Karissa McKelvey:  In the 18th, 19th centuries it was thought that property ownership was the only way to protect common resources such as grazing pastures. Garrett Hardin famously put it: “The individual benefits as an individual from his ability to deny the truth even though society as a whole, of which he is a part, suffers.”

It was thought that communities that only act in rational self interest destroy the common pool resource they are sharing. This is described as “the tragedy of the commons”: that isolated, autonomous individuals will always choose the path best for them as individuals.

Elinor Ostrom introduced a new body of research to challenge this. Over 40 years of research, she was able to prove that Hardin exaggerated the problems involved in managing a commons. In 2009, Elinor Ostrom was the first woman to win the Nobel Prize in economics. She talked about how people actually are able to come to together to form norms and rules that sustain their mutual cooperation. For example, she went to Nepal and studied how people there were managing their own irrigation systems. She found that if communities simply follow eight principles, a sort of blueprint, communities use to self-govern and sustain the resource without depleting it.

What about applying this to the internet? Before her death in 2012 Ostrom published a book with Charlotee Hess called Understanding Knowledge as a Commons. This book laid the groundwork for thinking of digital knowledge as a commons (that is the digital artifacts in libraries, wikis, open source code, scientific articles, and everything in between).

The Internet as a Commons

Looking at the internet as a commons — as a shared resource — allows us to understand both its unlimited possibilities and also what threatens it.

What threatens the internet? Right now, private companies that control large parts of the internet are trying to prevent the internet of commons. If products fail or are deemed not economically viable (for example Vine, Google Reader, etc), the whole suffers. Monopolies, like Google, are able to keep their power by influencing the political landscape. However, in the internet of commons, monopolies are no longer in control, and users would be trusted to self-govern the commons.

Decentralization has been the most recent proposal as our technological means to get away from this and give the power to users. In a decentralized world, users get to control the contracts of the website, can choose to fork that website, re-host data to fix broken links, evade censorship, and overall take ownership of their data. Freedom of expression, privacy, and universal access to all knowledge should be inherent to the web. But right now, those values are not.

Locking the Web Open

Thinking of the internet as a commons allows us to think of different ways we can moderate and grow spaces, allow innovation to flourish, and improve the quality of knowledge and information sharing. As Brewster Kahle puts it, decentralization ‘Locks the Web Open.’

I’m not just dreaming of a new world with Brewster Kahle about the future of the internet. The internet of commons is here today. Peer-to-peer (p2p) applications already exist, are being built, as well as used by real users as we speak — you can build one too! Secure Scuttlebutt, for example, is a completely p2p protocol for syncing data. Patchwork is a social networking application built on top of the Secure Scuttlebutt Protocol. People can join a public server and make friends, then use a gossip approach to find friends of friends. Many early adopters come from IRC and have started using it instead of IRC. It’s immensely successful as a little protocol and you can build something with it today.

Dat is inspired by BitTorrent and built in a similar fashion to Scuttlebutt. It is a decentralized protocol for storing, versioning, and syncing streams of potentially very large datasets. We’re a non-profit, funded by grants and, so far, we’ve operated more like a research lab than a company.

A foundational part of what we’ve been doing for the past three years is to work with university labs, libraries, researchers, and universities to help them manage their scientific data. Scientific articles and their related data are very specific and yet good use case for a commons approach to the internet.

As companies privatize data they create silos or they put up paywalls, and prevent the growth of the commons — another kind of enclosure. This means that certain people with power close the pathways into the commons so that they can profit from it… but it actually detracts from everyone’s ability to use it and also prevents its ability to flourish. Innovation suffers, as fewer people have access to the knowledge and it is much harder to produce contributions that could improve that research. The rationale given for companies to create paywalls is that it is expensive to collect, store, organize, present, and provide bandwidth for the billions of pages of articles and datasets.

Decentralization is a clear way we can reduce the costs of this hosting and bandwidth — as more people come to download the articles and data from the journal or library or university, the faster it gets. The dream is that universities could turn their currently siloed servers into a common resource that is shared amongst many universities. This would cut costs for everyone, improve download speed, and reduce the likelihood that data is lost.

Decentralization of data produces challenges though — just like a torrent, data that is decentralized can go offline if there aren’t any stable and trusted peers. In the case of scientific data, this is an immense failure. To mitigate it, we invoke the human part of a commons — the data will be commonly managed. For example, we can detect how many copies are available in different places, just like a BitTorrent, and compute health for a dat — for example, a dat hosted at the Internet Archive, University of Pennsylvania, and UC Berkeley is probably very healthy and has low probability of ever going offline, while a dat hosted by 5 laptops might go down tomorrow — even though there are more peers. When a dat becomes less healthy, the community can be alerted and make sure the resource does not go down. Decentralized tech and decentralized humans working together to use commons methodology in practice.

Along with this, what we get by design is that links can last forever, no matter what server they are hosted on — using a decentralized network based on cryptographic links and integrity checks allow many servers to host the same content without security risks, a property not present in http.

This concept of decentralization isn’t new. The internet was built upon the concept of it being very resilient, that if a node failed, it’d find another way to get information to other computers. The internet was originally decentralized, but over time it became clear that centralized parties were needed to fund and maintain websites on the internet. The move towards decentralization is almost a yearning for the past, a way to get around this really centralized section of internet history.

Building the Future

A way we’ve been thinking about building protocols for decentralization is looking to how current popular protocols were developed and mirroring those methods. Current very popular modes for transfer were developed by people like Tim Berners-Lee (CERN, www) and Vint Cerf (DARPA TCP/IP) who worked in research labs. They gave away their protocols for free to the public, as products of scientific inquiry. The secret sauce of what they did was to craft open standards that don’t need permission to use and reuse, prioritized usability, and involved no or low barriers to access. Even Google was founded from two folks in a university lab, who published their search algorithm PageRank.

Today, I look at the decentralized landscape in context of what these people were doing back in the day and wonder if we’re continuing their legacy. Ideally, new decentralized protocols could be built into browsers that people already use today. Alongside http://, we imagine dat:// view websites or data from a distributed network (which you can now do with the Beaker Browser!).

I look at initial coin offerings (ICOs) and new blockchain companies that claim to be revolutionizing the way we work on the internet, and I’m not seeing this same model. I’m seeing white papers that are published, and sometimes even implemented in open source. But if you look at what they propose, many offer siloed networks that are privatized, with money being invested into specialized coins that create new enclosures. A big component of these ICOs are trust-less networks, which remove the human elements of trust and social groups from the network.

Decentralization then, is not just a technological problem, it is also a human one. Researchers at MIT have been looking into many of these decentralized tools and are reaching similar conclusions — the technical problems are hard but we must solve the social and people problems if we want to progress: “Decentralized web advocates have good intentions, but there is no silver-bullet technical solution for the challenges that lie ahead.”

To top it off, over $1.6 billion was invested in these ICOs in the past year alone. Where are we going? Is the future of decentralization going to be rooted in paywalls and coins, with the management of those coins and that technology trusted to a single individual or group? Is that really where we want to end up?

With a commons approach to the decentralized web, the most ideal approach is guided from where we came. I am much more excited about creating protocols that are easy to use, develop with, and extend without asking for permission and without paying or having much money at all. That means that they are driven by the community, built for the public good, and given away for free. If the company or organization dies, the protocols should still be usable. Any blockchains involved should not be tied to a particular for-profit company. I should not be tying my data to any one coin or blockchain for fear of enclosure. The protocols should be optimizing for science(broadly speaking, as in developing knowledge) and mutual collaboration rather than optimizing for profit. Let us not recreate the problem we are trying to solve.

Photo by n.a.t.u.r.e

The post Karissa McKelvey on the Web of Commons appeared first on P2P Foundation.

Aaron Fernando: Blockchain has become one of those buzzwords that commands attention and carries a powerful social glow, yet in the likes of similar buzzwords that have attained such a prized status, it has lost much of its meaning. Blockchain has become a catchall term for just about any digital ledger system regardless of crucial variations in its design. With so many blockchain projects ranging from social impact initiatives to opportunistic marketing ploys, it can be difficult to discern which projects hold real potential. For this reason, here’s a deep dive on blockchain applications in our niche: social impact.

The volatility in the price of cryptocurrencies doesn’t matter to restaurateur Helena Fabiankovic, who started Baba’s Pierogies in Brooklyn with her partner Robert in 2015. Yet she and her business are already positioned to reap the real-world benefits of the technology that underpins these digital currencies — the blockchain — and they will be at the forefront  of a sustainable, community-based peer-to-peer energy revolution because of it.

So what does a restaurateur have to do with the blockchain and local energy? Fabiankovic is one of the early participants in the Brooklyn Microgrid, a project of the startup LO3 Energy that uses a combination of innovative technologies — blockchain and smart meters — to operate a virtual microgrid in the borough of Brooklyn in New York City, New York. This microgrid enables residents to buy and sell green energy directly to their neighbors at much better rates than if they only interacted with centralized utility providers.

Photo of Helena Fabianokovic of Baba’s Pierogies courtesy of LO3

Just as we don’t pay much attention to the critical infrastructure that powers our digital world and exists just out of sight — from the Automated Clearing House (ACH), which undergirds our financial system, to the undersea cables that enable the Internet to be globally useful, blockchain is likely to change our lives in ways that will eventually be invisible. In the sharing economy, we have traditionally just used existing infrastructure and built platforms and services on top of it. Considering that those undersea cables are owned by private companies with their own motives and that the locations of ACH data centers are heavily classified, there is a lot to be desired in terms of transparency, resilience, and independence from self-interested third parties. That’s where open-source, decentralized infrastructure of the blockchain for the sharing economy offers much promise and potential.

In the case of Brooklyn Microgrid, which is part of an emerging model for shared energy use via the blockchain, this decentralized infrastructure would allow residents like Fabiankovic to save money and make sustainable choices. Shared ownership and community financing for green infrastructure like solar panels is part of the model. “Everyone can pay a different amount and you can get a proportional amount of energy that’s put off by the panel, based on how much that you own,” says Scott Kessler, director of business development at LO3. “It’s really just a way of crowdfunding an asset.”

The type of blockchain used by the Brooklyn Microgrid makes it possible to collect and communicate data from smart meters every second, so that the price of electricity can be updated in real time and users will still transact with each other using U.S. dollars. The core idea of the Brooklyn Microgrid is to utilize a tailored blockchain to align energy consumption with energy production, and to do this with rapidly-updated price information that then changes behavior around energy.

One of the Brooklyn Microgrid’s core goals is to upend traditional energy pricing and change people’s energy use by adjusting pricing in real time. All of this happens on a local level, between neighbors. “I really like the idea of the community sourcing energy to one another,” Fabiankovic says. “I thought it was a smart way of sourcing energy, and we try our best to maintain sustainability as well, whenever we can. So this is just another way to do that.”

Localizing the energy grid is indeed a smart way of sourcing energy that also offers a way to reduce a neighborhood’s carbon footprint. “What we’re trying to do is create a real tight market that reflects the time value and the locational value of where energy is used,” says Scott Kessler, director of business development at LO3. The Brooklyn Microgrid utilizes LO3’s hardware, but it’s the blockchain-based software that really does the legwork, providing a kind of infrastructure layer for the energy-sharing economy. LO3 is not the only organization doing this — groups like Power Ledger, Swytch, and WePower, are experimenting with other versions of blockchain-based P2P energy grids.

Photo of LO3 founder Lawrence Orsini, courtesy of LO3

What exactly is a blockchain?

Before diving further into the uses of the blockchain in shared enterprises, let’s take a quick look at how exactly this emerging technology operates. In its original form, the term blockchain refers to a type of database that is permanent, public, distributed and uses cryptography for security. Here, distributed means that multiple computers simultaneously update and store data once they have come to a consensus about which data makes the cut. Permanent and public means that all changes to this type of database will be visible to all, going back to the moment the database was started.

Yet there are exceptions, and the term blockchain is becoming increasingly vague as many networks marketed as using “blockchain” are often not public or distributed in any meaningful way. Crucially, not all blockchains have a native cryptocurrency, which are the exchangeable digital money-like units with a market price. For blockchains that do have a native cryptocurrency, units of cryptocurrency are usually issued into existence as incentives for running and securing the network. This occurs either through a process of repeated, energy-intensive computations called “mining” or through other means.

Mining has fueled criticism about some blockchains’ enormous use of electricity, especially mining on the Bitcoin blockchain which eats up more energy than many countries. The practice of mining however, is becoming outdated as more efficient mechanisms of securing blockchains crop up. Moreover, as demonstrated by up-and-coming sharing economy entities that utilize blockchains, the technology isn’t limited just for speculative assets like Bitcoin or other cryptocurrencies. Organizations around the globe are finding innovative ways to use blockchain for as a mechanism for good, providing the powerful rails that the sharing economy of the future runs on.

Blockchain for a better economy

One organization creating these rails is Origin, which is working to reduce the cost, difficulty, and barriers to entry for building marketplaces, enabling people to build truly peer-to-peer marketplaces on the blockchain. In creating this kind of decentralized underpinning, blockchains offer communities alternatives to one-size-fits all solutions and economies of scale.

