Group items tagged

gospel of individualism, small government, and market fundamentalism

innovation is the new selfishness

mastery of public relations

making it seem as if the language of economics was, in fact, the only reasonable way to talk about the subject

memes are for losers; the real money is in epistemes.

“Open source software” was also the first major rebranding exercise overseen by Team O’Reill

It’s easy to forget this today, but there was no such idea as open source software before 1998; the concept’s seeming contemporary coherence is the result of clever manipulation and marketing.

ideological cleavage between two groups

Richard Stallman

Free Software Foundation, preoccupied with ensuring that users had rights with respect to their computer programs. Those rights weren’t many—users should be able to run the program for any purpose, to study how it works, to redistribute copies of it, and to release their improved version (if there was one) to the public

“free software.”

association with “freedom” rather than “free beer”

copyleft

profound critique of the role that patent law had come to play in stifling innovation and creativity.

Plenty of developers contributed to “free software” projects for reasons that had nothing to do with politics. Some, like Linus Torvalds, the Finnish creator of the much-celebrated Linux operating system, did so for fun; some because they wanted to build more convenient software; some because they wanted to learn new and much-demanded skills.

Stallman’s rights-talk, however, risked alienating the corporate types

he was trying to launch a radical social movement, not a complacent business association

By early 1998 several business-minded members of the free software community were ready to split from Stallman, so they masterminded a coup, formed their own advocacy outlet—the Open Source Initiative—and brought in O’Reilly to help them rebrand.

“open source”

The label “open source” may have been new, but the ideas behind it had been in the air for some time.

In those early days, the messaging around open source occasionally bordered on propaganda

This budding movement prided itself on not wanting to talk about the ends it was pursuing; except for improving efficiency and decreasing costs, those were left very much undefined.

extremely decentralized manner, using Internet platforms, with little central coordination.

In contrast to free software, then, open source had no obvious moral component.

“open source is not particularly a moral or a legal issue. It’s an engineering issue. I advocate open source, because . . . it leads to better engineering results and better economic results

While free software was meant to force developers to lose sleep over ethical dilemmas, open source software was meant to end their insomnia.

Stallman the social reformer could wait for decades until his ethical argument for free software prevailed in the public debate

O’Reilly the savvy businessman had a much shorter timeline: a quick embrace of open source software by the business community guaranteed steady demand for O’Reilly books and events

The coup succeeded. Stallman’s project was marginalized. But O’Reilly and his acolytes didn’t win with better arguments; they won with better PR.

A decade after producing a singular vision of the Internet to justify his ideas about the supremacy of the open source paradigm, O’Reilly is close to pulling a similar trick on how we talk about government reform.

much of Stallman’s efforts centered on software licenses

O’Reilly’s bet wa

the “cloud”

licenses would cease to matter

Since no code changed hands

So what did matter about open source? Not “freedom”

O’Reilly cared for only one type of freedom: the freedom of developers to distribute software on whatever terms they fancied.

the freedom of the producer

who must be left to innovate, undisturbed by laws and ethics.

The most important freedom,

is that which protects “my choice as a creator to give, or not to give, the fruits of my work to you, as a ‘user’ of that work, and for you, as a user, to accept or reject the terms I place on that gift.”

O’Reilly opposed this agenda: “I completely support the right of Richard [Stallman] or any individual author to make his or her work available under the terms of the GPL; I balk when they say that others who do not do so are doing something wrong.”

The right thing to do, according to O’Reilly, was to leave developers alone.

According to this Randian interpretation of open source, the goal of regulation and public advocacy should be to ensure that absolutely nothing—no laws or petty moral considerations—stood in the way of the open source revolution

Any move to subject the fruits of developers’ labor to public regulation

must be opposed, since it would taint the reputation of open source as technologically and economically superior to proprietary software

the advent of the Internet made Stallman’s obsession with licenses obsolete

Many developers did stop thinking about licenses, and, having stopped thinking about licenses, they also stopped thinking about broader moral issues that would have remained central to the debates had “open source” not displaced “free software” as the paradigm du jour.

Profiting from the term’s ambiguity, O’Reilly and his collaborators likened the “openness” of open source software to the “openness” of the academic enterprise, markets, and free speech.

“open to intellectual exchange”

“open to competition”

“For me, ‘open source’ in the broader sense means any system in which open access to code lowers the barriers to entry into the market”).

“Open” allowed O’Reilly to build the largest possible tent for the movement.

The language of economics was less alienating than Stallman’s language of ethics; “openness” was the kind of multipurpose term that allowed one to look political while advancing an agenda that had very little to do with politics

highlight the competitive advantages of openness.

the availability of source code for universal examination soon became the one and only benchmark of openness

What the code did was of little importance—the market knows best!—as long as anyone could check it for bugs.

