Our Credit is an application that enables communities to launch their own sovereign monetary currencies. These currencies are designed to be: value-stablenot inflationary like traditional fiat money and not deflationary like most cryptocurrencies but value-stable because it follows economic activity with credit expansion and contraction that provides just the right amount in circulation, mutual creditcommunity peers extend credit to one another and not banks, unenclosableit runs distributed using Holochain, and as long as there is at least one peer willing to run it, it will exist, censorship resistantnot under anyone's control or authority, interest free, frictionlessno inherent transaction fees because of the efficiency of the tech under the hood, real-time, managed and run collectively without requiring an intermediary banking institution.

It aims to make it straightforward for communities to launch, manage, and interact with their currencies. Every currency will be independent from any other, both technically and valuably.

The project is being incubated by Our Movement — itself a movement promoting radical social change by catalyzing the emergence of resilient societies.

Background

Money creation

Our financial institutions, be central banks or private banks, have complete monopoly over money creation. They create it out of nothingit's not backed by any asset at all, and lend it with interest. This results in a lot of problems, simplified as:for more detailed information, please see this article published by The Zeitgeist Movement

• Money is created as debt — whenever someone takes a loan, the money supply expands, therefore debt creation is the engine of economic growth.
• The money supply is under private control — only about 5% to 15% of all money supply is created by central banks, the rest is expanded by commercial banks by lending credit — as part of fractional-reserve banking.
• Bank deposits are not secure — due to fractional reserve banking, banks only keep a fraction of the money in physical form — and if there is a sudden high demand for money from customers, it causes bankruptcy.
• The money supply is pro-cyclical — creates boom-and-bust cycles by commercial banks lending credit aggressively to boost profits during times of economic growth and being restrictive to lend credit during a recession to minimize risk.
• The money supply fosters inflation — money loses value as time passes. Most stable currencies depreciate on average a couple of percent annually, while other currencies depreciate even more — and in some cases, currencies suffer double digit inflation rate.in 2017, there were 24 countries with more than 5% inflation rate and 21 countries with double digit percentage inflation rate
• More debt than money in circulation — total debt can never fully be paid back because there will always be more debt than money in existence.
• The monetary system is unstable — between 1970 and 2010 a total of 425 financial crises affecting member states of the International Monetary Fund was officially recorded: 145 banking crises, 208 monetary crashes and 72 sovereign-debt crises.
• Interest fosters wealth concentration — due to Pareto effect, those that already have money will benefit by gaining interest on their deposits from people that don't have and need those funds.

Perpetual economic growth forced by the process of money creation is a major cause to our civilization's downward spiral. To name a few trends like: mass species extinction, climate breakdown, biodiversity and habitat loss, ocean acidification, soil depletion, etc.

Credit and banking access

In our current financial system, access to credit is very expensive because of: profit, interest, and costly process of loan applications. Credit is inaccessible for a lot of people and SMEs because they're deemed unworthy or too risky by the banks.

Banking is also inaccessible to many people due to high maintenance fees and lack of branches in rural areas.

Proposal

Mutual credit currencies

Mutual credit community currencies (including asset-backed currencies), as part of alternative currencies, can serve as a substitution for traditional fiat currencies and break the monopoly of banks (central and commercial) over money creation and management. These are the main points where they differ:

• Are devoid of interest.
• Community peers extend credit to one another and not banks.
• Are sovereign because management and rules of the currency are set by the communities themselves as opposed to out-of-reach banking institutions.
• Enable a steady-state economy as opposed to fiat that forces the economy to perpetually grow.
• Exist solely as double-entry-accounting with debits and credits (where the sum total is always zero) and not as physical units.
• Credit supply is elastic because expansion and contraction follows economic activity, and allow the currency to breathe naturally and makes it effectively value-stable.
• Cost virtually nothing to be created and managed, as opposed to traditional fiat money that implement different technologies to prevent counterfeiting of paper cash and coins, and a very expensive infrastructure for commercial banks to secure deposits.

