See the shared notes from this session too.

Photo by richard winchell

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We talk to Brett Scott the alternative financial activist about the opportunities and challenges of transforming the economy.

Your work can be described as economic anthropology, an attempt to explore the historical origins and current approaches to economics. How cultural is our economic system?

I come from an anthropology background and one of the main ways anthropologists try to understand systems is by immersing themselves in them to understand the perspective of those involved. Sometimes that is called participant observation – participating in something while observing it. You can blend those elements in different ways: Hardcore anthropology can be weighted towards extreme participation with less structured observation, really immersing yourself. Some old-school anthropology is more weighted towards observation than participation, making it more prone to a ‘judging’ outlook.

The discipline of Economics has traditionally tried to fit economic activity into universal theories. The attempt to fit all societies over time into a single theory requires a level of abstraction that is often quite disconnected from actual practice, or how people experience themselves in economies. Anthropology, on the other hand, is more attuned to describing the differences between people – the specificities and variations – and more interested in showing the ways people have provisioned themselves over time, rather than just asserting that people have always traded as ‘self-interested agents’ on markets. In essence, Economics takes one form of economic activity, forged in a particular historical and political context, and implies that this is the only form of economic activity.

Also, economics as a discipline tends to make a strange distinction between economics and politics, as if the political sphere and economic sphere can be meaningfully separated from each other. Holistic forms of anthropology, though, would explore how different economic systems are formed in or imply different political or cultural systems – how they are all interlinked.

One of the insights that came out of anthropology and historical studies is that states cannot be meaningfully separated from our modern concept of markets. That is to say, market-based thinking was enabled by, or expanded by, modern states. Within traditional Economics, self-interest is presented as natural, timeless, and inevitable. If you look at the economist Adam Smith, he makes this assumption that people have always traded with each other since the beginning of time. Whereas, history and anthropology point out many instances of societies that do not rely on trade, or do not even have private property regimes, and that have completely alternative ways to provision themselves.

It is only in the context of modern state formations that you see the emergence of the modern conception of ‘markets’. In the time of Adam Smith, modern states had already formed and he was blind to the fact that many features of economies he was observing couldn’t really exist outside of that context. So economic anthropology and history will try to situate the economy within specific political and cultural epochs.

Modern academia has attempted to create discrete disciplines to describe and understand reality, such as politics, economics, psychology, and so on. But in your everyday life no-one experiences these things as separate from each other. You don’t experience your psychology as distinct from a decision to participate in a particular form of economic activity. They are all fused into one experience. So all economic activity is intensely cultural and political. It is concerned with the distribution of resources, your ability to act in a society. The idea that there is some realm of economic activity that is separate from culture is, frankly, bullshit.

If we change our culture, can we then transform the economy?

If you come from a strict Marxist background, you’d probably tend to say the material world conditions culture, or that the underlying relations of production support a ‘superstructure’ of beliefs and institutions. So the tendency – more or less – is to see cultural systems as being a reflection of the underlying economic situation. The question then is, “Can you change your underlying economic situation by altering your culture?” And yes, it probably is possible. But it is a complex process and I’m not sure I have a coherent answer. Within economic reform movements you have some people who say things like ‘all we need to do is make people think differently to effect change’, but that jars against the reality that every single day people need to enter an economy that has a particular structure, regardless of what they think. It’s not obvious what the link between changing people’s worldviews and changing economic structure is.

Take a look at small credit unions or local currencies. People are trying to think and behave differently – act out a different culture – but in reality they remain stuck within the vortex of a much more powerful economy. Sure, if everyone, at once, changed the way they behaved, you could probably change an economic system, but there is a huge coordination problem there. It seems more likely that change is a messy and contradictory process, driven by some things we consciously choose – like small changes in behaviour – and others that we do not, such as technological changes. It’s unpredictable. The Internet, for instance, has opened up new possibilities, but also created opportunities for new monopolies of power.

To shift the question slightly, we could ask, “How do you shift culture within a large financial institution, such as Goldman Sachs?” These institutions are huge, with like 35,000 employees. They have to go into work every day and keep doing the same thing. Even if individuals within the institution want to change their own personal behaviour, the day to day pressures and requirements won’t allow it. So if you wanted to change the culture you would have to press pause on the organisation for, say, three weeks, and then go around and convince everyone in it to behave differently. But there’s no way in hell that they can press pause, so any attempt to change culture has to happen on the fly, incrementally. But these cultures get locked into these institutions, and when it gets toxic they find it very hard to change it. Here’s an analogy: imagine you have a computer that has a load of viruses, but to get rid of them  will require a complete time-consuming reformatting. Now imagine you need to use it every day, and it’s not an option to be without it for a week, so you just keep using it. Likewise, we need to reformat financial institutions, but often we’re just superficially patching them up.