The new paradigm was presented as something that went beyond ideology and could attract corporate executives without losing its appeal to the hacker crowd.

What Raymond and O’Reilly failed to grasp, or decided to overlook, is that their effort to present open source as non-ideological was underpinned by a powerful ideology of its own—an ideology that worshiped innovation and efficiency at the expense of everything else.

What they had in common was disdain for Stallman’s moralizing—barely enough to justify their revolutionary agenda, especially among the hacker crowds who were traditionally suspicious of anyone eager to suck up to the big corporations that aspired to dominate the open source scene.

linking this new movement to both the history of the Internet and its future

As long as everyone believed that “open source” implied “the Internet” and that “the Internet” implied “open source,” it would be very hard to resist the new paradigm

Telling a coherent story about open source required finding some inner logic to the history of the Internet

“If you believe me that open source is about Internet-enabled collaboration, rather than just about a particular style of software license,”

everything on the Internet was connected to everything else—via open source.

The way O’Reilly saw it, many of the key developments of Internet culture were already driven by what he called “open source behavior,” even if such behavior was not codified in licenses.

No moralizing (let alone legislation) was needed; the Internet already lived and breathed open source

apps might be displacing the browser

the openness once taken for granted is no more

Openness as a happenstance of market conditions is a very different beast from openness as a guaranteed product of laws.

One of the key consequences of linking the Internet to the world of open source was to establish the primacy of the Internet as the new, reinvented desktop

This is where the now-forgotten language of “freedom” made a comeback, since it was important to ensure that O’Reilly’s heroic Randian hacker-entrepreneurs were allowed to roam freely.

Soon this “freedom to innovate” morphed into “Internet freedom,” so that what we are trying to preserve is the innovative potential of the platform, regardless of the effects on individual users.

Lumping everything under the label of “Internet freedom” did have some advantages for those genuinely interested in promoting rights such as freedom of expression

Forced to choose between preserving the freedom of the Internet or that of its users, we were supposed to choose the former—because “the Internet” stood for progress and enlightenment.

infoware

Yahoo

their value proposition lay in the information they delivered, not in the software function they executed.

The “infoware” buzzword didn’t catch on, so O’Reilly turned to the work of Douglas Engelbart

to argue that the Internet could help humanity augment its “collective intelligence” and that, once again, open source software was crucial to this endeavor.

Now it was all about Amazon learning from its customers and Google learning from the sites in its index.

The idea of the Internet as both a repository and incubator of “collective intelligence”

in 2004, O’Reilly and his business partner Dale Dougherty hit on the idea of “Web 2.0.” What did “2.0” mean, exactly?

he primary goal was to show that the 2001 market crash did not mean the end of the web and that it was time to put the crash behind us and start learning from those who survived.

Tactically, “Web 2.0” could also be much bigger than “open source”; it was the kind of sexy umbrella term that could allow O’Reilly to branch out from boring and highly technical subjects to pulse-quickening futurology

O’Reilly couldn’t improve on a concept as sexy as “collective intelligence,” so he kept it as the defining feature of this new phenomenon.

What set Web 2.0 apart from Web 1.0, O’Reilly claimed, was the simple fact that those firms that didn’t embrace it went bust

find a way to harness collective intelligence and make it part of their business model.

By 2007, O’Reilly readily admitted that “Web 2.0 was a pretty crappy name for what’s happening.”

O’Reilly eventually stuck a 2.0 label on anything that suited his business plan, running events with titles like “Gov 2.0” and “Where 2.0.” Today, as everyone buys into the 2.0 paradigm, O’Reilly is quietly dropping it

assumption that, thanks to the coming of Web 2.0, we are living through unique historical circumstances

Take O’Reilly’s musings on “Enterprise 2.0.” What is it, exactly? Well, it’s the same old enterprise—for all we know, it might be making widgets—but now it has learned something from Google and Amazon and found a way to harness “collective intelligence.”

tendency to redescribe reality in terms of Internet culture, regardless of how spurious and tenuous the connection might be, is a fine example of what I call “Internet-centrism.”

“Open source” gave us the “the Internet,” “the Internet” gave us “Web 2.0,” “Web 2.0” gave us “Enterprise 2.0”: in this version of history, Tim O’Reilly is more important than the European Union

For Postman, each human activity—religion, law, marriage, commerce—represents a distinct “semantic environment” with its own tone, purpose, and structure. Stupid talk is relatively harmless; it presents no threat to its semantic environment and doesn’t cross into other ones.

