One way to look at ‘coupling’ is the relationship that a transaction record implies between transactors. For example, the use of community currency implies membership in the same community or in communities that have an agreement in place to accept each other’s currency. In Ripple, direct transactions occur only if the transactors have preset limits with each other and payments have to be routed through pre-established accounts. These requirements may be viewed as ‘static binding’ or predetermined configurations to set limits on who could trade with whom.
In the case of mutual credit community currencies, it is not hard to see similarities with the pre-WWW philosophy that hyperlinks are to be made and maintained through a centralized database. A requirement that transactors must have an account with the same mutual credit accounting system highlights this similarity. But the similarity extends beyond considerations of ledger boundaries and into logical or abstract rules for initializing who could trade with whom. As long as the ability to transact requires a predetermined relationship, the ‘localized hyperlinks’ mindset applies even if the accounts were maintained in separate servers or accounting systems.
Under tyaga.org’s implementation scenarios, a transaction does not automatically imply that the transactors are members of the same community or that they have established credit limits with each other prior to the transaction. Anyone could potentially trade with anyone else. It is up to a potential recipient to accept or reject a currency brand at the time of transaction – essentially, the concept of dynamic or late binding as applied to a currency system design. This is similar to the WWW philosophy of allowing any web page to link to another page at-large, which is a less-controlled way of doing things but inherently more flexible and scalable. Even though mutual consent is required for an inter-entity transaction, such consent is only applicable to one instance of payment and does not imply past or future guarantees of currency brand acceptability between two brands.
Loose coupling, as described in a previous post, is expected to lower the barrier of setting up new currency brands, leading to more spontaneous currency brand creation (i.e., more ‘new web sites’ in the current analogy). Dynamic binding, as described in this post, is expected to lead to more diverse market selections and higher frequencies of inter-entity transactions (i.e., more ‘interdomain links’.)
As with all design trade-offs, however, there is a price to pay for such high expectations. Tyaga.org’s design approach for achieving flexibility and scalability comes at a substantial cost of stricter reporting requirements and greater dependence on service providers to make make sense of huge volumes of transaction data. The challenges of reconcilable reports, auditors and currency brand indices arise since each entity is allowed and encouraged to set its own currency limits as budgets, without having to predetermine transaction boundaries or specific entities as revenue sources.
In assessing my project plans for this year, I reviewed the core requirements that the implementation is trying to address. In an effort to simplify the core requirements even farther than the one-page ‘game’ representation, I have arrived at the following three main concepts:
1. An independent currency brand corresponds to, and is issued by, an entity with a self-determined mission to provide certain goods and services to the market or general public.
2. Independent currency issuance is defined as an equivalent increase in the unused revenue and expense budgets of an entity.
3. Published reports are necessary to audit the whole currency lifecyle, including the corresponding inflows and outflows between entities.
Among these main concepts, the definition of currency issuance might seem the most arbitrary to others. I now realize that this same definition also implies the other currency activity definitions in the ocaup accounting model. So instead of having to explain and defend the whole ocaup model (which really is not that complicated), I really only have to explain why #2 is so important to the design of accounting systems and payment protocols that affect inter-entity transactions.
First, it must be noted that all currency design require an accounting restriction of some sort. Community currencies impose geographic or shared-interest boundaries on where currencies might circulate. Ripple requires payments to be routed through a pathway of neighboring nodes. Traditional currencies impose restrictions on who could issue fiat notes into general circulation. So having a set of accounting restriction to guide the issuance and use of currency is nothing new and all are likely to be viewed as arbitrary. But why insist on #2?
The short answer is that #2 leads to looser coupling between currency brands. Loose coupling facilitates the ability to noncooperate with a particular entity by not accepting its currency brand.
For example, imagine a politician with a campaign budget that is funded by donations. If the politician’s ability to raise her campaign budget is tied to the ongoing donations that she receives, then she is more likely to care about satisfying the special interest of big donors such as lobbyists. In contrast, if she is able to fund her campaign budgets independently of donations that come in within a given period, then there is less pressure to attract or retain large donors. She would worry more about the acceptability of her currency brand to market participants and the general public. Because of #2, her currency activity is tied to the self-determined limits that her organization has set to conduct its campaign.
The other implication of #2 is that inter-entity currency flow is allowed as long as the payments do not lead to an increase in the unused budgets. In fact, considering that each entity fulfills a specialized role, #1 and #2 acknowledge that inter-entity transactions are to be expected and supported. Loose coupling does not have to lead to isolated currency systems.
When each market entity decides to issue its own currency as unused budgets, it would be impossible and counterproductive to predict which currency brand is going to be offered as payment for a transaction at any given time. Even if each person carries only one or two currency brands, a seller is faced with the prospect of receiving payments in many different currency brands from different customers (employees of google.com, seattle.gov, etc.) Clearly, an inter-entity payment protocol must factor such currency brand diversity in implementation use-case scenarios. Real-time advisories on currency brands would be the best approach since revenue sources would not be unnecessarily restricted through pre-emptive brand rejection based on potentially stale information.
To summarize, currency traceability to an entity, loose coupling between currency brands, and auditable reports of currency activity are important design goals that facilitate informed cooperation and nooncooperation with specific entities.
Would it be possible to reconcile the fundamental differences between the following two approaches:
“Currency designed for transactions between members of independent entities or brands”
“Currency designed for transactions between members of the same entity or community”
My doubts have resurfaced after reading some recent online discussions related to currency information systems. At issue is the importance of interoperability between different currency entities as supported by adhoc service providers.
With community-oriented currencies, the expectation is for the majority of transactions to occur between members of the same currency entity, so the administrative system of one currency does not have to worry about understanding information from another currency system. This obviously has the advantage of freeing each currency issuer to configure their currency and transaction grammar as needed, without worrying about what other issuers are doing.
In contrast, tyaga.org expects that separation of concerns and scalability would inevitably lead to a majority of transactions occuring between members of different currency entities. Where each entity specializes in serving a particular market need, access to product diversity is only possible through interentity trades. Each entity could still configure currency settings and use proprietary messaging/record formats. However, the need for publishing and reporting conventions is going to be unavoidable under a scenario of global interentity transactions.
It was interoperability concerns that led to the development of Prowl as a potential starting point for discussing uniform representation and standardized accounting terms, while still allowing for variations in parameters and calculation specifications. Without interoperability, it would not be possible to achieve traceable and auditable currency brands.