Group items tagged

In a first phase, the commons simply emerges as an added alternative.

becoming a subsector of society, and starts influencing the whole

phase transition and transformation will need to occur.

how a commons-dominated, i.e. after the phase transition, society would look like.

At its core would be a collection of commons, represented by trusts and for-benefit associations, which protect their common assets for the benefit of present and future generations

The commons ‘rents out’ the use of its resources to entrepreneurs. In other words, business still exists, though infinite growth-based capitalism does not.

More likely is that the corporate forms will be influenced by the commons and that profit will be subsumed to other goals, that are congruent with the maintenance of the commons.

The state will still exist, but will have a radically different nature

Much of its functions will have been taken over by commons institutions, but since these institutions care primarily about their commons, and not the general common good, we will still need public authorities that are the guarantor of the system as a whole, and can regulate the various commons, and protect the commoners against possible abuses. So in our scenario, the state does not disappear, but is transformed, though it may greatly diminish in scope, and with its remaining functions thoroughly democratized and based on citizen participation.

In our vision, it is civil-society based peer production, through the Commons, which is the guarantor of value creation by the private sector, and the role of the state, as Partner State, is to enable and empower the creation of common value. The new peer to peer state then, though some may see that as a contradictio in terminis, is a state which is subsumed under the Commons, just as it is now under the private sector. Such a peer to peer state, if we are correct, will have a much more modest role than the state under a classic state society, with many of its functions taken over by civil society associations, interlinked in processes of global governance. The above then, this triarchy, is the institutional core which replaces the dual private-public binary system that is characteristic of the capitalist system that is presently the dominant format.

fundamental mission is to empower direct social-value creation, and to focus on the protection of the Commons sphere as well as on the promotion of sustainable models of entrepreneurship and participatory politics

the state becomes a 'partner state' and enables autonomous social production.

the state does exist, and I believe that we can’t just imagine that we live in a future state-less society

retreating from the binary state/privatization dilemma to the triarchical choice of an optimal mix amongst government regulation, private-market freedom and autonomous civil-society projects

the role of the state

“the peer production of common value requires civic wealth and strong civic institutions.

trigger the production/construction of new commons by - (co-) management of complexe resource systems which are not limited to local boundaries or specific communities (as manager and partner) - survey of rules (chartas) to care for the commons (mediator or judge) - kicking of or providing incentives for commoners governing their commons - here the point is to design intelligent rules which automatically protect the commons, like the GPL does (facilitator)"

the emergence of the digital commons. It is the experience of creating knowledge, culture, software and design commons, by a combination of voluntary contributions, entrepreneurial coalitions and infrastructure-protecting for-benefit associations, that has most tangibly re-introduced the idea of commons, for all to use without discrimination, and where all can contribute. It has drastically reduced the production, distribution, transaction and coordination costs for the immaterial value that is at the core also of all what we produce physically, since that needs to be made, needs to be designed. It has re-introduced communing as a mainstream experience for at least one billion internet users, and has come with proven benefits and robustness that has outcompeted and outcooperated its private rivals. It also of course offers new ways to re-imagine, create and protect physical commons.

stop enclosures

peer to peer, i.e. the ability to freely associate with others around the creation of common value

communal shareholding, i.e. the non-reciprocal exchange of an individual with a totality. It is totality that we call the commons.

It is customary to divide society into three sectors, and what we want to show is how the new peer to peer dynamic unleashed by networked infrastructures, changes the inter-relationship between these three sectors.

In the current ‘cognitive capitalist’ system, it is the private sector consisting of enterprises and businesses which is the primary factor, and it is engaged in competitive capital accumulation. The state is entrusted with the protection of this process. Though civil society, through the citizen, is in theory ‘sovereign’, and chooses the state; in practice, both civil society and the state are under the domination of the private sector.

it fulfills three contradictory functions

Of course, this is not to say that the state is a mere tool of private business.

protect the whole system, under the domination of private business

protector of civil society, depending on the balance of power and achievements of social movements

protector of its own independent interests

Under fascism, the state achieves great independence from the private sector , which may become subservient to the state. Under the welfare state, the state becomes a protector of the social balance of power and manages the achievements of the social movement; and finally, under the neoliberal corporate welfare state, or ‘market state’, it serves most directly the interests of the financial sector.

key institutions and forms of property.

