For many currencies to coexist there needs to be an exchange rate between each currency and each other currency, which means either they are literally convertible into a different unit as miles are convertible to kilometers, or that there is a market enabling all currencies to be bought and sold for each other.

It always seemed to me that the whole point of a currency was that it was a shared reference point with a stable value in relation to goods and services, and that a personal currencies would be neither shared nor stable. Furthermore it would be very hard for the market to assess the value of each person’s promises.

There is plenty of monetary theory and historical experience around having multiple issuers of say, dollars. Many cryptocurrency advocates see themselves as implementing Hayek’s proposal for competing currencies. He believed that the most trusted currency provider would beat the competition and the least trustworthy would go out of business, and thus that the free market would give the users of money the highest quality money. I think a regime of personal currencies is an order of magnitude more complex than each bank issuing its own notes.

The Distributed ledger version of Ripple indicated how this might be done by granting every user the possibility to guarantee their friends’ IOUs. Everyone member’s promise was its own asset class or currency, and it provided an automated market for every possible pair of currencies. But the system would never work because any liquidity there might be for my promises of dollars would be spread thinly across many markets.

This was the problem the Bancor Protocol solved albeit with a token-based approach rather than using IOUs. Any user could issue any number of tokens and ‘connect’ them to other tokens in a pool with a common reserve token. The first currency could then be traded with, meaning exchanged for and priced against, the other tokens in the same pool, and therefore for tokens in other pools connected to that pool. Pools would be recursively connected until every token could be traded with every other across a tree structure just as I described in the credit commons white paper. The total number of markets was only the number of pools rather than one for each possible currency pair. Each pool could use its reserve to buy or sell tokens instead of needing a counterparty, meaning all the tokens could be liquid. This was an engineering achievement, and it forces us back to the question of why we thought everyone should issue their own token. It seems to work as a medium of exchange if you have an app connected to a blockchain, but what about other monetary functions? Its not standard of value because all token values are shifting with supply and demand, and its poor a store of value, having no intrinsic worth and only one guarantor.

So beyond those I have three major criticisms of massively multiplayer tokenomics.

The first is that doesn’t nothing to address the balance of trade problem which naturally occurs in any economy where different regions produce and consume different amounts. A money system needs to be explicit about how trade imbalances are handled. Receiving reserve tokens is like being given a interest-free credit which has to be repaid; it enables you to buy stuff from the wider markets, but you still have to sell stuff back to those markets. Economics has been contorting itself to get around the problem that some areas are more (economically) productive than others, and areas do not naturally import as much as they export. Rather what usually happens (see the Eurozone and the globalised dollar) is that the surplus countries start lending their surplus currency to the deficit countries at interest, and a trade imbalance eventually becomes an unmanageable debt leading to poverty and loss of sovereignty. If we are interested in social justice, we have to solve the problem of trade imbalances. There are basically 3 ways:

1. Political arrangements, investment from surplus areas to increase production in deficit areas, also maybe curbing or diverting consumption in surplus areas.
2. Debt forgiveness / grants from surplus areas to deficit areas
3. Block all trade when the trade becomes too imbalanced.

A multicurrency economy may have benefits regarding the issuance of currency and choice of which currency to use, but it obscures this balance of trade problem, especially when money is represented as variable value tokens. The Bancor approach uses a solid theory called the price-specie flow mechanism. The theory says that surplus areas’ currencies become stronger and deficit areas’ weaker, and therefore as trade becomes imbalances, prices change and surplus areas are encouraged to import and deficit areas export – essentially that with a free market in currencies, prices will automatically adjust to affect supply and demand to balance the trade. Unfortunately while the theory is solid, many economists say that in the real world there are many other factors affecting trade and this mechanism has little effect. Also it was never supposed to work for tokens but for a gold standard. So massively multiplayer tokenomics will be no more socially just than other money systems on this score.

My second criticism is that the distribution of risk/reward is very unclear. From time to time token issuers will go bust and the value of their tokens fall to nothing. Others will increase in value. Instead of holding money the purpose of which is to retain a known amount spending power, each user would hold a portfolio of assets whose value would be constantly changing. Every transaction would involve a choice and a negotiation of which tokens to transfer. This can be done automatically, or the user can use their own knowledge of the token issuers and their own assessment of what each token is worth or will be worth. In Bancor where demand is artificial, token values might not reflect any reality. The risk and reward is essentially randomly distributed except insofar as people know each others’ business and take the time to acquire and dump tokens they know about.This table shows who takes the risk in different monetary systems.

