Category: Entity

What, How and Why

During the last few months, I have channeled my spare time towards the implementation effort (updates at tyaga.org), which has obviously affected my ability to post regularly on this blog. I would like to catch up by discussing the ‘what’, ‘how’ and ‘why’ of currency traceability as promoted on this site. Hopefully, potential collaborators would see immediately whether or not satconomy fits well with their own vision.

Traceable to ‘WHAT’?

While many non-traditional currency design promotes currency that is traceable to a community or individual, satconomy’s emphasis is traceability to a market entity or organization. This emphasis leads to design issues that are not considered important in currency projects that promote self-sufficient collectives or personal currencies as issued by autonomous individuals. One very important issue is that each entity-issued currency brand is tracked in its own ledger (a collection of  entity-owned accounts and NOT just one account.) The one-to-one correspondence between an owner and an account in a mutual-credit system may be practical for an individual, but not for an entity with many ongoing budget and organizational concerns.

HOW will it be Traceable?

An entity’s budget effectively becomes its currency. As is common practice today, each entity will be expected to administer its own ledger/budget without a requirement to open an account in a centralized database. In the OCAUP accounting model, a flow transaction results in the corresponding cancellation of the payer’s expense budget and the recipient’s revenue budget. Credits are not reusable and do not circulate among entities. Each entity independently manages the life cycle of its currency brand, including account organization, budget creation (i.e., currency issuance), assignment, use and reporting.

WHY should it be Traceable?

Currency traceability, in the context of a dynamic currency index, enhances the ability of an entity to determine the currency brand reputation of other entities. The focus is on being able to reject payments from disreputable currency brands and thus exert pressure on the entity that issued the rejected currency brand. This focus is different from systems that track reputation to guide participants to decide which currency system to join (membership in a community currency) or which network node to extend credits to (lending to a creditworthy participant). In satconomy, participants can support and pressure each other even if they do not belong to the same community or are not networked in some way.

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The Credit Recipient in a Market Transaction

Instead of posting another development update, this time I’d like to present the role and perspective of a credit recipient in a market transaction under a satconomy framework.

The credit recipient in a transaction could be a seller, a tax collector, a nonprofit receiving a donation, a grantee, or others in a similar role. I hope that it is clear by now, after going through earlier posts, that each and every entity in satconomy issues its own currency brand, and therefore does not to receive credits from other entities in order to have currency to spend. It may be asked, then, what would be the point in having an entity act as a credit recipient in a market transaction, when that entity could already issue credits to itself (and its members)?

Remember that an entity issues or creates currency as credit-debit pairs. An entity accrues debits at the same time that it accrues credits. The rationale for accepting credits in a market transaction is for an entity to use those credits to cancel its self-accrued debt to the market.

An entity, by exchanging its products – goods and/or services – for the payment (credits) of a market participant does not receive profits, investment returns, cash or any ‘wealth’ in return. In a satconomy transaction, an entity simply gets to fulfill its self-determined obligation to the market. The partial or total fulfillment of its obligation to the market is quantitatively symbolized by the partial or total cancellation of its self-accrued debits.

The next question might be, why should a market transactor be selective as to which credits or currency brand to accept? It might seem counter-intuitive for an entity to reject any opportunity to cancel its debits. The answer should be found in an entity’s goals or mission statement, where it declares its specialization and target audience, and in the reputation of an entity with regards to its ability to provide value to the market. A trustworthy entity accepts its role in helping cultivate a robust and open market, so it should cater its products to benefit those entities that the market perceives as valuable contributors. If an entity is deemed to support unpopular regimes or monopolistic entities or free riders, then even though it has the ability to cancel its debt (using the credits received from the unpopular entities), market participants could still choose to reject its currency. In satconomy, noncooperation goes beyond the refusal to buy a product from an ‘unfair’ entity and extends to the rejection of that entity’s currency brand.

