In exploring the workings of various currency systems, I’ve had to overcome ingrained ideas that thwarted my informal study of core design issues. These myths are quite powerful. It is worth spelling them out in detail, hopefully to serve as reminders since these myths come up often in currency-related discussions.
“If everyone has the ability to issue money, then that particular currency would soon be worthless due to inflation.”
This assertion is true only if market participants unconditionally accepted that particular currency, regardless of how much was issued. In fact, it is possible to design a currency system where published information about potential over-issuance helps regulate the behavior of currency issuers. The design should make currency traceable to particular issuers, so that market participants would have the informed option of rejecting over-issued currency. The design requirement for traceability led to the core concept of independent currency brands in satconomy.
“All currency systems involves notes or credits that circulate in a market.”
This assertion is true only for commodities and reusable, or transferrable, physical representations of credits such as coins and currency notes. However, in ledger-based currency systems which do not require physical representation of credits, it is quite easy to design a system where credits are not transferrable between currency issuers. There would be different motivations for issuing currency, especially in light of the fact that — if everyone could truly act as an indepedent currency issuer — no one would need to receive currency from others in order to accrue credits. The budget-centric OCAUP accounting system was conceived to provide a currency lifecycle framework for bona fide currency issuers.
“It is possible to design a large-scale currency system that is technically and administratively much simpler than current systems.”
It is tempting to look at the simplicity of a mutual-credit system and assume that its design could be scaled easily with minor tweaks and network or sociotechnological features. I had the same hopes about five years ago when I started looking at currency systems, but I have since learned to embrace the challenges of dealing with complexity. It is true that the basis of any system might be simple and easy to understand. However, the policies and technical standards that are required to implement a simple system into large-scale, decentralized setting imply continous effort towards solving small and complex problems that come up regularly. In my opinion, a decentralized currency system that does not have an effective approach to auditing and indexing a diversity of issuers will not scale and influence anyone other than its limited membership base.
To summarize the counterpoints to the above myths:
– Even if currency issuance is decentralized, it is possible to encourage self-regulation and discourage inflationary tendencies by making currency traceable to specific issuers and not having guarantees of future currency acceptability between issuers
– It is possible to design a currency system where the currency lifecycle (e.g., budget creation, assignment and cancellation) is emphasized instead of currency circulation (e.g., credit transfer and velocity)
– Emergent complexity is inevitable in large-scale currency systems or frameworks, and must be carefully considered in the design of supporting information systems, policies and standards.