Group items tagged

allowing the free aggregation of individuals around shared values or common value creation

a huge sociological shift

new life forms, social practices and human institutions

emergent communities of practice are developing new social practices that are informed by the p2p paradigm

ethical revolution

openness

participation

inclusivity

cooperation

commons

the open content industry in the U.S. to reach one sixth of GDP.

political expressions

the movement has two wings

constructive

building new tools and practices

resistance to neoliberalism

we are at a stage of emergence

difficulty of implementing full p2p solutions in the current dominant system

At this stage, there is a co-dependency between peer producers creating value, and for-profit firms ‘capturing that value’, but they both need each other.

Peer producers need a business ecology to insure the social reproduction of their system and financial sustainability of its participants, and capital needs the positive externalities of social cooperation which flow from p2p collaboration.

peer producing communities should create their own ‘mission-oriented’ social businesses, so that the surplus value remains with the value creators, i.e. the commoners themselves, but this is hardly happening now.

Instead what we see is a mutual accomodation between netarchical capital on one side, and peer production communities on the other.

the horizontal meets the vertical

mostly hybrid ‘diagonal’ adaptations

For peer producers the question becomes, if we cannot create our own fully autonomous institutions, how can we adapt while maintaining maximum autonomy and sustainability as a commons and as a community.

Why p2p have failed to create successful alternatives in some areas?

In commons-oriented peer production, where people aggegrate around a common object which requires deep cooperation, they usually have their own infrastructures of cooperation and a ecology combining community, a for-benefit association managing the infrastructure, and for-profit companies operating on the market place; in the sharing economy, where individuals merely share their own expressions, third party platforms are the norm. It is clear that for-profit companies have different priorities, and want to enclose value so that it can be sold on the marketplace. This in fact the class struggle of the p2p era, the struggle between communities and corporations around various issues because of partly differential interests.

Even commercially controlled platforms are being used for a massive horizontalisation and self-aggregation of human relationships, and communities, including political and radical groups are effectively using them to mobilize. What’s important is not just to focus on the limitations and intentions of the platform owners, but to use whatever we can to strengthen the autonomy of peer communities.

requires a clever adaptation

use for our own benefit

The fact today is that capital is still capable of marshaling vast financial and material resources, so that it can create,

platforms that can easily and quickly offer services, creating network effects

without network effects, there is no ‘there’ there, just an empty potential platform.

p2p activists should work on both fronts

using mainstream platforms for spreading their ideas and culture and reach greater numbers of people, while also developing their own autonomous media ecologies, that can operate independently, and the latter is an engagement for the ‘long haul’, i.e. the slow construction of an alternative lifeworld.

The commons and p2p are really just different aspects of the same phenomena; the commons is the object that p2p dynamics are building; and p2p takes place wherever there are commons.

So both p2p and the commons, as they create abundant (digital) or sufficient (material) value for the commoners, at the same time create opportunities to create added value for the marketplace. There is no domain that is excluded from p2p, no field that can say, “we wouldn’t be stronger by opening up to participation and community dynamics”. And there is no p2p community that can say, we are in the long term fully sustainable within the present system, without extra resources coming from the market sector.

One trend is the distribution of current infrastructures and practices, i.e. introducing crowdsourcing, crowdfunding, social lending, digital currencies, in order to achieve wider participation in current practices. That is a good thing, but not sufficient. All the things that I mention above, move to a distributed infrastructure, but do not change the fundamental logic of what they are doing.

we are talking about the distribution of capitalism, not about a deeper change in the logic of our economy.

No matter how good you are, no matter how much capital you have to hire the best people, you cannot compete with the innovative potential of open global communities.

the p2p dynamics

the new networked culture

the opposite is also happening, as we outlined above, more and more commons-oriented value communities are creating their own entrepreneurial coalitions. Of course, some type of companies, because of their monopoly positions and legacy systems, may have a very difficult time undergoing that adaptation, in which case new players will appear that can do it more effectively.

the corporate form is unable to deal with ecological and sustainability issues, because its very DNA, the legal obligation to enrich the shareholders, makes its strive to lower input costs,  and ignore externalities.

we need new corporate structures, a new type of market entity, for which profit is a means, but not an end, dedicated to a ‘benefit‘, a ‘mission’, or the sustenance of a particular community and/or commons.

abundance destroys scarcity and therefore markets

open design community

will inherently design for sustainability

for inclusion

conceive more distributed forms of manufacturing

entrepreneurs attaching themselves to open design projects start working from an entirely different space, even if they still use the classic corporate form. Prevent the sharing of sustainability designs through IP monopolies is also in my view unethical and allowing such patents should be a minimalist option, not a maximalist one.

