Wednesday, July 19, 2017

A P2P cryptocurrency to replace FB, Amazon, Fiat, and Bitcoin.

Posted to HUSH slack. A prelude to this

Here's an idea for a cryptocoin to build upon the timestamp idea I posted a few days ago (again, that does not necessarily use the stars).

People get more coin by having more "friends" (actually, people you know to be distinct individuals). It might be a slightly exponential function to discourage multiple identities. Your individual coin value is worth more to your "local" friends than to "distant" friends. The distance is shorter if you have a larger number of parallel connections through unique routes. A coin between A and D when they are connected through friends like A->B->C->D and A->E->F->D is worth more than if the E in the 2nd route is B or C. But if E is not there (A->F->D) then the distance is shorter. More coin is generated as the network grows. Each transaction is recorded, stored, timestamped, and signed by you and your friends and maybe your friends' friends. Maybe they are the only ones who can see it unencrypted or your get the choice of a privacy level. Higher privacy requirement means people who do not actually know you will trust your coin less. Maybe password recovery and "2-factor" security can be implemented by closest friends. Each transaction has description of item bought/sold so that the network can be searched for product. There is also a review and rating field for both buyer and seller. For every positive review, you must have 1 negative review: you can't give everyone 5 stars like on ebay and high ranking reviewers on Amazon (positive reviewers get better ranking based on people liking them more than it being an honest review). This is a P2P trust system, but there must be a way to do it so that it is not easy tricked, which is the usual complaint and there is a privacy issue. But look at the benefits. Truly P2P. Since it does not use a single blockchain it is infinitely faster and infinitely more secure than the bitcoin blockchain. I know nothing about programming a blockchain, let alone understand it if I created a clone. But I could program this. And if I can program it, then it is secure and definitive enough to be hard-coded by someone more clever and need changing only fast as the underlying crypto standards (about once per 2 decades?)

Obviously the intent is to replace fiat, amazon, and ebay, but it should also replace FB. A transaction could be a payment you make to friends if you want them to look at a photo. The photo would be part of the transaction data. Since only you and your friends store the data, there are no transaction fees other than the cost of your computing devices. Your friends have to like it in order for you to get your money back. LOL, right? But it's definitely needed. We need to step back and be able to generalize the concept of reviews, likes, votes, and products into the concept of a coin. You have a limited amount dictated by the size of the network. The network of friends decides how much you get. They decide if you should get more or less relative power than other friends.

It would not require trust in the way you're thinking. Your reputation via the history of transactions would enable people to trust you. It's like a brand name, another reason for having only 1 identity. Encouraging 1 identity is key to prevent people from creating false identities with a bot in order to get more coin. The trick and difficulty is in preventing false identities in a way that scams the community.

Everyone should have a motivation to link to only real, known friends. That's the trick anf difficulty. I'm using "friend" very loosely. It just needs to be a known person. Like me and you could link to David Mercer and Zookoo, but we can't vouch for each other. That's because David and Zookoo have built up more real social credibility through many years and good work. They have sacrificed some privacy in order to get it. Satoshi could get real enormous credibility through various provable verifications and not even give up privacy, so it's not a given that privacy must be sacrificed. It should be made, if possible, to not give an advantage to people because they are taking a risk in their personal safety.

The system should enable individuals to be safer, stronger, etc while at the same time advancing those who advance the system. So those who help others the most are helped by others the most. "Virtuous feedback". This is evolution, except it should not be forgotten that "help others the most" means "help 2 others who have 4 times the wealth to pay you instead of 4 others with nominal wealth". So it's not necessarily charitably socialistic like people often want for potential very good reasons, but potentially brutally capitalistic, like evolution.