The state managed a public sector, under its own property.

The private sector , under a regime of private ownership, is geared to profit, discounts social and natural externalities, both positive and negative, and uses its dominance in society to use and dominate the state.

civil society has a relative power as well, through its capability of creating social movements and associations

Capitalism has historically been a pendulum between the private and the public sector

However, this configuration is changing,

the endangerment of the biosphere through the workings of ‘selfish’ market players; the second is the role of the new digital commons.

participatory politics

Peer production gives us an advance picture of how a commons-oriented society would look like. At its core is a commons and a community contributing to it, either voluntarily, or as paid entrepreneurial employees. It does this through collaborative platforms using open standards. Around the commons emerges enterprises that create added value to operate on the marketplace, but also help the maintenance and the expansion of the commons they rely on. A third partner are the for-benefit associations that maintain the infrastructure of cooperation. Public authorities could play a role if they wanted to support existing commons or the creation of new commons, for the value they bring to society.

if a commons is not created as in the case of the digital commons, it is something that is inherited from nature or former generations, given in trust and usufruct, so that it can be transmitted to our descendents. The proper institution for such commons is therefore the trust, which is a corporate form that cannot touch its principal capital, but has to maintain it.

s. Euclidean space

metric space

topological space

Physical space is the extension surrounding a point

My presentation of a general theory of living systems will employ two sorts of spaces in which they may exist, physical or geographical space and conceptual or abstracted spaces

Physical or geographical space

Euclidean space

distance

moving

maximum speed

objects moving in such space cannot pass through one another

friction

The characteristics and constraints of physical space affect the action of all concrete systems, living and nonliving.

information can flow worldwide almost instantly

Physical space is a common space

Most people learn that physical space exists, which is not true of many spaces

They can give the location of objects in it

Conceptual or abstracted spaces

Peck order

Social class space

Social distance

Political distance

life space

semantic space

Sociometric space

A space of time costs of various modes of transportation

space of frequency of trade relations among nations.

A space of frequency of intermarriage among ethnic groups.

These conceptual and abstracted spaces do not have the same characteristics and are not subject to the same constraints as physical space

Social and some biological scientists find conceptual or abstracted spaces useful because they recognize that physical space is not a major determinant of certain processes in the living systems they study

interpersonal relations

one cannot measure comparable processes at different levels of systems, to confirm or disconfirm cross-level hypotheses, unless one can measure different levels of systems or dimensions in the same spaces or in different spaces with known transformations among them

It must be possible, moreover, to make such measurements precisely enough to demonstrate whether or not there is a formal identity across levels

fundamental "fourth dimension" of the physical space-time continuum

is the particular instant at which a structure exists or a process occurs

or the measured or measurable period over which a structure endures or a process continues.

durations

speeds

rates

accelerations

irreversible unidirectionality of time

thermodynamics

negentropy

"time's arrow."

Matter and energy

Matter is anything which has mass (m) and occupies physical space.

Energy (E) is defined in physics as the ability to do work.

kinetic energy

potential energy

rest mass energy

Mass and energy are equivalent

Living systems need specific types of matter-energy in adequate amounts

Energy for the processes of living systems is derived from the breakdown of molecules

Any change of state of matter-energy or its movement over space, from one point to another, I shall call action.

It is one form of process.

information (H)

Transmission of Information

Meaning is the significance of information to a system which processes it: it constitutes a change in that system's processes elicited by the information, often resulting from associations made to it on previous experience with it

Information is a simpler concept: the degrees of freedom that exist in a given situation to choose among signals, symbols, messages, or patterns to be transmitted.