“Decentralization will enable people to self-organize and have more unique or highly-localized offerings,” says Coleman Maher, who handles Origin’s partnerships. “It’s convenient from a user experience perspective, in some ways, that AirBnB is the exact same experience in San Francisco as it is in Rio de Janeiro as it is in Tokyo. But all those cities have different cultural environments, regulatory environments, and different specialized, local concerns. It doesn’t really make sense that the same organization is running the home-share market in these three, vastly different cities. We think it makes sense that home-sharers host self-organized get-togethers and say, ‘Hey, we want to have our own home-sharing decentralized marketplace that’s fair to us and fair to our guests. We don’t want to have to play by AirBnB’s rules.'”

Another crucial part of the sharing economy infrastructure is financial infrastructure. Consider the two billion unbanked and underbanked adults around the world. Can blockchain benefit them as well? WeTrust is one of the blockchain startups working to do this, and has already put out a lending circle product on Ethereum, the second most popular blockchain after Bitcoin.

Lending circles (also called money pools, tandas, susus, chit funds, and a whole lot of other things depending where in the world you are) facilitate shared community finance and peer-to-peer credit for those who do not have the ability to take out bank loans. Plus, lending circles have “been around and used by millions of unbanked people for millennia,” says Jake Kuczeruk, former director of partnerships at WeTrust. Lending circles are democratic and allow people to lend to their peers without requiring any financial institution to mediate them — practically, at least. Regulation is another story. Still, “most of these circles are being done with cash, with fiat currency, which obviously has some real safety and security issues, not to mention just being crazy inconvenient,” Kuczeruk says.

Since blockchain can deal with these issues, reduce administrative costs, and increase transparency, WeTrust sees potential in applying this technology to people’s existing behavior around finances. “We’re realistic here,” he says. “Bitcoin and blockchain technology in general only have about a 15 million person ecosystem. Obviously the global unbanked/underbanked aren’t really familiar with this technology yet … But now we’ve reached a point where it’s like ‘Hey, this is live. Let’s sit down together, we’ll walk you though this.’ Because at the end of the day, we want to make this as easy to use as Venmo.”

Other startups are taking a different approach. Companies like Kora are making the blockchain immediately accessible to populations in need of financial services by finding ways to integrate it with technologies they already use, such as mobile phones.

In addition to creating what is effectively an open-source payments infrastructure, Kora has been working directly with a range of groups — from farmers in Nigeria to coffee producers in Peru to a cooperative in Bangladesh — to make financial products that are accessible and work for groups that may otherwise go without them. The blockchain allows these groups to access financial services at a lower cost, increase transparency around where their funds are and how they get used, and allow projects to scale up more easily. “We just think about what users need, and then blockchain just happens to be a nice way to get there,” Maomao Hu, co-founder and chief operating officer of Kora, says.

Kora staff member with farmers. Photo courtesy of Kora

Plus, the types of groups that stand to gain the most by integrating blockchain into their daily lives are very often the existing sharing economy entities that were disadvantaged by traditional finance and market forces. “Everywhere we go, the co-op has become a centerpiece,” Hu says. “They’re a really powerful structure for raising economies of scale, locally. The blockchain is actually this really powerful tool that almost overlaps, word for word, with some of the academic research that’s been done on co-ops.”

Another player using blockchain in the financial inclusion space is Moeda, a cooperative crypto-credit banking platform. “Moeda provides a transparent impact investment platform to impact investors and a banking-as-a-service platform to entrepreneurs who will be receiving loans to not only fund, but to scale and grow their businesses,” Taynaah Reis, CEO of Moeda, told Shareable in 2017. “In turn, their local communities will directly benefit.” Moeda has provided a round of microloans and seed funding for businesses in Brazil, and has partnered with a network of agricultural cooperatives in Brazil called Unicafes to do so.

Not all that glitters is digital gold

But there are still quite a few reasons to be wary of using blockchains. Emin Gün Sirer is computer science professor at Cornell University and co-director of the Initiative For Cryptocurrencies & Contracts (IC3), a group of academics and researchers working on cryptocurrency and blockchain development. Sirer created a digital distributed currency, Karma, that predated Bitcoin and is also familiar with the sharing economy and its reluctance to embrace blockchain. “Deep down, the underlying ethos is different,” says Sirer, about the two worlds. “In one, you have these highly individualistic, highly profit-driven people and they want to make money. And in the other, you have the exact opposite type of people. They want to make the world a better place and they don’t care about personal monetary compensation, typically.” But, Sirer explains that many in the latter “have a bootstrapping problem, they find it difficult to raise money.”

“But at the intersection of these two worlds are fantastic ideas. If you can come up with something that is easy to bootstrap, that does have some incentives built in for the people operating the schemes, and also makes the world a better place — then we’re talking. And we’re beginning to see such projects.” Some, like Chelsea Rustrum, co-author of the book “It’s a Shareable Life” and a contributor to Shareable, are focused on reconciling these two worlds so that they can work together. Rustrum started a group called Blockchain for Good which runs regular meetups in the San Francisco Bay Area and New York City and has also organized around diversifying this space, since women are severely underrepresented in the blockchain space, and minorities are still underrepresented in the tech industry.

Blockchain for Good meet up photo courtesy of Chelsea Rustrum

But other problems still exist. This ecosystem is still rapidly emerging. As such, applications and code are getting deployed as fast as possible by startups that feel acute pressure to move first — lest they allow competitors to swoop in, dominate a niche, and lock them out of the market. This rapid pace has made it particularly easy to lose funds due to hacks resulting from bugs in code and mistakes, in addition to scams and phishing attacks that prey on those new to the ecosystem.

Furthermore, the regulatory environment around assets issued and sold on a blockchain remains highly uncertain, and laws are playing out differently across countries and individual states. Decisions about whether certain types of blockchain assets are securities, commodities, money, or a new asset class are still being made and are changing over time. On top of that, a few Initial Coin Offerings (ICOs) have been outright scams, and many others are nothing more than honest, but inadequate ideas presented in a whitepaper, along with a website and some team photos.

Blockchain for cities

Still, the idea of crowdfunding on the blockchain goes beyond ICOs. Cities are finding innovative ways to use the blockchain to raise and distribute funds for public projects. In the U.S., the city of Berkeley in California announced that it would be using blockchain as the backbone for municipal bonds, allowing for more flexible funding for small directed projects, along with increased transparency. Importantly, this model would allow the less-wealthy residents of cities to peer-fund small projects in their locality and receive a financial benefit from doing so. “Normally, because the bonds are so expensive — these fiduciary firms  looking to scale their profits,” says Ben Bartlett, Vice Mayor of Berkeley. “They disallow small projects. You have to pay $100 million [to issue a bond], and things like that. But this way you can issue a bond for something small like a firetruck.” And that’s exactly what Berkeley is planning on doing.

Photo of Berkeley City Council meeting by Scott Morris

Separately, the City of Austin recently announced that it plans on using blockchain technology to provide identity services to its homeless population, simplifying the process of offering services and benefits to a demographic that frequently runs into obstacles due to lack of identity.

This is where the concept of a self-sovereign identity comes in. Simply put, a self-sovereign identity on the blockchain is a permanent identity that can only be accessed in full by the person or entity to whom it belongs, yet portions of that identity can be shown to any individual, organization, or agency whenever it becomes relevant. Since self-sovereign identities are decentralized and encrypted, identity theft or incidents like last-year’s Equifax hack become much less of a problem.

The existence of self-sovereign identities could allow individuals and small organizations to verify information about each other without having to go through third parties, again facilitating peer-to-peer uses. For example, instead of waiting on a credit report for a rental application, a landlord would be able to verify an applicant’s rental payment history, after the applicant chooses to authorize the landlord to see that information. Furthermore, the existence of self-sovereign identities would allow startups, NGOs, and government agencies to provide services to beneficiaries  and vulnerable populations while granting agency and protections to recipients of those services.

Blockchain for education and aid

One organization moving toward implementing a self-sovereign identity indirectly by providing a different set of services first is Amply near Cape Town, South Africa. Similar to the way a person could fund a new fire truck in Berkeley, they might also fund an educational center facilitated by blockchain. In Durban, some early childhood development centers receive government subsidies based on how many children attend its programs, but to date, the recordkeeping for these centers have been done on hand, on paper. As a result, the quality of the data is quite low and reporting is cumbersome.

Amply’s smartphone app simplifies the process of recording student attendance, and the organization aims to increase the app’s versatility via blockchain in quite a few ways. “The longer term goal, also here is that each child and staff member gets a decentralized identity (a DID). That identity, we hope, will eventually build up to become a self-sovereign identity,” explains Joyce Zhang, project lead at Amply.

By using a blockchain to track specific outcomes, Amply and partner organization ixo will make it significantly easier and more transparent for the South African government, nonprofits, and individual donors to measure and track impact with high levels of precision. If widely adopted, this won’t just make it easier for entities to see where their funds have the greatest cost-to-impact ratios, but it will vastly simplify and enable the sharing of impact data and information about what works between organizations and across borders — all while protecting the sensitive information of vulnerable populations.

Photo courtesy of Amply

Potential donors can decide that “this is a really cool project, I want to donate $100,” says Zhang, who is also the program manager at ixo. “And then for those attendances, instead of the teachers getting it from the government, they can get it from private funders or whoever else is using this system.”

One of the main aspects of the blockchain is that when any type of information gets put onto it, it is unfeasible and nearly impossible to alter or delete that information at a later time. On a secure blockchain, a record is a record and it always will be.

Blockchain as a public good

This is particularly useful for certain purposes that have nothing to do with transactions or markets, such as sharing information in the face of censorship from powerful or moneyed adversaries. The journalism platform Civil is tapping into this potential to permanently secure information in the public domain. Once something is published on Civil (planned to launch later this year), the platform enables a permanent archive of the content to be logged in the Ethereum blockchain so that no one — hackers, new management, or unsympathetic government — can alter or delete that content for private gain.

This is not a theoretical threat. In 2016, the Hungarian newspaper Nepszabadsag (People’s Freedom) was abruptly shut down and all of its records were taken offline in retaliation for its criticism of Hungary’s Prime Minister Viktor Orban. Closer to home, the Trump administration has taken down the Environmental Protection Agency’s climate change webpages, though its archives are still available.

In fact, the founders of the Civil platform created this functionality in response to incidents faced by local websites recently. In a post Daniel Kinsley, engineering lead at Civil, wrote that, “In 2017 alone, DNAinfo and Gothamist, two of the leading, local news-focused publications in the U.S., were abruptly shut down by their billionaire owner. Eight years of archives were taken down in a single day, and were only restored after vociferous public protest.” Yet by storing or backing up journalistic on decentralized blockchains, inadvertent censorship of this sort, as well as purposeful censorship will be much less of an issue.

Today’s media makes it nearly impossible to be level-headed about the potential for blockchain. It has a few reputations, all of which are extreme: blockchain as a technological panacea; blockchain as the driver of an apocalyptic crypto-bubble fueled by speculators, scammers, and ponzi schemers; blockchain as a force of revolution that will overthrow governments and bring entrenched industry incumbents to their knees.

It’s possible that certain aspects of of all of these visions will be realized, but eventually much of the sound and fury will subside, outlived and overtaken by the use cases that actually serve people on a day-to day level. Originally conceived as a peer-to-peer technology, the brunt of blockchain’s potential still lies in its ability to serve as the technological underpinning for the sharing economy and facilitate financial inclusion, information sharing, and even democratic self-governance and local governance.

When we find ourselves in a world fully immersed in blockchain, we will find that it is a permanently transformed one — one where cooperatives, schools, and neighborhood groups have many of the same technological advantages as governments and multinational corporations. But it will also one be a world that we take for granted and just seems normal — as normal as today’s world of electric light, wireless internet, and satellites in space.

Header image of the Brooklyn Microgrid project courtesy of LO3

Curious to learn more about the projects mentioned in this piece? Read these Q&As for a deeper dive:

• A blockchain for farmers and co-ops: Q&A with Kora’s Maomao Hu​
• Blockchain and the potential for local P2P power: Q&A with LO3 Energy
• Civic crowdfunding with the blockchain: Q&A with Berkeley vice mayor Ben Bartlett
• Blockchain for education in South Africa: Q&A with Joyce Zhang from ixo and Amply
• Blockchain-powered journalism: Q&A with Matt Coolidge of Civil

Do you have any leads for stories about how other organizations are using blockchain for good? Contribute your ideas to Shareable’s Collaborative Storytelling Project. And sign up for our weekly newsletter to stay on top of upcoming events and reader engagement projects around this story and more.

The post Blockchain as a force for good: How this technology could transform the sharing economy appeared first on P2P Foundation.

A deep dive into Holochain – what some are calling an evolution on blockchain technology, operating “in parallel to BitTorrent to power fully distributed apps”

Continuing our coverage of Holochain, the following analysis was written by Tristan Roberts and was originally published in Crypto Insider.

Tristan Roberts: Bitcoin made the impossible a reality, and Ethereum aimed to take that same utility into other domains. Artificial intelligences need not beholden to their human masters, and global organizations no longer need be at the mercy of a handful of executives. Truly cooperative, decentralized organizations seem to be just on the edge of becoming a reality.

However, despite all the possibilities that blockchain technology has teased us with, we’ve already started to see limitations: seemingly innocuous apps like CryptoKitties have made the Ethereum network grind to a halt, and multi-signature wallets have been accidentally, irrevocably locked. There are a lot of reasons why blockchains suck, but that topic is for another article. Instead we’ll see how scaling limitations can be overcome, with a particular focus on Holochain.

EoS, BitLattice, and Holochain are all examples of an evolution on blockchain technology. Technically, they are not even blockchains at all. Rather than a linear sequence of transactions – a series of ‘blocks’ – they are more like a mesh of transactions. They all provide cryptographic control of information, but none of them require nearly as much storage and processing power as Bitcoin and Ethereum.