My third criticism is usability. I can’t imagine a massively multiplayer token system working with cash; an app would be needed to price everything. The total amount in your wallet would need to be re-calculated hour by hour, and if you wanted to decide for yourself which tokens to spend and which to save, you would either have to configure your wallet or fiddle a lot just as you would if your pocket was full of coins from different countries. What you gain in usability, you would lose in knowledge and control over what was really going on in your wallet.

I’m also concerned that massively multiplayer token systems might not behave as their designers suppose.

Imagine you issued some tokens, but the more you spend them, the lower their price/purchasing power. You would much rather hold other people’s tokens than spend your own. It is very like borrowing money at interest Without mortgage tax relief distorting the picture, anyone would spend their savings before borrowing money because it is cheaper.

That means the only currencies circulating will be those issued by players currently in deficit. Meaning half the players’ token issuances are unnecessary. I see a lot of parallels with the fiat money system:

• the medium of exchange will consist entirely of the credit of the deficit traders, and currencies belonging to surplus traders will be not be needed.
• surplus traders have more spending power than deficit traders, equivalent to interest earned on fiat savings
• deficit traders have less spending power than par, equivalent to interest paid on fiat debt
• a trader who spends all his tokens without earning them back, effectively defaults on his debt, to his guarantors – in this case his neighbours

But unlike the fiat money system

• Our credit is determined by agreement with our neighbours not by the bank but
• We now have many currencies in our wallets
• Currencies purchasing power is constantly changing – we need to consult and app every time we want to know the price of something

My final concern is about competition between currencies. Hayek was keen that different institutions like banks should compete to provide exchange media and store-of-value services to the market. But most complementary currencies are designed by communities for their own use. If they were to compete against each other they might make a more ‘efficient’ economy, if anyone cares to unpack that assertion, but at the expense of exacerbating trade imbalances, and eroding each other’s sovereignty.

Adding these few thoughts up, it seems to me that a system of personal currencies isn’t fundamentally different to what we have now, though it could be much worse since manipulation would be much easier and injustices would all be obscured by unreliable exchange rates. It would democratise credit but there are much simpler and more accountable ways to do this.

A balance needs to be struck somewhere between one world currency a global monetary policy and near-zero risk, and personal currencies which require artificial liquidity and have no fixed value at all. It is as if anyone had the right to crown themselves king, and be sovereign over themselves. Great but somebody still has to clean the toilet every week. More currencies doesn’t mean more sovereignty, more credit, or more wealth, but it does mean more complexity and less liquidity.

After all, isn’t the whole point of a medium of exchange, like a sovereign realm, that it is something shared and agreed and standardised by a community?

Photo by Thomas Hawk

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The economic arguments are pretty compelling. Bitcoin is unable to cope with the transaction volume so users face long wait times or transaction fees sometimes in excess of $20 which greatly reduces its usefulness to the poor. Bitcoin was supposed to be decentralised, yet now 80% of mining power is under a single government which seems to disapprove of it. Bitcoin was hailed as the disintermediator of banks, yet banks are as vital to society as issuers of credit, which Bitcoin cannot do, being trustless. Other Bitcoin maximalist ideals about augmenting the role of gold are, in my opinion, grounded in flawed economics, and do nothing to improve the condition of humanity.

But all of these arguments are soft compared to the problem of Bitcoin’s energy consumption. This Bitcoin energy consumption index estimates (November 2017) Bitcoin uses more energy than the country of Ireland, and is rampaging up the country index; there is no meaningful upper limit on the power it could consume as it grows. While many such as Andreas Antonopolis predicted that the crypto-economy would be an ecosystem of many currencies, in the last six months we are seeing the opposite tendency as Bitcoin’s dominance (over other cryptocurrencies) is increasing.

Now that BTC is credibly going after smart contracts, high speed transactions, better privacy, and is winning hard-fork wars and institutional custody solutions – it's becoming safer to self-identify as a #BitcoinMaximalist. I am one, too! https://t.co/L68xyBIsMe

— Tuur Demeester (@TuurDemeester) November 17, 2017

The more hedge-funds pile into bitcoin, the more credible and the more valuable it gets, the more risk-averse money will pile in too, surely without regard for any environmental concerns or the knock-on effects for the economy, or indeed human rights.