Access to capital is probably the most powerful dimension of our financial system. How can communities have more control over the circulation of capital at this stage?

The financial system as it stands, in most countries, operates at a large scale. It has centralising tendencies that give financial institutions lots of market power, and these large banks are also closely connected to government. In general, these banks find it easier and more profitable to deal with other large-scale players, directing capital to large corporations or large infrastructure projects, for example. Or else they invest in large numbers of standardised financial products that can be sold at scale, such as mortgages. They don’t have much ability, or desire, to sensitively respond to the niche needs of small-scale communities.

So how do you change that? Short of restructuring the entire system so such power does not exist, there are interim approaches such as banking regulation and reform. For example, you might lobby for quotas on banks to get them to support the real economy and smaller businesses.

Then there are attempts to bypass or augment the mainstream banks. This includes, for example, building community banking systems or municipal banks. Local banking advocates will insist that if you have a small financial institution rooted in an area, it is far more likely to serve local interests. In this debate, countries like Germany are often mentioned, as they have an older and more established system of local and regional banking. Co-operative banks are another approach. The idea is to change the ownership structure of banks to produce better outcomes, bearing in mind that co-operative banks often work at large scales and need not be local in orientation.

Then there are the local currency movements. This approach is not necessarily about accessing or raising capital, but creating economic exchange between people. This is different to raising money for a business. That said, mutual credit systems are currency systems, but they also provide access to short-term small-scale credit. They don’t solve the problem of accessing large-scale investment, but they can be very effective at allowing small businesses to trade on credit. Sardex in Sardinia is a good example.

A mutual credit system is when a network of people create an economic network and then set up a system to record when members give energy, labour or goods to another member of the network. The member who receives the labour goes negative, and the person who gave it goes positive. It’s essentially a ledger system for recording obligations between people. Members go in and out of credit and debt with each other. Over time, this is basically what a monetary system is: I contribute things, but I also needs things. When I contribute to the system I get positive credit, when I need things I am using up my credits or going into debt. This creates a cycle between members.You can create these networks with, say, 150 people, and I think they are one of the most undervalued approaches within local currency movements.

So there is local banking, local currencies, mutual credit, but there are also systems like community shares, which allow you to raise equity finance by offering shares to your local community. These have been relatively successful on a small scale.

You also have to bear in mind that is has been quite a while since there have been coherent communities in the UK. We often talk about ‘community’, but in London people often don’t know each other in their own neighbourhoods. There is a whole raft of work around community cohesion that is required before we even start to develop ways for communities to finance themselves.

I think with all of these things you have to have serious commitment. There are a lot of people trying to design local economic strategies that are volunteer-led or part-time. I’m not against small timebanks or other volunteer-led schemes, but they are not a serious challenges to the economic system. In the case of Sardex, it is a serious attempt to build a parallel currency system, and one that also integrates into the normal system. Recently I’ve become interested in the Greater London Mutual, and the network of new regional banks supported by the Community Savings Bank Association, which look like serious attempts to build local and co-operative banking.

If you can combine these alternatives with banking reform and policy changes, putting pressure on the existing banking system, you can then start to make a difference.

More recently you’ve been exploring what you call the ‘dash to a cashless society’. Could you explain how this offers new surveillance opportunities to private companies and governments, and how you understand the social consequences?

The term cashless society is a euphemistic way of saying the ‘bank payment society’. Within this system you need a bank account and you have to ask banks to facilitate payments. In a cashless society you always have to go through a financial institution.

Think about the traditional story given in any Economics course. A market is made up by two basic players – a buyer and a seller. The buyer gives money tokens to the seller who hands over tangible goods or services. In a cashless society, however, there is the introduction of a third player between every transaction – the money-passer, who moves money between the buyer and the seller in exchange for a fee. These payments intermediaries include the card companies and banks, who run the underlying infrastructure to allow this. So the ‘cashless society’ is an economic system that is predicated on every transaction passing through the banking system and groups like Visa and Mastercard.

