Internet DRAFT - draft-vanrein-monee-reqs
draft-vanrein-monee-reqs
Network Working Group R. Van Rein
Internet-Draft OpenFortress.nl
Intended status: Standards Track 27 January 2022
Expires: 31 July 2022
Requirements for Domain-Issued Currency (Monee)
draft-vanrein-monee-reqs-00
Abstract
Monee allows people to operate a currency under a domain name, using
a monetary system that expresses value added, not debt. Currency is
intentionally created where and when value is added, and destroyed
where and when value is destroyed. Inflation is possible, but
revealed as a temporary blot on a currency. New currencies are
bootstrapped locally and may then expand in expanding circles.
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Table of Contents
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. History of Currencies . . . . . . . . . . . . . . . . . . 3
1.2. Monee as Transparant Currency . . . . . . . . . . . . . . 4
1.3. Monee as Network Currency . . . . . . . . . . . . . . . . 5
1.4. Monee as Humane Currency . . . . . . . . . . . . . . . . 6
1.5. Monee as Transition Currency . . . . . . . . . . . . . . 7
2. Currency Identitification and Naming . . . . . . . . . . . . 9
3. Balance Information and Transaction Information . . . . . . . 9
3.1. Basic Balance and Transactions . . . . . . . . . . . . . 10
3.2. Bootstrap Balance and Transactions . . . . . . . . . . . 11
3.3. Conflict Balance and Transactions . . . . . . . . . . . . 13
3.4. Balance and Processes . . . . . . . . . . . . . . . . . . 16
3.5. Storage Considerations . . . . . . . . . . . . . . . . . 17
3.6. Technology Considerations . . . . . . . . . . . . . . . . 18
4. Paths between Currencies . . . . . . . . . . . . . . . . . . 18
4.1. Evaluating a Foreign Currency . . . . . . . . . . . . . . 18
4.2. Suggesting a Trading Ratio . . . . . . . . . . . . . . . 19
4.3. Trusting Currency Information . . . . . . . . . . . . . . 20
5. Security Considerations . . . . . . . . . . . . . . . . . . . 22
6. IANA Considerations . . . . . . . . . . . . . . . . . . . . . 22
7. References . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1. Normative References . . . . . . . . . . . . . . . . . . 22
7.2. Informative References . . . . . . . . . . . . . . . . . 22
Author's Address . . . . . . . . . . . . . . . . . . . . . . . . 22
1. Introduction
This requirements document introduces the currency design of Monee,
along with the data and procedures that are needed for it. The
design is abstract, framing the requirements of an interoperable
protocol.
TODO: Much of the Introduction section is interpretation, and not
technical. Unsure whether this should stay here, but some
introduction into the underlying concepts of Monee are necessary,
somewhere.
Monee supports two economic schools of thought; TODO-check-
literature-for-details: it defaults to the Austrian school of
economics around Mises and Hayek, where money is fully backed, like
under the gold standard; it can also support Keynesian economy of
inflation through partial reserves as a temporary approach to growth.
A core value of Monee is that it makes this distinction abundantly
clear, and enables markets to trade with fully backed currency with
individual exceptions being made outside of such markets and based on
detailed information about the level of inflation. Gresham's law
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suggests that users will prefer fully backed currencies. Currencies
with partial backing complicate the negotations because of the risk
involved.
Monee can achieve price stability, and has no need for any interest
rate. Rather than borrowing and debt, the concept of the currencies
is to show added (real) value. For bootstrapping of new initiatives,
early adopters may choose to share in the risk and possibly receive a
higher award upon success. Islamic banking bans interest, and has
shown similar mechanisms to work well.
1.1. History of Currencies
During barter trade, two persons swap goods at a negotiated ratio.
Using money as an intermediate value, barter trade can be split into
two transactions. These halves of the barter trade no longer need to
find each other to trade directly.
The first forms of money were coins from valuable materials like gold
or cocoa beans; or they were rare natural things like sea shells.
When these monetary forms were replaced with debt statements, they
became easier to handle. But paper statements are easy to produce,
so it was however necessary to trust the party who issued such debt
statements. Initially, debt statements were issued by gold smiths
who stored gold in their vaults; later, this became a service of
national banks.
Given the convenience of handling money, stored gold is not taken out
a lot, and it could be assumed that only a part of it would ever be
called for, which paved the way for betrayal, wherein more debt
statements were issued than covered in gold. This is called
inflation. More debt statements represent the same productivity and
the market mechanism renegotiates prices; after some time, the
purchasing power of a debt statement is lower.