It is clear that, like the US finance sector under Alan Greenspan, Bitcoin is optimised to grow, and has no capacity to regulate itself with respect to wider global concerns such as the environment. “Bitcoin launched private currencies into the mainstream, but it’s time to admit we made a mistake in not estimating how environmentally damaging it would become at scale,” explains the original ‘Professor Bitcoin’, Dr Jem Bendell.

That means Goldman Sachs’ optimism about Bitcoin’s price should be read not as cause for celebration but as the herald of an environmental disaster, comparable perhaps to the Kuwaiti oil fires in the aftermath of the first Gulf War.

There are more and more articles appearing to point this out, but not many are saying what can be done. Bitcoin would be harmless if all the mining was done with free Geothermal energy in Iceland. Who might invest in sufficient infrastructure to produce that quantity of geothermal energy?

The recent push to adopt Bitcoin Cash to reduce the transaction processing bottleneck does little to reduce wasted energy and would lead to mining being even more centralised. In theory, Bitcoin could switch to a proof-of-stake consensus model, but the vested interests and voters – the miners – would have to volunteer to write-off their own capital-intensive operation.

So unless or until Bitcoin bursts like a bubble, capital gains from Bitcoin should be regarded as ethically dubious as shares in Raytheon or Texaco, or blood diamonds.

Another approach then, could be the mass adoption of a more modern cryptocurrency with a better design. There are no shortage of superior candidates vying to take Bitcoin’s crown, my interest has been piqued by

• IOTA which is scalable and fast
• Faircoin with its participatory governance and proof-of-cooperation.
• Holochain which isn’t a blockchain at all
• Chia (Pre-ICO) with its proof-of-time and proof-of-diskspace

If there was sufficient feeling in the cryptocommunity that Bitcoin was toxic, we might see capital starting to divest into other coins, and new fortunes made as the money gradually convened around one or more other coins.

On the other hand, if this community does not conduct itself in a socially and environmentally responsible way, then are not governments justified in stepping in to regulate it? Is not excessive CO2 just as antisocial as oil spills and nuclear waste?

What we can do about this depends on who we are. Investors might diversify their portfolios, weighting more heavily the coins they want to win. Exchanges might create markets between different alt-coins rather than assuming all transactions are either to or from Bitcoin or ethereum. Fund managers could create ethical crypto-funds, meaning they avoid proof-of-work coins. Software developers could focus more on multi-currency support. Governments could distinguish between coins, perhaps continuing to clamp down on Bitcoin now and remaining undecided what to do with other coins. Bendell concludes “Bitcoin has served its purpose and we must move on with smarter and cleaner tech – either voluntarily or with government help”. We have much to thank Bitcoin for. And if getting rich without working was all that mattered then we could go full steam ahead. But in a planetary emergency, we cannot afford to get stuck on unhelpful ideologies. Almost everything Bitcoin stands for can be better advanced by our swarming around newer technologies.

Photo by coccinelle67

The post Time to bin Bitcoin? appeared first on P2P Foundation.

Photo by alf.melin

The radical experiment in community cryptocurrency, Faircoin, reached a milestone this week when the Faircoop assembly declared that it would sell and buy back coins from its members at parity with the Euro. This means that the cooperative maintains a pool of cash available for redeeming coins from active members who accepted them but cannot spend them. This gives confidence to traders and the coop also offers a much more stable (and easy to mentally calculate) rate than the free market.

I explain this strategy in more detail in my previous blog post.

This public attempt by a self identifying group to manage the market makes Faircoin unique amongst cryptocurrencies. As well as having an ‘official’ price used by the cooperative, Faircoin has a free-market price because it is publically traded like any other cryptocurrency. However Faircoop hopes that Faircoin holders will coordinate around a simple strategy of mutual benefit, in contrast to the every-man-for-himself attitude of the free market. The strategy involves holders simply committing to spend the coins, (or at least try to spend the coins!) on goods and services rather than selling them for cash or bitcoin, which generates no real economic activity. With that commitment Faircoop traders benefit both from immediate spending and people holding the coins to spend later when they hope the price is higher. Holding the coin, any asset in fact, reduces the supply and helps keep the price high. As the spending power goes up, many people feel richer and more inclined to spend and even donate.

The first chart shows Faircoin’s history against the Euro, with the straight brown line showing the official price struggling to stay above the rapidly rising free market price. (Click for more detail.) The second chart shows Faircoin keeping pace with bitcoin, which doubled over the last six months. It also shows volatility against Bitcoin reducing over the last 2 months. It also shows the free market price responding to the news of the official price, leaving me wondering whether the Coop had finally wrested control of the coin from the free market!