There are a lot of institutions lobbying for this system – the banks themselves and digital payment companies who facilitate the movement of money between bank accounts. Then there is the state that can see many advantages to this. In particular it allows them to monitor all transactions. If you’re forced to use digital payment systems, all of your transactions are recorded and leave a data trail. This data can then be analysed. They are interested in this for anti-terrorism and crime detection, but also to monitor tax. There are also monetary policy interests, in particular the ability to introduce negative interest rates.

So the implications are far more than data about transactions, and it’s not just states that find this useful, but corporations, too. Large technology companies, like Google and Amazon, are trying to build payment infrastructure to expand their data monopolies and gain ever deeper insights into people’s economic behaviour. For example, big web platforms often are in the advertising business, but struggle to prove whether adverts convert into sales. So one endgame for some of these large technology companies is to discover the correlation between the adverts you see and how much you spend. So they have an obvious interest in receiving and analysing that data, and if they can track what you spend, they can also develop more efficient advertising.

Another endgame is machine learning and predictive analytics that try to predict, and ultimately steer, people’s behaviours. Banks themselves are interested in this approach, using data to influence behaviour.

There is no cashless society at present, but there is a big political push for it. In this context, it is interesting to explore crypto-currencies that create some form of counter power.

Blockchain technology has been offered up as one of the most recent transformative technologies, with use in supply chains, payment exchange, and its ability to decentralise the control of data. How do you see the political implications of this technology?

Blockchain is multi-layered. At its base, the original version, blockchain technology is essentially a means for a network of strangers to keep track of their positions relative to each other, without a central intermediary. In the case of Bitcoin, it is about keeping track of money tokens. The concept can be applied more broadly though.

Why is blockchain seen as a profound shift in technology? If you walk out in the street, right now, wherever you are, you are going to see a group of people you do not know – strangers. You don’t necessarily distrust them, but there is no easy way to extend your trust. Traditionally, the way we would deal with this is through state law – such as consumer protection laws – and big third-party institutions and corporations who mediate between these interactions. I can walk into a shop and buy something without needing to know the seller personally.

Then blockchain emerged as a technology that could facilitate transactions between people without requiring intermediary institutions. People have historically been able to do that in small-scale situations, but blockchain tech enables this at large scale. The first version of this was Bitcoin, which is a system that enables people to move tokens between each other without relying upon banks. Unlike the banking system, where transactions are recorded on private ledgers controlled by an oligopoly of banks, whose permission you require to move money around, Bitcoin is based on a public ledger that is updated by special players in a peer to peer network.

The second wave of blockchain – such as the Ethereum system – took the same concept, but moved towards developing more complex interactions between people beyond the exchange of money tokens. In particular they added the ability to deploy automated agents onto the network, which they – somewhat misleadingly – refer to as ‘smart contracts’. In Bitcoin you assume all players on the network are humans who make their own decisions about whether to send tokens. The automated ‘smart contract’ agents of Ethereum though, are like robots, forced to do certain things when members of the network interact with them. For example, if you want to raise money for a company, you can programme a smart contract to automatically send a share to someone who sends it money. To understand this, imagine a vending machine. It is an automated agent. You give it money and it gives you a drink. It has no choice. Now imagine this kind of thing in digital form. If you start to link these ‘smart contract’ entities together you can automate all sorts of interactions.

The third wave of blockchain tech – which is being hyped right now – is the corporate use of the technology. The first two waves were open systems in which anyone could join and, theoretically, everyone had the same rights. In wave three, which is known as private, closed or ‘permissioned’ blockchains, institutions or groups of institutions control who is able to join the system, and can give users different rights and powers within the system. This fundamentally changes the entire ethos. They’re just trying to make more efficient versions of business as usual. Banks, for example, already collectively run certain shared systems for things like payments, and they currently see private blockchain systems – or ‘distributed ledger technology’ – as just a more efficient way to do the same thing. So if American Express says it’s ‘using blockchain’, they’re going to be building a closed system, and this makes it confusing for the public, who often don’t know there is a difference between the open systems and closed systems.

So, to give an example, when I was working within the derivatives market, two traders would agree a deal – let’s say a trader at Goldman Sachs would do a deal with a trader at Barclays – but once they’d done that they report it to their separate back office staff, who would do all the dirty work of having to make the transfers and make sure both traders had recorded the same details about the deal. This takes time, and each bank has different systems that don’t necessarily jive with each other. So the interest for large banks is in finding ways to automate the coordination between themselves, so that they can fire all their back office staff who do the reconciliation work.