Inflation used to be done in secret, and later publicly introduced as
a temporary measure. Having learned that it is never reversed, the
democratic variant on secrecy is to present it openly but in an
incomprehensible manner. Deflation, which is the reverse process,
calls upon the original over-spending party to destroy their debt
statements, which is a painful encounter with their over-spending; it
corrects the purchasing value, but this advantage is evenly spread
over all other debt statements. So it calls upon a party to weaken
its own position to benefit others. Deflation is highly unlikely and
is rarely implemented.
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The situations worsens when inflation is not measured as a coverage
ratio of debt statements divided by its backing, but if it rises as
an annual percentage. This means that purchasing power is
continually being eroded, and discourages long-term savings such as
pensions. It also suggests towards fast consumption, instead of
investing in future purchasing power.
Since inflation benefits those who release debt statements, it
disadvantages those who work to add real human value to an economy.
The result is a financial industry that trades with excessive amounts
of money that have no relation to the amounts of money available to
people who are actually productive. Also, without democratic
controls over how this money is spent, it has become completely
uninteresting to the financial industry to deal with the small
amounts of money involved in sustaining productivity.
Inflation causes current savings to reduce in purchasing power in the
future. This is a motivation for consumption, rather than saving or
investing for future financial resilience. This triggers
consumption, even if this is unwise in the long run and makes
humanity as a whole consume more resources than our one planet can
sustain.
Under inflation, people with more money than they can spend see their
posessions erode, unless they invest it somewhere. A common
structure is then to apply an interest rate to compensate for
inflation, compensate for a risk of defaulting and perhaps add extra
for profit. Interest works as a money pump from those who lack money
to those who have it. Contrast this to Islamic banking, where the
lender partakes in business risk and profit, often with some control
over how the investment money is put to use. Combining this system
of investment with one free of inflation, there would be no principal
cause left to hamper price stability. Investing always incurs a
risk, and should never be done with money that cannot be missed; in
this light, it is a good sign that price stability takes away the
pressure to invest. Those with money to invest can use it to help
develop the economic activity of others, and may spread their risk by
relating to more than one other.
1.2. Monee as Transparant Currency
Monee permits inflation, but only as a local property of a currency,
and it is blatantly clear. This clarity will usually limit trading
partners to those who want to support a new business initiative, and
who are willing to take a temporary risk while it is starting. As
long as the value added exceeds the value taken for it, there is a
possibility for profit, which allows the currency to deflate and
evolve to one that is fully backed.
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From then on, there is no longer a need to risk inflation and price
instability when trading with this currency; as long as growth takes
a careful pace, it can be fully backed by confirmations of having
added value. By constraining trading partners until this point, it
is now beneficial to the currency issuer to deflate it to the point
where value has been added. Any excess value can be spent freely in
trading, both in support of uncertain new initiatives and for
everyday trading with fully backed Monee currencies.
TODO: Find a way to represent interest, outlandish as it may be to
Monee.
1.3. Monee as Network Currency
Monee uses network connectivity to allow people to trade directly,
and express offering of value by minting their own currency. Value
is considered to have been added when it is confirmed by another who
cancels some of their own currency in return for it. This might be
called a trade, but the currency is an expression of value added
rather than a debt statement; under the Monee system, being rich is
the same as having been useful to others.
Monee needs to establish a market mechanism, both to find the
exchange ratios between currencies and to establish trust in any
statements made for a currency. The exchange ratio must leave room
for mutual profit, so the ratio is not the same in both directions,
but comparing them is a possible factor to consider when evaluating
trust. Other elements of this trust evaluation are the degree of
overlap in mutually trusted relations. Parallel and sequential paths
via such relations can be used to derive a suggested trading ratio
between the currencies. This information is free for interpretation
by anyone (and their software should help with this) and will depend
on individual taste and the level of risk that one can tolerate. In
the absense of inflation it does seem reasonable to expect price
stability by default.
Contrast that with speculation, like on markets for bulk goods (rice,
beans, ...) which works by predicting their future prices and trading
them through bond futures, causing a rise in the sales price of such
bulk goods. This benefits traders but is financed with inflated
money and can raise the cost of living for the poorest on the planet.
Such derived financial products are difficult to make with Monee.
Debt is transferrable, but that is not true for confirmations of
value-adding, nor for promises of such future confirmations. Without
interest, many financial derivatives are impossible. Price stability
takes away most gambling power, because it makes Monee currency
owners less prone to accept uncertainty, in the interest of their own
purchasing power. TODO:IS:ALL:THIS:CORRECT?
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1.4. Monee as Humane Currency
Monee currencies work like a wallet. Currency increases in return
for work, and it decreases when taking out value added by others.
This is how everyday money works. The difference is that the wallet
has its own currency, which is created when and where value is added,
and destroyed when and where value disappears.