If the coop really does have control of the coin then the strategy for the official price must no longer be to follow Bittrex as that could create a feedback loop. Nor to push the official price up as high as the Bittrex will support. Faircoop’s aim is to be able to redeem the coins at the official price for all who ask, and that means reducing the redemption requirements by creating a real economy, where the coins circulate and facilitate trade rather than returning to their issuer. This is only possible to the extent that the coin is used for payments by producers of goods and services in the real economy.

Anyone can speculate on Faircoin by purchasing them in Bittrex where the market is somewhat liquid. But those who really want to participate should install a wallet, ensure you have the private keys somewhere safe, and buy from FairCoop at the official price (not more, of course, than you can afford to lose).

However your participation does not really begin until you supply goods and services for Faircoin, and/or demand goods and services for Faircoin, thus literally creating (the space for) a market around you. Admittedly trading is easier for those living in the footsteps of founder Enric Duran (Barcelona and Athens); but trying to use Faircoin anywhere is one way each of us can contribute to growing a solidarity economy! You should always trade at the current official rate (today 1EUR!), not at this minute’s Bittrex price. Using the official rate strengthens the shared story that this money is a collectively governed in the interests of stability and utility, (unlike say, Bitcoin) and that each transaction is greasing larger economic wheels!

And as the coins you don’t spend increase in value, remember that that you are merely the custodian of value which belongs to the whole community. How can the solidarity economy grow if unearned profits are liquidated? As the holder of several thousand Faircoins I am committed to spending my profits, not selling them!

Share the wealth! My Faircoin wallet is: fMLHHYFKrmYdJCHnczSzGEbMiDd7NgxiWZ

The post Faircoin reaches parity with Euro appeared first on P2P Foundation.

This year however, the project is in a different league. Instead of Enric’s periodically announcing the price on an obscure FairCoop noticeboard like a sovereign, there is now a lively chat group with 80 members. Their objective is twofold, 1) to propose the ‘official’ price of FairCoin to the FairCoop monthly assembly, and 2) to manage the free market price.

The price should increase slowly and steadily, in contrast to other cryptocurrencies which fail as money because they are volatile. They aim to build confidence attract long term investors who want their money to do social good. FairCoop is selling FairCoin at the official price and building a pile of Euros. Those Euros are not for spending but remain available to buy back FairCoins from members who accepted them but cannot spend them. They do not guarantee to redeem all FairCoin ever issued, why should they? They are just a private institution in a free market trading a commodity.

Insofar as coins are circulating they don’t need to be redeemed and only then can the pile of Euros be LENT (not spent) on something else. They are building their own bank, capitalised by the FairCoin in our wallets.

It is this manipulation for a purpose, within the free market, that makes FairCoin so interesting. Cryptocurrencies by their nature allow anyone to participate, but a motivated team with some resources should be able to ‘own’ or at least take control of a market for their own ends. They need to keep as many coins as possible in friendly hands, and of course to grow the list of vendors who accept FAIR, who can be reassured of a cash price from FairCoop.

Two years ago the ‘official’ FairCoop price had been 5x of the Bittrex price, and a few people kept the faith, but it was really only a handful of activist business who accepted it. But something, whether Enric’s persistence, or the whims of the free market, or a handful of self appointed market-managers, lifted the price, then in in May this year, there was a rush of money into crypto-markets, and FairCoin, with its low volume of trade benefited more than most.

Suddenly the free-market price was above the official price. FairCoop had to restrict its sales to prevent arbitrageurs eating the money pile.

This has been the situation for some weeks. The new price should be decided by the assembly. If (and when) the volatility can’t be managed and the official price drops, FairCoin holders will weather the storm, especially after having enjoyed a 20 fold increase in the free-market price.

This all means that suddenly there is a lot more money behind Faircoin. The team can more confidently offer cash redemption to more vendors and has more reserves with which to smooth the free market volatility. The official list of vendors is much improved on two years ago, though still rather weak. So saying, I was able to go to a wholefood store in Athens and buy more than I could carry!

FairCoop activists are also innovating on payment technologies possible in few other cryptocurrencies. They are able, with a Spanish partner, ChipChap, to convert FAIR into Euros and withdraw them from the ATM in one smooth action! The Bank of the Commons initiative aims to provide a multi-wallet solution for holding and moving between Euros, Bitcoin, FairCoin, and balances from local exchange systems.