This next generation of crypto-networks have some parallels to how Einstein uppercut Newton. Rather than spend huge amounts of energy to construct an objective reality, these fledgling networks have a more relativistic perspective. Data is verified locally, rather than through global consensus mechanisms that make a linear, absolute sequence of events.

Your dear author has quested across the globe in search of what is ‘next’, and nothing seems to answer that question as thoroughly as Holochain.

Holochain is not a blockchain. It’s more like “git repositories for each agent which can be published, shared, synchronized or merged via a BitTorrent-like DHT (Distributed Hash Table)”. This shift to ‘agent-centrism’ rather than ‘data-centrism’ is important. Each application has its own Holochain, and each agent has their own chain. Rather than spending an absurd amount of energy to craft a single record of events, Holochain allows people to write anything to their own chain. However, transactions that violate the rules of the application (such as me saying that you gave me all your tokens) won’t be propagated by the network.

What does this mean to real people? Well, imagine Facebook without Zuckerburg sucking up all the wealth. Users get paid for their posts and for the data they generate – if they opt in to their data being sold. Imagine Uber owned by the drivers and riders; AirBnb owned by the hosts and guests. Strangers can interact collaboratively in a high-trust manner, without a profit-seeking corporation sucking up all of the ‘value’ it can.

Holochain is not just a way of verifying and controlling data. It is also a way of hosting that data as well: Ethereum meets the Inter-Planetary File System. When a request is made to see new messages on Holochain’s Twitter-killer, Clutter, the data is sourced from nearby nodes and comes in gradually like flowing water rather than being delivered in a single dump from a centralized database.

When you add something to a holochain, you sign it, append it to your own chain (like in Hashgraph, the latest entry is hashed to confirm the whole history is valid), and submit it to the Distributed Hash Table, which makes sure it conforms to that chain’s rules. You are also receiving and checking other people’s transactions in the process. Each application is its own Holochain, and a cell phone can easily act as a node for multiple Holochain apps.

Yes, there will be an ICO. Holo, the creator of the open-source Holochain, is framing it as an “initial community offering”. Unlike most ICO’s, Holo has taken great effort for this offering to be not just legally compliant, but perhaps even ethical. One of the founders, Arthur Brock, makes a solid point: most blockchain enthusiasts deride ‘fiat’ currencies as coming from nothing. But if a credit – say, a bitcoin – is made without a corresponding debit – then it is also coming from nothing, and is just as aptly labelled ‘fiat’ as notes from the Federal Reserve.

Holo is taking a different route. The credits that they offer during their ICO will be matched 1:1 to debits for their organization. Their organization will alleviate this massive deficit through a 1% transaction fee on the network. Similarly, each user is able to be either negative or positive, however, a much smaller debt limit than the Holochain organization.

Much of Holochain’s core infrastructure is already in place – proof-of-concept applications are already running. Thus, they are framing this as an ‘initial community offering’ – seeking enough Ethereum in order to make the community grow organically over time, rather than simply hoarding more Ethereum than they could ever hope to responsibly use like some upstarts.

Holo has already had a very successful crowdfund on IndieGoGo, primarily offering lightweight computers to act as nodes in the network. Much like Ethereum’s ICO, Holochain’s token offering keeps getting pushed back; perpetually just 2 weeks away. You can stay posted here.

If you are just interested in making mad returns on your cryptoinvestments, the remainder of this article is probably not for you. However, if you have a gut feeling that sexy distributed networks might just change how we interact with each other for the better: read on.

Metatcurrency Project & Ceptr

Holochain stems from a decade-old project re-evaluating some of the basic fundamentals of how we interact with each other. Theis Metacurrency Project in turn gave birth to Ceptr, a re-imagining of computer systems, based on mimicing biological processes rather than using cold, hard, centralized logic. The hope is that Ceptr will sprout out of Holochain, which the group believes is a necessary foundation for their loftier ambitions.

The Metacurrency Project’s starting point is viewing the universe as being made of language. Language is made of:

• Carriers, such as paper, lightwaves, soundwaves, and electricity
• Receptors, which transforms signal A on carrier X into signal B on carrier Y e.g. the ear transforms soundwaves into neural impulses, a microphone transforms soundwaves into electrical impulses, a speaker transforms electrical impulses into soundwaves, a pen transforms muscular movements into writing.
• Protocols, the code, for example, binary
• Signals, the patterns themselves

There are levels here. It’s a fractal. If you read this sentence on a screen, there were the electrons that made light, light that made a letter, letters made words, words made sentences. The receptors are lightweight virtual machines. These are autonomous. Receptors are composed of other receptors. Receptors hold both code and data. Branches of the tree hold data-types (e.g. integer) and data.

What data-type is it receptive to? What data-type does it output? This builds meaning into the computing stack at the lowest level possible

You can’t store meaningless data. You can store an age, or a shoe size, or something like that. You have to say the meaning of it.

These self-describing trees with data incorporated can use different protocols, but reduce to one big interoperable, mashable system.

How might you see this principles actually bring value to your life? Imagine mashing together your emails, facebook feeds, tweets, texts into a single stream. Without organization, this would be a mess of information. However, an intelligent system could start to organize the flow of information; managing workflow with ticketing scheduling. Once the workflow is defined, currencies and wealth can be built on top. In many ways, currencies are used to prioritize how we spend our attention. Currently, Facebook and Twitter manage our feeds for us. They have their own motivations which are not always in harmony with our own well being.

In the same way there is a constellation of protocols, there are a constellation of currencies: for example, we have all probably used our reputations in some way to get money.

Ceptr is a protocol for protocols. It’s a low-level, fundamental protocol for how to structure data, organize processing, and communicate. In other words: TCP/IP for wealth.

Is system-wide consensus really needed for a simple transaction between two individuals? In Holochain’s agent-centric approach, each user marks the transaction in their ledger, and this is made public for those who actually need to know. False transactions are not allowed to propagate through the network, and those who make fraudulent claims are eventually pushed out of the network.

The MetaCurrency project rejects the deeply seated idea that scarcity is a necessary for wealth. “Rather than trying to make one global, anonymous, digital cash, we are interested in building a rich ecosystem of interoperable currencies.”

Non-fiat system of money

One of the most notable ways in which this group diverges from typical understanding of money is the use of ‘mutual credit’. As mentioned earlier, most currencies, including Bitcoin, are based on fiat. They mint the tokens by a line of cod, and trade the resulting tokens that are backed by nothing. This requires global consensus of the state of the ledger. This cannot be done on a Holochain, where local versions of the ledger fall out of sync by design (everyone has their own ledger, in other words). You can’t track the coins. But you can still implement money if you re-consider what money is; a non-fiat kind of money.

Mutual credit systems has been around for centuries. In a mutual credit system, units of currency are issued when a participant extends credit to another user in a standard spending transaction. Picture a new mutual credit currency with all accounts having a zero balance. The first transaction could look like this: Alice pays Bob 20 credits for a haircut. Alice’s account now has -20, and Bob’s has +20.

So instead of coins being issued backed by nothing, they are issued by the peer, in arrangement with another peer, by creating liability/debt. “Managing the currency supply in a mutual credit system is about managing credit limits — how far people can spend into a negative balance. Different systems set different rules about this, ranging from everyone having the same limit (e.g. 100 credits), to having NO limits and leaving the choice up to each person as to whether they want to extend more credit to someone deep in debt.”

Ceptr’s ontology of ‘wealth’ is slightly unusual; when they say their tech can measure currencies, that includes any resource. AirBnB reputation is a currency. A movie that has a high IMDB rating is wealthy in that sense. A college degree is a form of wealth. And of course, traditional paper money is a currency.

Too narrow a view of wealth is what causes negative externalities. You burn coal to make money, but ruin the air; you didn’t have good air on your balance sheet.

Wealth is currently one-dimensional. Ceptr is trying to build a more complex, expressive idea of wealth, analogous to the shift from oral knowledge to written. Wealth in their terms can be subjective/expressive, like satisfaction. The proposed system allows any receptor to make a statement, then consensus is negotiated. If they don’t come to consensus, that’s fine, they fork, or cancel the transaction. Each node has full authority to process its own transactions.

If Alice receives a transaction request from Bob, she checks his signed transaction chain to arrive at the current state of his ledger, and “If both nodes are in an appropriate state which allows the current transaction, then they countersign the transaction and append to their respective chains.”

When your node appends a mutually validated and signed transaction to its chain, it has updated its local state and is able to represent the integrity of its data locally. As long as each transaction (link in the chain) has valid linkages and countersignatures, we can know that it hasn’t been tampered with.

Most distributed apps have no need for consensus with the whole world. If I want to book your room, you & I have to make an agreement, no more. This seems to me a more in line with decentralization than what Ethereum or Bitcoin can provide.

If you’d like to learn more, a solid section of links is provided below. More than all of this technical knowledge, however, the reason why I support Holochain is its community. It is both literally and figuratively a magical group of people. When the authors met them in San Francisco, they were literally living cave like rooms, no bigger than the size of a bed. None of the people seemed to be there to get wealthy: all of them were passionate about building something better. Of restoring the internet to its former glory, before behemoths sucked up all the value.

RESOURCES

– Holochain Greenpaper

– Mutual Credit: Currency without Consensus

– Holochain Gitub Repo

– Holochain Overview <10 Minutes

– Two short videos for understanding what a receptor is: [1] [2]

–  Video on receptor-based computing

–  An hour presentation on Ceptr.

Note: I have not received any compensation from Holo other than a lovely meal at their former group home – the Holodeck – and a deep meaningful gaze into their spokesperson Matt Schutte’s eyes. \International pirate of intrigue Conor O’Higgins contributed substantially to this article.

This article has been edited publication to reflect the distinction between Holo and Holochain. It is republished in the P2PF blog with the author’s explicit permission.

Featured image from Ibrahim Boran on Unsplash

The post What could come after blockchain technology? The what and why of Holochain appeared first on P2P Foundation.

Holochain : The Blockchain picks up a Dimension

Jamie Klinger: Bitcoin’s central mechanism — the Blockchain — is a monumental achievement in computer science. And from that central achievement, many other cryptocurrencies have emerged attempting to improve the model in one way or another. Holochain has come along to further decentralize, maximize efficiency, and allow for all types of interfaces and applications to be built with it.

Holochain harnesses the parallelism of BitTorrent to power fully distributed apps.

Holochain is a data integrity engine for distributed apps

An Engine is “a machine with moving parts that converts power into motion.” (Source: Google)

Data Integrity is what blockchains and torrents have been doing. They make certain that the data on my computer is the same as the data on your computer. They make certain that the order of the data is exactly the same, otherwise there would be a malfunction.

Distributed Apps are apps that run locally on your personal device (as opposed to in the cloud).

https://www.pexels.com/u/lumariia/

A centralized app like Snapchat offers you a small file (the app) to download that sends data through centralized servers.

A decentralized app like TenX runs on a decentralized blockchain (Ethereum).

A distributed app would run locally on your personal device and would offer peer-to-peer connections.

So if Snapchat were a distributed app, you and your friends would all have the (d)app on your phone, and when you send a photo, it would be sent directly to your friends and only to your friends. No intermediary servers. No intermediary blockchain.

Another way of seeing distributed apps are as scripts (executed code) that hook into distributed databases, compiling data.

Holochain allows you to build interoperable apps for communication

https://www.pexels.com/u/gratisography/

If you want to build a Twitter clone on Holochain (which, incidentally, its core team has already started, and it’s called “Clutter”), you decide on the rules for message size, hashtags, and whatever other parameters are important to you. Maybe you decide that for your specific Twitter app, it is crucial to segregate posts by the person’s color preference, so in the creation of your app, you hold a sign-up requirement for people to share their favorite color.

Now, when you post a poll and people begin to respond, you can have their answers sorted automatically by the respondent’s favorite color.

Ok, so you made Twitter with color preferences, we’ll call it Color-Twitter. That’s not the most useful feature in my opinion, so I make a poll asking people to vote on a more useful parameter and gather statistical information. The group votes and they choose age. We then request to the creator of the app to add in this parameter to Color-Twitter. Here’s what happens next.

https://www.pexels.com/u/sebastian/

The app creator likes your idea

Congratulations! The app creator wants to integrate your update! They build the new functionality into the app, but since it is a distributed system, everybody who is using the platform needs to download the latest version.

The founder will run both versions (and hopefully many people will do the same to facilitate the transition) where the users who have upgraded will leave one final tweet saying, “I no longer post here. Find me as HonestlyJamieK on ColAge-Twitter, follow this link.”

Some users may choose to stay behind and continue using Color-Twitter. They will not be able to interact with ColAge-Twitter accounts. But it could be possible in the future that ColAge-Twitter accounts can interact on the old chains of users still running Color-Twitter. This is because the parameters for Color-Twitter have been met by all users, but the parameters of ColAge-Twitter have not been met by all users.

Color-Twitter can only exist as long as there are users running that specific app. If all of Color-Twitter users go offline and/or upgrade to ColAge-Twitter, it will no longer be accessible.

Users who have chosen to use ColAge Twitter are now required to register their age before being able to join..

