Tagged: Mutual Credit

Implementation Analogies: Boundaries, Bridges and Towers

To illustrate the overall implementation strategy in satconomy, it is worth comparing and contrasting it with the strategies that could be inferred from mutual credit and Ripple currency systems.

The implementation strategy in mutual credit currencies might be likened to building boundaries. Members are allowed inside the boundary and could trade with one another, while non-members are invited to join this mutually beneficial community relationship where the currency stays within common boundaries. Satconomy is not concerned with erecting community boundaries where the members trade with one another. Rather, satconomy promotes the creation of entity boundaries where members work with one another to provide products to the market in general. Entity-issued credits and products, rather than being restricted from flowing outside each entity’s ‘boundaries’, are meant to flow between entities in open market transactions.

The implementation strategy in Ripple might be likened to building bridges between nodes or islands of market participants. The unique payment routing feature in Ripple is intentionally restrictive in that only the directly connected participants are allowed to cross the bridge between them. If participant A does not have a direct bridge to the island of participant C, but B has direct but separate bridges to both A and C, then Ripple enables a transaction by requiring an IOU to ‘cross’ from A to B and a separate IOU to ‘cross’ from B to C. In this sense, B acts as an indirect relay person that converts the payment between A and C. Participant A’s payment does not reach C directly. In satconomy, there is always a direct payment between market transactors, causing the immediate cancellation of credits and debits between the involved entities. In contrast to how Ripple offers a manual settlement option for the cancellation of credit-debits pairs after a market transaction, satconomy requires an automatic cancellation-settlement of credit-debit pairs at the completion of the transaction itself.

The implementation strategy in satconomy might be likened to building towers, through which market participants could assess the value that each entity brings to the market. If an entity is deemed to provide benefit to the market, then the currency brand that it issues would be perceived as acceptable in a transaction. If the news or perspective from the ‘tower’ is not favorable towards a certain entity, then its currency brand would also lose favor in the market. In an effective implementation of satconomy, this metaphorical ‘tower’ facilitates access to highly transparent, up-to-date and verifiable information about market activities, entity account reports and analyst opinions.

Comparison to Mutual Credit Systems

The following implementation scenario might help explain satconomy to those who are familiar with LETS, TimeDollar or mutual credit type systems:

Suppose that instead of individual trading accounts, members decided to organize into unit entities within a trading community or market. The unit entities would be known within the community by its brand. Each entity does not need to trade with other entities or borrow from others in order to issue currency. Instead, if an entity member has made a perceived contribution to the entity’s goals, then that member is awarded credits and the entity accrues the corresponding amount of debits. The amount of currency or credit-debit pairs that an entity could issue is self-determined within the entity – for example, by a supervisor, manager and other positions of authority that monitors the level of member contribution to its goals.

The member who earns the credits can then spend it on products in the market, or more rarely, redeem it for the products of the entity if those are not already provided as benefits to the members. Currency is intended primarily to be used outside the issuing entity. When the entity is able to benefit someone with its products, goods and services, its debits are cancelled together with an equal amount of the beneficiary’s credits.

In other words, satconomy may be implemented as a mutual-credit community where the members organize into unit entities, each with a declared market specialization. Currency is issued within an entity as credit-debit pairs, which translates to an entity account that has both credit and debit balances as opposed to a single net balance. Only the entity by itself could increase its balance amounts, and those balances have to increase by the same amount at the time of currency issuance. Finally, credits may only be used to cancel debits that are already existing.