So why not show some support by at least getting yourself a FairCoin wallet, proudly displaying this badge, and listing your trade on the Fairmarket.

The post Paying attention to FairCoin! appeared first on P2P Foundation.

Since ‘political economy’ became a subject in the 18th century, the predominant political dichotomy has been framed as labour versus capital. Marx talked about ‘control of the means of production’ as the essential political power that the workers needed to wrest from the capitalists. A great deal of activism and political theory continues in that vein: Gar Alpowitz work What then must we do? is all about rebuilding worker-owned coops and similar institutions. We have 150 years of history testifying to their effectiveness.

The movement has waxed and waned, but never (yet) overcome its antithesis; capitalists have the power to issue almost unlimited credit, and social movements, however popular, seem always to be on the back foot. I am dubious whether worker-owned institutions will ever dominate the economy. On the one hand we see economic justice trying to break out in many forms and places, and on the other dark and powerful forces are suppressing them: laws are being changed to make coops less competitive, and occasionally countries which swim against the neoliberal flow suffer a CIA-led regime change. The Power that controls property also controls the law, the media, the security forces, the military and the banks.

The industrial age needed machinery and factories and hence empowered those with capital and property to invest. That thinking has carried through to the digital era in which a Silicon Valley start-up needs huge amounts of money to engage a raft of skilled people to create (and create a market for) a plethora of unneeded tools, one of which might survive and be sold for a massive profit. Yet there is nothing about the internet that necessitates that capital-centric way of creating wealth. Platform cooperativism is the notion that the digital ‘means of production’, the platform, should be owned by, governed by and should enrich the participating value creators. As an approach and as a tactic, it is a straight extension of rudimentary 19th Century cooperativism into the digital age and cyberspace. In which case we should anticipate it working as it always has on the sidelines but never to impact the wider economy.

Why Protocols?

I believe another strategy shows promise. Let us not focus on property and ownership and control, but on relationships and protocols and collaboration. There are plenty of precedents to work with, but I haven’t seen this thinking applied in the platform cooperativism space.

By protocol I mean a language, convention, or standard. Use of such things cannot be restricted, prevented or monetised any more than use of a word, gesture, or social code. The Internet is essentially a set of protocols such as TCP/UDP, http, HTML, which led to a highly egalitarian participative infrastructure. That need not have been so: in a parallel universe, Microsoft R&D invented the web and now every page is a visual-basic-enhanced word document; MS Office is the only tool for authoring web-pages, and it costs $5000 for a licence and still looks wrong on Firefox!

Fortunately that particular dystopia was avoided because we had those open protocols. I think that is why the early Web inspired a great deal of optimism about the levelling of the socio-economic playing field – recall John Perry Barlow:

We are creating a world that all may enter without privilege or prejudice accorded by race, economic power, military force, or station of birth. We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity. Your legal concepts of property, expression, identity, movement, and context do not apply to us… We believe that from ethics, enlightened self-interest, and the commonweal, our governance will emerge. A cyberspace Independence Declaration

The basic internet remains free as designed: we still pay nothing for example for sending an email or retrieving a web page but something has gone wrong. The Internet continued to grow, as with all technologies, as new layers were built; the internal logic of each layer is entirely independent of the others just as the stable atomic model of protons, neutrons and electrons owes nothing to the fuzzy quantum reality on which it is based. Gradually the capitalist interests worked out how to replicate their own logic and structures in cyberspace. On top of the open protocols they built pay walls, monetised services and enclosed spaces. The rules are different at every level. In 2017 it seems normal that platforms large and small, own data and control economic territory for the benefit of private investors. The biggest platforms have the most users and the most money and the most political power and that is why I find it hard to imagine any platform like minds.com competing head-to-head with Facebook, and winning.

Beyond platforms to protocols

I want to expand upon this argument:

A platform cooperative or a platform company model is not one that takes full advantage of the potential to have a truly distributed network. They still have a central platform operator at their core, providing coordination, quality assurance and, most essentially, trust. However, it is possible to go beyond platforms to protocols – to commonly agreed ways of operating. Thus anyone who agrees to the rules can become a part of the network.Mikko Dufva

Ride-sharing is the poster child of the sharing economy, the pressure point chosen by platform cooperatives, and the current fiefdom of Uber. It could be considered a natural monopoly, which is to say it involves infrastructure which need not be duplicated – users don’t want to have multiple identities, apps, user interfaces, price structures etc. PayPal creator Peter Thiel is being lauded by businessmen for arguing that these monopolies are desirable and that competition is for losers. Since he doesn’t address the social question of how monopolies should be owned or governed, we should assume from his investment strategies that he intends to own as many as possible himself.

