[p2p-research] How Open Money Ought to Work

[Ryan Lanham]

I've been thinking a long time about LETSIs and Open Money lately.  I have a
few thoughts on the execution of a larger scale scheme than those typically
handled in current LETSI frameworks.  I'll throw them out here and welcome
any feedback.



1.      Those who honor one or more types of local currency are members of a
LETSI network.  Think of the old credit card honored symbols on retailer
doors.

2.      A LETSI network, or more generally, the [exchange network] (in my
example below, the hypothetical Bay Area Bucks Network) is a membership
organization.

3.      Any person or organization making offers (or bids) in the [exchange
currency] requires [membership] in the exchange network (like having an Ebay
account).

4.      Scrip can be used by anyone whether or not they are a member so long
as it is used at a member organization.  Scrip is essentially local legal
tender as accepted by a member (e.g. for 50% of any bill or for all
purchases under $20 US etc.)

5.      To get currency without being a retail member, members create an
[ask bid]—like selling something on Ebay--for a good or service (or loan) to
attain exchange currency.

6.      When an ask bid is accepted or a [counter offer] is made and
agreed—like from an Ebay buyer member—a [contract] is recorded at the
network administrators at a given [exchange price] set in the network
currency.  The issuing person is the [asker], the one who accepts the ask
bid or sets a counter-office that is agreed is the [offerer].

7.      There is also meta-market of local currencies with inter-currency
pricing linked to other standards of value such as $US and to each other.
This central exchange point is called the [grand market].

8.      The [network administrator] is an entity responsible issuing
currencies following a contract.  It could be a community foundation,
chamber of commerce, group of market makers, etc.  It manages electronic
account credit and debits and also trades scrip for electronic account
debits.

9.      All contracts require that the offerer complete transaction comments
within an agreed period based on the goods or services specified in the ask
bid.

10.  The network administrator can freeze accounts of those who do not issue
comments and/or investigate negative comments and resolve them as
appropriate in the membership provisions.

11.  The grand market set of exchange prices is set once per 24 hour period
to simplify administration of the participating networks.  For example, the
Grand Market would publish that LETSI currency A is worth 0.2 US dollars or
1 garden fresh tomato, 20 aluminum cans, 1.4 units of LETSI Z (etc.)

12.  Any participant in LETSI A could fulfill a contract be delivery in kind
quantities of specified items to the network administrator (usually US$),
but could be pounds of canned goods for a local food pantry, etc.

13.  As an example, Say someone wanted to issue 1000 Bay Area Bucks (a
hypothetical network currency) to themselves in exchange for a large good or
service (an ask bid).

14.   There would be known ways to use those BAB units publicized and
supported by the network administrator (the catalogue) and the local network
would encourage advertising schemes.

15.  I would put my ask bid (1000 BAB) up for offer to participants in the
pool (the retailers, etc. would honor the bucks)...for, say 500 lbs of
concrete ready mix.  I might just as well ask to borrow 1000 BAB in exchange
for paying 20 US dollars every week for one year based on a standard
contract noted in the ask, or offer a coupon for 100 hamburgers of a given
type at my hamburger stand.  The list of asks would look very similar to a
micro credit site (e.g. Kiva or MyC4) or Ebay sales items, etc.

16.  The BABs would only be unlocked if (and only if) another member
accepted by confirmation online that the BABs I wanted for the good or
service were contractually agreed.

17.  The member offerer might offer fewer BABs (e.g. 640) for the services
or goods to the asker--in other words, there can be auctions.

18.  The asker then either choose to accept or decline an offer.

19.  Upon agreement, a contract is set (matched).

20.  The network administrator automatically issues network currency to the
account of the asking member.

21.  The asking member who now has a credit to an account can go to a
central facility to trade e-currency for scrip (essentially an ATM).

22.  The grand market allows movement of liquid commodities and currencies
between local exchanges at daily set rates.  E.g. BABs to US$, ounces of
silver, BABs to other LETSI currencies, etc.  The simplest model would
be US$ but a range of grand market trades would likely quickly arise.  A
central foundation would manage the grand market.

23.  It would be straightforward to add charity or microcredit systems to
this framework where a special rate of scrip could be moved to a charitable
account, for example, in exchange for a credit card debit.

24.  The key supporting systems would include the catalogue of asks, the
bank accounting system of e-accounts, the scrip tracking system, the grand
market system, and ancillary tools like charity systems, microfinance
systems, etc.  However, most things could be handled as a variation on the
central catalogue system.


Ryan Lanham
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