What is important here is the distinction between open public and closed private blockchain systems. That said, you could also use closed systems to launch co-operatives. If you were trying to create a co-operative version of Uber, a closed blockchain system could be very useful. So drivers could get together to coordinate themselves. So there is interesting potential.

With the Paradise Papers we are reminded again how tax policy and legislation is often written by the legal teams of large companies who are offshoring their assets and profits. This is a clear example of big finance’s political power. What are the opportunities for us to transform the policy and legal environment?

We are used to this tacky distinction between ‘states vs markets’, but I start from the assumption that there has always been a symbiosis between states and markets. The state creates the underlying structures that enable large-scale markets to operate. If you accept that, you can then think about which market players the state prioritises. Do they favour the large corporate players or the small players and ordinary citizens? This is kind of the historical battle between conservatives and labour: is the state there to facilitate the owners of capital, the CEOs, the elite entrepreneurs, or is it there to protect those with less market power, the employees and marginalised? The state is always going to be captured – the question really is who has captured it? Is it a corporate state, or a citizen’s state? This is a dynamic that goes back and forth.

I do think there are opportunities to transform the policy and legal landscape, and it has happened over the years. It is a fickle system, though. A positive policy change can be reversed by a new government, like a law to separate safe banking to risky banking that then gets repealed. In the long-term the ideal is to try build systems that do not rely on external regulation, but that have positive principles built into their DNA. I’d not give up on financial reform, but it’s difficult. I’ve just come back from spending time with Finance Watch in Brussels: they lobby for the public interest in finance, but they are outnumbered by highly paid private lobbyists that the financial industry deploys. They have to fight day to day against the odds.

In terms of the Paradise Papers, I feel there has been a political turn in the tax avoidance debate. I think there have been gains for tax justice groups. At the same time, there has also been a fatigue among the general public. We hear about new scandals frequently, but there is only so much outrage people can express. This is a long-term fight, not something you can win in quickly. So stick in there and enjoy the ride.

Alternative financial activists, such as the Robin Hood Co-operative and Debt Jubilee, use ‘traditional’ financial tools to challenge the system. How do you understand the strategic relationship between financial protest, financial reform, and the creation of new financial institutions, tools, and services?

Finance activism, financial reform, and alternative financial should, like you say, align with each other. I think they do, but those within these groups do not often attempt to overtly work together. Partially because of funding structures. If you are a critical artist exploring finance, like Paolo Cirio, his funding stream will come from arts funding bodies. And then if you’re FinanceWatch, your funding comes from NGOs and EU sources. This means they’re often having to play into different institutional spheres that don’t allow much overlap.

Also the energy required to work towards different campaigns means focusing obsessively on certain priorities. If your whole world is lobbying in Brussels or Westminster, you may become dismissive or intolerant of the direct action strategies of activists scaling the Houses of Parliament. There are cultural differences within financial reform and they don’t always recognise each other’s value. Sometimes because they are competing for media attention, funding and legitimacy.

But when I zoom out and think about how we will create financial change, I see all of these approaches playing a role. Financial activism and protest is very effective at getting media attention – Occupy Movement, Move your Money campaign, UK Uncut were very good at getting headlines and asking for extreme changes. This then creates space for more centrist organisations to draw up more technical proposals for financial reform. They come through with more palatable demands, which can create change.

The same with climate change movements. Earth First or Greenpeace open space for less overtly activist sustainable finance groups – like CarbonTracker – to come and make technical proposals. You have to zoom out to see the politics – take alternative finance platforms like peer-to-peer lending. Mainstream policymakers struggle to directly attack big banks, and may find it easier to support the alternative finance sector as a way to indirectly weaken banks. The alternative finance sector in the UK has actually been quite good at ‘playing the state’, presenting themselves as a useful alternative to address the shortcomings of the traditional finance giants.

On the extreme end of financial activism, there is little crossover with more ‘respectable’ alternative finance entrepreneurs. If you take Enric Duran, or the Robin Hood Co-op, they have no interest in reforming finance. They are trying to create parallel systems that do not rely on the current system. It’s not like the divestment campaigns, or ethical banking system, which are trying to reform the current system, and that’s an important distinction.

The divestment campaigns are an interesting case study. These campaigners are often criticised by those within more mainstream sustainable finance circles as lacking nuance or being counterproductive. But the divestment organisations have been great at driving the debate on unsustainable investment in a more public way. They actually indirectly support the work done by the technical sustainable finance community. The student activists are creating a space for more technical changes to be introduced.