The set of all these possible categories (the alphabet) is called the ensemble or repertoire

.) The unit is the binary digit, or bit of information

. The amount of information is measured as the logarithm to the base 2 of the number of alternate patterns

Signals convey information to the receiving system only if they do not duplicate information already in the receiver. As Gabor says:

[The information of a message can] be defined as the 'minimum number of binary decisions which enable the receiver to construct the message, on the basis of the data already available to him.'

meaning cannot be precisely measured

Information is the negative of uncertainty.

information is the amount of formal patterning or complexity in any system.

The term marker was used by von Neumann to refer to those observable bundles, units, or changes of matter-energy whose patterning bears or conveys the informational symbols from the ensemble or repertoire.

If a marker can assume n different states of which only one is present at any given time, it can represent at most log2n bits of information. The marker may be static, as in a book or in a computer's memory

Communication of almost every sort requires that the marker move in space, from the transmitting system to the receiving system, and this movement follows the same physical laws as the movement of any other sort of matter-energy. The advance of communication technology over the years has been in the direction of decreasing the matter-energy costs of storing and transmitting the markers which bear information.

There are, therefore, important practical matter-energy constraints upon the information processing of all living systems exerted by the nature of the matter-energy which composes their markers.

organization is based upon the interrelations among parts.

If two parts are interrelated either quantitatively or qualitatively, knowledge of the state of one must yield some information about the state of the other. Information measures can demonstrate when such relationships exist

The disorder, disorganization, lack of patterning, or randomness of organization of a system is known as its entropy (S)

the statistical measure for the negative of entropy is the same as that for information

entropy becomes a measure of the probability

Increase of entropy was thus interpreted as the passage of a system from less probable to more probable states.

according to the second law, a system tends to increase in entropy over time, it must tend to decrease in negentropy or information.

therefore no principle of the conservation of information

The total information can be decreased in any system without increasing it elsewhere

but it cannot be increased without decreasing it elsewhere

. Making one or more copies of a given informational pattern does not increase information overall, though it may increase the information in the system which receives the copied information.

transforms information into negative entropy

smallest possible amount of energy used in observing one bit of information

calculations of the amount of information accumulated by living systems throughout growth.

the concept of Prigogine that in an open system (that is one in which both matter and energy can be exchanged with the environment) the rate of entropy production within the system, which is always positive, is minimized when the system is in a steady state.

in systems with internal feedbacks, internal entropy production is not always minimized when the system is in a stationary state. In other words, feedback couplings between the system parameters may cause marked changes in the rate of development of entropy. Thus it may be concluded that the "information flow" which is essential for this feedback markedly alters energy utilization and the rate of development of entropy, at least in some such special cases which involve feedback control. While the explanation of this is not clear, it suggests an important relationship between information and entropy

amount of energy actually required to transmit the information in the channel is a minute part of the total energy in the system, the "housekeeping energy" being by far the largest part of it

In recent years systems theorists have been fascinated by the new ways to study and measure information flows, but matter-energy flows are equally important. Systems theory is more than information theory, since it must also deal with energetics - such matters as

the flow of raw materials through societies

Only a minute fraction of the energy used by most living systems is employed for information processing

I have noted above that the movement of matter-energy over space, action, is one form of process. Another form of process is information processing or communication, which is the change of information from one state to another or its movement from one point to another over space

Communications, while being processed, are often shifted from one matter-energy state to another, from one sort of marker to another

transformations go on in living systems

One basic reason why communication is of fundamental importance is that informational patterns can be processed over space and the local matter-energy at the receiving point can be organized to conform to, or comply with, this information

the delivery of "flowers by telegraph."

