If you haven't read part 1 of this series, please go read it now or none of this is going to make a lick of sense.

In the previous article, I explained the impetus and goals behind VIVA. Now we're going to discuss how it accomplishes these goals and we start by examining the components.

As I mentioned before, VIVA is an economic engine.

Our engine is comprised of 4 economic layers, 3 of which are cryptocurrencies and the 4th is an AI driven asset management pool.

The 3 cryptocurrencies are...

1. Crowns, these are a deflationary cryptocurrency that confer certain rights within the system including the right to control coin fundamentals, such as price, marketcap, supply distribution rates etc.
   Only 42,000 of these will ever be mined. They are minted about once a week on average.

2. VIVA, are the beating heart of our economic engine, all transactions occur in VIVA and all debts are settled with it.
   VIVA supply is managed by Crown Holders with the assistance of the asset management pool.

3. vX these are market pegged assets, guaranteed to always be worth X of VIVA. For example, 1 vUSD is always $1USD of viva. vX are created by individuals, but backed by the network. These are similar in many ways to bitUSD or SBD, but there is no bagholder risk and converting in or out is instantaneous. The X here is to be replaced with any of USD, EUR, JPY etc. Holding vX gains you a daily interest rate and vX are used as a fiat gateway instrument, but more on that later.

So here is how this works.
VIVA cannot be mined, it must be "minted"
In order to mint, you must hold a Treasury Right which is borrowed from a Crown Holder.
The amount of VIVA a mint can create in a given time frame is directly proportional to the percentage of the minting target under control of that Crown Holder.
Example if there are 100 crowns and you control 1 Treasury Right, you are able to mint up to 1% of all coins that are to be minted in that cycle.
You as a Crown Holder get a vote in the number of coins to be minted that week, and the amount to be minted is the mean average of all votes after lopping off the highest and lowest figures.

Minting must be attached to a business activity. The business can be anything except minting.
The mint is there to give the business owner access to affordable computing resources for their enterprise.
The mint pays its worker nodes.
Anyone can run a node and nodes are free to come and go as they please to any mint.

At this time, there are three kinds of worker nodes, Compute, Storage & Network, there will be others in the future.
For more details on that, check the white paper.

VIVA does not use DPOS or any sort of rotating structure or competitive block finding structure at all.
We use a graph based settlement mechanism where each mint is responsible for their chunk of the graph and up to 5 others called affiliates.

The ledger (our blockchain is a graphdb we call a ledger) can grow in multiple directions because all settlement is mint to mint. This means that forks are normal, natural and not a problem. Double spends just mean new coin entered circulation, but each mint is on the hook for each transaction it approves, not the receiver.

So here is how this is structured.
A new startup wants to run a business and needs infrastructure but doesn't want to rely on Amazon or similar services due to cost concerns.

For the cost of a good quality rack mounted server and colo agreement, they can spin up a business activity and attach to a mint. They acquire a Treasury Right, the mint attaches to the network and begins minting on their behalf. From here, the business proposition is that VIVA is infrastructure that pays you. In exchange, you accept viva as payment.

VIVA uses proof of stake as a way of controlling the supply.

Thus in order to mint, all mints borrow stake from the liquidity pool.
When they borrow stake, they pay an upfront "interest" cost and this cost varies depending on the current network variables.
These variables are set by Crown Holders and the liquidity pool all of whom are actively seeking to maintain price while increasing marketcap.

It is possible although unlikely for interest rates to exceed 100%, meaning it is possible for minters to mint a negative amount of coin and this is why they must have a Treasury Right in order to mint.
It's the Crown owner not the mint or the mint worker who is on the hook for periods of negative minting.
However this loss is socialized to all crown holders equally and it's possible they may actually want to do this from time to time in order to mop up excess liquidity. This can happen if business activity recently failed and decided to liquidate a large amount of coin.

It's an opportunity cost not a dollar cost.
In effect every Crown Holder has less coins, but each coin is worth more for everyone.