Since I specialise in not specialising, it makes it easier for me to to see the points of intersection. There needs to be more people who hop between different approaches, overtly spending more time in different communities. The technology community, the localist community, the policy community, the artistic community, and so on. Hybrid approaches are often the most interesting.

Brett Scott is a journalist, campaigner and the author of The Heretic’s Guide to Global Finance: Hacking the Future of Money (Pluto, 2013). He writes for publications such as the Guardian, New Scientist, Wired Magazine and CNN. He is a Senior Fellow of the Finance Innovation Lab, and helps facilitate a course on power and design at the University of the Arts London.

Links

Follow Brett on Twitter at @suitpossum

Order ‘Power’, Issue 20 of Stir Magazine

Info & Credits

Published in STIR magazine no.20, Winter 2018

Illustration by Nick Taylor

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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.

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.

Stephanie Rearick and Leander Bindewald: If it wasn’t crystal clear just weeks ago, it is now: The economy as it stands is currently positioned in direct opposition to social and environmental objectives. For the sake of the wellbeing of our communities, our children, and our planet, it is imperative we change the voracious path of our consumption culture and consider how we might create opportunities for people to find meaningful work.

At the Mutual Aid Network, we have developed a new type of networked cooperative — one that, among other things, lets people find talented collaborators for personal, neighborhood-wide, or even city-wide projects. Here’s how we make it happen:

The first step is to bring people together around a common goal of any size and scope to form an individual “Mutual Aid Network.” The common goal can be anything — a group of friends aiming to redesign each person’s work life, a watershed restoration initiative, a city-wide energy efficiency and renewables program, a decentralized cooperatively-owned manufacturing initiative, a travel and culture exchange, or a meal program to ensure that everyone in a neighborhood has enough to eat. While each network is entirely autonomous, the underlying principles it follows are from drawn from commons governance and cooperative models.

To achieve the common goal, members pool and steward resources by combining any of the following tools — all tried and true in the patches of solidarity economy, big and small, over the course of generations:

• Shared resources or the commons: Participate in tool libraries, makerspaces, shared laundry facilities, and so forth.

• Timebanking and swapping: Exchange time credits — for example, an hour worth for a service, be it babysitting, cooking, cleaning, rides, light carpentry, gardening, art/music/language lessons, in exchange for a service. Contribute frequent flyer miles, meals, plots of land, buildings, equipment all to be acknowledged in community credits that are fair, transparent, and always mutually beneficial.

• Price-based mutual credit currencies, for business and highly professionalized service: Buy a $1,000 piece of equipment from a participating business for 1,000 points of interest-free credit, to be paid back by selling $1,000 worth of goods and services to the network. Taxed according to applicable laws.

• Savings pools and community investment: Contribute to a common pool of money to be allocated to collectively agreed causes or members with one-off financial needs, be they for a home, health care, or even burial expenses. Examples of this abound around the world and include the Mutual Aid Societies in the U.S., the original Building Societies in the U.K.

And then there is the “Humans United in Mutual Aid Networks,” formerly referred to as the Main Mutual Aid Network, which is one big global cooperative owned by all individual Mutual Aid Network sites. The members connect, share resources and best practices, and support new Mutual Aid Network sites all around the world by using the same approach and principles applied in the local sites.

Of course we don’t expect everyone to be solely working in the Mutual Aid Network context, but expect that more opportunities will build over time. Our strategy is to start with a number of pilot sites with different focus areas, strengths, and limitations, and have each one commit to supporting one another and help foster new sites. Eight pilot sites have signed up already, and at least eight more are in the works.

The economy of the 21st century is something we’ve been prototyping throughout human history. Now we can connect those ideas and practices that have proven to be sustainable over time and use technologies to connect, exchange, share, and learn collaboratively and effectively. Networks of networks can quickly connect to create a world where everyone has the opportunity to build the skills needed to make whole, happy communities. We are already doing it, across the world, independently and increasingly interdependently. Please join us. What you can do:

• Join an online orientation

• Join the Humans United in Mutual Aid Networks (formerly Main Mutual Aid Network) global co-op (U.S. based, global membership)

• Join the Humans United in Mutual Aid Networks work groups

• Explore creating a pilot site

• Participate in our Summit in Madison, Wisconsin, from Feb. 17-20

• Sign up for our e-mail list

All of those opportunities, plus more learning resources, can be found at: www.mutualaidnetwork.org

Here are some of our pilot projects:

Madison, Wisconsin

Allied Community Co-op is the first Mutual Aid Network pilot site. It’s where some of the organization’s fundamental ideas were born. Located in a food desert with little infrastructure (no school, grocery store, library, or neighborhood center), the Allied Co-op is working to bring a food buying club and a cooperatively-owned grocery store to the neighborhood.