Being empowered to create currency astounds many, but it allows Monee
to express added value, rather than owning someone else's debt; Monee
has a more constructive approach to money. Most considering money
creation get naughty, imagining the minting of piles of money, but
they soon realise that money is not a purpose of its own. Their real
wish is purchasing power, which calls for trust in the currency, and
inflation backfires on that. Inflation has bad karma in Monee, and
modesty forbids from boundless creation of currency. This makes
Monee a tool for achieving price stability.
The ability to create money is an open invitation to people to think
about how they can earn it. Put differently, how they can be
producers rather than mere consumers driven by market powers. Even
the backfiring effect of inflation should not be a show-stopper,
because it is simpler than monetary restrictions imposed by banks,
employers and governments. Most people can be useful to others in
ways that they themselves find trivial; it is social and economical
to let that develop. Variety in currencies has been shown before to
empower people who failed to function under the stifled mechanisms of
national currencies.
A vital part of Monee is that it can be bootstrapped from small
communities, without any call on outside funding. Barter trade is
the simplest way to establish trust between local peers, but more
elaborate schemes can also be founded in local trust. An initial
currency may be inflationary, and show for it, but locality can
provide an alternate basis of trust and help a new initiative to get
started by sharing in its risk. To this end, promises to future
payments may be considered acceptable, as an explicit inflationary
form of spending but possibly at a different exchange ratio than
would have been the case without inflation. All this can be done
without a bank.
Note how this means that interest is not required under Monee.
Interest is a problematic concept, because it rises at an exponential
pace while pumping funds from those who need it to those who already
have it. To achieve price stability, one should not engage in
offerings with interest rates but instead be open to differentiated
pricing to reflect variations in risk.
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Most businesses generate a profit at some point, and this allows them
to deflate their currency. Since inflation is blatantly obvious, it
quickly becomes a personal wish to get it out of the way. Providers
who started off with inflated currency will see the gradual drop in
inflation and that would keep them happy. In general, businesses may
need to pop in and out of inflation, and the amount of inflation can
be taken as a sign of some despair.
When businesses mature, they will start looking for more customers.
This would be a gradual process, based on an expanding network where
potential customers judge their connectivity to a new business
relation based on overlap in networks. Initially a new business may
be mostly isolated from anyone else, but it is normal for the network
to spread and bring new customers in reach. This may call for more
uncertainty, increasing with distance.
This mostly repeals branding strategies of marketing; the network
offers word-of-mouth as a better recommendation, and there is little
use to instignate some perceived value to give the product a
superficial gleam; this would work when customers are disconnected,
but connections between them may easily lead to ridiculing an
inaccurate gleam. In short, this model is not a yellow-brick road to
World Domination. It is not expected to scale at an exponential
pace, or to a monstrous size. This may make it more supportive of
diversity and less of monotonicity.
1.5. Monee as Transition Currency
Inflated currencies erode purchasing power. Such currencies are
unfit to save money in, but the same effect eases the burden of
payback on a loan. Governments are aware of this, and sustain loans
over very long periods, if not indefinitely.
Monee can offer price stability, and is therefore likely to become a
currency of choice for everyday trading (according to Gresham's law).
It is also a more likely form of savings, possibly with 100% backing
by commodities such as gold.
This may cause users to move away from inflating currencies, which
can be tolerated if it happens at a calm pace. Cash withdrawal pulls
inflated portions away from financial markets, but if those are
expected then it is feasible to prepare for the change. In the
asymptotic case, only loans would remain in these inflationary
systems. These could be based with 100% covering commidities that
the banks take out of circulation.
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Monee can also be used to express inflationary national currencies,
posted under the domain names of (central) banks. This would release
vital trading information in an easily understood form, and may be
seen as part of democratic accountability. It may also be used for
risk assessment while trading it with Monee currencies. Monee
considers a (central) bank as any other user who mints their own
currency.
Governments are encouraged to interact with Monee and not force their
citizens to convert to an inflationary currency. History has often
shown that it empowers citizens to welcome alternate currencies,
provided they can be normally earned and spent. Being able to
interact with one's government in terms of these alternate currencies
offers great protection in times that a national currency fails.
This yields protection from such catastrophies as runs on a bank,
attacks on banking infrastructure, hyperinflation and bursting
bubbles. This protecion works for citizens as well as their
government.
This transition may well remove funds from financial markets. This
should reduce investments with unbacked currency that drive up prices
of bulk goods such as corn and soy. It will also improve the ratio
between the circulated debt and any commodities held by (central)
banks, and thereby deflate their currency. The trick is now to use
this change to remove inflation completely, and grow into a fully
backed currency. The adoption of Monee as a payment system for
everyday trade is likely to incraase sensitivity for partial reserve,
and make a currency less acceptable if it is inflationary. After
all, under Monee a (central) bank is just another creator of money.