Of course, accidentally minting negative amounts of coin is a strong sign that the crown holders and the mint should pull their sell orders off the market for a bit and give the price a chance to breathe.

A mint would continue minting in the face of negative minting, because the benefits from finding a crown more than offset any losses from negative minting.

A mint can serve multiple businesses and has a great deal of leeway in what they are allowed to do. The consensus mechanism enforces individual balances, but accounts are settled mint to mint and each mint manages its own slice of the blockchain, so there is never a problem with forks.

All coins are valid because they are backed by the mint that made them and the network is designed to absorb the rare stray coin. This also means that all individual transactions default to private. Money is mixed inside the mint, so for Alice to send Bob $1vUSD, She sends it to the mint, with an encrypted note saying "give bob 1 vUSD", the vX she had is then destroyed by the mint and the mint creates a new vUSD crediting it to Bob. There is no link, it's total anonymity by default.

Alice and Bob can also optionally buy redemption codes at their respective mints and give that code to anyone, again no links.

The final piece of this puzzle is the liquidity pool.
Each person has both a wallet with funds for immediate spending and a liquidity pool account.
The liquidity pool is funded entirely by individuals and acts as the people's voice in the ecosystem.
All worker nodes receive their pay directly to their liquidity pool account, the liquidity pool is a lifetime retirement income account that pays daily dividends.

The liquidity pool maintains a spread between what it charges in interest and what it pays in dividends.

50% of the spread is immediately paid as a dividend to each person in the liquidity pool. If their account is in compounding mode, this is used to acquire more stake, otherwise it's credited directly to their wallet.

25% of the spread is awarded by an awards committee to individuals and causes who could benefit the most. The awards committee is voted on by everyone each year. There is one committee member for each crown. The award goes directly into the individual's pool account and like all pool funds, it pays dividends for life.
It could be life changing amounts of money. By crediting their pool account it gives them incentive to stay in the VIVA ecosystem.

25% is used to fund a subjective proof of work system similar in many ways to steemit's but with some important differences.

Each upvote is worth exactly $1 vUSD, no matter who is doing the voting or how much stake they have.
Stake in the pool is used to determine how many votes you get each day, it defaults to 1 vote per thousand viva you've deposited, starting with your first thousand. But this can fluctuate a bit since we need to regulate inflation from subjective proof of work systems.

Any vUSD earned from upvotes received, goes directly to the pool account of the recipient.
Voting is an important part of the ecosystem. When a vote occurs, the vote is for the person based on some content they created.

In the case of content, you can earn from it indefinitely, it never ages out of the system, people can vote the same content as many times as they care to.
But there is more than just content.

There are also actions that can be voted on.
For example if a storage worker node, served a file in less time than was allotted, then the $1vUSD upvote would be a tip for service. A system like that would be automated and part of the client.
Conversely you can downvote, but it goes against their rep, it doesn't take any money from them but it does effect their sort ordering in certain menus. Rep is a rolling window of 90 days and all reputations trend towards 0 with disuse.
This is all handled through a system of receipts that are generated by each activity.

Unused voting power is not wasted though.
In a rolling 7 day window, all excess, unused, votes are donated to the awards committee to increase the amount of their award.

The awards committee must award 100% of their funds each day. If they fail to do this, then the funds are destroyed and removed from the system. They can do this as a single award to a single person, or they can do it as 1% to 100 people (just an example, not a real limit), or anything in between. The point being to find the people who need it the most. However an individual can only receive a single award per year, no matter how large or small.

The awards committee is completely autonomous, but they are selected by vote of everyone in the pool each year. These members are each peers, there is no hierarchy and beyond "rules for awards", they have no authority within the system.

Now we've discussed each component of the system.
Next we'll talk about how these pieces come together to drive a solid economy.
https://steemit.com/basicincome/@williambanks/introduction-to-viva-part-3-how-does-it-work