The high road scenario proposes an enlightened government that ‘enables and empowers’ social production and value creation and allows a much smoother transition to p2p models; the low road scenario is one in which no structural reforms take place, the global situation descends into various forms of chaos, and p2p becomes a survival and resilience tactic in extremely difficult social, political and economic circumstances.

accelerated end of capitalism

Making sure that we get a better alternative is actually the historical task of the p2p movement. In other words, it depends on us!

I don’t really think in terms of technological breakthroughs, because the essential one, globally networked collective intelligence enabled by the internetworks, is already behind us; that is the major change, all other technological breakthroughs will be informed by this new social reality of the horizontalisation of our civilisation. The important thing now is to defend and extend our communication and organisation rights, against a concerted attempt to turn back the clock. While the latter is really an impossibility, this does not mean that the attempts by governments and large corporations cannot create great harm and difficulties. We need p2p technology to enable the global solution finding and implementation of the systemic crises we are facing.

Open Capital is defined as “a proportional share in an enterprise for an indeterminate time”

‘Enterprise’ is defined as ‘any entity within which two or more individuals create, accumulate or exchange Value”.

Value is to Economics as Energy and Matter are to Physics.

The Metaphysics Of Value

division between “subject” and “object”.

primary reality is “Quality”

formless and indefinable

not a “thing”

a non-intellectual awareness or “pre-intellectual reality”

but an event at which the subject becomes aware of the object and before he distinguishes it

Quality is the basis of both subject and object

distinguish between “Static” and “Dynamic” Quality

treating Value as a form of “Quality” as envisioned by Pirsig.

Riegel

defined “Value” as “ the Relativity of Desire” again implying indeterminacy.

Pirsig’s approach Capital may be viewed as “Static” Value and Money as “Dynamic” Value. “Transactions” are the “events” at which individuals (Subjects) interact with each other or with Capital (both as Objects) to create forms of Value and at which “Value judgments” are made based upon a “Value Unit”.

The result of these Value Events /Transactions is to create subject/object pairings in the form of data ie Who “owns” or has rights of use in What,

at what Price

accounting data

Neo-Classical” Economics confuses indeterminate Value with a market– determined Price –

Data may be static

This Data identifies the subject with objects such as tangible ‘Material Value’

Data may itself constitute ‘Intellectual Value’

It, too, may then be defined in a subject/object pairing through the concept of “intellectual property”.

Other forms of Value are however not definable by data:

“sentimental” Value

Emotional Value’

'Spiritual Value’

We may therefore look at the “transaction” or “value event” in a new light.

The creation and circulation of Value essentially comprises the concept we know of as “Money”.

Money / Dynamic Value

“The purpose of money is to facilitate barter by splitting the transaction into two parts, the acceptor of money reserving the power to requisition value from any trader at any time

money

value unit dissociated from any object

monetary unit

the basis relative to which other values may be expressed

The monetary process is a dynamic one involving the creation and recording of obligations as between individuals and the later fulfilment of these obligations

The monetary “Value Event”/ Transaction involves the creation of “Credit”

obligation to provide something of equivalent Value at a future point in time.

These obligations may be recorded on transferable documents

database of “Credit”/obligations is not Money, but temporary “Capital”

“Working Capital”

Static Value – which only becomes “Money”/ Dynamic Value when exchanged in the transitory Monetary process.

what we think of as Money is in fact not tangible “cash” but rather

the flow of data between databases of obligations maintained by Credit Institutions

or dynamic

Banks literally “loan” Money into existence

In exchange for an obligation by an Individual to provide to the Bank something of Value

Bank’s obligation is merely to provide another obligation at some future time

These Bank-issued obligations are therefore

claim upon a claim upon Value

The true source of Credit is the Individual, not the intermediary Bank

this Money they create from nothing despite the fact that it is literally Value-less

Thus there is no true sharing of Risk and Reward involved in Lending

issue in relation to Credit/Debt and this relates to the nature of Lending itself.

the practice of Lending involves an incomplete exchange in terms of risk and reward: a Lender, as opposed to an Investor, has no interest in the outcome of the Loan, and requires the repayment of Principal no matter the ability of the Borrower to repay.

