Holochain Forum

What is a mutual credit currency?

Your lending is also your income. Since when you issue an IOU to someone else, it will only clear if they issue IOUs to others that end up forming links to people issuing IOUs to you.

It is probably good if you don’t trust people who are not in the real world.

That is not addressed by multi-hop mutual credit. A good way to know that though is the same way you know a irl profile is verifiable. By actually knowing the person.

Not addressed by multi hop mutual credit. Might be good to not spin off in thousand directions but keep it to mutual credit as this topic is about.

Depends on the person that you want to be trusted by. Humanity has survived so far. People are exceptional at reading manipulation, except when a society is entirely built on it.

Society currently favours Machiavellian intelligence but not all types of social organization do.

I think the nation-state/Ethereum approach is good too. It doesn’t eliminate trust, but it produces a very trustworthy central infrastructure that people can use. But I still like multi-hop mutual credit and similar grassroots systems more.

Multi-hop mutual credit is not that easy to attack actually. This is one thing I like about it, besides all the other things. It does not rely on publicly verifiable digital signatures and “computational hardness” assumptions those have, at all. It isn’t in the “crypto” (how people use the term “crypto” i.e., meaning publicly verifiable proof and not traditional cryptography) paradigm at all. Much less so than Holochain that still relies on public signatures. It is an ideal system, cryptographically.

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definitely not my intention, only trying to use helpful analogies

yep I pulled that exact quote from section 8

this part is confusing

So I would store all my data on my private server using client-side encryption and then choose whether / who to share it with?
Does this mean other participants don’t know who I’ve transacted with and for how much?

Thanks for the answers, I think I’m getting a better macro view

Where could I find more information about this? Not sure that I agree.

I really like the Holochain design. It feels like a good fit for me personally, and I love the flexibility and freedom for customization. Plus the community is fantastic!

Well in multi-hop mutual credit you’re supposed to know the people you interact with directly. So it does not have the problems more trust-centralized systems have. Same with social media though, people are meant to know the people there too. Social links and credit links are same type of thing.


[quote=“pqcdev, post:54, topic:807”]

The “trust lines” are between people who know and trust one another. Creating fictional people has no impact because they are not real and do not have any real human relationships.

Exactly how to do the computer architecture is probably something people have different ideas about. I think you could do your own bookkeeping on some machine somewhere you control. You can even do it in a physical book but passing on requests is then not automated (unless you have a mechanical turk working for you) so probably easier with a computer.

“Other participants” being people you do not have a direct 1-to-1 relationship with, I’d prefer a design where the social links and records are not public since there is no reason for them to be. If you then want to make something public to some group you could do so, but it isn’t necessary. This is because the accounting only matters on a person-to-person scale, no oversight is needed.

You are welcome.

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Asymmetric cryptography was invented in the 1970s, partly to solve how to exchange encryption keys when telecommunication was becoming so widespread. The mathematics of it also allowed for the equivalent of a written signature, a public signature. But in multi-hop mutual credit, the signature does not need to be verified publicly, it only needs to be verified by a single person recieving the transaction. For this, public signatures are not needed. Might need what is called a message authentication code to avoid the very tiny attack vector of mutating some bit of the message but that is a bit perfectionist, just in general there is no need for any public signature.

You can use public signatures too but they aren’t needed. Public signatures rely on computational hardness assumptions that while they might be strong enough, a perfect cryptographic system is even stronger because you cannot know if you guessed right, you cannot brute-force it without spamming an actual other person with 2^bits messages.

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I’m definitely understanding better, appreciate the comprehensive response :+1:

Happy to hear. I invented a system on top of multi-hop mutual credit in 2012. This is one reason I care about it. It uses the credit links as “wires” to redistribute wealth person to person for guaranteed basic income. An incredible invention, based on just a single rule that scales organically to raise all people out of poverty. But this is also besides the topic of this thread, I find that moderators on different forums can sometimes get pissed if I stray from their focus so…

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Thats great! It would be incredible to achieve a world without poverty and where everyone has their basic needs met.

Sure, definitely best to keep on topic. Thanks for the convo

-All the best

In terms of engaging with the existing system, the one I like most is a variant of C. Bucky Fuller said it best:

In order to change an existing paradigm you do not struggle to try and change the problematic model. You create a new model and make the old one obsolete.