So Uber’s near monopoly, won as a direct result of having unimaginable access to money, is an invaluable commercial advantage in itself because without serious competition it can squeeze the market for all it is worth. But be careful what you wish for; should Uber fall from grace, the market would probably splinter into many incompatible pieces, which benefits neither the people with cars nor those who need rides.

A platform cooperative ride-sharing service sounds like an attempt to form a cooperative and compete with Uber by recycling profits and remunerating workers better. Its not a very convincing business plan even if the allegations about illegally to sabotaging its enemies are not true because Uber has resources to undercut any competitors until they choke.

But an open protocol for ride-sharing changes the game completely. Anyone could sign up to the network and announce their intention to travel or willingness to chauffeur. A simple algorithm would connect them and at journey’s end they might remunerate each other in cash, Bitcoin, home-brewed cider or anything; the line between giving a friend a favour and earning a crust would be very grey. There would be no middle men collecting rent or dictating how drivers should behave as representatives of the company. The open protocol creates a free market – not in the neoliberal sense of Wall Street being able to flush out the economy of any country it likes with imaginary dollars, but in the sense that suppliers and customers can meet without middlemen, regulators or rentiers. This is less optimal for collecting taxes and running protection rackets, but more optimal for granting everyone access to the economy, and probably much more efficient in terms of using underutilised transport infrastructure.

This article’s title suggests that a protocol could replace a platform as a basis for a cooperative infrastructure. More accurately, it seems to me that an open protocol diminishes the role of the platforms and changes the operating environment by:

• the main benefit to users of a monopoly is built in to the protocol, so there is no benefit to users of having the market dominated by a monopoly.
• suppliers and customers can interact without paying middlemen (which was one of the early promises of the internet)
• users benefit from no longer being captured inside walled gardens
• the question of data ownership is probably handled in the protocol, not in law, and not by a 3rd party, which reduces costs.
• the platform owner is no longer responsible for what happens between suppliers and customers, reducing the need for surveillance and fees.
• the law of the land applies only to the traders behaviours, and thus is much simpler

A changed economy

In short, most of the functions of the platform are no longer necessary and in its absence there is room for new kinds of organisations to fulfil new kinds of function. The new kinds of organisations could compete on the basis of what value they can add to the protocol, or they could just cooperate to make the users lives easier. To stay with the concrete example of ridesharing.

• Companies could develop paid apps which compete on the best user experience
• Drivers of old bangers could organise to ensure constant supply and that they don’t undercut each other.
• Drivers could organise mutual insurance and/or finance.
• A system could be built on top of the protocol to help set up multiple passengers with multiple destinations in the same car, perhaps taking a small cut of the savings.
• A private ambulance service could be imagined, along with haulage companies, a postal service, long distance travel and regular commuter ridesharing.
• if the protocol didn’t handle it, a 3rd party service would be needed to ensure that drivers and/or passengers were identified or had a certain reputation.

Likely such a protocol widely deployed would render our transport ecosystem unrecognisable. It might obviate most full time driver jobs in favour of hitch-hiking 2.0 approach. The free market would level out the full time driving jobs and the unemployment of drivers and costs and revenues, leading presumably to a more equal society (at least until driver-less cars took over!)

The role of blockchains

The blockchains are already making this happen because blockchains are basically protocols which allow open participation. Blockchains can perform some of the critical functions of platforms without being owned by any one institution, namely:

• store data
• execute contracts
• manage payments.

This article about Arcade City makes it clear:

In the end, Arcade City will be a protocol composed of Ethereum smart contracts supporting a global logistics network with an entire ecosystem of apps and businesses running on top of our infrastructure. What SMTP is to email, Arcade City will become for distributed logistics.

For all the bluster about Arcade City being an upcoming platform coop, to me it seems there is no platform in the sense of a thing which can be owned & sold. What then does the brochure site mean when it claims to be owned and operated by its members? It seems to me that the language is wrong.

The human factor

The benefits and challenges of co-owning and operating a legal entity such a cooperative within a legal jurisdiction, are quite different to the benefits and challenges of using, governing and stewarding a universal protocol. Regrettably Arcade City has now forked after a disagreement in the board, which poses serious questions about the claim that its members were in control. Technology alone will not create the society we want; at a more fundamental level, we have to learn to work together.