Ethical problem

Money is not

an “Object” circulating but rather a dynamic process of Value creation and exchange by reference to a “Value Unit”.

Capital/ Static Value

Capital represents the static accumulation of Value

Some forms of Capital are “productive”

An ethical question

in relation to Productive Capital relates to the extent of “property rights” which may be held over it thereby allowing individuals to assert “absolute” permanent and exclusive ownership - in particular in relation to Land

our current financial system is based not upon Value but rather a claim upon Value

Financial Capital consists of two types:

“Debt”

“Equity”

Interest

obligations of finite/temporary duration but with no participation in the assets or revenues

absolute and permanent ownership/participation (without obligation) in assets and revenues

discontinuity between Debt and Equity

at the heart of our current problems as a Society

The Enterprise

‘Charitable’ Enterprise

‘Social’ Enterprise

Value

exchanged in agreed proportions;

Value is exchanged for the Spiritual and Emotional Value

‘Commercial’ Enterprise

‘closed’

Value are exchanged between a limited number of individuals

Early enterprises were partnerships and unincorporated associations

need for institutions which outlived the lives of the Members led to the development of the Corporate body with a legal existence independent of its Members

The key development in the history of Capitalism was the creation of the ‘Joint Stock’ Corporate with liability limited by shares of a ‘Nominal’ or ‘Par’ value

over the next 150 years the Limited Liability Corporate evolved into the Public Limited Liability Corporate

Such “Closed” Shares of “fixed” value constitute an absolute and permanent claim over the assets and revenues of the Enterprise to the exclusion of all other “stakeholders” such as Suppliers, Customers, Staff, and Debt Financiers.

The latter are essentially ‘costs’ external to the

owners of the Enterprise

maximise ‘Shareholder Value’

There is a discontinuity/ fault-line within the ‘Closed’ Corporate

It has the characteristics of what biologists call a ‘semi-permeable membrane’ in the way that it allows Economic Value to be extracted from other stakeholders but not to pass the other way.

Capital most certainly is and always has been - through the discontinuity (see diagram) between:‘Fixed’ Capital in the form of shares ie Equity; and ‘Working’ Capital in the form of debt finance, credit from suppliers, pre-payments by customers and obligations to staff and management.

irreconcilable conflict between Equity and Debt

xchange of Economic Value in a Closed Corporate is made difficult and true sharing of Risk and Reward is simply not possible

No Enterprise Model has been capable of resolving this dilemma. Until now.

Corporate Partnerships with unlimited liability

mandatory for partnerships with more than 20 partners to be incorporated

in the USA

it is the normal structure for professional partnerships

Limited Liability Partnerships

In the late 1990's

litigation

The UK LLP is supremely simple and remarkably flexible.

All that is needed is a simple ‘Member Agreement’ – a legal protocol which sets out the Aims, Objectives. Principles of Governance, Revenue Sharing, Dispute Resolution, Transparency and any other matters that Members agree should be included. Amazingly enough, this Agreement need not even be in writing, since in the absence of a written agreement Partnership Law is applied by way of default.

The ease of use and total flexibility enables the UK LLP to be utilised in a way never intended – as an ‘Open’ Corporate partnership.

‘Open’ Corporate Partnership

concepts which characterise the ‘Open’ Corporate Partnership

it is now possible for any stakeholder to become a Member of a UK LLP simply through signing a suitably drafted Member Agreement

‘Open’

supplier

employee

may instead become true Partners in the Enterprise with their interests aligned with other stakeholders.

no profit or loss in an Open Corporate Partnership, merely Value creation and exchange between members in conformance with the Member Agreement.