It does not have to be social network, but it does seem likable social people would immediately get more wealth. It's a transaction + reputation + existence network. Your coin quantity is based on reviews others give you for past transactions (social or financial) plus the mere fact that you were able to engage in economic or social activity with others (a measure of the probability of your existence). There have been coins based on trust networks but I have not looked into them. It's just the only way I can think of to solve the big issues. If the algorithm can be done in a simple way, then it's evidence to me that it is the correct way to go. Coins give legal control of other people's time and assets. If you and I are not popular in at least a business sense where people give real money instead of "smiles" and "likes" like your brother, why should society relinquish coin (control) to us? The "smiles" might be in a different category than the coin. I mean you may not be able to buy and sell likes like coin. Likes might need to be like "votes". You would get so many "likes" per day to "vote" on your friends, rather than my previous description of people needing to be "liked" in order to give likes, which is just a constant quantity coin. Or maybe both likes and coin could be both: everyone gets so many likes and coins per day, but they are also able to buy/sell/accumulate them. I have not searched for and thought through a theoretical foundation for determining which of these options is the best. Another idea is that every one would issue their own coin via promises. This is how most money is created. Coin implies a tangible asset with inherent value. But paper currency is usually a debt instrument. "I will buy X from you with a promise to pay you back with Y." Y is a standard measure of value like the 1 hour of laborer's time plus a basket of commodities. Government issues fiat with the promise it buys you the time and effort of its taxpayers because it demands taxes to be paid in that fiat. This is called modern monetary theory.

So China sells us stuff for dollars, and those dollars gives china control of U.S. taxpayers, provided our government keeps its implicit promise to not inflate the fiat to an unexpectedly low value too quickly, which would be a default on its debt. So your "financially popular" existence that is proven by past transactions of fulfilling your debt promises gives you the ability to make larger and larger debt promises. How or if social likes/votes should interact with that I do not yet know. But I believe it should be like democratic capitalism. The sole purpose of votes is to prevent the concentration of wealth, distributing power more evenly. This makes commodity prices lower and gives more mouths to feed, and that enabled big armies, so it overthrew kings, lords, and religions. Then machines enabled a small educated Europe and then U.S. population to gain control of the world.
see that the Ithaca NY local HOUR coins are a simplified version of what I was trying to invent. The things missing are: 1) digitize it 2) enable seamless expansion (exchange rates) to other "local" communities (in other words, "local" would be a continuous expansion from yourself, to your "friends" to the world. "friends" would have a better exchange rate as they are trusted more. "friends" is a bad word: "trusted market participants" is better. So Amazon (at least for me) would get a high beginning trust setting. There would be an algorithm for determining the exchange rate based on how much your trusted connections trust the secondary connections. Then your own history with secondary marketplace connections (such as buying from an Amazon chinese source directly) would increase your trust of them if your exchanges with them have been good. "Trust" aka "history of good reputation" would be the currency (not "friends"). A missing 3) item is the ability to include a review by both buyer and seller next to the history of exchanges. Your history of exchanges are stored in your most highly trusted connections. Future buyers or sellers wanting to interact with you (or you with them) would be able to see your hisotry of transactions. There would be a setting of how private you want to be. If you want to be intensely private, your exchange rate with distant buyers/sellers would not be as good because they can't verify your reputation. "Reputation" is the primary coin and it would be treated like any other asset. But the creation and destruction of the coin would be managed on a system-wide level so that your reputation can be compared to others, so those with least reputation are weeded out via the marketplace. If you give nothing measurable to society, then you would get nothing from it. You can sell your reputation for dollars or whatever. "likes" might be a 1 to 10 integer that goes beside the "review" field that adds or subtracts from your reputation. But giving likes comes at a cost of your own reputation. I have not worked out the details of this. These likes are just like the 10 signatures on the back of script in the Ithaca NY HOURS coins. So I could learn a lot from their 26-year experiment on how to enable it to expand. They need to be in contact with some really good blockchain devs who could implement something like I'm describing. It could be like an explosion emanating from Ithaca NY that changes the world. Proven there, it could pop-up in other places independently but instantly tap into Ithaca via a few extensions of trust. Extension of trust is the creation of a debt and credit, the source of all fiat-like currency. But by managing the total on a system-wide level without a trusted 3rd party prevents it from being like current gov-backed fiat. Some features: your personal blockchain of transactions is not publicly disclosed unless you want. It is also recoverable and reversible if > 50% of your most local trusted sources agree to your request for recovery. So no permanently lost coins. A thief and those who accepted funds from thieves would lose out. But if you get hacked too much, then the reversals hurt your reputation.