It is a good idea to have standardised exchange options, which remove
money from one system and inject it into another. The exchange task
may involve a mix of accounted storage of cash with audited
destruction of superfluous cash. Such things might be organised by
individuals, under guidance of a bank's statements as to what no
longer constitutes legal tender, but this is could be a bit messy; it
does not benefit monetary stability if people start posting videos in
which they give public proof of an exchange by burning uniquely
numbered bank notes. Standard exchange options should be helpful to
smoothen any such transition.
Assuming that everyday trading converts to one with stable prices, it
would be riskful to take out loans that incur an interest rate. The
model of Islamic banking is the more attractive form of external
funding, bringing participation and financial guidance instead of
relentless payment obligations with a worst-case risk of bankruptcy.
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This transition is expected to reestablish trust in the financial
industry, and a gradual process as described above is probably a more
desirable process than waiting for the rupture of banks and their
currencies.
2. Currency Identitification and Naming
Monee currencies are identified by a public key and it has a starting
time that is incorporated into every signature with the key.
Signatures are used to commit to balance sheets and transactions.
Detached signatures are summarised in a distributed hash table,
rendering the signed information undeniable because the currency
looses control over publication locations.
Besides an identity, a currency can have any number of names that
consist of a domain name and a currency name. The currency name may
be prefixed with "+monee+" (without quotes) to form a user name; for
a domain name ecb.int and currency name euro, a URL-style name
+monee+euro@ecb.int can be used with protocols like email, chat or
telephony. The domain name is used to locate a database that can
provide balance and transaction details to match the signature
information found in the distributed hash table. Aliases could
exist, but the signing key that forms the identity is the only way to
engage in minting transactions.
During its life, a currency may add or remove names. There may be
multiple consecutive names, but for the same identity they must
represent the same information. In times when a currency has no
name, it cannot be operated. This specification considers only
domain-based names, but future extensions may add variants. Not all
implementations may be able to connect to all names of a currency,
and the domain-based form should be a fair default scheme for most
general uses.
3. Balance Information and Transaction Information
To support the functions of a Monee system, parties must learn of
each other's currencies by way of a balance sheet with standard items
that software can evaluate to guide policy-based decisions. The
information that is made available aims to balance between the
privacy of individual trades and the purpose of establishing how a
currency developed in history.
Transactions take place on two balance sheets at the same time, and
each has its own currency and value. In addition, conflict
resolution may call for third party involvement. The following
symbols will be used to change the balances in the respective
currencies used for the role:
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VAR CURRENCY/ROLE MEANING
$1 producer amount of currency
$2 consumer amount of currency
$3 arbiter amount of currency
#1 producer arbitration fee
#2 consumer arbitration fee
#3 arbiter arbitration fee
3.1. Basic Balance and Transactions
This is an example of a basic balance sheet for a Monee currency:
Liquid 123 Minted 7
Valued 116
----- -----
Debit 123 Credit 123
Transactions often make an atomic change to two balances:
1.Liquid 123 1.Minted 7 2.Liquid 479 2.Minted 0
1.Valued 116 2.Valued 479
----- ----- ----- -----
1.Debit 123 1.Credit 123 2.Debit 479 2.Credit 479
TODO: Find a way to represent interest, outlandish as it may be to
Monee.
In this picture, the posts have the following meaning:
Minted is the amount of currency that is currently created, without
having been confirmed as "value added" by another currency.
Liquid is the amount of currency available for spending. Since it
rises along with Minted, this value is increased as part of
inflation.
Valued is the amount of currency free from inflation. This value
equals the Debit sum minus the inflation, which is found in all
other Credit posts. In this simple balance sheet, Valued =
Liquid - Minted.
In this simple balance sheet, inflation is defined by Minted.
The following table summarises transactions that operate on these
balance sheets:
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TRANSACTION PRECONDITION UPDATES
create 1.Minted += $1, Liquid += $1
destroy $1 <= 1.Minted, 1.Minted -= $1, Liquid -= $1
$1 <= 1.Liquid
value $2 <= 2.Valued, 2.Valued -= $2, 2.Liquid -= $2,
$1 <= 2.Liquid 1.Valued += $1, 1.Liquid += $1
devalue $1 <= 1.Valued, 1.Valued -= $1, 1.Liquid -= $1
$1 <= 1.Liquid
barter2 $1 <= 1.Minted, 1.Valued += $1, 1.Minted -= $1,
$2 <= 2.Minted 2.Valued += $2, 2.Minted -= $2
Note how value does not change 2.Minted but just adds the value as
new liquidity. Minting is a currency-local operation. Devaluation
exists for symmetry but does not usually make any sense; it deletes
information about approval. Barter trade is mutual value-addition.
