Mutual Credit

We need a new currency.

One of the biggest problems with our the current economy is the structural inequality that is built into the system.

We all create value by our daily work. But since capital has been accumulating through the ages in the hands of fewer and fewer people, the result we face today is an abysmal wealth gap between the richest 1% who own almost two thirds of the total wealth and the remaining 99% who are left with the scraps.

A small financial elite has established itself in a position of monopoly on the money supply and is using that power to quite literally control the world.

We can free humanity from this tyrannical pyramid scheme not by fighting against it, but rather by creating a better alternative to it: a new model that will make the existing one obsolete.

We need a new kind of money. So, what is money?

Money is basically just a token of trust. You earn that trust by providing a valuable good or service to someone, and then you give it back to someone else in exchange for their goods or services. It is ‘a promise of payment’, and since everyone is expected to fulfill their promises, we can actually use it as a token of exchange even with people we don’t personally know or trust.

The idea of money has been a great invention with a very successful history. Let’s quickly recap its major developments:

1. First there was no money. People exchanged goods via bartering.

2. Then some populations started using attractive objects such as shells or beads as universally-accepted tokens to exchange for other commodities.

3. With the advent of empires, precious metals and minted coins were adopted as standard tokens for commercial transactions.

4. In the middle ages, as trade flourished and the transport of large sums of coins became impractical, merchants started using promissory notes instead.

5. During the Renaissance, banks started issuing paper banknotes which were convertible into gold or silver. Since banks issued notes far in excess of the precious metals they kept on deposit, this marks the beginning of fractional reserve banking.

6. In 1971, US president Nixon cancelled the direct convertibility of dollars into gold, thus ending the post-war Bretton Woods system and replacing it de facto with the current regime based on central bank-issued fiat currencies.

7. In 2008 Satoshi Nakamoto launched the first digital cryptocurrency, Bitcoin, which uses cryptography to ensure trust and fungibility on a distributed ledger called the blockchain. The Bitcoin protocol solved what is known as the double-spending problem without the need of a trusted third-party.

Cryptocurrencies provide a radically new approach to money-making. While the power to print a distribute money had always rested with the divine right of kings and nation-states, with cryptos that power is no longer controlled by a central authority and can thereby return to its rightful owners: the people.

With Bitcoin, money is created by solving a consensus algorithm called Proof-of-Work. It is a complex algorithm that requires a lot of computational power to be solved. If you solve it you create a token, or block, which is then added to the public distributed ledger, or blockchain, whose copy is stored and continuously updated at every node of the network.

Satoshi’s idea elegantly bypasses the need for a central issuing authority and effectively distributes the creation of money as a trusted token of exchange.

But what it fails to address is a) the distribution issue (how fairly is the money distributed?) and b) the scalability issue (how efficiently can the system scale?).

a) In systems dynamics, a positive feedback loop happens when the results (outputs) of a certain process amplify the causes (inputs) which initiated that same process, thus creating a self-reinforcing cycle of cause and effect (also known as the Pareto Effect).

With the blockchain, if you have more money to buy more computing power, then you can solve more algorithms and earn more money than others, which in turn lets you invest more in computing power, and so on. The result is the rich get richer and those with power amplify their power.

b) In economics, a negative externality is the indirect cost someone has to pay for someone else’s actions. Now, in order to regulate the mining of new blocks, Bitcoin asks you to devote a lot of computing power to solve their algorithms, and in order to make the exchange market secure without a central authority, it asks every user to maintain at all times the copy of a public record of every transaction being made.

Since computing power has a cost in terms of electricity, both operations waste incredible amounts of electrical power. It is estimated that Bitcoin’s current electricity consumption already amounts to a whopping 30 Terawatts a year, more than entire countries like Ireland or Nigeria, and is growing so fast it could, by some estimates, consume all of the world electricity by February 2020.

Being so power-hungry, blockchain adoption on a large-scale would result in an unsustainable ecological burden that could be potentially even greater than the one the current system produces, with catastrophic side effects for the entire human population and the future generations.

That’s why even blockchain based cryptocurrencies are still not good enough. We need to “think outside the blocks”, and design a new cryptocurrency which can be equally distributed between the peers (ethical), without triggering negative environmental costs for society at large (eco-sustainable).

Welcome Holo, the mutual credit currency where the net balance is always ZERO!

Holo is a cryptocurrency running on the Holochain and backed by distributed computing power. You basically earn Holo fuel by hosting on your computer an app of the Holochain ecosystem. Holo fuel can then be exchanged for other goods, services and even currencies.

When you make a transaction, the cryptographically-signed copy of that transaction remains in your personal record instead of ending up in a global public ledger as it happens on the blockchain. This adds to scalability by drastically reducing computing overhead and avoiding the bottlenecks created by a redundant consensus algorithm, while still providing cryptographically-secure transactions by enforcing a universal set of validation rules (Holo’s DNA).

From the whitepaper:

“Since all valid transactions are double-entry accounting entries, Holo’s internal crypto-accounting functions just like a balance sheet where every transaction keeps the sheet in balance. Every credit has an offsetting debit. Nobody ever gets to create something from nothing. There is no minting, mining, or burning of coins. This means the sum of all the positive balances is always equal to the sum of all the negative balances.”

This way, Holo can achieve a dynamic but stable currency supply able to expand and contract in response to market demand while designing away the speculative bubble cycles of fiat currency systems.

We want to partner up with the Holo team and start developing together a new breed of cryptocurrency to use as a reserve currency for the WAM. This currency will be provisionally called WECredit and will be backed by our distributed network of energy, food, housing and transportation providers.

Feel free to leave any comment or question below, and join the discussion on the dedicated forum.

Also in Coop Network:

• Distributed Web — Common internet infrastructure
• Circular Economy — Regenerative business model
• Universal Welfare — Ethical incentives program

Other WAM! publications:

Life Tribe

A new humanity

Conscious Forum

A new consciousness

Eden Planet

A new world