Proportional shares

in an Enterprise constitute an infinitely divisible, flexible and scaleable form of Capital capable of distributing or accumulating Value organically as the Enterprise itself grows in Value or chooses to distribute it.

Emergence of “Open” Capital

example of how ‘Temporary Equity’ may operate in practice

The Open Capital Partnership (“OCP”)

Within the OCP Capital and Revenue are continuous: to the extent that an Investee pays Rental in advance of the due date he becomes an Investor.

Open Capital – a new Asset Class

create a new asset class of proportional “shares”/partnership interests

in Capital holding OCP’s

Property Investment Partnerships (“PIP’s”)

Open Corporate Partnerships as a Co-operative Enterprise model

A Co-operative is not an enterprise structure: it is a set of Principles that may be applied to different types of enterprise structure.

Within a Partnership there is no “Profit” and no “Loss”.

Partnerships

mutual pursuit of the creation and exchange of Value

Partners do not compete with each othe

the crippling factors in practical terms have been, inter alia: the liability to which Member partners are exposed from the actions of their co-partners on their behalf; limited ability to raise capital.

they favour the interests of other stakeholders, are relatively restricted in accessing investment; are arguably deficient in incentivising innovation.

The ‘new’ LLP was expressly created to solve the former problem by limiting the liability of Member partners to those assets which they choose to place within its protective ‘semi-permeable membrane’

However, the ability to configure the LLP as an “Open” Corporate permits a new and superior form of Enterprise.

it is possible to re-organise any existing enterprise as either a partnership or as a partnership of partnerships.

the revenues

would be divided among Members in accordance with the LLP Agreement. This means that all Members share a common interest in collaborating/co-operating to maximise the Value generated by the LLP collectively as opposed to competing with other stakeholders to maximise their individual share at the other stakeholders’ expense.

facilitate the creation of LLP’s as “Co-operatives of Co-operatives”.

he ‘Commercial’ Enterprise LLP – where the object is for a closed group of individuals to maximise the value generated in their partnership. There are already over 7,000 of these.

the Profit generated in a competitive economy based upon shareholder value and unsustainable growth results from a transfer of risks outwards, and the transfer of reward inwards, leading to a one way transfer of Economic Value.

This,

will very often impoverish one or more constituency of stakeholders

A partnership, however, involves an exchange of value through the sharing of risk and reward.

Whether its assets are protected within a corporate entity with limited liability or not, it will always operate co-operatively – for mutual profit.

Open Capital, Economics and Politics

continuity between Capital as Static Value and Money as Dynamic Value which has never before been possible due to the dichotomy between the absolute/infinite and the absolute/finite durations of the competing claims over assets – “Equity” and “Debt”

Open Capital Partnership gives rise to a new form of Financial Capital of indeterminate duration. It enables the Capitalisation of assets and the monetisation of revenue streams in an entirely new way.

It is possible to envisage a Society within which individuals are members of a portfolio of Enterprises constituted as partnerships, whether limited in liability or otherwise.

Some will be charitable

Others will be ‘social’

‘Commercial’ enterprises of all kinds aimed at co-operatively working together to maximise value for the Members.

the process has already begun

Capitalism

superior

to all other models, such as Socialism.

It can only be replaced by another ‘emergent’ phenomenon, which is adopted ‘virally’ because any Enterprise which does not utilise it will be at a disadvantage to an Enterprise which does.

The ‘Open’ Corporate Partnership is: capable of linking any individuals anywhere in respect of collective ownership of assets anywhere; extremely cheap and simple to operate; and because one LLP may be a Member of another it is organically flexible and ‘scaleable’. The phenomenon of “Open Capital” – which is already visible in the form of significant commercial transactions - enables an extremely simple and continuous relationship between those who wish to participate indefinitely in an Enterprise and those who wish to participate for a defined period of time.

Moreover, the infinitely divisible proportionate “shares” which constitute ‘Open’ Capital allow stakeholder interests to grow flexibly and organically with the growth in Value of the Enterprise. In legal terms, the LLP agreement is essentially consensual and ‘pre-distributive’: it is demonstrably superior to prescriptive complex contractual relationships negotiated adversarially and subject to subsequent re-distributive legal action. Above all, the ‘Open’ Corporate Partnership is a Co-operative phenomenon which is capable, the author believes, of unleashing the “Co-operative Advantage” based upon the absence of a requirement to pay returns to “rentier” Capitalists.