The Social Justice Center, a multi-stakeholder nonprofit building in Madison’s affluent East Side, is a convening partner in exploring Madison’s second Mutual Aid Network pilot, which will be an inter-city partnership connecting Allied Co-op and many other local stakeholders in a network of resource-sharing and exchange initiative designed to create more equitable distribution of existing resources across the city.

Lansing, Michigan

The Mid-Michigan bioregion is home to a number of both for-profit and nonprofit cooperative enterprises, including the Mid-Michigan Time Bank, the Lansing Maker’s Network, and the Mid-Michigan Renewable Energy Cooperative. By leveraging time, tools, and talents, these groups will form the backbone of the Mid-Michigan Mutual Aid Network to help the region find new ways to build a sustainable new economy.

“Mutual Aid Networks provide a platform for communities to build from the ground up through identifying strengths and resources that are present globally which can be put into action through local location-specific projects,” says Marshall Clabueaux, a renewable energy activist and social entrepreneur.

Providence, Rhode Island

In the Providence Bay Area, the Fertile Underground Natural Cooperative is working to get a catering truck on the road. This truck will take food from farms and supermarkets and offer the raw, natural ingredients for free, while selling the prepared food. The goal of this project is to reach places that have limited access to fresh food and provide cooking demonstrations using seasonal produce.

Waterville, Kansas

Wellness Weaver, a timebank, has collaborated with partners around the US to connect people who want to create a FUNctional Health and Wellness Workers Cooperative — a wellness-oriented Mutual Aid Network.

“The value of the Mutual Aid Network is to bring the wisdom and expertise of those that have used time banking formally as a way to help develop and support the best functioning Wellness Oriented Mutual Aid Network,” says Helen Stucky Weaver, retired nurse and founder of Wellness Weavers.

St. Louis, Missouri

Solidarity Economy St. Louis is currently working to incubate African-American cooperative businesses, co-host a local conference around the theme of “Health, Wealth, and Disrupting Capitalism,” develop a time bank youth court program, engage in community organizing efforts to create a neighborhood food hub in the food desert of North St. Louis, and promote community development of vacant land.

“Being part of the Mutual Aid Network allows us to connect to and co-create a global movement of people who are working to build just and sustainable economies,” says Julia Ho, founder of Solidarity Economy St. Louis. “The only way for us to truly achieve mutual aid in our own communities is by extending mutual aid to others.”

Bergnek, South Africa

Bergnek Community Projects is a community development initiative that was started to empower and uplift women and youth through sustainable business ventures. The program provides access to food, clean water, and reproductive health care for women and girls in school. The long-term aim of the group is to build a community health care center.

Hull, United Kingdom

This Mutual Aid Network aims to create a chain reaction that goes back into communities. It meshes a thriving timebank with 600 members and the Hull Coin initiative, the City of Culture’s 2017 nomination, which is currently mobilizing 4,000 volunteers.

“When I started the TimeBank back in 2010, I saw it as the solution to everything,” says Kate Macdonald. “I realized in time that it is ‘one’ solution and that to have a viable parallel economy, we need different options which have strengths to use in different circumstances. When I heard Stephanie speak about Mutual Aid Networks a couple of years ago, I realized this had been what I had been looking for. What is often missed is a mechanism to join things up.”

Lehigh Valley, Pennsylvania

The Mutual Aid Network of the Lehigh Valley addresses the social determinants of health of communities’ most vulnerable members, including formerly incarcerated people, juveniles aging out of the foster care system, homeless populations, individuals recovering from addiction, and newly settled refugees. This project address tackles these issues by tackling social isolation, one of the key factors that contributes to poor life and health outcomes.

These eight initiatives demonstrate that building a solidarity economy that serves every human being on the planet is possible.

A previous version of this article appeared in the July 2016 issue of STIR magazine

Header photo courtesy of the Mutual Aid Network.

The post The Mutual Aid Network Takes a Ground-Up Approach to Create a Collaborative Economy 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.

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

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

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

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

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

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

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

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

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

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

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

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