Once Ceptr — a parent project encompassing Holochains and related tech that would further simplify interoperability — is integrated, it could be fully possible that if another application already holds the information required by this app, Color-Twitter could automatically make a request for access to this parameter. This can be looked at a little bit like an auto-fill feature. In other words, by filling out your age once, you might never have to fill it out again, you would only need to approve access to that information by a specific app that you downloaded.

https://www.pexels.com/u/pixabay/

The app creator does not like your idea

If the creator does not believe that this is the vision of their system, they can refuse to upgrade and remain with Color-Twitter.

Now, the same thing happens as before except that the founder of Color-Twitter is the one who is left behind. I can take the original app’s code, fork it, add the parameter of age, and launch it in holochain as my separate app. People can now use my app to broadcast tweets too if they choose.

Just like in the other example, if my new app follows all of the rules of the Color-Twitter, when someone broadcasts on the ColAge-Twitter app, they can (if they choose) simultaneously broadcast on the Color-Twitter app. As long as the rules of all the apps validation rules (color for Color-Twitter, color+age for ColAge Twitter) are met, you can broadcast across as many apps as you are running; the holochain-equivalent Facebook, Flickr, Slack, etc.

https://www.pexels.com/u/pixabay/

Distributed, not decentralized

Want to post on the Color-Twitter? I hope you’re prepared to share the network load. Holochain apps will be light enough to run on your cell phone and will be efficient enough to only be grabbing the information you request at any given time.

If the system was decentralized, we would require upgraded nodes for ColAge-Twitter to be able to run. With a distributed system, it is entirely individualized and is up to the user base to voluntarily follow along. However, if your dApp is financially sustainable and you want to provide your users with access without requiring them to maintain a shard* of the system, there will be an opportunity for dApp maintainers to run nodes/servers.

*Each app consists of a series of shards distribted across the userbase sharing the serverload, comparable to torrent functionality

https://www.pexels.com/u/kaiquestr/

Lyft & Uber vs La’Zooz & Holochain

La’Zooz was a blockchain-based ridesharing app. It functioned as a self contained system. The network was supported by its mobile app users running the app and earning tokens, who were supported financially by token purchasers, which worked by having drivers accept the tokens. They completely removed the middleman that is Uber. While that project itself has fallen to the wayside, the idea of it seemed completely obvious to anybody who has ever played with blockchain — and it won’t be going away.

Why pay a middleman when the system can be taken entirely out of the hands of a corporation? There actually are a number of very important reasons why Lyft and Uber need to exist today and why the blockchain isn’t ready for them just yet. There are legal challenges, security issues, insurance requirements, etc., that make a purely peer-to-peer system for ridesharing a bit out of reach. But in a few years, we can expect smart contracts to enter the equation and solve many of these problems.

Decentralized and/or Distributed reference systems are right around the corner. We can create parameters for verification of proper insurance, background checks, and any other requirements for potential drivers. This would function similarly to a smart contract, allowing for users to move through to the next level of verification once accepted through the former.

And once the Uber-clone is up and running, somebody can decide to fork it and generate an eco-friendly version which would only support drivers using electric cars. Eco-Uber might cost more, but it would offer a new parameter to its participants.

https://www.pexels.com/u/gratisography/

There Are Too Many Apps!

After Eco-Uber started, somebody created Red-Uber for red cars and Blue-Uber for blue cars. If the driver is subscribed to the Mass-Join-Drivers App, and fits the appropriate driver parameters, they can automatically (with permissions) becomes a driver for all of the latest apps.

For users, imagine someone now has a list of options to choose from (Red-Uber, Blue-Uber, etc) and it’s just too many unimportant choices for them. They don’t care about who drives them from point A to B, they just want to get there quickly.

Just like with Color-Twitter and ColAge-Twitter, if you as a broadcaster meet all of the requirements, you can broadcast to whomever you like, even multiple applications simultaneously.

So the user sends out their lift request to all of the appropriate driving apps. Once the first driver responds to the call, it will ping the user and then automatically cancel all of the other lift requests.

Holochain is like having access to all of the capabilities of all of the Internet apps simultaneously without needing an API, because the languages are entirely compatible. Holochain is the equivalent of having an IFTTT layer built underneath the entire Internet.

It is important to note that some of the deeper features described in this article will require self-describing protocols which have been built into Ceptr, a highly related but (currently) separate sister project.

The Ultimate Dashboard

Today, we are forced to settle for what Facebook’s algorithm decides to show us. Our capabilities for manipulating our feed are extremely limited. With Holochain, we are only limited to the parameters set by the applications. And if you and your friends don’t like those parameters, you can change them with a forked app!

And because the information exists on a layer on top of the app and isn’t held proprietarily, you can mix and match your feeds to your heart’s content. I might create dashboards for all different circumstances and be able to jump between them seamlessly. Everything dog-related from all of my app channels from users who have posted at least 10 times could be one of my dashboards. All pizza-related posts by users with a high reputation level who live within 10km of me could be another dashboard.

Because the information isn’t forced to sit uniquely in each application, the end user can create a customized experience with the parameters of their choosing. The possibilities for data mining and consensus building are endless. End the data-monopolies of Facebook and Google. If we choose to use Holochain, we choose how our information is shared and empower the commons to utilize it for collective growth and understanding.

Sources:

• CEPTR Home
  
• Holochains for Distributed Data Integrity
  
• Arthur Brock’s Personal Web Site | Arthur Brock 

Lead image: https://www.pexels.com/u/invisiblepower/

The post What is Holochain and why does it matter? appeared first on P2P Foundation.

But what does this mean for fans of cooperation and a more sustainable, steady state, or circular economy? Is this is an opportunity to rebuild the resilience and community bonds that the original co-op coins offered our societies, by utilising new digital technology?

These days, the term “crypto currency” seems to have become synonymous with blockchain based currencies and the idea of an Initial Coin Offering (ICO) seems to be seen as a way to raise millions in “investment” from nothing more than a website and a white paper. At the Open Co-op we’ve been talking about alternative economic models, and digital currencies, for decades because we believe an alternative economy, which places people and the planet before profit is an essential part of the future. If the neoliberalist capitalist system remains the only option the future looks very bleak indeed. So we’re excited about all the experimentation that’s going on – and the range of alternative currencies being created. But we’re equally worried about the “crypto bubble”, sordid speculation and the insane energy consumption of Bitcoin, which has been (possibly dubiously) estimated to consume more power in 2020 than the entire world does today.

To be clear, a crypto currency does not have to based on the blockchain. A crypto currency is simply a currency that is cryptographically encrypted (meaning: encoded) to make it secure. So when we talk about crypto currencies here we do not just mean systems that use the blockchain, we mean any alternative, digital currency.

Equally, an ICO does not have to aim for wild increases in valuation, it’s simply a term that is used to describe the initial launch and distribution of a new, alternative currency. So when we talk about ICOs here we do not mean “ponzi schemes” or a means of raising huge amounts of money through crowd funding via speculative tokens, we mean launching and distributing a new, alternative currency.

These distinctions are important because if alternative currencies are to be taken seriously and facilitate a path to a more sustainable, steady state and circular economy then it is essential that these terms don’t get totally tarred by the Bitcoin bubble and blockchain brush.

A well designed Co-op Coin could catalyse the co-operative economy

The idea is simple; to run an ICO and create a co-op coin, with the specific purpose of facilitating the growth of the commons and the co-op economy.

There are so many alternative currencies out there already it seems important to do a quick review of the existing options:

• RChain co-operative is is building a platform for ‘scalable blockchain applications’. The Co-op is the organisation that develops the open-source RChain platform software, whilst RChain Holdings is a for-profit entity whose mission is to grow the ecosystem around the RChain platform.
• Colu Local Network is a blockchain based payment network that allows communities to issue their own currency and use it to incentivise merchants and consumers for buying and selling with fiat currency.
• Steem is an incentivised, blockchain based, public content platform. Their first app, Steemit, is a blogging platform featuring tokens which are distributed to content creators and curators daily as rewards, based on community voting.
• Slightly more on topic, Boyd Cohen is working on an ICO for the Collabor8 token with the goal of raising funding to create major platform coop infrastructure that can be used by platform cooperatives to shorten the runway to viability. The collabor8 ‘social currency’ seem particularly  interesting because it includes an element of social reputation…
• Bill Olivier also seems to cover a lot of the right ground in his doc on Co-operative Exchange Token, although he seems hampered by the belief that ICOs (as they commonly work) are not a plausible option for co-ops, whereas we believe an ICO can be designed to work ethically.
• FairCoin is one of the more ethically minded alternative currencies, which aims to “implement fair value exchange on a global level” using a unique “proof-of-cooperation mechanism”. Again, this is a blockchain based system but one which uses “collaboratively validated nodes” (CVNs) to secure the network. It’s a clever system but one which is still prone to speculation which undoubtedly undermines their proud claim that “FairCoin now is the the most ecological and resilient cryptocurrency”! Since their “air drop” (basically, dumping a load of coins around the internet to be picked up by whoever gets there first, with some limitations on claims per person) the “value” of a Faircoin has increased hugely and the community “claims” one Faircon is now worth €1.2. These claims about Faircoins’ value must be decided at  a General Assembly via “consensus reached through an open, participatory process of discussion. Not the invisible hands of the market…” and the other Fair ventures like the marketplace and their growing community of local nodes do make this a valid and vibrant economy. But since everyone involved in Faircoin obviously has a vested interest in its increasing valuation and since Faircoin can be traded on at least two exchanges it is just as prone to speculation as gold, or Bitcoin. In fact, their page on “value” includes a slightly humorous request for speculators to leave Faricoin alone: “If you just want to get rich soon and intend to “pump and bump” – please consider other AltCoins to speculate on.” Not the most robust means of securing a stable, inflation and speculation proof system!
• Coinsence is a platform for social collaboration that aims to “empower social and ecological engagement and support [by] building a collaborative, fair and sustainable economy”. Coinsence is new and only has a small community at the moment, but they seem to have a identified a clever model via which they issue different tokens to represent community currencies, voting rights and asset shares. Tokens can then be allocated by communities to provide incentives for ‘projects’, as well as being used as a means of exchange. These ‘social currencies’ have a limited store of value (making them less prone to hoarding and speculation) since they include high demurrage and transaction fees. The fees can be democratically re-invested into selected community projects. It’s not entirely clear how Coinsence secures the transactions, or if their technology is at all scalable but their model includes a lot of the right ingredients for a vibrant co-operative economy.
• Duniter is a crypto currency software system, which means it provides the ability to create currencies. Again, it’s blockchain based but its’ currency code includes a Universal Dividend (for currency creation and distribution) and is based on a clever concept; a Web of Trust via which each member is recognised (its identity is trusted – not its actions) if they satisfy the WoT rules which require the members to have enough signatures (links) from other members. These signatures (links) expire over time so the WoT is a clever way to ensure that people are who they say they are via social validation.

Then there’s a range of other middy interesting (again, all blockchain based) crypto currencies which are ‘backed’, or at least vaguely related, to other assets like solar panels and mangrove trees:

• Solarcoin is issued to owners of solar PV systems, for free, for every 1MWH (Megawatt hour) of electricity their PV system generates. Anyone can register their solar PV system with the SolarCoin Foundation and a typical 4kW domestic PV system could expect to earn just over 5 SolarCoins a year, every year over the 40 years the project will run. As government support for feed-in tariffs are withdrawn SolarCoin could become an important incentive to help encourage people to adopt greener energy – and/or another means to engage in wild speculation.
• The HCP coin for mangrove trees was helped into life by an ex JP Morgan banker and a guy who runs a “net positive” surf board company that is buying HCP coins to help his company become carbon positive. It’s another novel idea with clear, carbon reduction objectives but with worrying possibilities given a companies ability to ‘cash out’ from their carbon reducing investments.
• There’s not really anything co-operative, or particularly sustainable, about the TIME token but a list of this nature would not be complete without making reference to ChronoBank, who raised $5.4 Billion via their ICO. Aiming to “disrupt the HR / Recruitment industries” with a crypto currency based on the blockchain, they claim that “labour is abundant enough for everyone to have access to it, yet scarce enough to be valuable. It is the most tradeable resource in the real economy. Labour Hour tokens will tokenise this resource. Because they are backed by real labour, they are absolutely inflation-proof and have next to zero volatility” At the time of writing an hour of TIME was worth about $36 but the day before it was worth $32… Looking at the fluctuating value of the token over time seems to slightly undermine their “zero volatility” claim.

If you’re aware of other crypto currencies which are of interest to the co-op economy please let us know in the comments below.

What is clear from this list is that creating crypto currencies does not seem too hard. We can dream up a million ways to ‘back’ or link a currency to something, and there are just as many ways to distribute.

The hard part of currency design seems to be incentivising the type of economic activity which leads to the kind of world we want to live in and avoiding hoarding and speculation. The list above does not seem to include a single currency that is “speculation proof” or many ideas to addresses the speculation issue, other than Coinsence’s mention of high demurrage, which can cause other issues.

What’s wrong with speculation anyway?

Fans of crypto seems to be missing the fundamental point that any increase in value (of any cyrpto currency) is not really “money for free”. It is money we are borrowing (yet again) off the planet and future generations.

OK, so this “money” is not created as interest bearing debt (like most “normal” money) by banks. It is created by human perceptions instead. The global mindset imbues these newly created digital assets with virtual value via our subconscious belief in scarcity and our grotesque affinity for greed.

But when we “cash in” those perceptions by converting our digital coins to GBP or USD and spend them on (often finite) resources like land, or building materials, or solar PV – all of which have an environmental impact – we are using up those resources, quicker than we would have been able to do without crypto currencies.