There is a clear institutional division of labour between these three players

a set of "for-benefit institutions' which manage the 'infrastructure of cooperation'

an enterpreneurial coalition that creates market value on top of that commons;

because democracy, and the market, and hierarchy, are modes of allocation of scarce resources

Is there perhaps a new model of power and democracy co-evolving out of these new social practices, that may be an answer to the contemporary crisis of democracy

we are witnessing a new model for the state. A 'P2P' state, if you will.

The post-democratic logic of community

these communities are not democracies

Can we also learn something about the politics of this new mode of value creation

has achieved capacities both for global coordination, and for the small group dynamics that are characteristic of human tribal forms and that it does this without 'command and control'! In fact, we can say that peer production has enabled the global scaling of small-group dynamics.

Everyone can contribute without permission, but such a priori permissionlessness is  matched with mechanisms for 'a posteriori'  communal validation, where those with recognized expertise and that are accepted by the community, the so-called 'maintainers' and the 'editors',  decide

These decisions require expertise, not communal consensus

tension between inclusiveness of participation and selection for excellence

allowing for maximum human freedom compatible with the object of cooperation. Indeed, peer production is always a 'object-oriented' cooperation, and it is the particular object that will drive the particular form chosen for its 'peer governance' mechanisms

The main allocation mechanism in such project, which replaces the market, the hierarchy and democracy,  is a 'distribution of tasks'

no longer a division of labor between 'jobs', and the mutual coordination works through what scientist call 'stigmergic signalling'

work environment is designed to be totally open and transparent

every participating individual can see what is needed, or not and decide accordingly whether to undertake his/her particular contribution

this new model

Such communities are truly poly-archies and the type of power that is held in them is meritocratic, distributed, and ad hoc.

conflicts between contributors

are not decided by authoritarian fiat, but by 'negotiated coordination'.

we are interested in the resilience that comes from building a rich ecosystem of interoperable currencies

What are the core elements of a modern cryptocurrency?

Digital

Holdings are electronic and only exist and operate by virtue of a community’s agreement about how to interpret digital bits according to rules about operation and accounting of the currency.

Trustless

don’t have to trust a 3rd party central authority

Decentralized

Specifically, access, issuance, transaction accounting, rules & policies, should be collectively visible, known, and held.

Cryptographic

This cryptographic structure is used to enable a variety of people to host the data without being able to alter it.

Identity

there must be a way to associate these bits with some kind of account, wallet, owner, or agent who can use them

Other things that many take for granted in blockchains may not be core but subject to decisions in design and implementation, so they can vary between implementations

It does not have to be stored in a synchronized global ledger

does not have to be money. It may be a reputation currency, or data used for identity, or naming, etc

Its units do not have to be cryptographic tokens or coins

It does not have to protect the anonymity of users, although it may

if you think currency is only money, and that money must be artificially scarce

Then you must tackle the problem of always tracking which coins exist, and which have been spent. That is one approach — the one blockchain takes.

You might optimize for anonymity if you think of cryptocurrency as a tool to escape governments, regulations, and taxes.

if you want to establish and manage membership in new kinds of commons, then identity and accountability for actions may turn out to be necessary ingredients instead of anonymity.

In the case of the MetaCurrency Project, we are trying to support many use cases by building tools to enable a rich ecosystem of communities and current-sees (many are non-monetary) to enhance collective intelligence at all scales.

Managing consensus about a shared reality is a central challenge at the heart of all distributed computing solutions.

If we want to democratize money by having cryptocurrencies become a significant and viable means of transacting on a daily basis, I believe we need fundamentally more scalable approaches that don’t require expensive, dedicated hardware just to participate.

We should not need system wide consensus for two people to do a transaction in a cryptocurrency

Blockchain is about managing a consensus about what was “said.” Ceptr is about distributing a consensus about how to “speak.”

how nature gets the job done in massively scalable systems which require coordination and consistency

Replicate the same processes across all nodes

Empower every node with full agency

Hold this transformed state locally and reliably

Establish protocols for interaction

Each speaker of a language carries the processes to understand sentences they hear, and generate sentences they need

we certainly don’t carry some kind of global ledger of everything that’s ever been said, or require consensus about what has been said

Language IS a communication protocol we learn by emulating the processes of usage.