Since it mostly consists of falsehoods and opinions

it can be easily corrected with facts

to say that Tehran is the capital of Iraq is stupid talk

Crazy talk, in contrast, challenges a semantic environment, as it “establishes different purposes and assumptions from those we normally accept.” To argue, as some Nazis did, that the German soldiers ended up far more traumatized than their victims is crazy talk.

For Postman, one of the main tasks of language is to codify and preserve distinctions among different semantic environments.

As he put it, “When language becomes undifferentiated, human situations disintegrate: Science becomes indistinguishable from religion, which becomes indistinguishable from commerce, which becomes indistinguishable from law, and so on.

pollution

Some words—like “law”—are particularly susceptible to crazy talk, as they mean so many different things: from scientific “laws” to moral “laws” to “laws” of the market to administrative “laws,” the same word captures many different social relations. “Open,” “networks,” and “information” function much like “law” in our own Internet discourse today.

For Korzybski, the world has a relational structure that is always in flux; like Heraclitus, who argued that everything flows, Korzybski believed that an object A at time x1 is not the same object as object A at time x2

Our language could never properly account for the highly fluid and relational structure of our reality—or as he put it in his most famous aphorism, “the map is not the territory.”

Korzybski argued that we relate to our environments through the process of “abstracting,” whereby our neurological limitations always produce an incomplete and very selective summary of the world around us.

nothing harmful in this per se—Korzybski simply wanted to make people aware of the highly selective nature of abstracting and give us the tools to detect it in our everyday conversations.

Korzybski developed a number of mental tools meant to reveal all the abstracting around us

He also encouraged his followers to start using “etc.” at the end of their statements as a way of making them aware of their inherent inability to say everything about a given subject and to promote what he called the “consciousness of abstraction.”

There was way too much craziness and bad science in Korzybski’s theories

but his basic question

“What are the characteristics of language which lead people into making false evaluations of the world around them?”

Tim O’Reilly is, perhaps, the most high-profile follower of Korzybski’s theories today.

O’Reilly openly acknowledges his debt to Korzybski, listing Science and Sanity among his favorite books

It would be a mistake to think that O’Reilly’s linguistic interventions—from “open source” to “Web 2.0”—are random or spontaneous.

There is a philosophy to them: a philosophy of knowledge and language inspired by Korzybski. However, O’Reilly deploys Korzybski in much the same way that the advertising industry deploys the latest findings in neuroscience: the goal is not to increase awareness, but to manipulate.

O’Reilly, of course, sees his role differently, claiming that all he wants is to make us aware of what earlier commentators may have overlooked. “A metaphor is just that: a way of framing the issues such that people can see something they might otherwise miss,

But Korzybski’s point, if fully absorbed, is that a metaphor is primarily a way of framing issues such that we don’t see something we might otherwise see.

In public, O’Reilly modestly presents himself as someone who just happens to excel at detecting the “faint signals” of emerging trends. He does so by monitoring a group of überinnovators that he dubs the “alpha geeks.” “The ‘alpha geeks’ show us where technology wants to go. Smart companies follow and support their ingenuity rather than trying to suppress it,

His own function is that of an intermediary—someone who ensures that the alpha geeks are heard by the right executives: “The alpha geeks are often a few years ahead of their time. . . . What we do at O’Reilly is watch these folks, learn from them, and try to spread the word by writing down (

The name of his company’s blog—O’Reilly Radar—is meant to position him as an independent intellectual who is simply ahead of his peers in grasping the obvious.

“the skill of writing is to create a context in which other people can think”

As Web 2.0 becomes central to everything, O’Reilly—the world’s biggest exporter of crazy talk—is on a mission to provide the appropriate “context” to every field.

In a fascinating essay published in 2000, O’Reilly sheds some light on his modus operandi.

The thinker who emerges there is very much at odds with the spirit of objectivity that O’Reilly seeks to cultivate in public

meme-engineering lets us organize and shape ideas so that they can be transmitted more effectively, and have the desired effect once they are transmitted

O’Reilly meme-engineers a nice euphemism—“meme-engineering”—to describe what has previously been known as “propaganda.”

how one can meme-engineer a new meaning for “peer-to-peer” technologies—traditionally associated with piracy—and make them appear friendly and not at all threatening to the entertainment industry.

O’Reilly and his acolytes “changed the canonical list of projects that we wanted to hold up as exemplars of the movement,” while also articulating what broader goals the projects on the new list served. He then proceeds to rehash the already familiar narrative: O’Reilly put the Internet at the center of everything, linking some “free software” projects like Apache or Perl to successful Internet start-ups and services. As a result, the movement’s goal was no longer to produce a completely free, independent, and fully functional operating system but to worship at the altar of the Internet gods.