You could argue that Solarcoins are incentivising the installation of PV, and that is a good thing

but, when their value increases, they are still extorting real tangible, natural, value (things like birds and forests and trees) into a mythical pool of financial value – and ultimately that will only ever speed up the destruction of the natural environment.

So let’s not get too hasty about imagining a scenario where PV is “more than free”. All our actions in the real world have environmental impacts and just because crypto currencies have found a new way to externalise those costs it does not mean we should be slapping ourselves on the back about it! It is our children and grandchildren that we are forcing to pay for this new, naked emperor.

It is essential to keep the true “costs” (including the power consumption issues) in mind when thinking about ethical alternative currencies.

Beyond blockchain – thinking outside the blocks

Of all the current crypto currency options Holo stands out because it based on the Holochain (a more efficient way of encoding transitions)  and it’s currency is not only going to be based on “mutual credit” but its also going to backed by computer processing power. It’s well worth watching this great video from Philip Beadle to get an idea of how blockchain works and the differences between Bitcoin, Etherium and Holochain – especially from an app building point of view.

Holo are just concluding a very successful crowdfunder which aims to provide the ‘bridging technology’ to bring holo into the mainstream. The ‘hosting boxes’ (holo ports) people have bought through the crowdfunder will allow non-technically minded people to simply plug a spare hard drive in to their router to provide storage capacity and processing power on the Holo network.

The Holo network is nothing short of true peer-to-peer. Meaning that users can access each others computers directly, without the need to go via Google’s or Amazon’s servers. In fact, they can host and runs applications on the Holo network, in much the same way as BitTorrent works. This provides incredible opportunities for scaling (as more peers join the network, everyone benefits from ‘the network effect’) and, equally as importantly, the opportunity to re-define how the applications that run on the network are designed to work; it solves the entire “net neutrality” issue completely. Holo, and the people behind it, have designed the Holo network to work in a more “user centric” way than the way the web works today.

The Holo ICO is a very HOT topic. Art Brock, one of the founders of the project, has written about building responsible crypto currencies and agrees that

Cryptocurrencies do not have to be gambling tokens created from nothing. They can be responsibly connected to assets, promises, or real-world value. They don’t have to re-create all the speculative money problems that they were supposed to be solving.

Currencies can be optimised to be a useful means of exchange, or a useful store of value, but rarely work well when trying to be both at the same time. “Holo fuel” (also known as HOT, or Holo Tokens) are designed to provide a medium of exchange on the Holo network. Their ICO requires users to buy HOT with ETH (another crypto currency).

Given that buying in to the Holo ICO with ETH will be at a specific price, we were keen to understand how the value of HOT has been calculated, how it hopes to avoid being linked in value to ETH and other crypto currency prices in the future, and how HOT will avoid suffering from speculation? We put the question to Jean Russell, project lead for the Holo ICO, who answered as follows:

HOT is set as 10k x ETH for the launch. But that is just the initial set. Once the network starts, then 1 HOT = 1 Holo fuel. And Holo fuel is about the value of hosting in Holo.

Surely there will arise an exchange that will convert ETH to Holo fuel, so they will be relational in some way. However, even if the Ethereum system collapses, Holo can continue and the value should not be negatively impacted. We believe that we will be much more than 10,000x faster/cheaper than Ethereum (mostly because that system in some ways was designed to be difficult and slow as part of the security). Our system is designed for scalability and resilience (DHT) so it should get better as it scales. Anti-fragile in fact.

The initial price (and the practical network value the community gives it) will be a gap that speculators can guess at. Thereafter though, it should remain fairly stable as it is really about the asset and the value of that asset in the marketplace.

I can’t give the deep philosophical explanation that Art can, but what I hear from him is that mutual credit along with asset-backing pretty much assures that it can’t be a gambling game of high stakes. Those who invest early when there is high risk of the platform getting off the ground will gain some benefit, yes. But then it should achieve a meta-stable state.

We have high hopes for Holo. With Holochain offering a viable alternative to blockchain it should, naturally, benefit from “second mover advantage” by learning a lot of lessons from its predecessor. The way it has been designed from a holographic, and sociocratic perspective seems to fit the requirements of a co-operative economy which distributes ownership and governance to the lowest possible levels.

If their ICO, which they are calling an “Initial Community Offering“, goes well it will be very interesting to see how this first major alternative to the blockchain based systems develops.

Launching a Co-op Coin?

If Holo is successful and a vibrant peer to peer community emerges, perhaps the Holo Network would be the place to launch a dedicated co-op coin? Much of the hard work, in terms of underlying infrastructure, will have been done so a launching a co-op coin on holo should not be as hard as starting from scratch. The main issues would be achieving agreement between a sufficient number of stakeholders about a co-op coins parameters, mainly it’s issuance and the management of supply and demand.

It seems to make sense that a co-op coin could only ever be spent at co-ops, thereby facilitating Principle 6 (co-operation between co-ops) by giving co-ops a specific currency in which to trade. Mutual credit also seems to provide a sensible means of managing supply and demand.

One idea for co-op currency creation could be to issue a set amount of Co-op Coins each month or year, to every member of every co-op that registers with the coin issuer. This would mean the coins are created and distributed as far and wide as possible, and provide a basic “co-op citizen’s income” whilst, at the same time, it would create a global directory of co-op members – something which would massively benefit the co-op economy.

Another, additional, idea to create co-op coins would be to issue an amount of co-op coins (again, to every member of every co-op that registers with the coin issuer) which have to be ‘spent’ into existence. If these coins could only be allocated to commons-building and co-op projects the Co-op Coin would incentivise the growth of co-ops and the commons. And once Co-op Coins have been “earned” in this way, the workers who completed the projects’ tasks would be able to spend the coins in any co-op, breathing further life into the co-op economy.

There are probably other, better ways to issue Co-op Coins and we’d be interested in your thoughts.

How should we enable the creation and distribution of new currency within the co-op economy?

Avoiding the speculation issue seems the hardest nut to crack. Even if there is no way to “cash out” a Co-op Coin via a currency exchange hungry co-operators might still look to exploit discounts on goods they could buy with co-op coins and sell elsewhere in traditional currencies. The only sure-fire way to avoid speculation seems to be for an economy to be ubiquitous and all encompassing, by providing everything a person needs and a method of transacting that is more efficient than all other options. Designing complimentary currencies, which satisfy the different needs to provide a “store of value” and a “medium of exchange” which work together in efficient symbiosis also seems essential for a sustainable economy.

With the right design it seems clear that a well managed ICO for a Co-op Coin could provide incredible funding opportunities for the co-operative economy. Imagine if the surplus of every co-op was converted into Co-op Coins and allocated to co-op building and commons-creation projects… Together we could create an alternative economic model to the extractive version that exists today; a clear path to a more co-operative world. Ignoring the possibilities of crypto currencies is no longer an option for anyone with an interest in a better future.

Photo by mulberrymint

Originally published in The Open Coop

The post Thinking outside the blocks: What would a co-op coin ICO look like? appeared first on P2P Foundation.

I know some of this may seem idealistic or unreasonable, but if we’re going to raise the bar for integrity on ICOs, we may as well set our sights high.

Caveat Emptor: When I started writing this post a couple months ago, my lofty ideals had not been dragged through the shark-pit that the ICO space has so quickly become. I have been humbled by the process of seeing just how hard it can be to stay true to high ideals for maintaining integrity.

NINE WAYS TO RAISE ICO INTEGRITY

I’m going to skip over some pretty basic things, like making your project open-source, sharing your smart contract code publicly, getting it security audited, and such. And I also want to specifically note, we are not doing an Initial CoinOffering, but an an Initial Community Offering, because Holo fuel is crypto-accounting-based not crypto-coin-based.

1. Measure Actual Demand for Your PRODUCT to Scale Your ICO Supply

It’s tempting to believe all those buyers of your coin are banging down the doors to get your product. Some surely are. However, the fact that people will buy a poker chip to play with should not be confused with having found the early adopters for your product. In fact, if these two things are distinct, how do you know there’s actually demand for your product at all?

I’d suggest it is possible to find ways to have your early adopters pre-commit to your product, not just purchase gambling chips. Doing this seems more reasonable for measuring demand than a token they may ditch before you ever get to launch.

In our case, we want to know who will run P2P apps that can be built on Holochain. So, we launched a crowdfunding campaign to sell Holo hosting boxes, and tickets to dev trainings or hackathons where people build Holochain apps. In each case, a purchase shows us someone who will either host and run apps, or build them. Our token supply is then scaled to support a host/dev ecosystem of that size (times a growth multiplier) over the first year.

It was quite surprising to see how much demand there is for what we’re building. We became Indiegogo’s #1 trending project in about 6 hours. We raised $90K or 40% of our goal in the first 24 hours. Unfortunately Indiegogo’s legal team then delisted us because they were uncomfortable about our project being connected to cryptocurrencies. Even while hidden from being displayed on their home page and category displays, we still met our $200K minimum goal in just 78 hours. I’m excited to see what happens when our ICO launches and people realize that buying from our Indiegogo campaign is what unlocks more token supply each day!

A crowdfunding campaign may not be the best way to demonstrate demand for your project, but I’d suggest you find your own way. How might you find sponsors or customers willing to put up front money for use of your product? If you don’t try, how do you expect to separate mere gamblers from your actual early adopters? How will you test if you actually have a market for your product or identify how to communicate with them?

2. Seek the Crowd, Not Just the Funds

My last post covered why this is an important orientation to be rooted in if you want to reach your crowd of actual users and early adopters, not just crypto speculators. If your sale doesn’t last long enough for regular people to get in, then you are not getting your real stakeholders on board, for example, when your offering sells out in 30 seconds.

What if you were to code an escrow account that gathers all the purchase bids, maybe caps them so no one could buy more than 10% or so, and then transfers coins to accounts pro-rated by what portion of the actual bids they placed. This would at least allow everyone to get something, rather than sell out in one block to the people paying the highest gas prices.

In fairness, this isn’t easy to do. When we tried to implement that approach in Ethereum, it did not prove feasible to do on chain. We had to split the work across multiple blocks because of gas limits, and it gets expensive really fast. We considered taking the calculations off-chain from Ethereum to Holochain, but decided it may be too early in the review of our own security model to expose all the funds for our ICO as such an early real-world test case.

Given how easy this kind of computation is to do on Holochain, it was quite a wake up call about how little practical computation smart contracts can actually do, and how immature most of the state-channel/off-chain integration systems were. So we all get to watch as some people trading pictures of kitties brings the world’s global computer to its knees.

In the end, we opted for a simplified approach of reserving part of the token supply that your Indiegogo purchase unlocks for a brief time. This way big crypto whales paying higher gas fees or leveraging automated processes can’t just swoop in and take all the tokens in our sale. Regular people — hopefully our real early users — get a reasonable amount of time to set up a crypto wallet and decide if they want to buy the token supply they unlocked.

3. Be Radically Honest

For me, there’s something wrong about the incongruence of seeing people scramble for “easy ICO money” while setting up themselves up as a non-profit, charitable foundation. I’m sure some groups truly do have noble motives to foster good things and a good community with their project, but much of this approach just seems like legal shenanigans.

Everyone is guessing about the legal status of most things happening in this space. Nobody knows for sure how cryptocurrencies or fundraising by crypto will end up getting treated legally. There are very few places with actual regulatory frameworks designed to enable ICOs and regulate decentralized currencies.

Therefore much of what is happening is rhetorical positioning, and may get determined retroactively. Equity. Commodity. Utility. Security. Regardless of what you call it, it may end up getting based on how, when, and whether you delivered what you promised. It can be tricky to cut through the red tape from lawyers to try to just “tell it like it is.”

In order to use accept cryptocurrency in an ICO and have bank accounts where we can deposit the money, we have to gather KYC (Know Your Customer) information for Anti-Money Laundering laws. Unsurprisingly, banking turns out to be one of the more challenging things to do if you’re a crypto company (Monopolies like to protect their turf.).

Even if it means scaring people away from our offering, I feel the best thing to do is be as truthful and straightforward as possible. It’s best if they walk away now rather than get angry later because they didn’t want what we’re actually providing. We try to make it clear what we’re actually doing, even if it doesn’t match the typical crypto-anarchist political ideals.

For example, Holo fuel has transaction fees to sustain the infrastructure and app ecosystem. People immediately assume centralization — that transactions come through us, or that we’re party to every transaction. We’re not. In fact, we don’t even receive copies of every transaction. They’re distributed around the DHT so a bunch of people have them, but without a global ledger, we’re not holding them all.

Even though we know many cryptocurrency people are likely to have a negative reaction to these fees, it is actually the responsible thing to do in our design. So we’ll just have to bite the bullet and re-explain (in forums, chats, emails, etc.) how our currency is actually less-centralized than most cryptocurrencies, even with transaction fees.

4. Deliver Substance Beforehand — Show Don’t Just Tell

Cryptography and decentralized computing is some pretty dense stuff. Many people seriously involved in the space don’t have a solid technical understanding of what’s going on under the hood in crypto projects. Certainly, most people thinking about participating in an ICO are in no position to differentiate between the real deal and smoke and mirrors.

So, even if your tech plan is solid, having a team that can work together and produce results is a whole other thing. Bringing complex tech from design, to build, to usability, and then into widescale adoption is something far more tech startups are failing at than succeeding. Before asking people to fund you, can you deliver something — a proof-of-concept, prototype, or alpha release? It doesn’t have to be bulletproof yet, but it can demonstrate you have a team that can at least get something across the finish line.

