In this post I will get into the nitty gritty of the roaming, no arbitrage web bot banker that offers pricing units to collections of interacting merchants. In the current world, this web bot banker is akin to a combined derivative industry and central banker; serving semi orthogonal groups of web merchants.
Its services offered.
It produces units of inventory variation that can be exchanged, profitably, as pricing discounts between sellers and buyers of related goods. These units of variance will be valued at a fixed percentage of price discount, somewhere around 1%, for any product purchased over the collected finite number of merchants. All merchants will be eager to participate because the banker bot promises, and delivers, the minimal amount of inventory volatility possible among the group. The banker always delivers the Pareto efficient discounts on all products within the network. Every merchant is guaranteed to be more profitable because excess inventory volatility is always removed
How does the banker bot find groups of merchants?
Well, its main search technique is fundamentally semantic processing with the goal of maximizing networks having a strong self correlative component. That is, networks in which bundles of exchanges run correlative across a near minimal spanning tree of connections. It uses the now standard of graph convolution with a minimizing function, then organizes links and nodes into a minimal tree. It does have to recognize merchant activity, but will do so because merchants, excited about the service, will so indicate merchant activity using some indicator in their URL.
Once a suitable network is found, then the bot can find the real relative price between them, in a stable ordering, up to some precision. That is, it can compute the Black-Sholes solution over the whole network with no other information other than the spectrum of sales on a per merchant basis. It needs no other information. This is mostly about estimating Phi,Pi and e to a precision that matches the variation in the probability distribution of sales. (The theory of everything).
How do merchants interact with the bot?
The bot publishes the relative spectral market share for all of the finite number of merchants in the discovered graph. It also publishes its current precision, and fixes the percentage value of the unit of discount. The theory says that is can determine the relative price spectrally and all other correlations among pricing are external to its price list and precision. Hence, merchants are free to sell in whatever other units of standard currency they choose and alter their price. But among the group, the unit of variation, as a fixed percentage price discount, will always optimize inventory flow.
The banker bot offers the group the ability to save and borrow units of price variation as they choose, up to a limit of 15% of spectral density, typically. The lending and savings rates, the relative price ordering, and the spectral density of the market group is republished whenever the bot finds a material change exceeding its current precision. The banker bot will always set the rates to target a net zero price flow into and out of the market. It can add or remove merchants as needed.
Basically that's it.
It is just the first baby step to the singularity. The web bot's seigniorage is the price of computing and network services that maintain its function. These web bots will be the staple of global merchants exchanges. They will run loose, always finding inventory volatility that can be changed into profits for correlated merchants. The derivative industry then only needs to price the tax currencies of governments in order to complete the total solution. And of course, store fronts gain access to the system with smart cards in the hands of their customers. Any shopper always able to obtain units of variance for any and all merchants that are networked.
How soon? Like real soon is my guess. I have a hard time seeing how either the humans or the bots can pass up the opportunity.
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