The pattern is simple, with an example shown for 2 people. Unlike
the value transaction, the barter operation does not implicitly
create currency. The reason is that barter trade always occurs with
both parties present.
Note how barter trade offers an elegant mechanism for bootstrapping
currencies; first each currency mints currency to represent goods
available for barter trade, and after completing the barter trade
they have shown the value of the goods they traded by way of the
currency.
3.2. Bootstrap Balance and Transactions
As an extension to the basic balance, this adds a few posts that help
to bootstrap a currency:
Liquid 123 Minted 7
Promised 6
Future 20
Valued 90
----- -----
Debit 123 Credit 123
Transactions often make an atomic change to two balances:
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1.Liquid 123 1.Minted 7 2.Liquid 479 2.Minted 0
2.Promised 6
1.Future 20
1.Valued 96 2.Valued 473
----- ----- ----- -----
1.Debit 123 1.Credit 123 2.Debit 479 2.Credit 479
In this picture, the posts have the following meaning:
Promised is the amount of currency that we used to confirm added
value in other currencies. Normally that would lower the
Liquid post, but initially that may be too low and so the
Promised post is increased. Soon after the Liquid is high
enough, both the Liquid and Promised posts will be reduced.
Promise!
Future is the amount of currency for added value, but the ones
expressing that needed to raise their Promised post instead of
lowering their Liquid post. The value in Future moves to
Liquid at the same time as the reduction of Liquid and Promised
in the other currency.
Valued is the amount of currency free from inflation. In this
simple balance sheet, Valued = Liquid - ( Minted + Future +
Promised ) although the total amount of appreciation is then
Valued + Future, but assuming that might take in a risk from
this currency.
In this balance sheet, inflation is defined by Minted + Promised +
Future.
This example balance shows the two sides of a promise in one balance
sheet; this is not always combined. Once in stable operation, a
currency is likely to have no Promised post left, but it may still
support others through the Future post. Those others then have the
matching Promised post.
The following table summarises the new transactions that operate on
these balance sheets:
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TRANSACTION PRECONDITION UPDATES
promise $2 <= 2.Minted 2.Promised += $2, 2.Minted -= $2,
1.Future += $1, 1.Liquid += $1
monetise $2 <= 2.Promised, 1.Future -= $1, 1.Valued += $1,
$2 <= 2.Valued, 2.Promised -= $2, 2.Minted += $2,
$1 <= 1.Future 2.Valued -= $2, 2.Minted += $2
#TODO# CHECK THIS CAREFULLY, DISAPPEARS TWICE FROM 2.Credit?!?
deliver $2 <= 2.Promised, 2.Promised -= $2, 2.Liquid -= $2,
$2 <= 2.Liquid, 1.Future -= $1, 1.Valued += $1,
$1 <= 1.Future
#TODO# CHECK THIS CAREFULLY, DOES NOT DISAPPEAR FROM 2.Valued?!?
defect $1 <= 1.Future 1.Future -= $1, 1.Minted += $1
#DROPPED# $2 <= 2.Liquid,\n$2 <= 2.Promised, 2.Promised -= $2, 2.Liquid -= $2,
Note how promises show up as inflation until they are delivered by
the consumer or monetised by the producer; promises are like holding
a promise to payment without having turned it into money. Defecting
on a promise is considered a destructive step to take, but it stops
weighing on this inflation post.
3.3. Conflict Balance and Transactions
It would be harmful to stability if a statement of added value could
be retracted. On the other hand, trading conflicts are a reality
that should be dealt with. In fact, showing (unresolved) conflicts
as part of the balance information can provide useful information.
This option exists for those currencies who intend to promise
confliction resolution to simplify the formation of new trust.
Disputes should not be a one-sided mechanism to overpower a currency.
Disputes made by parties who complain all the time must be considered
of lower impact on a currency's trustworthiness than complaints by
parties who rarely complain.
A complaint about falsely provided information, such as suppressing a
transaction or forking another sequence of balances is considered
well-founded, and can be formally verified. Temporary downtime of a
database may end up as unfounded when the currency comes up in
reasonable time.
Procedures to settle a conflict may start with an attempt by the
currency issuer to correct any problems. When this is not considered
reasonable, a mutually agreeable third party may be asked to provide
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arbitrage. To enable such settlements, the parties should allow the
third party to control the currency booking, which they reserve on
special balance posts. The arbiter may require additional funding of
the procedure by the loosing party.