Remember, if you don’t limit your ICO to accredited investors who can afford the risk, then you’re asking regular folks for their cash. It’s only fair that you and your team put some skin in the game too. A white paper plus some marketing materials and angel funds for expensive ICO lawyers is not what I’m talking about. Have your team do some work for which their payout is in the same currency created in the ICO.

We held our first hackathon for people to build things on Holochain in March 2017. Six months later we finally felt ready to call something an Alpha release, and we expect to have many dApps and a handful of currency systems built on Holochain before our Holo fuel for hosting next-gen crypto apps goes live. We put years of design and a solid year of software development into our platform before asking people to purchase our hosting credits.

5. Don’t Take it All Up Front

Some ICOs almost accidentally raised hundreds of millions (like Bancor or Tezos), others (like Filecoin or EOS) targeted raising half a billion or more. They have argued these figures are justified because they have to raise everything up front. But actually, that’s just a design decision they made. And if you raise that much money, you’re going to have to devote a significant portion of your attention to protecting and managing those assets.

If you can’t structure your crypto infrastructure with incentives that pay for maintenance of the infrastructure, maybe you haven’t found a sustainable design yet. How can you include a revenue model for the infrastructure so everything does not need to be taken up front, without compromising the values of decentralization people seek in crypto systems?

Holo is sustained by nano-transaction fees on the micro-transactions used for hosting services. We do this without centralizing transactions, records, or enforcement. In fact, we don’t even have copies of all transactions (although the network as whole does). The pattern of mutual enforcement ensures that when a large enough transaction fee has accrued in someone’s account, nobody will do the next transaction with them until they pay it.

As someone who has been designing a wide variety of types and structures of currencies over the last decades, I see many viable approaches for building in a revenue model to sustain the infrastructure. What if software updates carried similar rewards as mining blocks? Shouldn’t a currency reward the people maintaining the software and security as well as those running the hardware?

6. Establish a Reasonable Cap

Once you’ve designed system updates and maintenance into the operating revenue of a currency, then wouldn’t it make sense to limit how much you raise up front? Why create unnecessary risks in managing funds, failing to deliver, getting beat to market, or having a security flaw in your early designs which leads to complete loss?

Doesn’t it make more sense not to get greedy and to cap the ICO at a reasonable amount to launch your system plus a little extra runway for unforeseen obstacles? We expect to have our systems operating within 6 months, so we’re capitalizing our first year, just to be safe. Extra capital can be used as reserves to liquidity and backing for the currency.

Once you’ve included a way to generate sustaining revenue, and you don’t have to raise all future capital in one Token Pre-sale, then you can set a responsible cap on your ICO. Having hundreds of millions in cryptocurrency may seem like a dream come true, but it can make you a target, or disrupt your team and become as much a problem as a solution (look at Tezos).

Even though we are arguably providing a solution which encompasses everything EOS (now in the billions) and many other huge ICO campaigns have promised, we are capping our sale around €25 million. This helps us stay focused on delivering the goods instead of gambling on crypto markets with other people’s money.

7. Minimize Risk of Being Considered a Security (for Everyone’s Sake)

Many people know about the Securities and Exchange Commission and the fairly tight regulation of investments in the U.S., but most countries have laws to protect people from being defrauded by people selling bad investments. The criteria for defining a security are complex, but one significant dimension is about risk. The more you can protect your ICO participants from risk, the better off everyone is.

Disclaimer: I am not a lawyer. Do not consider this to be legal advice.

Typically selling equity in a venture puts it directly into the class of being a security and a shared risk. Many groups are focusing on selling utility tokens with a clear usefulness, or commodity tokens with some kind of clear value. There’s a framework some law firms have developed as general guidelines for navigating these categories.

In our ICO, we pre-sell hosting credits. Participation is simply a pre-purchase of hosting services for P2P apps — an item with actual utility in a $200 billion dollar hosting market. Our cryptocurrency functions like when you buy $20 of credits at a stock photo web site and spend a few dollars on rights on different photos, and the site uses this to determine which photographers get paid.

Holo sells hosting service, which gets provided by various hosts, who get paid in internal currency for their computing power. So, in order to lower risk, rather than just creating speculative coins, we are using a business model with an established precedent in a rapidly growing industry, and leveraging traditional accounting methods augmented with cryptographic immutability.

If you run a HoloPort hosting box, build an app, or install Holo software on your own server, you are a direct participant in generating value in that ecosystem. Because these participants provide direct value, rather than primarily relying on investment in value produced by others, our hosting credits might not be deemed a security.

Another significant way to reduce risk is to shorten the timeline between ICO and the launch and use of the goods/services you’re offering. Additionally, you can define clear and direct benefits, services, products, or rights that people are purchasing (rather than speculative collective upside of future value). Also, you can limit your sales to “qualified” investors (people rich enough to take such risks). Or if you’d like to keep your ICO accessible to normal folks, you can limit purchases to small, low-risk amounts. Combining all of these approaches significantly lowers everyone’s risks.

Are there creative approaches you can take to reach and serve a broad enough audience that your real fans and early adopters can participate? How might those approaches let you access people in the U.S. and other places with restrictions on securities?

8. Better Currency Design and System Dynamics

I’ve written about this elsewhere, but I don’t think enough people are questioning fundamental currency design and dynamics nearly enough. Cryptocurrencies don’t just have to be speculative tokens detached from any real-world value. They don’t have to be coins magically created from nothing.

No matter how cool your idea is, the lid on the success of your future crypto platform comes down to how well you designed the currency that powers it. If it doesn’t move value to the parts of the network which sustain it, it will die. If it doesn’t create the right flow dynamics, it will become imbalanced. Great tech that is only accessible to the ultra-rich, or the ultra-techie because of what it takes to buy into the currency that runs it, is not actually great tech at all.

What’s worse, although blockchain claims to be a decentralized platform, most blockchain systems use either Proof-of-Work or Proof-of-Stake as their consensus algorithm with incentive rewards to nodes providing those proofs. Both of those algorithms are actually approaches to centralizing power and control. In both cases, the rich get richer. It’s no accident that Bitcoin, not even 10 years old, is already more centrally held, issued, and controlled than the national currencies it sought to replace.

The problem here is most everybody assumes there’s basically just one way to run a cryptocurrency, and people have no idea the hundreds of choices available which fundamentally change the patterns of value and wealth in your currency ecosystem.

Holo fuel is not coin- or token-based, instead it is run on massively scalable, double-entry crypto-accounting. Holo fuel is never created from nothing, every credit is accompanied by a balancing debit. This has two interesting side effects:

1) There is always a stable net supply of ZERO credits in the system.

2) Holo starts out in debt for the amount people bought from the ICO and we will literally have to produce 100 times the value we received in economic activity to repay that debt.

Holo fuel is backed by the computing power of the people offering hosting of P2P crypto apps. We will set the price at ICO launch to a benchmarked set of distributed computing tasks at a fraction of the cost (probably 1/10,000) to run on Ethereum. For the hosts providing computing, Holo fuel is also partially backed by outside currencies that were used to purchase credits, so hosts can redeem the credits they’ve earned to pay their bills.

Since the supply of the currency is bound to provide computing power and grows with the capacity of the network to provide it, the value of this computing power for hosting services provides a stable center of value for the currency. There is virtually infinite demand for computing power, so, with or without exchanges, both fairly stable demand and convenient liquidity for meeting that demand already built into Holo fuel. You can’t prevent speculation, but you can design your currency so that the tail doesn’t wag the dog.

Holo fuel is designed to have a rapid rise in value and spending power and then largely stabilize in value to support and encourage active spending and use instead of hoarding. We’ll see how successfully our design pans out — but it will not be just normal crypto speculation tokens.

I’d like to challenge everyone in the crypto space to move beyond just crypto-tokens created from nothing (which is what “fiat” issuance actually means). Instead, imagine new ways your currency can be issued, held, linked to other value and reputation, and tied to reliable real-world value to strengthen and stabilize its value.

9. Accountability

Did you know there are ICOs spinning up with no team members visible, fake team members, or stolen identities? For starters, have a visible team of real humans connected to real world accomplishments and failures, that responds on social media which is also connected to other real world humans. Let’s start with knowing who we’re holding to account.

Provide a clear design of what you’re delivering, a road map to get there, and approximate timelines. Everyone understands timelines and strategies can shift. Be public about that when it happens too.

Be responsible for how much money you accept. Have a way to make value you’ve produced visible. This is more than than the value of your token, but the functioning of a mature crypto project. As mentioned above, the Holo organization’s negative balance makes it quite clear how much was taken in and where we stand in the process of returning 100 times that original value to the community.

Navigating the strange and complex variety of logical contradictions emerging in the ICO space can feel challenging. One way people try to hold a project to account is to issue a bunch of tokens to team members that vest slowly so that they have to stay in the game to create long-term value. ICO rating forms seem to imply if team members don’t have to wait a couple years to vest, then you are just some kind of dump scam. When speculative tokens are the only way of creating a currency, this makes some sense.

Isn’t the point of an ICO to self-capitalize a crypto project? Why wouldn’t you want a project to use the tokens as their own capital to replace the cash costs of paying their team. Does it actually make sense to sell more tokens, putting other people’s money at risk, to just keep value locked in the team’s accounts? Of course, when value comes from artificial scarcity, you want to keep the team from dumping their tokens and crashing the currency. How about a slow release plan? Let them draw salary type equivalents for period of time.

What ways are you taking accountability for ensuring the value of your offering, and for how much your community has funded you?

Conclusions

The ICO space may seem fresh, new, and exciting, but it is also full of scams (whether by intent or by accident). If we want to keep this space alive and maintain the possibility for projects to gain access to creative capital, we need to raise the bar.

There are many sites out there doing ICO listings, reviews, and ratings. It seems some may just be leeches attached to an ecosystem with crypto-cash flow. It’s really hard to tell what kind of due diligence is really getting done, or how well equipped they are to even do it.

When we filled out the listing forms, there was simply no room to communicate anything innovative — no place to explain how our currency or supply actually worked. ICOs have been around for like 10 minutes and they’re already cookie-cutter, fill-in-the-blank projects. I want room to invent and discover the better ways of doing this than the few patterns that have emerged so far!

As we’ve spoken with experts and potential “advisors” in the space, some didn’t like our process. They thought the “small” numbers in the crowdfunding campaign made it hard for the big players to take us seriously. They wanted to push us straight to taking from VCs, when we took this path to connect us directly to our user community and limit the influence of VCs.

In any case, don’t think that doing an Ethical ICO means easy money. It takes a strong moral compass to steer clear of the patterns already emerging in the ICO space, but that may be what it takes to not compromise your integrity, accountability, or relationship with your community. I mean, lawyers are practically in the business of making sure you’re not accountable, and protecting you from the risks of being held to account.

At this stage, I can’t know for sure we’ve avoided all the missteps. In fact, there have been a few times we’ve had to backtrack and do things over again in new ways. But I’d like to think we will at least stand out from the crowd a bit for having tried so hard to get this right. I hope people will still be figuring out all the things we’ve done differently for many months to come.

What do you think of our choices? Do you see any major missteps?

What ideas do you have about how ICOs should work that would make things cleaner, clearer, and safer for all?

Photo by Gwendal_

The post Launching an Ethical ICO appeared first on P2P Foundation.

Every week new ICOs are riding the wave of the crypto craze.

Billions of dollars worth of investments this year… Yet many don’t know about the darker dynamics fueling the process. Why is so much flowing into these offerings? Could it be that exchanges can’t cash out the bitcoin whales so they need to dump into new coins just to diversify holdings? And bonus for them if they can seize control of enough of a coin’s supply to manipulate its value.

$30 Million raised in 24 seconds… Hundreds of millions in an hour… An ICO sold out in a single block of transactions… The whole Ethereum network bogged down by preemptive, over-gassed transactions… One thing we know is those ICOs as a crowdfunding tool are challenged in reaching much of the crowd of end-users for their product — whales are jumping into small pools where they can exert massive influence.

Yet, fundamentally, there are good ideas hoping to grow. And good people, hoping to support and benefit from good ideas. Can we establish a healthier pattern so that the possibilities inherent in decentralized currencies don’t collapse under the weight of over-regulation, and burnt-buyer-backlash?

If we don’t raise the bar of integrity for ICOs ourselves we’ll lose the opportunity to establish stable footing for them to continue. I think we need to challenge a lot of the assumptions that are already hardening in this immature ICO space, including the structure and very nature of the cryptocurrencies being used.

What makes an ICO approach responsible and ethical?

I’ve read the criteria from various rating sites. What stands out to me is their weird blend of obviousness and blindness. Obviously, having a revenue model and demand for your product still applies to crypto projects. Blindly, everyone pretends the clumsy first-gen, global-ledger, burn-the-planet (proof-of-work) approaches are here to stay. ICOs to build data centers just to mine near hydro-electric dams are ranked quite highly.

In other words, I don’t believe you should take these people’s advice. And frankly, you have no reason to take mine either. As a builder of blockchain alternatives, I’m completely biased and focused on the next generation of tools. Yet aside from these varying perspectives about the future of decentralized technology, I believe there’s some common sense about making better ICOs that we can identify.

(And a legal disclaimer — I am not a lawyer, please do not construe any of this as expert legal advice.)

The first question everyone should ask if considering an ICO: Is this ICO primarily a tool to reach money, or to reach people?