Could it be that O’Reilly is right in claiming that “open source” has a history that predates 1998?

Seen through the prism of meme-engineering, O’Reilly’s activities look far more sinister.

His “correspondents” at O’Reilly Radar don’t work beats; they work memes and epistemes, constantly reframing important public issues in accordance with the templates prophesied by O’Reilly.

Or take O’Reilly’s meme-engineering efforts around cyberwarfare.

Now, who stands to benefit from “cyberwarfare” being defined more broadly? Could it be those who, like O’Reilly, can’t currently grab a share of the giant pie that is cybersecurity funding?

Frank Luntz lists ten rules of effective communication: simplicity, brevity, credibility, consistency, novelty, sound, aspiration, visualization, questioning, and context.

Thus, O’Reilly’s meme-engineering efforts usually result in “meme maps,” where the meme to be defined—whether it’s “open source” or “Web 2.0”—is put at the center, while other blob-like terms are drawn as connected to it.

The exact nature of these connections is rarely explained in full, but this is all for the better, as the reader might eventually interpret connections with their own agendas in mind. This is why the name of the meme must be as inclusive as possible: you never know who your eventual allies might be. “A big part of meme engineering is giving a name that creates a big tent that a lot of people want to be under, a train that takes a lot of people where they want to go,”

News April 4 mail date March 29, 2013 Baffler party March 6, 2013 Žižek on seduction February 13, 2013 More Recent Press I’ve Seen the Worst Memes of My Generation Destroyed by Madness io9, April 02, 2013 The Baffler’s New Colors Imprint, March 21, 2013

There is considerable continuity across O’Reilly’s memes—over time, they tend to morph into one another.

Intellectual Property (IP) management

increase profitability

company competitiveness

Enhancing profitability and growth performance of SMEs by combining and transferring new and existing knowledge into innovative, disruptive and competitive solutions

Intellectual Property (IP)

increase profitability of the enterprise through innovation

increase the return in investment in innovation activities

Particular attention must be paid to IP protection and ownership

Enhancing profitability

competitive solutions

global business opportunities

individual property rights and market exchange have been elevated over most everything else, and this has only eroded the rights of commoners,

reframe the very notion of “the economy” to incorporate non-market sharing and collaboration.

we had concluded that incremental efforts to expand human rights and environmental protection within the framework of the State/Market duopoly were simply not going to achieve much

the existing system of regulation and international treaties has been a horrendous failure over the past forty years. Neoliberal economics has corrupted and compromised law and regulation, slashing away at responsible stewardship of our shared inheritance while hastening a steady decline of the world’s ecosystems

We concluded that new forms of ecological governance that respect human rights, draw upon commons models and reframe our understanding of economic value, hold great promise

An economics and supporting civic polity that valorizes growth and material development as the precondition for virtually everything else is ultimately a dead end—literally.

Achieving a clean, healthy and ecologically balanced environment requires that we cultivate a practical governance paradigm based on, first, a logic of respect for nature, sufficiency, interdependence, shared responsibility and fairness among all human beings; and, second, an ethic of integrated global and local citizenship that insists upon transparency and accountability in all activities affecting the integrity of the environment.

We believe that commons- and rights-based ecological governance—green governance—can fulfill this logic and ethic. Properly done, it can move us beyond the neoliberal State and Market alliance—what we call the ‘State/Market’—which is chiefly responsible for the current, failed paradigm of ecological governance.

The basic problem is that the price system, seen as the ultimate governance mechanism of our polity, falls short in its ability to represent notions of value that are subtle, qualitative, long-term and complicated.

These are, however, precisely the attributes of natural systems.

Exchange value is the primary if not the exclusive concern.

anything that does not have a price and exists ‘outside’ the market is regarded (for the purposes of policy-making) as having subordinate or no value.

industry lobbies have captured if not corrupted the legislative process

regulation has become ever more insulated from citizen influence and accountability as scientific expertise and technical proceduralism have come to be more and more the exclusive determinants of who may credibly participate in the process

we have reached the limits of leadership and innovation within existing institutions and policy structures

it will not be an easy task to make the transition from State/Market ecological governance to commons- and rights-based ecological governance

It requires that we enlarge our understanding of ‘value’ in economic thought to account for nature and social well-being; that we expand our sense of human rights and how they can serve strategic as well as moral purposes; that we liberate ourselves from the limitations of State-centric models of legal process; and that we honor the power of non-market participation, local context and social diversity in structuring economic activity and addressing environmental problems.

articulate and foster a coherent new paradigm

deficiencies of centralized governments (corruption, lack of transparency, rigidity, a marginalized citizenry)

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