When trading conflicts is raised after a party adds value to our
currency, we need a few more balance posts:
Liquid 123 Minted 7
Argued 0
Debated 3
Arbiter 1
Valued 112
----- -----
Debit 123 Credit 123
Transactions often make an atomic change to two balances, and not
shown here, may even update the balance of an arbiter:
1.Liquid 123 1.Minted 7 2.Liquid 479 2.Minted 0
2.Argued 1
1.Debated 3
1.Arbiter 1
1.Valued 112 2.Valued 478
----- ----- ----- -----
1.Debit 123 1.Credit 123 2.Debit 479 2.Credit 479
Note that the Argued post is on the client side of an argument while
Debated and Arbiter sit on the serving side.
In this picture, the posts have the following meaning:
Argued is the amount of currency that was subtracted from Valued in
exchange for services, but that is now being questioned. The
other side will first save the value in their Debated post and
may later move it into their Arbiter post. When settled,
Argued is reduced by the amount and either Valued or Minted is
raised.
Debated is the amount of currency that was Valued but later gave
rise to discussion. This may apply to all or part of the added
value. It may be resolved between the two currencies, or a
mutually agreeable third may be asked to listen in. When
settled, Debated is reduced by the amount and either Liquid is
reduced or Valued is raised again.
Arbiter is the amount of currency that was Debated but with no
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mutual resolution it has been forwarded to a third party for
arbitrage. When settled, Arbiter is reduced by the amount and
either Liquid is reduced or Valued is raised again.
Valued is the amount of currency free from inflation. This value
equals the Debit sum minus the inflation, which is found in all
other Credit posts. In this simple balance sheet, Valued =
Liquid - ( Minted + Argued + Debated + Arbiter ).
In this balance sheet, inflation is defined by Minted + Argued +
Debated + Arbiter. The reason to include Debated is that it is not
Valued and may be a sign of inflation. Individual policies for trust
in currencies may of course override this, and choose to not take
Debated into account as part of inflation.
The conflict resolution operations reference a prior transaction, but
they introduce their own values for $1 and $2 which must not be
higher than in the referenced transaction, and whose ratios must
match that of the original transaction.
The following table summarises the new transactions that operate on
these balance sheets:
TRANSACTION PRECONDITION UPDATES
debate $1 <= 1.Valued 1.Debated += $1, 1.Valued -= $1,
2.Argued += $2, 2.Liquid += $2
settleF $1 <= 1.Debated, 1.Debated -= $1, 1.Minted += $1,
$2 <= 2.Argued 2.Argued -= $2, 2.Valued += $2
settleU $1 <= 1.Debated, 1.Debated -= $1, 1.Valued += $1,
$2 <= 2.Argued, 2.Argued -= $2, 2.Minted += $2
escalate $1 <= 1.Liquid 1.Arbiter += $1, 1.Liquid -= $1
rulingF $1 <= 1.Arbiter, 1.Arbiter -= $1, 1.Minted += $1,
$2 <= 2.Argued 2.Argued -= $2, 2.Minted += $2,
1.Minted += #1, 3.Valued += #3 TODO:BALANCE
rulingU $1 <= 1.Arbiter, 1.Arbiter -= $1, 1.Valued += $1,
$2 <= 2.Argued 2.Argued -= $2, 2.Minted += $2,
2.Minted += #2, 3.Valued += #3 TODO:BALANCE
After a debate is opened, the two parties may reach a mutual
settlement, and if that fails then the Debate can be escalted to a
mutually agreed Arbiter to pass a ruling. The settle and ruling
transactions can be any composition of F/U partials, for founded/
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unfounded. Arbitration costs an amount #3 which is split over #1 and
#2, and also into F/U partials. The ratios between $1 and $2 (and
$3) is always the same as in the debated transaction, as is the case
for #1, #2 and #3. After handling a conflict, funds may be dumped in
Minted, which may then be cleaned up locally by destroying that
amount of currency; take note that a few changes in one transaction
may add up.
Monee may develop to standardise conflict resolution procedures and
funding mechanisms.
3.4. Balance and Processes
Operations on balances are restricted to a few well-known
transactions. These transactions have preconditions. In addition,
some transactions are follow-ups on other transactions and must be
the only follow-up.
Yet another constraint on transactions is that they are signed by a
deciding party, which is usually the one whose currency is
disadvantaged. The other party can keep a copy and has proof at any
future time if a transaction was to be removed.
The following table shows per transaction who will sign the
transaction and for follow-up transactions which other kind it may
reference:
TRANSACTION SIGNER REFERENCES
create producer -
destroy producer -
barter TODO:?? -
value consumer -
devalue producer -
promise consumer -
monetise producer promise
deliver consumer promise
defect producer promise
debate consumer value
debate TODO:?? barter
settle producer debate
escalate producer debate
escalate consumer debate
escalate consumer settle
ruling arbiter escalate
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3.5. Storage Considerations
Transactions occur in all currencies impacted by them. One currency
is generally disadvantaged, and this is the one to sign the
transaction. The other end can use the signature to enforce the
existence of the transaction. It is considered an offense if such a
transaction is removed from either side, and a reason for corrective
measures, possibly even discrediting the failing currency so spending
it becomes difficult.
