In the previous post, we shed light on the unsuitability of the previous decades’ economic tools to resolve our current collective social, economic and environmental woes. We explored existing institutional alternatives to address this problem, such as the real world Solidarity Economy movement and crypto-native Decentralized Autonomous Organizations (DAOs). We introduced a new institution we believe holds promise: the Decentralized Exchange Trading System (DETS), dubbed Kolektivo.
After this brief introduction, many questions remain regarding Kolektivo. In this second installment, we will detail in more depth three of Kolektivo’s components: the registry, governance, and monetary systems.
The Registry System: Who is Part of Kolektivo?
The registry system addresses the questions of: “Who will have access to Kolektivo, and what decisions should they be able to make? How can we assign roles and differentiate, for example, between permanent Kolektivo residents and tourists?”
To answer this, the system selects and groups participants according to certain criteria. This is essential, because it is what lets Kolektivo define group boundaries and determine who is able to participate in certain decision-making processes.
We imagine several ways to set up this registry system, and each DETS can choose those that suit them best:
- Web of Trust (e.g. Proof of Humanity): A user wishing to join a registry (think of this as a fancy term describing a membership list) gives some personal information, and a person already part of the registry guarantees the validity of the new profile. Each member can challenge newcomers if they think they’re fake or don’t meet membership requirements.
- Centralized Verification: In this case, a certain administrative group directly manages the membership list.
- Private Proof of Membership (e.g. Zero-Knowledge Proofs): A type of proof that registry applicants to prove they meet conditions for membership without revealing personal information.
These techniques all make it possible to create different types of groups. In Kolektivo, interface badges are planned to signify various memberships. Suppose, for example, that an economic decision has to be made for inhabitants of a particular area. A new registry will be opened, and a corresponding badge will be displayed in the interface to each member. Returning to the original question: tourists could be in a group that grants them more limited economic rights compared to the rest of Kolektivo.
The Governance System: How Do We Make Decisions?
Governance is, generally speaking, the set of decisions taken by a group in order to direct a certain area of activity. Kolektivo’s governance system has several overarching objectives, aiming to be…
- Representative: Decisions taken must above all represent the wants and needs of the Kolektivo community.
- Resilient: In the event of a crisis, the system must adapt and make decisions quickly.
- Practical: The system should be simple and accessible for governance participants.
There are tradeoffs between these objectives, and prioritizing one can sometimes make another worse. For instance, in order to quickly respond to crises, urgent decisions cannot always be taken by the entire community. How, in this case, can we continue to ensure adequate representation?
We propose to differentiate two spheres of political decision-makers in Kolektivo:
- The Legislative (i.e. the general assembly): This will generally be made-up of the entire Kolektivo community. Think of modern democracies today: nearly everyone has some decision-making, or voting rights. We expect this general assembly will be responsible for making infrequent and important decisions.
- The Executive: Small groups of individuals — typically domain experts — elected by the general assembly for their specialized skills or qualities. They will be responsible for taking — for the common good — more frequent managerial and urgent crisis-response decisions.
Since the two groups are not the same size, they do not have the same decision-making process. An executive body is likely some sort of committee, and for practical reasons, will only need to use a multi-signature wallet to make decisions through some majority of committee members. On the other hand, as the Legislative is larger than the Executive, it will need different voting methods appropriate to its size, such as…
- Conviction Voting: In this, voters indicate which proposals they prefer and how much they prefer them. The longer a voter’s choice remains fixed, the more weight their vote gains. This mechanism may be useful for community budgeting.
- Quorum Voting: A straightforward majority voting mechanism likely to concern major decisions, for which the attention and the voice of the majority is needed.
- Liquid Elections: In this system, for each vote, the voter has the option of either voting directly or transferring their voting rights to a delegate of their choice. This mechanism may be useful for appointing executives.
The Monetary System: How Do We Manage the Money?
Kolektivo’s monetary system will be designed by and for its community, which democratically chooses the policies and measures that suit it — from taxes to subsidies. The monetary system frames a complementary currency (CC). The CC is a stablecoin, meaning its value is equal to that of the national currency. Kolektivo’s reserve ultimately backs the value of all CC outstanding, similar to Central Banks today. The mechanism for exchanging reserve collateral — the assets accepted by the reserve for creating CC — is complex. To this end, we recommend interested readers to watch the above lecture describing Celo’s Mento system — a very similar system as what is planned for Kolektivo..
Beyond the reserve, Kollektivo’s monetary system follows some immutable core principles:
- Capital-circulating: This means that money must circulate freely in order to benefit the community, even when the economy experiences a downturn or shock, such as Covid-19, or some natural disaster.
- Extraction-resistant: The flow of money must remain mostly within the community, to benefit it in the first place. Foreigners should not be able to take over the community economy.
- Capital generating: It should be easy for Kolektivo to create local forms of capital or attract foreign capital for the purposes of creating money. Imagine the value of food forest tokens being used as a reserve asset to create complementary currency.
- Reliable and low risk: members should be able to trust that their complementary currency will stay stable and equal to the national currency.
In conclusion…
“New crypto-institutional forms and assemblages are now possible.”
– Kolektivo Whitepaper
Kolektivo is a new attempt at creating viable local institutions using blockchain tooling. It aims to be adapted for a large variety of communities and environments. While the registry, governance, and monetary systems are designed to correspond to general objectives of democracy, equality and solidarity, they also aim to be very scalable, flexible and resilient.
In the next and final post, we complete our description of DETS by presenting a fourth component: the natural capital system. We ask and attempt to answer a final question: How can the economic activity of Kolektivo enable the sustainability of ecosystems that support the community?
➡ Want to learn more? See the Kolektivo whitepaper