Don’t be lazy and say “both!” Even though it is a form of “crowd” — “funding”, there’s an easy way to tell if the operation is tailored to one goal or the other. If you sell out in 24 seconds, or even an hour or two, then it’s pretty clear you were structured for money — not participation. If you can tell yourself the truth about your actual priorities, that should change the shape and structure of everything about your ICO.

It sure looks like there are some pretty sketchy projects pretending to do something useful that will really just abscond with people’s money. And that’s going to bring down the regulatory hammer on everyone. In fact, while this blog post was sitting in drafts waiting to get published, and the SEC started rattling swords, China and South Korea both banned ICOs, and have then steered toward regulation instead.

For the Money

If your ICO is primarily about getting money, I believe you should consider full-compliance with securities laws in the jurisdictions you are selling. Register your offer. Get regulated. That’s exactly what those laws are for — preventing people from getting fleeced by investment offerings they are in no position to evaluate.

Buzz-kill, right? Aren’t ICOs exciting because they sidestep government regulations?

That’s certainly true of ICOs, past and present — I propose a different future.

For the People

ICOs don’t have to be about gambling on the value of some volatile cryptocoin. I’m convinced that it’s possible to design for value stability and to offer clearer kinds of returns. A truer path to thread this needle may involve doing the work to overhaul what you’re offering in order to reduce unnecessary risk, and actually attempting to engage actual, long-term users, not just short-term speculators. I also see ways to structure so that there is greater accountability for funding received and for delivering results.

There are law firms working on frameworks for ICOs, categorizing rights vs. equities and all that jazz. Others will tell you to start a non-profit foundation in Switzerland and pitch your coin sales as if they are donations. Although masquerading as a non-profit may be easier, it won’t build long-term trust with your user-base nor with regulators. (let’s tell the truth: a cryptocoin by any other name will still be as volatile.)

Look, it’s your lawyer’s job to cover your butt. However, when we are building truly decentralized, peer-to-peer systems, we’ve got to cover each other’s butts — in how we design, build, and fund. We can’t afford to take an us vs. them stance against our users in any part of the process. We are them. They are us. If you build in systemic inequities at the funding stage, there’s no reason to believe they won’t be there in every stage of operation.

A House Built on Sand…

Cryptocurrencies don’t have to be worthless tokens with their only value determined by gambling markets. Please see my previous post on Responsible Cryptocurrency Design if you want to understand what else is possible.

Fundamentally, you can’t make your ICO more responsible or valuable than the currency underlying it. And frankly there are some weak-ass cryptocurrencies out there which are really just digital poker chips that waste a lot of electricity.

I know it’s heresy to say some of what follows, but it must be said. Please do the whole community a favor of making the extra effort to improve the field of ICO approaches.

Elements of an Ethical ICO:

This post has gotten long enough, so I will just share some of the questions I’m grappling with:

• Truthful: How could you structure for the most straightforward, truthful representation of your product and intention to your crowd? Cryptography and decentralized computing are hard enough to understand without being buried in marketing spin.
• Measure of Demand: People buying a coin does not prove they’re interested in using your product. How can you separate demand for your product from demand for poker chips to gamble with?
• ICO on proof not theory: How can you help people determine if your idea is possible, and if your team has the chops to build it? What can you build before an ICO as a show of good faith?
• Don’t take it all up front: Can you design your currency to avoid needing to grab all funds in a single initial raise? How can you enable expansion in a manner that’s responsive to future demand and growth?
• Reasonable Cap: Given the prior question, what is a reasonable amount to raise to deliver your first round of solid results? Can you structure so that your cap expands based on true, up-front interest from users of your product (not just the coins)?
• Fair balance of power and wealth: If your thing is so darn cool, you’ll already have all the advantages of being the earliest movers and shakers. How can you structure the distribution of power and wealth to make it a good deal for latecomers as well?
• Not a security: Can you reach more people by ensuring your offer is not interpreted as a security? Might this let you access people in the U.S. and other places with restrictions on securities? Can you offer a clear and known value, not just odds in a betting market?
• Embedded Value: Can your currency be connected to reliable real-world value to strengthen and stabilize the market for it? Would value stability allow cryptocurrencies to move into more mainstream use for a productive economy, not just a speculation market?
• Accountability: Are there ways to take accountability for ensuring the value of your offering, and for how much your community has funded you?

I’m really not trying to rain on your ICO parade. Let’s keep the party going! But that means that, as geeks and crypto-practitioners, we’ve got to raise the bar! Wasn’t at least part of the point to not get dragged down the path of corruption with the rest of the financial industry?

Remember, we started building ICOs to solve real problems with our current financial systems. Duplicating these problems (or worse) in crypto-space fails to accomplish that goal.

These kinds of questions must be asked and answered by more groups doing ICOs. SPOILER ALERT: I’ll offer some answers for all of them in my next post on the trials and tribulations of Launching an Ethical ICO.

This is part two of Arthur Brock’s three part series —. Part three will be available on the P2P Foundation Blog within the next week. 

Photo by ellen reitman

The post Toward an Ethical ICO appeared first on P2P Foundation.

Jean Russel: This week’s #Holochats theme is #responsibility. In that context, I want to share the strategy for Holo’s ICO, and how it is designed to support responsible flows in the ecosystem. [For those interested in knowing more about generating flows, Herman Wagter and I wrote a book, Cultivating Flows.]

Starting Assumptions

We want to build a thriving ecosystem. To jump-start it, we are choosing to run an ICO together with a crowdfunding campaign in order to support three primary capacities in relationship to each other.

1. We want reliable and widely distributed hosting capacity, which we create by offering hosting devices in the crowdfunding campaign.
2. We want to engage developers in creating Holochain apps which can then use that hosting capacity. We generate developer engagement through educational and networking events offered in the crowdfunding campaign.
3. We want an economy that rewards developers and hosts who build and support applications that the world uses on the web. To do this, we are creating a currency through an ICO.

Accomplishing this meant we had to answer several questions: How do we carry out our ICO responsibly so the ecosystem can thrive? Who are we being responsible to? How do we run the ICO in ways that honor the ecosystem as a whole? How do we reward both our initial community creating the ecosystem and the participants in the ecosystem?

Solving for Aspirations

In our ICO, the crowd’s participation is just as important to us as the funding we’ll be generating. We aspire to be an ecosystem of distributed participants. That means:

• We want to make sure participation is widely distributed rather than ending up belonging to a few whales, which can often happen in an ICO.
• We need to have a way to prevent a big crypto whale from buying up the tokens by paying a premium gas fee to jump in line.

We aspire to be an ecosystem of flows, where people are rewarded reasonably for engaging in ways that increase the health of the ecosystem. That means:

• We want our team to rewarded for their time, talents, and commitment to growing this ecosystem.
• But we must do so responsibly, balancing that with the whole. Therefore we must select a reasonable proportion for the team and put limits on “cashing out” after the jump-start of Holo.

We aspire to reward those with early faith in the ecosystem we are building. That means:

• We can’t make speculation be the honeypot. We feel the best option is to get all participants to have some “skin in the game,” so to speak.

We aspire to raise enough funds to responsibly deliver on the promises, and the ideas put forth in our Green Paper (and other papers we created outlining the ecosystem). That means:

• At the very least, we need one at least million euros to deliver on those promises to do work this year. As it says in the Green Paper, if the ICO raises less than that, then we will return ICO funds to the participants and seek other avenues of funding.
• In order to have enough currency available for the ecosystem to flow people need to have Holo fuel to pay for hosting. In other words, the currency supply needs to relate to the size of the ecosystem. That is why the supply of the currency in our ICO is driven by the activity of backers (developers and hosts) in the crowdfunding campaign.

What that Means Strategically in ICO Design

Given our aspirations, how do we then design the shape, structure, flows, and opportunities of the ICO to fit those assumptions and aspirations?

• Reasonable Funding: a small-but-functional ecosystem would need to be 2.5 million euros, so that is the supply we will launch with on day one of our ICO, January 23, 2018.
• Supply Linked to Demand: After that, the supply of the ICO is calculated in proportion to the scale of the ecosystem. There is a supply formula we use to describe how each purchase in our crowdfunding campaign, whether a hosting device or a developer event, releases tokens in the ICO. We described this in our post, Attuning to the Crowd.
• Reserved Tokens: People who have participated in the crowdfunding through Indiegogo get first dibs on the tokens their purchase released in the ICO.

Reserved Tokens: Tactical Details

We want our existing participants to have access to the economy they are participating in. So when the ICO launches, we will notify participants (except those in restricted locations) that the tokens that they have released into the ICO through their purchase are reserved for them. We know it takes some time to receive and read the notification email, get whitelisted, and purchase your reserved tokens so we have implemented a three-day waiting period before reserved tokens are added to the ICO’s available supply. They are available for purchase exclusively to the person who released those tokens for 24 hours. After that, they are openly available for purchase. The tokens created by purchases from locations that are restricted from participating in the ICO will be available for anyone (in non-restricted areas) to purchase.

We are quite excited to watch the movement of supply in Holo’s ICO. You can see the daily supply too at https://ico.holo.host.

Once the sale starts, you will be able to see the amount of supply, how much has been sold, and what is being held in reserve on this chart.

To release more supply in our ICO, bring in more hosts and developers through Indiegogo. Create this ecosystem with us, responsibly.

The post Designing Ecosystem Flows for a Responsible ICO appeared first on P2P Foundation.

I’ve been thinking a lot about how to make ICOs really solid, ethical, lasting sources of good. However, at the heart of an ICO is the “C” — the cryptocurrency which is being offered. How can we really get to ethical ICOs when cryptocurrencies themselves aren’t ready to serve mainstream needs? [This is the first of three articles about getting to ethical ICOs.]

’Cause let’s tell the truth — cryptocurrencies just aren’t safe for everyday use by normal people and businesses yet.

I’m not talking about double spends, or 51% attacks. I’m not talking about inaccessible UI, and impenetrable language. I’m not even talking about poor key management or device security. While those are substantial issues, more fundamentally, most people simply can’t take huge risks with the value of money. The crypto-roller-coaster is certainly fun for some people, but it is not a ride for those who can’t afford to lose what they invest.

Crypto trading markets are not currently meant to be very accessible. The risks seem vast and incomprehensible. Most cannot analyze code (think of DAOhub, for example) or tell from a whitepaper who’s blowing smoke and who can deliver the goods. There’s too much news to track and too much insider information to be connected to.

Crypto whales can jump into smaller coin pools and play pump & dump games to manipulate prices. If you aren’t one of those folks shaping the market, then you are probably one of the suckers hoping to get lucky instead of screwed. And so far all we really have are trading markets. There’s no substantial economy using cryptocurrencies yet. All this nonsense market cap stuff is just people trading one kind of poker chip for another.

I know that paints a pretty dark picture. Many will want to point to the long-term upward trend of the few giants like Bitcoin or Ether, even in the face of economists who think those bubbles are bound to burst. I wonder what happens to them when the next generation tech comes out that transcends proof-of-work, proof-of-stake, consensus, and blockchain itself? How long will those bloated energy hogs — already centralized under the control of very few mining pools — stand against truly resilient, low-power, fully distributed alternatives?

It Doesn’t Have to Be This Way

It is not fundamental laws of physics or laws of computation which has us repeating the toxic patterns in the crypto-space that have corrupted global financial markets — concentrating wealth and power to the few, and manipulating volatile boom/bust cycles. We are simply repeating the problems of the past because of our failure to see real alternatives.

The designers of blockchain may have understood cryptography, but it looks like they didn’t learn the basics of currency design or weren’t willing to challenge the dysfunctional patterns of our financial system.

Cryptocurrencies do not have to be gambling tokens created from nothing. They can be responsibly connected to assets, promises, or real-world value. They don’t have to re-create all the speculative money problems that they were supposed to be solving.

In fact, the whole crypto community understands currency design so poorly that they have practically redefined the word “fiat” (from Latin, meaning spoken into being from nothing) to mean national currencies. This fails to notice that every cryptocoin so far is also spoken into being from nothing. (Hint: Here’s how you can tell, ask yourself, “Who gets debited when someone is credited with newly mined coins?” If the answer is “Nobody,” then you know it is fiat.)

Optimizing for Medium of Exchange

National currencies enjoy monopolies propped up by mandatory tax in the currency and legal tender laws. Essentially, this makes life almost impossible without using a national currency. This compulsory monopoly should be easily crushed by cryptocurrencies if we had good ones — fast, cheap, interchangeable, decentralized. But we’re still stuck in the monopolistic mindset of money.

We’ve collapsed a bunch of different functions into money that actually can and should be reconfigured in many ways: medium of exchange, store of value, unit of account, and token of status.

Monopoly Busting Rule: Don’t try to be everything to everyone. Currency design should be optimized to be a medium of exchange or a store of value, but not both. These two traditional functions don’t actually play too well together. If you optimize a currency to be a good store of value, then people don’t want to spend it. They sit on it, and no activity in the mainstream economy takes place in that currency. One of the ways to optimize for circulation, is various forms of “demurrage” (almost a kind of hoarding tax) which create a kind of hot-potato effect to keep the money moving. It has to be easy to spend, using familiar tools, with minimal overhead.

What if we gauged the success of a cryptocurrency on its level of integration into the daily productive economy of how work gets done? If the only measure of a cryptocurrency’s success is its market price or market cap, then we won’t have cryptocurrencies that people will want to use for every spending. And if they stay so volatile, then many people simply can’t rely on them for everyday survival. When we have cryptocurrencies with stable values over time, we’ll see many more businesses being willing to accept them, and more people willing to participate and spend them.