Old trading history may be summarised to accommodate privacy, as long
as it continues to assure inclusion of past transactions. Bloom
filters tuned to a low risk of false positives accommodate that. The
entries would be hashes of issuer-signed agreements with others,
which those others may at any time test for presence of a
transaction.
Balances and intervening transactions are combined into a Merkle
tree. This is helpful for verifying that no changes were made in
previously committed records. Committing such balances is done by
signing the Merkle tree outcome with the currency's public key and
publishing the result.
The Merkle values are computed as follows:
* The initial Merkle hash is computed over the starting time and the
public key. The initial balance is not explicitly incorporated;
its balance posts are all-zero and its timestamp is the starting
time.
* Other currencies may be referenced by this same hash, computed
with their starting time and public key, and also no initial
balance.
* Each transaction is hashed as its binary representation followed
by the binary representation of the new balance, including the
hash over its starting time and public key.
* Each balance is hash as its binary representation, including the
timestamp for the balance, the balance posts and a Bloom filter
incorporating all the binary representations of other currencies
changed in transactions since the preceding balance.
* After one or more transactions, a new Merkle hash is computed over
the previous Merkle hash, a list of transaction hashes in time
order and a balance hash that applies at the end.
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The last value is signed by the currency's public key, and published
in the distributed hash table as a follow-up to the prior Merkle hash
for the then-latest balance. New currencies start by publishing the
initial Merkle hash to make such a then-latest balance available.
3.6. Technology Considerations
Merkle trees are sensitive to their input formatting; this should be
a canonical form, with a unique representation for every combination
of data values. The traditional format for such security
requirements has long been DER, and newer approaches have stuggled
with these requirements, so DER still seems like the best option.
DER includes framing of the encoded data.
To retrieve data from a remote server, we can benefit from abilities
such as search, synchronise and access control. It is useful to
point to a database server from DNS records [RFC2782]. There is only
one portable database protocol that goes this far with its
standardised support, and that is LDAP [RFC4511]. It also happens to
integrate well with DER (it uses the more general BER format for the
protocol).
The publication of data in a distributed hash tree calls for a
network; ideally, this is a generally agreed-upon form, such as
Kademlia (which currently is not standardised). The contents of
Kademlia would point from one signed Merkle tree to the next one. An
interesting variation might be GNUnet, which more difficult to attack
because its route starts with a few random legs.
4. Paths between Currencies
4.1. Evaluating a Foreign Currency
TODO
* Inflation of a currency is defined as the sum of Minted and
Promised posts. It should not be considered relative to Valued
and/or Future, because scaling with current size expresses support
for exponential growth, which may impair diversity. To benefit
stability and quality, it is better to consider inflation as a
ratio of the considered ValueAddition.
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* Minting is a sign of inflation, and must be considered carefully.
Liquid businesses have it set to 0, young businesses may be a bit
higher, but it is a sign of growth and that may interfere with
diversity. If minting is allowed to be a percentage, it would
support exponential growth, rather than a linear pace from fixed
minting where individual attention can be applied. When
considering minting, consider it in relation to the value that is
about to be added.
* Futures are a sign of being helped out to develop or grow. It is
a sign that others expressed trust, although it matters who they
are and whether they are actually trying to pay on their promise.
This means that Futures are something to consider carefully, but
not to reject too quickly. It depends on the willingness to
investigate.
* Promises are a sign of having started to help out others, but when
the Value post is high enough, then a Promise is a sign that this
work is not finished, stopping the supported party from getting
started.
* When the distributed hash table points to a newer balance,
consider what caused this surprise. Your cache may need updating,
but the currency's database should never be behind.
* Trust should be combined with the above to derive a risk estimate.
The precise computation is a matter of local taste. When clients
decide what the norms are, then sellers can choose how selective
they want to be. The model should not load the decision code into
clients, so as not to replicate the privacy assaults that have
become the norm under HTTP.
* Exchange rates that differ wildly in the two directions may be
considered suspect. See the next section for suggestions of a
trading ratio.
Monee may develop to standardise requirement profiles. This probably
starts with choices between software configurations.
4.2. Suggesting a Trading Ratio
Any expression that a foreign currency has added value is paired to a
reduction in a visiting currency. This calls for an exchange rate
between the two currencies. A prior exchange rate could serve as a
hint, especially because a system without inflation can offer price
stability. In lieu of such history it can be useful to suggest an
exchange ratio.
