Prefs are a form of preferred stock (thus 'prefs') that are issued to the buyer of good or service by the receiving account. The issuing of this form of artificial capital is intrinsic to the system.
The benefit of owning a pref is that the owners of a pref will receive a dividend payment whenever cash 'demurrages' in an account.
This is the method that we have chosen to distribute to a citizen the full output of their labor.
This concept is based on the pattern 'predistribution of economic rents.'
The belief here is that as one participates in the economy, one should be rewarded when that participation leads to a growth in the economy. Currently the economic rent that companies generate goes to shareholders. We are not against value added profit being distributed to shareholders, it is the economic rent, or the 'super profit' that leads to an imbalance in equality in a society.
We take economic rent as a reality. Perfect competition and perfect markets are not real. When an economic rent is paid, we want that person who paid it to gain a future advantage. This is the payment of the demurrage dividend.
Over a number of years of participating in the economy it is likely that a citizen will establish a significant flow of pref payments and will be free to pursue retirement and or a more fitting career free of the worry of how they will pay for their next meal.
How does this work in principal? Say an account is catching up. Its balance is $1000 and it has not caught up in a month. The demurrage rate is 12% per year and thus the cash is demurraging 1% or $100. We will assume that taxes are 0% for this example. If an account owns 200 out of a total 2000 prefs in the demurraging account(10%), the owning account will receive a $10 pref payment. The demurraging accounts new balance is now $900 and it can send and receive payment as well as claim any pref payments that have been sent to this account.
Prefs should be netted between two accounts so that they cannot collude to overtake a majority position in an account. If citizen A pays citizen B $5000 and later citizen B pays back $3000, the net prefs should be $2000 owned by citizen A in citizen B.
Because all activity will be in the public ledger it should be simple to create functions that can seek out and find colluding activity seeking to overtake pref ownership.