The premise underlying ECO protocol is that, given accessible data and an intentionally designed governance system, a digital currency ecosystem can regulate its own monetary policy to enable its economy to thrive (source).

To understand the purpose and underlying mechanism of monetary policy, one of the closest parallels is a government's monetary policy for its fiat national currency. To support favorable economic outcomes, a monetary policy uses levers available to it and regulates the money supply in the economy. Fiat monetary policy typically needs to influence the money supply somewhat indirectly, not having direct access to either cash in circulation or other forms of money stored in financial institutions.

In contrast, an economy based on smart contracts is able to influence the money supply in its ecosystem more directly (although it has access to indirect incentives for participants' financial behavior as well).

The monetary policy of ECO protocol involves adjusting three levers:

1. Linear Supply Change. Among blockchain-based currencies this is also known as linear rebase. The protocol can prorate (proportionally change using the same multiplier) the amounts of the token in each holder wallet simultaneously. The proportion of each wallet's holdings to the overall supply remains the same, so the underlying value everyone's balance represents is meant to remain the same. What changes is the nominal amounts. Linear supply change (rebase) can make the token either inflationary or deflationary.
2. Random Supply Inflation. Additional tokens get minted, but are not distributed equally to all holders. Instead, an algorithm determines which wallets will receive these extra tokens as a 'nonlinear wealth effect.' This can simulate, although rather abstractly and not as systemically, an interaction of inequality and inflation in an economy. Here, the instruments include the number of wallets (tickets) whose balance inflates, and the % rate by how much.
3. Lockup Contract's Interest Rate. While the other two levers influence ECO token holdings in wallets directly, this is a behavior incentive instead. Lockup interest rate mirrors a fiat yield on savings. A lower rate increases the circulating token supply, while higher lockup interest reduces it (and therefore reduces inflation). An additional instrument ECO uses for lockups is duration for which the tokens are locked at a specified interest rate.

(An additional, fourth lever is Supplemental Transaction Fees. At the time of this writing in June 2023 it is not yet enabled in the v1 of ECO protocol.)

Briefly, the monetary governance mechanism works as follows: In each generation, each Trustee proposes a combination of values for each instrument (one variable for linear rebase, two for random inflation, and two for lockup). Then the Trustees rank the proposals, which determines each proposal's scores. Highest total score is the monetary policy packet that gets implemented for a generation (in case of tie with an incumbent policy, the new one loses). The full governance process is described here.

This dashboard

This dashboard allows one to access all generations' monetary policy proposals, as well as the results of which proposal won for each generation.

A separate table allows to see the proposals and winner policy for a specific generation, and another - all proposals and wins/losses for a specific trustee (enter the generatioin and/or trustee address at the top of the dashboard as parameters).