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Suggested trading ratios are never more than a suggestion; they may
be accepted or rejected by either side. The best derivations
consider a risk for various trading ratios, thereby giving grounds
for negotiation and even supportive of policy automation; payments
for online media access can be more riskful than for physically
sending gold nuggets.
Any paths between the two currencies can be taken into account, but
the relationships for adding value form a directed graph, and the
opposite relationship is strictly unrelated. Sequential paths
between the two currencies can each suggest a ratio, and these may be
multiplied to find the path's overall ratio. Parallel paths may be
taken as alternatives, and a (weighted) average, possibly with
standard deviation, can be used to combine their suggestions.
Finally, overlapping portions of parallel paths may be applied with a
reduced weight to allow equal impact by all legs.
Monee may develop to standardise ratio calculations. This probably
starts with choices between software configurations.
4.3. Trusting Currency Information
Monee is not different from other currencies when it comes to trust,
but a network of individual currencies does need to evaluate trust
more carefully. Central banks conceal the relations of their
currency to other currencies and, increasingly, debt of bankrupt
nations and financial crisis circumventions. Their currency is a
package deal, and we can take it or leave it. Monee allows everyone
to make their own decisions while trading.
The reason why people trust money is rather pragmatic: "Will it buy
me what I need?" and, as part of that, "Will it still be good in the
future if I accept it now?" To be accepted, alternative currencies
always need to take care of this, even if the default currency is in
a deep crisis; mistrust in an old system does not make people accept
a new system until these issues are addressed.
A conservative approach to these questions is 100% backing in an
asset such as gold. It is a sufficient condition, but not a
necessary one. Care should be taken not to resort to debt papers,
and continue to focus on added value, but other than that it may well
be possible to weave asset-backed value notions into a Monee
currency.
Monee currencies may choose to add value that may be replicated
easily, such as growing organic tomatoes, being attentive to another
person's problems and so on. These things add value without
suffering from the poor replication properties of classic money.
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This is why Monee allows users to mint their own currency. It simply
makes no sense to centralise that function where it has no bearing on
the value added, and where a lure to abuse would be created.
When spending Monee, the question is if the person who offers to add
value will indeed add that value, if proper conflict handling is in
place in case they do not, and whether others have had trust in this
offering. What matters most in this situation is whether the
appreciation of added value is meaningful to the prospective
consumer.
This is why they need to explore the paths from their currency to
that of the producer, and see if there is overlap with people whose
judgement they value. These people are the foundation of the
upcoming trade. There might also be intermediates that are
considered counter-indications, but that mechanism should be used
with care; this could create a destructive business opportunity
consisting that adds negative judgement to a (competitor's) currency.
Likewise, conflict handling is a useful measurement of problematic
trading, but if a conflict comes from a customer who raises many
conflicts relative to positive outcomes, then their conflicts are not
very informative. Such statusses may in fact be verified by the
producer before offering or accepting a trade.
The network over which parties trade is, at least in principle, a
personal network. Communities may form, both locally or founded on a
shared mindset, and function as a hop towards the parties that all
others are trading with. A person may trust such a network and, if
the feeling is mutual, such a network may trust the person too. This
adds extra trust validation paths that allows new trading to take
place. Note how this does not start from a global scale, but rather
allows networks to grow.
In the end, the implementation of trust policies is personal, and
Monee simply provides the desired information to make reasonable
judgements. Software for Monee is likely to provide options with
parameter tuning, and may even support scripting plugins for
individual regimens. To producers, this means that they could be up
to anything. The need to protect web browsers from agressive web
sites suggests that customers should dictate the rules, and producers
should be welcomed to follow if they want.
Monee may develop to standardise trust policies. It would be a
consumer's choice which one to accept, a standardised one or a
personal policy.
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5. Security Considerations
TODO: Trust in information being supplied, specifically completeness.
TODO: Where to find information that discredits a currency.
6. IANA Considerations
None.
7. References
7.1. Normative References
[RFC2782] Gulbrandsen, A., Vixie, P., and L. Esibov, "A DNS RR for
specifying the location of services (DNS SRV)", RFC 2782,
DOI 10.17487/RFC2782, February 2000,
<https://www.rfc-editor.org/info/rfc2782>.
7.2. Informative References
[RFC4511] Sermersheim, J., Ed., "Lightweight Directory Access
Protocol (LDAP): The Protocol", RFC 4511,
DOI 10.17487/RFC4511, June 2006,
<https://www.rfc-editor.org/info/rfc4511>.
Author's Address
Rick van Rein
OpenFortress.nl
Haarlebrink 5
Enschede
Email: rick@openfortress.nl
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