Examples

WIR Bank in Switzerland is one the oldest banks implementing a mutual credit clearing system, that has been in function since 1934 and is still thriving. Other traditional ones generally were local timebanking currencies.

Contemporary prominent examples include: Sardex (a B2B mutual credit currency being used in Sardinia, Italy), Open Credit Network (also a B2B mutual credit currency being used in UK), and Holo fuel (a micropayment mutual credit currency to be used for distributed web hosting, which will go live sometime in 2019).

Benefits

Multiple studies have shown that community currencies: develop local economies, encourage local trade, increase trust among community members, strengthen the social fabric, promote self-sustainability — among others.Stockholm Univesity | The case of Sarafu-credits: Examining how a community currency can contribute to sustainable livelihood in informal settlement (source) Univesity of Copenhagen | Voucher Systems for Food Security: A Case Study on Kenya’s Sarafu-Credit (source)

Our Credit

Our Credit is an application that aims to make it straightforward for communities to launch, manage and interact with their currencies. Any community will be able to bootstrap a local currency for free, and with no maintenance cost.

These currencies embody principles covered in the previous section. Because the application will be based on Holochain, by default, they will also be: unenclosableit runs distributed using Holochain, and as long as there is at least one peer willing to run it, it will exist, censorship resistantnot under anyone's control or authority, frictionlessno inherent transaction fees because of the efficiency of the tech under the hood, and real-time.

Management

The application will come with a collection of variable settings, that need to be decided and tuned over time by each community according to their specific needs. After some trial and error with different settings, most communities will head towards settings that prove to be most resilient and effective.

Some setting example are:

• Membership membranes — where the community decides the rules to become a member of a currency. Some communities may decide that uploading front and back pictures of the ID is sufficient (and be vetted digitally by n number of active members); other more tight-knit communities may decide that an agent needs to meet personally and be approved by an n number of randomly chosen active members, while some communities may delegate the approval process to their respective municipalities.
• Credit limit — is the amount that an agent can go into credit. The limit can also be set to be dynamic, so to enable reputable agents to go into more credit. Everyone starts off with the same limit, but will be adjusted automatically for each agent to be the equivalent of what one can pay back in 3 months (or another arbitrary period set by community) based on the transaction history of each account.
• Area — is a setting where the community can choose the geographical area where their currency will be used.
• Taxation — communities may decide to levy a Transaction Tax that gets collected in a common account, to fund projects that interest them.

Use

Other than being useful as general-purpose monetary currencies, they will also find widespread use as timebanking currencies — where communities may decide, for example, that an hour of labor is equal to a unit of currency.

Access

Given that in this day and age almost everyone has a personal smart device~95% of humans aged over 15 have smart phones (source), even in poorer societies, makes the use of Our Credit very accessible — and transacting happens in real-time and can even operate in personal networks without an internet connection, as long as peers have funds to spend.

It also runs efficiently on hardware with very low-end specs — so no need for the latest gizmos.

Transparency

The project will be developed as open-source, which makes it possible for anyone interested to audit the code at any time. Also, because it is based on Holochain, all data generated will be publicly available — enabling inspection to happen in real-time, which further instills trust among the participants and legitimizes the project.

License

This project will be Free/Libre and Open Source Software (FLOSS)free as in speech and beer, and its source code will be licensed under an OSI-approved license.

Status

The project is being incubated by Our Movement — itself a movement promoting radical social change by catalyzing the emergence of resilient societies.

It will be built using HolochainHolochain is a DLT framework for writing fully distributed peer-to-peer applications. It is free and open-source software built by Metacurrency Project for data storage and integrity, and React NativeReact Native is a UI framework for writing native apps. It is free and open-source software built by Facebook for the user interface (UI). It will be accessed most commonly through web browsers but there will also be native apps for major operating systems (OS).

This case study is a living document which means it is a work in progress, not completed yet and is being updated. Licensed under CC BY-NC-SA 4.0 — unless otherwise noted.