Development Update

It looks like I should be able to provide initial working examples of both the Reporter and Entity modules by early next month. Nothing fancy. The modules are written in PHP script with the intent that they fit within existing blogging platforms that use MySQL databases.

Briefly, the reporter and entity modules will have about five and seven tables, respectively. The PHP-coded transaction engine will have dynamic rollback and rollforward features, and will be designed to handle arrays containing any number of records with five elements each: date, amount, to, from, instance (or reference/receipt). The engine will output two arrays, one containing the detailed transaction results for each submitted record and the other containing the summary results of affected reporter or entity accounts.

If an exact copy is not found in a pending table, a submitted record will be inserted in the pending table and the engine switches to processing the next record. On the other hand, if an exact copy is found,  the transaction engine moves forward with updating the corresponding to-from accounts in the verified record. That’s the general idea, details will be found in the working example and code text files to be provided elsewhere.

Back to work.

Development of System Modules

I have been busy the last few weeks, not just for the holidays, but mostly because I started exploring possible collaborations with other alternative currency proponents. I have not been able to give a lot of specifics, mostly vague concepts, which I’d like to clarify here.

Firstly, there are a lot of ways to structure an entity cluster, but the following illustration of currency flow represents what seems to be the most logical arrangement of core accounts around a brand node, subject to debate and refinement. Even with the partial shading, the core Expense and Revenue nodes should be visible. (Click to expand image.)

Inter-Entity Currency Flow

Although not shown here, it is worth emphasizing that each entity independently issues currency as credits to its expense accounts (general, personal and emergency funds), paired with an equal amount of  debits issued to its revenue nodes. In satconomy, self-accrued credits within an entity (such as ABC currency brand) are primarily intended to be used to cancel another entity’s debits (such as XYZ currency brand). In a transaction, the buyer redeems his credits for products of other currency-issuing entities in the market, and the entity which provides the product cancels its debits as a symbol of satisfying its self-declared obligation to the market.

In the next illustration, I have tried to highlight the system modules that could be separately and simultaneously developed for an effective implementation of satconomy. (Click to expand image.)

 Reporting System Modules

I am currently working on a satconomy Reporter Module, an ongoing project that previously didn’t have a name or clear development goal. I likened the project to building a tower in an earlier post. As I see it, the reporter node would be similar in function to a stock exchange or financial market bulletin. The main difference is that in satconomy, the information will be about a diversity of currency brands and entity reputation instead of stocks, bonds and traditional currencies. I’ll have more to say about my development strategy, based on PHP and MySQL, in another post. 

The Entity Module is essentially a small-scale, open enterprise software that keeps track of entity currency issuance and cancellation, plus various account maintenance features to promote highly transparent currency issuing entities. This module will be developed to interface with the Reporter Module, in light of the information service each module is designed to provide. For example, the Reporter Node that I am developing will not keep track of an entity’s unused credit and debit balances – that task will be handled within an Entity Module. My main goal is for highly flexible, secure and platform independent modules to be able to link to each other for information auditing purposes.

The Offline-Transaction Module is another puzzle piece awaiting development – any early takers?  I have particular ideas about this module as well, namely that an offline transaction device should be capable of being used for both buyer and seller roles – no special card readers, highly mobile, small size, long-battery life (if needed), like a small wrist watch, mp3 or cell phone device. The store-and-forward model is favored, in order to facilitate the implementation of satconomy in infrastructure-challenged regions where always-on connectivity and/or provider fees may be prohibitive.

I’ll provide more details and updates within the next few weeks, for anyone interested in finding out more.

Unit Entities in a Trusteeship Economy

When the basic principles of satconomy were being elucidated, trusteeship-based economy as promoted by M.K. Gandhi was neither followed nor considered in detail. However, as soon as the the concept of specialized unit entities became inseparable from the notion of independent currency brands, it became clear that satconomy was a special implementation of trusteeship economics.