Matter-energy and information always flow together

Information is always borne on a marker

. Conversely there is no regular movement in a system unless there is a difference in potential between two points, which is negative entropy or information

If the receiver responds primarily to the material or energic aspect, I shall call it, for brevity, a matter-energy transmission; if the response is primarily to the information, I shall call it an information transmission

Moreover, just as living systems must have specific forms of matter-energy, so they must have specific patterns of information

example

example

develop normally

have appropriate information inputs in infancy

pairs of antonyms

one member of which is associated with the concept of information (H)

the other member of which is associated with its negative, entropy (S)

System

A system is a set of interacting units with relationships among them

.The word "set" implies that the units have some common properties. These common properties are essential if the units are to interact or have relationships. The state of each unit is constrained by, conditioned by, or dependent on the state of other units. The units are coupled. Moreover, there is at least one measure of the sum of its units which is larger than the sum of that measure of its units.

Conceptual system

Units

terms

Relationships

a set of pairs of units, each pair being ordered in a similar way

expressed by words

or by logical or mathematical symbols

operations

The conceptual systems of science

observer

selects

particular sets to study

Variable

Each member of such a set becomes a variable of the observer's conceptual system

conceptual system may be loose or precise, simple or elaborate

Indicator

an instrument or technique used to measure fluctuations of variables in concrete systems

Function

a correspondence between two variables, x and y, such that for each value of x there is a definite value of y, and no two y's have the same x, and this correspondence is: determined by some rule

Any function is a simple conceptual system

Parameter

An independent variable through functions of which other functions may be expressed

The state of a conceptual system

the set of values on some scale, numerical or otherwise, which its variables have at a given instant

Formal identity

variables

varies comparably to a variable in another system

If these comparable variations are so similar that they can be expressed by the same function, a formal identity exists between the two systems

Relationships between conceptual and other sorts of systems

Science advances as the formal identity or isomorphism increases between a theoretical conceptual system and objective findings about concrete or abstracted systems

A conceptual system may be purely logical or mathematical, or its terms and relationships may be intended to have some sort of formal identity or isomorphism with units and relationships empirically determinable by some operation carried out by an observer

Concrete system

a nonrandom accumulation of matter-energy, in a region in physical space-time, which is organized into interacting interrelated subsystems or components.

Units

are also concrete systems

Relationships

spatial

temporal

spatiotemporal

causal

Both units and relationships in concrete systems are empirically determinable by some operation carried out by an observer

patterns of relationships or processes

The observer of a concrete system

distinguishes a concrete system from unorganized entities in its environment by the following criteria

physical proximity of its units

similarity of its units

common fate of its units

distinct or recognizable patterning of its units.

Their boundaries are discovered by empirical operations available to the general scientific community rather than set conceptually by a single observer

Variable of a concrete system

Any property of a unit or relationship within a system which can be recognized by an observer

which can potentially change over time, and whose change can potentially be measured by specific operations, is a variable of a concrete system

Examples

number of its subsystems or components, its size, its rate of movement in space, its rate of growth, the number of bits of information it can process per second, or the intensity of a sound to which it responds

A variable is intrasystemic

not to be confused with intersystemic variations which may be observed among individual systems, types, or levels.

The state of a concrete system

its structure

represented by the set of values on some scale which its variables have at that instant

Open system

Most concrete systems have boundaries which are at least partially permeable, permitting sizable magnitudes of at least certain sorts of matter-energy or information transmissions to pass them. Such a system is an open system. In open systems entropy may increase, remain in steady state, or decrease.

Closed system

impermeable boundaries through which no matter-energy or information transmissions of any sort can occur is a closed system

special case

No actual concrete system is completely closed

In closed systems, entropy generally increases, exceptions being when certain reversible processes are carried on which do not increase it. It can never decrease.

Nonliving system

the general case of concrete systems, of which living systems are a very special case. Nonliving systems need not have the same critical subsystems as living systems, though they often have some of them

Living system

a special subset of the set of all possible concrete systems

They all have the following characteristics:

open systems

inputs

throughputs

outputs

of various sorts of matter-energy and information.

maintain a steady state of negentropy even though entropic changes occur in them as they do everywhere else

by taking in inputs

higher in complexity or organization or negentropy

than their outputs

The difference permits them to restore their own energy and repair breakdowns in their own organized structure.