Letting the new grow up amongst the old until it replaces it outright. This is exceedingly difficult, because the old system is always demanding its tribute. But I do believe that we can carve out small pockets of regenerative, non-adversarial economic activity and hopefully grow them over time. For my own part, I’ve been lucky enough to have lovely in-laws who are letting us stay at their place for pretty good rent. It’s allowed us to transfer a fairly large part of our economic lives from the dollar economy into the squishy realm of gift/reciprocity/trust. Cooperative gardening, shared meals, occasional babysitting. I know not everyone else is in this position, but I hope that our relative privilege will allow us to be in a better position to offer the same gifts to other people by virtue of the freedom we’re gaining.

Anyhow, we’re talking about mutual credit, so I’ll stay on topc. Just felt like there were ties to the human economy and my own experiences in it.

One thing I’m still not sold on is the whole ‘trust’ things. There’s no way for me to trust my immediate counterparties immediately; trust is like a multidimensional spectrum where I can trust someone 95% in some cases and 3% in others. The thing I struggle with re: trustlines is that I hope my friend/neighbour/aunt is being honest with me, but FWIU each of their trust pairing has its own ledger. This prevents me from having good visibility into their overall credit risk, which is an important factor in determining how much risk I personally want to take on by extending credit to them. While I agree that I shouldn’t extend any more credit than I’m willing to lose, the fact of the matter is that I’m also basing my decisions on the assumption that I usually won’t lose that credit in the end. And that requires me to have a broader picture of their level of risk.

That’s why I like the idea of each person having a single ledger – their own ledger – that’s publicly visible and protected from tampering by a ‘cloud of witnesses’. I do have a grave concern about this – privacy – although I think this is partially solved by @matslats’ Credit Commons idea. Small mutual credit networks, where members connect to people in other networks via ‘steward’ accounts operating in networks one level of hierarchy up. It’s mutual credit + multi-hop, something halfway between the polar opposites of a global mutual credit network and the atomised network of Ripple.


gotta love Bucky

and that’s eloquently stated Paul, I’d have to agree

Exactly! I only meant lose on an individual basis, while incorporating the proper risk of ruin. Should have clarified that my reference was to the Kelly Criterion. It’s best to diversify risk over a large enough sample size, which can only be calculated by having access to all the necessary information. The more available metrics the better, imo

EV = SUM i [ net((% chance)(amt gain)) - net((% chance)(amt loss)) ]

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No worries; I understood you as being concerned about lack of access to good data about other people in a trustlines-based network, and was agreeing/continuing on with a comparison to community mutual credit.

I think what I’m seeing here is that there is no perfect silver-bullet solution. Each solution optimises for some things at the expense of others. Trustlines are wonderfully elegant but don’t offer much built-in support for collective intentions, of the sort Matthew Slater describes. (I don’t say it prevents it; it’s just that it doesn’t have that principle baked in, so you have to do extra work.) Community mutual credit, on the other hand, is more fiddly but embodies the idea of the collective in its very design. And that fiddliness pretty much necessitates a bit of extra complexity such as a centralised server or some sort of peer-to-peer witnessing protocol (Holochain or blockchain).

Each one for its purpose; I have strong philosophical attraction to collective, bottom-up action that’s more intentional and overt than the ‘invisible hand of the market’, so I’m sure you can figure out which one I lean towards :wink:

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Taking trust down to the lowest level, one-on-one relationships, minimizes that risk (the risk is larger when you trust at bigger scales, including traditional mutual credit community concept. ) But it isn’t removed completely. Nor is it for any relationship.

I think a better way to look at it is as a mutual thing. The credit is actually the income to the person accepting the IOU. Both parties benefit, and both have a mutual responsibility to know what their credit limits are. And yes people can lie deliberately and fuck others over but that is social suicide in a culture that isn’t built on manipulation. Since most of us these days live in cultures that are built on manipulation we just tend to forget that. So since both parties want to actually set accurate credit limits it should work out pretty naturally. This is the good thing about a relationship based system, that both parties relate to one another.


I think I can get behind that, yeah. Takes a paradigm shift, but that’s gonna be necessary anyway if we want to get healthier as a civilisation.

As a side note: a comment on that video says and I quote

“it doesn’t make sense. if Carol borrows money from David, then she already trusts him.
here’s a scenario…
-Carol owe’s David,
-Carol gets hit by a bus
what now?!”