Professor Jem Bendell and I have explored these ideas further in our new paper Thwarting an Uber Future for Complementary Currencies: Open Protocols for a Credit Commons especially as they relate to payment systems, which we argue is the ultimate Death Star platform.

Photo by Glassholic

Photo by Glassholic

The post From Platform Cooperativism to Protocol Cooperativism? appeared first on P2P Foundation.

What if those proto-chemists were found to be not ‘making gold’ but merely charlatans ‘taking gold’? Some sovereigns managed money better than others, but now that power resides with private corporations. The language of ‘wealth creation’ masks the real intention which is extract money from society as fast as possible, to lock it up in tax havens, and to drive the masses, deprived of a medium of exchange, back to the bank to borrow more! The social conseqences are increasingly acknowledged (although not by banks) to include the rich-poor divide, short-termism, erosion of democracy, the military industrial complex and, via the growth imperative, climate change itself.

Users of money and financial services seem to have very little influence in the matter. However much we disapprove of banks, boycotting them (as I do) makes normal life impossible. Banks are part of our social DNA, that’s what Too Big To Fail means.

The problem is not that saving and lending are critical functions which only banks can do. Indeed the idea that money is some kind of stuff which we rent is merely a misleading metaphor. The problem is that only a bank can underwrite your IOU so that everyone else will accept it. If all the banks and bank accounts were taken down in some Mr Robot scenario, the only money left would be a tiny volume of notes and coins. We wouldn’t be able to pay each other and the economy would stop dead.

You might think the alchemical fumes are affecting me when I say the way forward is in the collective relocating our trust. But it is worth considering just how much trust we place in banks, not only to guard our savings from theft and bail-ins, but to invest responsibly without the need for taxpayer bailouts, to set interest rates such as LIBOR fairly, not to launder money for international drug cartels, and indeed to manage the quantity of money in the economy. And compare that trust with the trust we place in our friends, family and business associates.

So the essence of bypassing banks, at least to the extent that we don’t use money to pay interest and taxes, is understanding how IOUs work. In the Irish banking strikes of 1970s, the whole economy ran on IOUs in the form of cheques. Allegedly pub landlords took the role of judging creditworthiness. It wasn’t the most efficient system but it worked. Similarly in Greece before the Euro, it was common practice for strong local businesses to pay their bills by cheque, and for that cheque to circulate as money before returning to the business. Both of these are examples of interest free money creation, and taken to scale, they create stable economies (no more boom and bust) in which credit is always available.

So how could this be instituted today? Its not enough to hope that all the banks fail at once, (and wish for the calamity that would cause). It can’t be expected that a whole culture would participate while banks are still omnipresent, But there are thousands of groups worldwide who practice forms of collaborative credit – the most numerous are business barter networks and LETS (Local Exchange Trading Systems). If only we had the collective sense to use them, not only would the economy’s liquidity problems be solved, but economic policy would devolve much closer to us, the people who actually back the money!

A key difference between these systems, which I call ‘collaborative credit’ systems and the mainstream economy is the principle of exchange. Conventional money is designed for saving, which means NOT exchanging. In fact by making debts more and more unpayable it can be shown even to prevent exchange. Many things can be used as a store of value, but a good medium of exchange requires that social consensus which is unique to money. Money which really facilitates exchange must be always available to be earned or borrowed, and it should be less valuable than real things to prevent its hoarding. The principle of exchange says that we should give and receive the same amount of value; that money isn’t valuable in itself, it is just a way of tracking the balance of my giving and receiving. By committing to give and receive favours in equal measure, we acknowledge that being owed favours doesn’t put one in a position of power, but brings with it an obligation to spend back. Taking responsibility for our own finances takes effort yes, but probably less than feeding a parasite! With money no longer scarce, competition (for money) gives way to collaboration. Collaborative credit implies that everybody’s promise has equivalent value, which in economics is called fungibility, an important property of money. Because every credit is balanced by an equal and opposite debit, aggregate supply and demand in the system are perfectly balanced by design. The simplicity and elegance of the exchange paradigm makes neoliberal economics look like the blind leading the blind up an alley without a paddle!

By forming what the Germans call ‘exchange circles’, narrow fields of reciprocation, we reduce our personal (and aggregate) demands for money; and within our own economic circles, we reclaim a measure of power of credit issuance and even monetary policy.