Dictionaries try to catch up when the usage

there is certainly no global ledger with consensus about the state of trillions of cells. Yet, from a single zygote’s copy of DNA, our cells coordinate in a highly decentralized manner, on scales of trillions, and without the latency or bottlenecks of central control.

Imagine something along the lines of a Java Virtual Machine connected to a distributed version of Github

Every time this JVM runs a program it confirms the hash of the code it is about to execute with the hash signed into the code repository by its developers

This allows each node that intends to be honest to be sure that they’re running the same processes as everyone else. So when two parties want to do a transaction, and each can have confidence their own code, and the results that your code produces

Then you treat it as authoritative and commit it to your local cryptographically self-validating data store

Allowing each node to treat itself as a full authority to process transactions (or interactions via shared protocols) is exactly how you empower each node with full agency. Each node runs its copy of the signed program/processes on its own virtual machine, taking the transaction request combined with the transaction chains of the parties to the transaction. Each node can confirm their counterparty’s integrity by replaying their transactions to produce their current state, while confirming signatures and integrity of the chain

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 you encounter a corrupted or dishonest node (as evidenced by a breach of integrity of their chain — passing through an invalid state, broken signatures, or broken links), your node can reject the transaction you were starting to process. Countersigning allows consensus at the appropriate scale of the decision (two people transacting in this case) to lock data into a tamper-proof state so it can be stored in as many parallel chains as you need.

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.

If you can reliably embody the state of the node in the node itself using Intrinsic Data Integrity, then all nodes can interact in parallel, independent of other interactions to maximize scalability and simultaneous processing. Either the node has the credits or it doesn’t. I don’t have to refer to a global ledger to find out, the state of the node is in the countersigned, tamper-proof chain.

Just like any meaningful communication, a protocol needs to be established to make sure that a transaction carries all the information needed for each node to run the processes and produce a new signed and chained state. This could be debits or credits to an account which modify the balance, or recoding courses and grades to a transcript which modify a Grade Point Average, or ratings and feedback contributing to a reputation score, and so on.

By distributing process at the foundation, and leveraging Intrinsic Data Integrity, our approach results in massive improvements in throughput (from parallel simultaneous independent processing), speed, latency, efficiency, and cost of hardware.

You also don’t need to incent people to hold their own record — they already want it.

Another noteworthy observation about humans, cells, and atoms, is that each has a general “container” that gets configured to a specific use.

Likewise, the Receptors we’ve built are a general purpose framework which can load code for different distributed applications. These Receptors are a lightweight processing container for the Ceptr Virtual Machine Host

Ceptr enables a developer to focus on the rules and transactions for their use case instead of building a whole framework for distributed applications.

how units in a currency are issued

Most people think that money is just money, but there are literally hundreds of decisions you can make in designing a currency to target particular needs, niches, communities or patterns of flow.

Blockchain cryptocurrencies are fiat currencies. They create tokens or coins from nothing

These coins are just “spoken into being”

the challenging task of

ensure there is no counterfeiting or double-spending

Blockchain cryptocurrencies are fiat currencies

These coins are just “spoken into being”

the challenging task of tracking all the coins that exist to ensure there is no counterfeiting or double-spending

You wouldn’t need to manage consensus about whether a cryptocoin is spent, if your system created accounts which have normal balances based on summing their transactions.

In a mutual credit system, units of currency are issued when a participant extends credit to another user in a standard spending transaction

Alice pays Bob 20 credits for a haircut. Alice’s account now has -20, and Bob’s has +20.

Alice spent credits she didn’t have! True

Managing the currency supply in a mutual credit system is about managing credit limits — how far people can spend into a negative balance

Notice the net number units in the system remains zero

One elegant approach to managing mutual credit limits is to set them based on actual demand.

concerns about manufacturing fake accounts to game credit limits (Sybil Attacks)

keep in mind there can be different classes of accounts. Easy to create, anonymous accounts may get NO credit limit

What if I alter my code to give myself an unlimited credit limit, then spend as much as I want? As soon as you pass the credit limit encoded in the shared agreements, the next person you transact with will discover you’re in an invalid state and refuse the transaction.