For God’s sake, just don’t be that silly… ever! LOL

Imagine what would happen if a company like Google were to get hacked so horribly that the parent company Alphabet declares bankruptcy! Being the monopoly that it is, such an event would definitely cause a domino effect throughout the market (for instance, even Netflix would go down as an aftereffect). Why then do we (service providers, such as Netflix) not worry about such an event happening? Simple. We’ve made such trust that we mostly take for granted so so implicit that we don’t even talk about it, let alone calling it “trust”. But guess what? Not calling trust “trust” does not magically eliminate it; rather it only renders you unprepared (by having a very low margin of safety that you wouldn’t have kept that low had you whole-heartedly accepted your assumptions as a “trust” being placed and kept a realistic worldview thereby)…

In fact, even possessing dollar bills in your wallet implies that you trust the dollar; and that’s no different from extending credit to the Fed, if you think about it. Consider an example: Bob does some sweat work for a week, only to be later paid 500 dollars for his labour. Now, out of the blue, news emerges that the Fed’s mainframe’s hard-disk got old and stopped working (they have no backup, by the way; LOL)! Boom! All data lost! Dollar plunges to zero! In this case, Bob has lost the product of his hard work. Now Bob is regretting having extended credit to the Fed’s dollar! He should have asked his employer to be paid in Gold… See… Do you notice some correspondence?

Now, I do admit that personal one-to-one kind of trust that Ripple advocates is actually a recipe for disaster (imagine having conflicts every other day with your friends about their credit-worthiness, about how you were rethinking about their financial condition and possible risk of bankruptcy last night). Given sufficient time for systems like Ripple (or Vril) to settle into equilibrium, people will emerge who expertise in trust-building and convincing the population in their credit-worthiness; guess what they would be called? Entrepreneurs! All examples of Alice and Bob should better be substituted (by the reader himself, of course) by Alicia Corp. and Bobby Ltd, for example. However, explainers are biased towards giving the simplest examples that strike the best, and that’s totally understandable. (At least that’s the case with me; I guess I overuse analogies a bit too much, to the point that it divorces from the message intended to be conveyed…)

Doesn’t that make sense?

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I feel really great about Holochain, I’m thankful for the community and honored to be here.

Thanks for the ELI5 vid this will save me alot of time explaining ^^

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I see Holochain offering many cool features for DAG’s and mutual credit Sovereign Accountable Commons


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Private source chains are neat and cryptography is fun :mage:
I wonder what amazing decentralized Holochain applications (dHapps) the community will design for mutual credit.

Zomes and membranes are really cool https://developer.holochain.org/docs/concepts/

@The-A-Man I think I partially follow you but I’m also feeling thick today. I hear you saying that we generally put ourselves at high risk (low margin of safety) by virtue of the fact that we don’t usually think of money and credit in terms of trust; we just coast by assuming that ‘the system just works’. Am I right?

As I’m thinking, one thing that comes to mind is that, although open-ledger mutual credit doesn’t remove the need for (and cognitive exhaustion of) assessing a person’s credit-worthiness, it does greatly simply the amount of signal we have to process. AND it causes Alice to not be too worried about Bob’s risk of default, because the economy absorbs it, not Alice. (Which I guess is both a good thing and a bad thing.)

And while I’m chewing on this, I’m reminded of @mwl’s contributions to the thread. On debt/IOUs vs true mutual credit:

[quote=“mwl, post:30, topic:807”]
IOU means I Owe You - in which frame A’s transfer to B is NOT considered payment and a debt still exists. Which is NOT money as I know it - it’s just another form of debt-factoring.

And I consider that LETSystems (and other such form of mutual commitment) are money, issued by users. No debt happens.

The problem is compounded when the interests of those in “credit” are presented as entitlement to be paid, and applicable (in theory) to any on the negative side of the ledger.

For me that breaks autonomy, accountability, choice, contribution, pattern, purpose, ethics and adds in reification of risk and accelerates extraction.[/quote]

and on mutual credit as mutual commitment:

and it also makes me think harder about trust, and I recall this thing that @mwl said in another thread:

I have to be honest that, at first, that grated against me. Aren’t we supposed to learn to trust people?! But now I think I know where you’re coming from @mwl – are you saying that LETSystems recognise that human trust is fallible and burdensome (both for the truster and trustee) even when everybody’s being honest – you never know when someone’s going to get hit by a bus or fall on hard times and render a piece of credit unredeemable?

One thing I’ve never been able to grasp (and I think you know I’ve struggled with this) is, what purpose does the open ledger serve? Is it meant to be an information source to help inform decision-making re: engaging in a transaction with someone? If so (or if not), how?

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https://letsystem.org/schedule.html says it all (almost all). Section 2 - Values is all inspired by Eric Frank Russell in his “And then there were none” novella - http://droppdf.com/v/p7Dr9.
The option to publish an open ledger is mainly included to help nervous players who feel they have (or should have) some control over the behaviour of others.
In some systems - for example high value multi-stakeholder networks - it may serve some purpose, but not much - imho - in any m/c systems presently of interest to me.