So why isn’t everybody doing it already? Even in Greece where the need is dire, the move to alternatives forms of production and exchange is almost imperceptible. I could list reasons all day about financial illiteracy, breakdown of trust, atomisation of society, but instead we should look to those who ARE doing it.

Fortunately collaborative credit does not require that ‘the masses’ participate, only that the circles have sufficient density. The bigger, and more connected exchange circles become, and the more goods and services move within them, the more they look and behave like money systems, spreading more risk more evenly, and allowing credit of greater quantities for longer durations.

If we use legal money, we do so for better or for worse, under the law. But the sentiment “I’ll scratch your back if you scratch mine” needs no law, no regulation, no taxation, and no money. Those who are serious about a fairer economy, are the ones finding, trusting and working for each other. There is no alchemy for creating wealth, but the obscuration of money creation is about appropriating wealth created by others.

Matthew Slater co-authored the Money & Society massive online open course with Professor Jem Bendell. Participation is free and it starts again on Feb 19th. See http://ho.io/mooc

Photo by Bev Anne

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What if the hundreds, even thousands of existing local currency initiatives were interoperable? Could they constitute a global system of exchange and offer at least a partial alternative to a dominant parasitic financial system? What are the social and technical obstacles to scaling grassroots initiatives which grow out of local community action?

The Credit Commons is a proposal from the builders of two of the largest blocs of community currencies in the world. Tim Jenkin, developer of Community Exchange Systems and Matthew Slater, developer of Hamlets and cofounder of Community Forge. A new white paper introduces the a backbone accounting infrastructure, touches on the economics and the technology, and describes the parts already in place. A small but diverse group has formed around the initiative and set up creditcommons.net where the paper is hosted and developments can be recorded.

Interoperable complementary currencies is hardly a new idea, but it is difficult both technically and politically because grassroots initiatives are by nature diverse and disconnected. The profusion of handmade platforms ten or fifteen years ago is consolidating to a few platforms, making it easier to address the question of interoperability between perhaps 1000 to 2000 online exchanges.

Previous attempts to enable intertrading have all focused on creating new ‘meta’ platforms in which exchanges rather than members keep accounts. This is technically easy but results in cumbersome user experiences and even accounting discrepancies. More seriously, governance – of exchange rate mechanisms, credit allocation and dispute resolution – always ended up in the hands of whoever happened to own the platform.

The problem of ownership and control has become easily solvable since Bitcoin. Blockchain protocols replace ownership with a set of rules and consensus algorithms. But the Credit Commons’ resemblance to Bitcoin stops there: what we intend is an entirely different monetary model with an implicit social aspect.

Bitcoin as money, being limited in quantity and costly to produce, is firmly based in the commodity money paradigm. Commodities are ideal for the store of value function because they are actually ‘valuable’. A good medium of exchange though, must be sufficient and available when needed, but doesn’t have to be valuable. Exchange means to give and receive economic value in the same measure, as opposed to accumulating credit or debit indefinitely. If exchange is the intention then valueless tokens, which have meaning only within that marketplace, function perfectly as intermediaries, facilitating complicated multilateral exchange. A mutual credit circle is a group of people who give each other credit, trusting them to repay, and use that credit as liquidity between themselves. This was all well understood monetary theory but has been losing traction since about 1694.

However the drawback of relying on trust is that it thins as groups grow. Hence the most innovative part of the credit commons design is that mutual credit systems can be nested into super-systems. Each circle can also retain full autonomy over monetary policy and exchange rates, as long as they balance imports with exports.

The Credit Commons is more than just a technical proposal to piece  different applications together.  By proposing trust circles governed at every level, it proposes an entirely different way of organising our economy. It is not just a technical protocol. The smallest circles govern themselves and come together voluntarily to form larger blocs with more collective power to issue and redeem credit.

Monetary thinkers throughout history have argued that money best serves society when its value comes not from its metal content or even its rentable income, but when it supports existing social frameworks of trust and exchange. A payment of valueless money is not the end of an exchange, but merely its half-way point; the exchange is complete only when both parties have something of value in their hands and the place-holding tokens have returned to nothing.

The Credit Commons does not need to be sold to investors. Thanks to available technology, it can be created with comparatively limited resources, as a parallel exchange system to the existing one. We are seeking technical partners to join us in assembling a network to connect multitudes of small alternative currency communities, so that

“Perhaps a day might come when there would be at last be enough to go round, and when posterity could enter into the enjoyment of our labors.” (Keynes, The Economic Consequences of the Peace (1919))

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