zawy [8:59 AM]
There are several crucial good features this has: 1) there's not exactly a single coin, but a continuous spectrum of exchange rates between reputations in keeping with an evolvability 2) security/protection of value via reversibility by local consensus. 3) The local consensus that determines reputation points and reversals can be penalized by the wider market if it has a reputation of being a bad or dumb consensus. 4) It's not a fixed-quantity coin (quantity of coin is determined by the market rather than an arbitrary decision by core devs, under the constraint of a protocol I haven't defined) 5) there is not a central blockchain which has security, privacy, anonymity, and failure problems. 6) the protocol can have various parameters chosen by the user. The user can chooses his reputation coin's characteristics. The wider market will decide how to value that coin. The users decide parameters that determine how to value other's reputation. I might trust chinese manufacturers to send product more than other people. You could decide this by haggling on price, but auto-searching for buyers and sellers needs you to define how you're going to rate potential candidates. Even the protocol has the potential of being changeable (evolvable). 7) OpenBazaar is not needed because it's inherent to the protocol. If you have a history of selling an item and allow your buyers to make it public, then scans of the network reveal you. Certain requirements are needed such not being able to pick and choose which past buyers can reveal past transactions. 8 ) Besides having "cross chain atomic swaps" and openBazaar built-in via a very simple protocol (Even Zcash-level anonymity might be choosable for individual transactions), I think it could also include STEEM and LBRY objectives as well as smart contracts.

9) government would have to bend over backwards to justify taxing your marketplace reputation. Even VAT taxes might have trouble if every reputation credit you issue creates a reputation debit. This could turn bank manipulation of government against both gov and banks: we are not taxed for taking out loans which enables banks to charge more interest. When we buy a house, our signature to promise to repay the debt is an asset on the bank's balance sheet. This enables them to create money out of thin air via the Fed, which is somehow connected to the FED's overnight interest rate. You pay 6%, bank gets 5%, FED get's 1%, or something like that. The rest of the money (your house's value) came from no-where to pay previous owner, and goes back to nowhere as you pay it off, except for the interest you gave to the banks and FED. Our promise to pay it back is the source of the initial money. Banks might be limited in their ability to do this by reserve requirements. Anyway, the system I'm describing makes your local trusted marketplace connections your bank. They are basically issuing credit to relative strangers by vouching for your reputation to repay. Your local network is taking the risk of you not repaying them. You repay the debt to your creditors via future transactions. The amount you buy must equal the amount you sell. Your expenditures equal your income so there is no net income to tax, as long as you do not convert your reputation credit to dollars. You and your local network have no net asset to be taxed. Any net assets you gain for resell are inventory that is not taxed (if less than $10 M)
I do not propose any mining, but local connections validate and record your transactions (including smart contracts). Everyone "mines" by giving more than they receive. Best summary of the idea: By initially trusting people more than your measurement of their reputation justifies, you are loaning trust to the system that the system will pay back to you. So "trust" is the debit side (what you give) and "reputation" (what you receive) is the credit side of your personal balance sheet that the system records on your local "connections" (these are not simple network peers but people with who you have a history of transactions). Let's say I send you a 2 pound bar of tellurium for nothing except to gain reputation points in the system. I need you to be a part of the system and to record the transaction. That still does not benefit my reputation unless you also gain reputation by buying or selling with others. Then those others and myself trust each other's reputation more since we all trust you. A history with them builds trust without you, so you could default out and things not crash. The trick is for the protocol to keep track of things so that it is not tricked by false identities into unjustly increasing or decreasing reputations. There needs to be a pre-existing trust to get it started. The system does not create any trust. It only keeps track of who deserves a credit of trust from past giving of trust and who owes a debt of trust by receiving goods or services or other likes without trusting anyone.
The only way to get a good reputation is to sell goods or services to someone who is not in your network. You get more reputation if you send the goods or services to someone who is not in anyone's network, provided they subsequently add others to their network who are not in yours. This should only add to your reputation after the fact only 1 level and decreases after they've added a few, so it's not a pyramid scheme. The goal is not to reward you for bringing in others, but reward you for making a real sale to a real independent person (not your personal friends who did not receive anything in return) who will use the system on their on. This is the same thing as "burning" something such as human labor (in antiques) or computing resources. Nick Szabo has also stressed the importance of the age of an item and it's history of use as a currency as increasing its value. So the length of time someone has been holding and building reputation without violating trust would add value to their reputation. This causes some added value for early adoption and for sticking with the system. The formulas for calculating reputation need to be derivable by statistical theory or determined by the marketplace.

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