However, the design principles for a value stable currency are rather different than the ones employed in current cryptocoins. Some of the characteristics you need when optimizing for value stability are:

• Dynamic supply — that can expand and contract based on real market behavior and demand
• Sufficient supply — not too scarce, not too plenty, but just right
• Strong internal value — a strong spending sink with clarity about the currency’s value in obtaining it

Given today’s cryptocoins, this may seem like a pipe dream. But it’s not really as hard as it may seem. Imagine a currency backed by an asset which can pretty easily be delivered by a loose network of providers who accept the currency in payment for: electricity from solar panels, computing power from idle computers, rides from passing drivers, stays in empty bedrooms, etc. A currency tuned to kilowatts or computing power would have a strong enough internal value to serve as center of gravity and common economic need.

For a sufficient supply which can expand and contract, I only know of one form of currency issuance that fits the bill: Mutual Credit. One of the strange things about mutual credit is that the net supply is always ZERO. It uses double-entry accounting type transfers which always have an offsetting debit for every credit. Positive and negative account balances always balance each other.

The active supply in mutual credit is controlled by managing credit limits. If you use an algorithm to tie people’s credit limit to their recent earning history in the currency (with some tweaks to prevent gaming), then their credit expands when there’s demonstrated demand for the value they sell, and it contracts when there’s not. We get at least some kind of breathing — expanding/contracting effect — that we were looking for.

Finally, you’d need to build an interface that connects this Open Value Network (electricity, computing, open source hardware, etc.) to outside demand. People could buy the crypto-credits, denominated in kilowatts or kilobytes, with outside currencies which the providers would be able to use to cash out for the services they provide that back the value of the whole system. Special reserve accounts would need to be created for this cashing in or out, operating as a very limited type of exchange focused on the asset providing the center of gravity for value.

To implement this we’d have to abandon the cryptocoin token-centric approach for a crypto-accounting, user-centric approach. Luckily there’s a blockchain alternative called Holochain that makes this kind of thing pretty straightforward to build.

Whew! If you’re not used to detailed currency design discussions, that may have sounded like a lot of unfamiliar words. Hopefully it’s enough to paint a picture of a viable alternative approach to cryptocurrency.

Optimizing a Store of Value

People with excess cash should be able to easily convert from medium of exchange currencies to other cryptocurrencies, optimized to be stores of value. It is only fair to share this as a counterpoint to the medium of exchange currency design above, however, as often happens, this blog post is getting too long and I will need to make it a separate post to give it the space it deserves. Suffice it to say that it is designed to move slower and to be correlated to real world value which grows not because of speculation or perception, but because of actual growth of the asset itself.

As a simple example, imagine a tree-banking currency designed to invest in sustainable growth of tropical hardwoods — as long as there are humans building things, it is likely that hardwoods like teak will be valuable. Imagine converting to tree-banking credits which employ people to steward rainforest and replant zones and sustainably harvest hardwoods. There are many other kinds of examples where invested inputs grow in physical real-world value just by staying invested — these make optimal configurations for store of value currencies.

I have a Dream!

Imagine a world where cryptocurrencies have risen to new levels of common usage and integrity. Where global and local economies are rooted in peered value networks with peered governance, far outside the spheres of mainstream politics and easy access to mutual capitalization. Imagine easily transferring resources where they’re needed without being gouged by foreign transaction fees, ATM fees, wire fees, delays, and paperwork.

I think a major step toward this dream becoming a reality is networks of value-stable, asset-backed crypto-credits rooted in designs like I described above.

We’re working on some of these now, to be built on holochain.

Stay tuned!

This is part one of Arthur Brock’s three part series — Toward an Ethical ICO. Parts two and three will be available on Medium within the next two weeks. If you’d like to get them early, sent to your inbox, request the PDF.

The post Building Responsible Cryptocurrencies appeared first on P2P Foundation.

Aaron Fernando: The staff at the nonprofit organization HullCoin has done something very unusual in the city of Hull in northeast United Kingdom. Residents of Hull can earn HullCoins, which can be used at various places around the city. It’s an innovative model. But how exactly does it work? To learn more about the group’s approach, we spoke with the two founding members of HullCoin, Dave Shepherdson and Lisa Bovill. Here’s what we learned.

Aaron Fernando: It seems like both of you have had significant experience in civil service before this the start of this project. Can you talk a little about that, and if that influenced you to start HullCoin?  

Lisa Bovill: I worked for the local authority for 20 years. I delivered and managed advice services — so that’s civil rights advice. I was also in charge for developing anti-poverty strategies for the city and as part of that, strategies to combat financial exclusion. So working with those who couldn’t get access to mainstream financial products and were penalized as a result.

At the same time, most local authorities across the U.K. were experiencing funding problems themselves — reductions in the amount they got from central government — which meant that they could do less to help people to manage their finances and less to  combat poverty.

That was really where this whole thing started, and we were looking for creative solutions. We looked at technology and emerging technologies as having potential to help us with that.

I notice many similarities between HullCoin and things like time banks and loyalty reward programs. Could you talk a little bit about the things that influenced you, and what types of programs were you looking at when you developed the concept for HullCoin?

Bovill: We do have a local time bank, and we work closely with the time bank. It’s similar in that we are looking at non-monetary value systems. But we are different in lots of ways: It’s not just an hour for an hour. We are looking for a reward system that isn’t based on time, it’s based on social outcomes. HullCoin has a value, in terms of being able to redeem it for goods or services in a way that a time credit doesn’t have. What we want to do is interact with the time bank in a way that allows us to exchange those non-monetary value systems with each other and to create something like a varied secondary economy.

Shepherdson: When we were looking at mutual credit systems and local currencies — there are a lot of local currencies in the U.K. — the predominant ones are the Bristol Pound and the Brixton Pound — what we saw was that there were mutual credit systems (such as time banks) which are user-to-user exchanges, but local currencies were all effectively pegged to fiat currency. Like Lisa said, we were looking around the anti-poverty strategy in the city and we wanted something that would be generated into existence through social outcomes.

We looked at Bitcoin and blockchain technology as a decentralized clearing house which gave us regulatory freedom. It was 2014 when we started looking at this. In the U.K. certainly, a lot of what was going on with Bitcoin and blockchain was still cottage industry. I mean, kids were still mining cryptocurrency in their bedrooms.

How does an individual HullCoin unit get issued? Is it backed by anything?

Bovill: We will work with a number of grassroots and local organizations that will be given an amount of the currency and then they will be allowed to set their own rules around how they issue it. With some guidelines — quite broad guidelines from us — so it will really be up to those people. We’re not planning to regulate this or be really hands-on in terms of about how you issue or what you issue for. It’s up to those organizations who work with the city to make those decisions.

Shepherdson: And it’s not back by any commodity. It’s backed by the community itself.

When one organization issues HullCoin, will it be the same type of HullCoin as when another organization does? And those can basically cross paths?

Shepherdson: Yeah, absolutely. The only thing that will differentiate between different HullCoins is that into each HullCoin, we insert software which documents evidence of positive social outcomes generated by the coin into the coin itself. An issuing organization — whether that be a charity, a local authority, the NHS, the university, schools, prisons, everybody who signed up for it will be able to insert positive social outcomes and that stays within their own transaction histories.

The person who generates the coin who has done the positive social outcome — that can be for self-improvement or volunteering, or it could be mentoring, or could be caring for relatives — that positive story stays with them on their wallet, on their app. It sits on there and any business or retailer that accepts HullCoin as a form of discount also receives a time-stamped copy of that positive social outcome.

What you get collectively, then, is distributed ledger of all the positive social outcomes that have taken place — in this instance Hull is the city — but essentially, could be spread across numerous geographies or within any context, really.

That’s really interesting. That leads to one of my questions that deals with why you used cryptocurrencies. I was looking your tweets and I came across a question you asked that I wanted to pose back to you: “Why would you create a local currency using blockchain over traditional digital payment systems.”

Shepherdson: We did a full appraisal of all the different systems and which we could use, including blockchain. Because we’d developed links with Feathercoin, we were able to obtain the skills to develop the distributed ledger (blockchain) infrastructure very, very cheaply.

What I think mutual credit systems — and any currency systems — have trouble with, is that at scale they become incredibly inefficient and it becomes more expensive the more successful that that you are.

One the things with local currencies: with paper, the more that you issue, the more your running costs and maintenance costs stack up. While we obviously have server costs around the surrounding tech, the actual payment infrastructure is incredibly efficient. Not only that — it’s incredibly secure at the same time.

We’re a social technology company which specializes in distributed ledger technology. The application of HullCoin in this first instance… This is something that could be genuinely valuable and is complementary to the economy as a whole, but provides that platform for the adoption of the technology.

If we’re able to achieve successful public penetration of [blockchain] technology, then other applications potential the blockchain technology become extremely attractive. If you think of Bitcoin as being the world’s first-ever programmable money then it has become a no-brainer to use the model we’ve landed on — and the fact that we’ve been able to develop the infrastructure and everything at a fraction of the cost of what the industry rates are.

I’ve noticed that there’s often a disconnect between the local currency folk and the digital technology folk — not just crypto enthusiasts but with FinTech and mobile payments generally. Do you encounter this disconnect at all?

Bovill: I think the reason is that one is all about grassroots and people and the other is digital — and therefore automated and not people-centered. But we have come from a background of services that engage with people, so we want to see technology that’s put into the hands of communities in a way that they never thought that the technology would.

But also, I think that it’s difficult when you have a more traditional model that’s trying to achieve something, and then technology comes along and enables you to do it in a different way but you’ve already got an established model. So then you have to switch to a different model, and it’s difficult to accomplish that.

Shepherdson: Now, I don’t know the inner workings of a chip and pin machine. All I need is confidence. As long as I have confidence when I use my contactless payment, I get a reassurance.

So it’s all built upon confidence. What we’ve developed in the last 12 months — the UX on this— it actually resonates with all the communities that were working within Hull and beyond. If you look at what was developed, there’s no mention of blockchain technology. That does not sell to the public. We benefit from the infrastructure internally. All we’ve got to do is build confidence with it.

Once people have done something and they go back to their accounts on the system and see that they have been credited with a balance, they feel that they have been paid. It feels like money. That’s the psychology of money. So we replicate the psychology of money within the system; the technology in terms of blockchain and Bitcoin, from the user side of things is completely irrelevant.

How do you see a local currency scaling? And is it a relevant question for a local currency to scale?

Shepherdson: I think a local currency can scale. I think local communities should own their own currencies.

Bovill: It can be local, but use the same model.

Shepherdson: You can basically share the platform. The way that we’ve designed the whole current platform is that you can take the front and down you can share the back-end and you can have your own customizable set of coins which are specific to your geography or your interests.

It doesn’t just have to be around a local area. You could have one which is specific to a college, education, or health. It’s interoperable in a number of ways and you can white label the same platform and it’s extremely efficient and cheaper to do so rather than developing anything from scratch.

Is there anything unique about the city of Hull it lends itself to success of a program like this? And in the best case scenario what do you hope to achieve with HullCoin?

Bovill: I don’t think there’s anything so unique about the city of Hull apart from the fact that it is a Northern city and every time there’s economic downturn, it’s just battered because the primary economy gets battered. There’s a disproportionate effect on the local citizens.

We were trying to — in our strategies — to prevent that. We were trying to think about some way to create economic resilience for cities like Hull and Northern cities like Hull.

Shepherdson: 90 percent of all of the world’s croutons are made in Hull. [Laughter]

I suppose Hull’s always had a bit of a rebellious streak to some historical extent. I like to think in some ways we plug into that. It is mostly beaten down. But again, when there’s issues like the things that we were looking to address that’s where innovation sometimes comes from— necessity, really.

If we can provide a mechanism which gives people an opportunity to contribute to their economy and their community and also helps themselves and it gains traction — if that achieves success and credibility then our work here is done.

Bovill: In terms ultimate aim, with the local currency, it is about trying to operate a key component in create a secondary economy. A secondary economy which matches unmet need with what would otherwise be wasted resources.

Shepherdson: And also, we have an interest and aspiration to linking with the universal basic income model of welfare. The current model of welfare that we have in the U.K. really is, I don’t think, fit for purpose. And it certainly isn’t fit for purpose in what I think we would determine is a post-automation economy.

You’re going to have to look at “what is value?” In a much broader economic sense then what is currently considered by Western governments. Hopefully what we’ve developed with HullCoin — both within its economic modeling and its blend of technology and application — is fit for purpose for the future model of welfare which reflects the changing economic activities people will be undertaking. You can have a corporate and a communal contribution to your economy, which is somewhat different from what it is now.

And you’re planning on doing an ICO (initial coin offering) as well?

Shepherdson: That’s aligned with our aspirations of creating a parallel currency. We’re working with the number of academics and some people within the blockchain sphere on putting together a draft whitepaper and we’re going to make an assessment whether that draft is fit for purpose, and then we’ll make an assessment whether or not we’ll do an initial token sale on a parallel currency.

The potential is certainly there and I think unlike what a lot of other blockchain crypto startups are doing, we’ve actually got an MVP (minimum viable product). We’ve got a track record, we’re close to market and if we get the economic modeling right we will be able to launch the cryptocurrency.

Image of Dave Shepherdson and Lisa Bovill courtesy of HullCoin

Photo by cactusmelba

The post The English City With Its Own Cryptocurrency: Q&A With the Founders of HullCoin appeared first on P2P Foundation.