In living systems many substances are produced as well as broken down

To do this such systems must be open and have continual inputs of matter-energy and information

entropy will always increase in walled-off living systems

They have more than a certain minimum degree of complexity

They either contain genetic material composed of deoxyribonucleic acid (DNA)

or have a charter

blueprint

program

of their structure and process from the moment of their origin

may also include nonliving components.

They have a decider, the essential critical sub-system which controls the entire system, causing its subsystems and components to interact. Without such interaction under decider control there is no system.

other specific critical sub-systems or they have symbiotic or parasitic relationships with other living or nonliving systems

Their subsystems are integrated together to form actively self-regulating, developing, unitary systems with purposes and goals

They can exist only in a certain environment

change in their environment

produces stresses

Totipotential system

capable of carrying out all critical subsystem processes necessary for life is totipotential

Partipotential system

does not itself carry out all critical subsystem processes is partipotential

A partipotential system must interact with other systems that can carry out the processes which it does not, or it will not survive

parasitic

symbiotic

Fully functioning system

when it

Partially functioning system

it must do its own deciding, or it is not a system

Abstracted system

Units

relationships abstracted or selected by an observer in the light of his interests, theoretical viewpoint, or philosophical bias.

Some relationships may be empirically determinable by some operation carried out by the observer, but others are not, being only his concepts

Relationships

The relationships mentioned above are observed to inhere and interact in concrete, usually living, systems

these concrete systems are the relationships of abstracted systems.

The verbal usages of theoretical statements concerning abstracted systems are often the reverse of those concerning concrete systems

An abstracted system differs from an abstraction, which is a concept

representing a class of phenomena all of which are considered to have some similar "class characteristic." The members of such a class are not thought to interact or be interrelated, as are the relationships in an abstracted system

Abstracted systems are much more common in social science theory than in natural science.

are oriented toward relationships rather than toward the concrete systems

spatial arrangements are not usually emphasized

their physical limits often do not coincide spatially with the boundaries of any concrete system, although they may.

important difference between the physical and biological hierarchies, on the one hand, and social hierarchies, on the other

Most physical and biological hierarchies are described in spatial terms

we propose to identify social hierarchies not by observing who lives close to whom but by observing who interacts with whom

intensity of interaction

in most biological and physical systems relatively intense interaction implies relative spatial propinquity

To the extent that interactions are channeled through specialized communications and transportation systems, spatial propinquity becomes less determinative of structure.

PARSONS

the unit of a partial social system is a role and not the individual.

culture

cumulative body of knowledge of the past, contained in memories and assumptions of people who express this knowledge in definite ways

The social system is the actual habitual network of communication between people.

RUESCH

A social system is a behavioral system

It is an organized set of behaviors of persons interacting with each other: a pattern of roles.

The roles are the units of a social system

On the other hand, the society is an aggregate of social subsystems, and as a limiting case it is that social system which comprises all the roles of all the individuals who participate.

What Ruesch calls the social system is something concrete in space-time, observable and presumably measurable by techniques like those of natural science

To Parsons the system is abstracted from this, being the set of relationships which are the form of organization. To him the important units are classes of input-output relationships of subsystems rather than the subsystems themselves

system is a system of relationship in action, it is neither a physical organism nor an object of physical perception

evolution

differentiation

growth

from earlier and simpler forms and functions

capacities for specializations and gradients

[action] is not concerned with the internal structure of processes of the organism, but is concerned with the organism as a unit in a set of relationships and the other terms of that relationship, which he calls situation

Abstracted versus concrete systems

One fundamental distinction between abstracted and concrete systems is that the boundaries of abstracted systems may at times be conceptually established at regions which cut through the units and relationships in the physical space occupied by concrete systems, but the boundaries of these latter systems are always set at regions which include within them all the units and internal relationships of each system

A science of abstracted systems certainly is possible and under some conditions may be useful.

If the diverse fields of science are to be unified, it would be helpful if all disciplines were oriented either to concrete or to abstracted systems.

It is of paramount importance for scientists to distinguish clearly between them

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.