Trusteeship is based on the management and use of one’s wealth and resources for the benefit of the community. It differs from communism or socialism in that the trustee is neither coercively deprived of private ownership nor specifically supervised by state authorities. On the other hand, trusteeship differs from capitalism in that the trustee is expected to benefit the ‘whole’ – community, market, society – and not merely to  maximize  ‘owner’ profits. In simplified terms, ownership is predicated on being a good trustee.

But what if the trustee was found to be untrustworthy? What if the trustee was not managing its resources for the benefit of the ‘whole’? Who should make that determination, who should take action, and what would be considered as appropriate action?

Satconomy provides answers to those questions through the use of entity-specific currency brands. The effectiveness of an entity as a trustee is symbolized by its currency brand, which its members earn for contributions made to the entity’s specialization and goals. If a market participant determines that the entity is not a responsible trustee, then that individual may choose to not work for that entity and/or reject that entity member’s currency in a transaction. Satconomy encourages market participants to not buy from irresponsible entities AND to reject any currency brand that are individually perceived as representing unsustainable market activities.

To specifically answer the questions posed earlier: In satconomy, each market participant is encouraged to make an independent and informed evaluation of an entity’s effectiveness as a trustee. A market participant does not have to evaluate all of the known market entities and currency brands, but rather, only those that he or she might be economically involved in through a work or trading relationship. If an entity is determined to be untrusworthy, then the appropriate action would be for the individual evaluator to noncooperate with the irresponsible trustee. Each satconomy participant is expected to actively help regulate the market through the acceptance or rejection of entity-specific currency brands.

From this expectation of a highly informed and involved market, the primary challenge in satconomy becomes how to offer universally accessible and up-to-date information about market entities. In meeting that challenge, satconomy would promote the open establishment of cumulative perceptions regarding a trustee’s performance.

Comparison to Stock or Bond Issuing Entities

Unit entities in satconomy have operational similarities with publicly held corporations, which issues shareholder stocks, and municipal governments, which issues bonds. However, there are important differences:

(1) Instead of quantitatively symbolizing the status of an owner as a shareholder or a lender as a bond holder, credits in satconomy are awarded based on the recipient’s perceived contribution to the entity’s goal or mission. 

(2) An entity may issue any amount of its currency according to its self-determined limits, as long as the currency is issued as credit-debit pairs. That is, for each self-determined unit increase in the entity’s credits, its absolute debit quantity must also increase by an equal amount.

(3) The credits are intended, but not guaranteed, to be redeemable into products of the market in general. Redeemability is not specifically limited to the products of the issuer.

(4) When the credits are redeemed for products in the market, the credits are cancelled together with an equal quantity of the product provider’s debits. There is no reusable currency transfer between entities. Each entity does not need to acquire currency from other entities since an enity could independently issue its own brand of currency.

For added emphasis, it is worth repeating that there are no guarantees that credits could be redeemed for products in the market, or that the debits of the entity would be cancelled eventually as a symbol of fulfilling its self-determined obligation to the market.

Unit Entity – A Basic Definition

A unit entity could be a sole proprietor, partnership, corporate organization, cooperative, nonprofit, government, public agency or any other type of organization that exists to address a perceived need outside of itself. In satconomy, an entity does not exist merely to satisfy the needs of its member(s), i.e., it is NOT a trading club or an exclusive community. More specifically:

(1) A unit entity has a declared specialization: An entity determines the needs that it intends to address and sets corresponding milestones for itself. Since no entity could possibly address every market need, an entity must specialize in order to achieve reasonable objectives.

(2) A unit entity has ongoing ‘credit recovery’ mechanisms, i.e., some means to be able to cancel debits: Examples are product sales, tax collection, fundraising, asking for donations, and any other activities which represent credits that are received from the general market.

(3) A unit entity is primarily known by its brand: An entity is a fluid organizational concept, with dynamic membership profiles, goals and directions. A brand is an entity’s attempt to maintain a more stable and lasting impression of its socio-economic relevance.