and… was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.