If two people collude to commit an illegal transaction by both hacking their code to allow a normally invalid state, the same still pattern still holds. The next person they try to transact with using untampered code will detect the problem and decline to transact.

Most modern community currency systems have been implemented as mutual credit,

Hawala is a network of merchants and businessmen, which has been operating since the middle ages, performing money transfers on an honor system and typically settling balances through merchandise instead of transferring money

Let’s look at building a minimum viable cryptocurrency with the hawala network as our use case

To minimize key management infrastructure, each hawaladar’s public key is their address or identity on the network. To join the network you get a copy of the software from another hawaladar, generate your public and private keys, and complete your personal profile (name, location, contact info, etc.). You call, fax, or email at least 10 hawaladars who know you, and give them your IP address and ask them to vouch for you.

Once 10 other hawaladars have vouched for you, you can start doing other transactions because the protocol encoded in every node will reject a transaction chain that doesn’t start with at least 10 vouches

seeding your information with those other peers so you can be found by the rest of the network.

As described in the Mutual Credit section, at the time of transaction each party audits the counterparty’s transaction chain.

Our hawala crypto-clearinghouse protocol has two categories of transactions: some used for accounting and others for routing. Accounting transactions change balances. Routing transactions maintain network integrity by recording information about hawaladar

Accounting Transactions create signed data that changes account balances and contains these fields:

The final hash of all of the above fields is used as a unique transaction ID and is what each of party signs with their private keys. Signing indicates a party has agreed to the terms of the transaction. Only transactions signed by both parties are considered valid. Nodes can verify signatures by confirming that decryption of the signature using the public key yields a result which matches the transaction ID.

Routing Transactions sign data that changes the peers list and contain these fields:

As with accounting transactions, the hash of the above fields is used as the transaction’s unique key and the basis for the cryptographic signature of both counterparties.

Remember, instead of making changes to account balances, routing transactions change a node’s local list of peers for finding each other and processing.

a distributed network of mutual trust

operates across national boundaries

everyone already keeps and trusts their own separate records

Hawaladars are not anonymous

“double-spending”

It would be possible for someone to hack the code on their node to “forget” their most recent transaction (drop the head of their chain), and go back to their previous version of the chain before that transaction. Then they could append a new transaction, drop it, and append again.

After both parties have signed the agreed upon transaction, each party submits the transaction to separate notaries. Notaries are a special class of participant who validate transactions (auditing each chain, ensuring nobody passes through an invalid state), and then they sign an outer envelope which includes the signatures of the two parties. Notaries agree to run high-availability servers which collectively manage a Distributed Hash Table (DHT) servicing requests for transaction information. As their incentive for providing this infrastructure, notaries get a small transaction fee.

This approach introduces a few more steps and delays to the transaction process, but because it operates on independent parallel chains, it is still orders of magnitude more efficient and decentralized than reaching consensus on entries in a global ledger

millions of simultaneous transactions could be getting processed by other parties and notaries with no bottlenecks.

There are other solutions to prevent nodes from dropping the head of their transaction chain, but the approach of having notaries serve out a DHT solves a number of common objections to completely distributed accounting. Having access to reliable lookups in a DHT provides a similar big picture view that you get from a global ledger. For example, you may want a way to look up transactions even when the parties to that transaction are offline, or to be able to see the net system balance at a particular moment in time, or identify patterns of activity in the larger system without having to collect data from everyone individually.

By leveraging Intrinsic Data Integrity to run numerous parallel tamper-proof chains you can enable nodes to do various P2P transactions which don’t actually require group consensus. Mutual credit is a great way to implement cryptocurrencies to run in this peered manner. Basic PKI with a DHT is enough additional infrastructure to address main vulnerabilities. You can optimize your solution architecture by reserving reserve consensus work for tasks which need to guarantee uniqueness or actually involve large scale agreement by humans or automated contracts.

It is not only possible, but far more scalable to build cryptocurrencies without a global ledger consensus approach or cryptographic tokens.