Stephen DeMeulenaere

Alternative, Community, Complementary, Bitcoin, Cryptographic, Digital Currencies & Payment Systems specialist

Stephen DeMeulenaere - Alternative, Community, Complementary, Bitcoin, Cryptographic, Digital Currencies & Payment Systems specialist

Building Towards Cryptographic Credit with Proof-of-Importance

As often happens, when I think about the next blog post I would like to write, I come across an article that helps explain my point. In one way, this is really great because it encourages us to find out about emerging cryptographic currencies, and on the other, it proves that many of us are on the same page about what we want these currencies to be able to do, in this case, to craft an inclusive economy based on personally-issued credit within a distributed cryptographic currency system.

NEM/New Economy Movement is a new alt-coin that builds on the concepts implemented in NXT, but takes the proof one step further than Proof-of-Stake by implementing what they term a Proof-of-Importance algorithm.

Proof-of-Importance adds a reputation indicator to the blockchain, which is very useful in preventing Sybil attacks. It also motivates people to become more involved in the NEM Economy.

This connects to the previous generation of complementary currencies which calculated Turnover, the sum of transactions in and out, to determine a user’s creditworthiness. Complementary Currency systems, unlike Cryptographic Currency systems, are systems that allow each member to issue themselves the credit needed in order to complete a transaction, as long as they are willing to accept this credit others have issued to themselves in return.

But this may be about to change. As Blockchain 2.0 currencies use lighter, faster proofs than Bitcoin’s Proof-of-Work algorithm, we inch closer to being able to issue Cryptographic Credit. What would this look like?

Firstly, it would not be centrally-issued credit. For decades, Complementary Currency Systems have allowed their members the right to issue themselves credit in order to, and only in order to purchase items within the system, if you did not already have an existing balance. This allowed people who did not have money, the opportunity to enter into the economy and understand the importance of balanced reciprocal obligation.  You can’t just print your own money and add it to your bank account; but if you need to buy something with it, it is available.

Next, there would be algorithmically-defined limits. Complementary Currency systems, using the Mutual Credit model, allow the system’s creator to decide whether there are limits, or preferably no limits. Setting limits arbitrarily comes from and creates an atmosphere of distrust. As long as the seller knows the Turnover (= Trust Level) of the person who wishes to buy from them, there doesn’t need to be a limit.

However, in a Cryptographic Credit Currency System, one’s access to credit would be determined by their Proof-of-Importance or transaction reputation within the system. It’s like starting with the basic card, and upgrading to the platinum card as you participate more in the system. The more you offer and are willing to accept, the higher your rating rises, and the more money you can issue personally.

Thirdly, it would look more Mutual than Hierarchical. Allowing people to issue themselves credit in the course of a transaction means changing the economy from being exclusive, to being inclusive. To date, nearly all cryptographic currencies are exclusive economies, where people need to purchase the digital currency in order to be able to join the system to participate. As mentioned in the above-linked articles, this creates a hierarchy where the top 5% hold the vast majority of the currency.

Fourthly, it would Interest-Free. In ancient times, interest was not charged between friends, family or community members. It was only charged to mitigate risk in non-local, long-distance transactions. Similarly, as the currency is being issued and spent into an economic community, and in a decentralized way, there would be no need for the charging of interest.

Fiftly, all accounts would belong to humans and have identifiable owners. In order to determine reputation, accounts would need to have identifiable human owners. A tool like OneName points in this direction.

Sixthly, there may be a circulation incentive, known as Demurrage. The only cryptographic currency with demurrage is Freicoin. This method of taxing unspent balances ensures that any excess credit slowly circulates back into the system, which prevents hoarding and hierarchicalization, the process by which social hierarchies are created.

Lead Developer Makoto states this very well in his interview with CoinTelegraph:

Coin Telegraph: Why did you start making another cryptocurrency? Do you see any problems in bitcoin?

Makoto: NEM was started to rectify some of the problems with not only the world economy, but also with other cryptocurrencies. One of the problems is of course distribution of wealth. In fiat-based economies, the richest 1% will soon own more wealth than the other 99% of people. In crypto currencies like Bitcoin, wealth is concentrated to such an extent so as to be an existential threat, and other crypto currencies have been similarly criticized.

Some level of inequality is not necessarily a bad thing, and indeed people have significant individual differences, but it can be a bad thing when it hampers equality of opportunity. If one person can dump and destroy an entire currency, then that reduces the opportunity of others.

With NEM, we really want to bring the focus of money back to the people. The world today is one where money is controlled by powerful elites, banks, and governments; at NEM we want to empower regular people and that is why our motto is, “A new economy starts with you.”

There is a similar system that started several years ago, Ripple’s Web of Trust.

Seventhly, the currency would be stable. In order to issue credit into an economy, the currency and its valuation would have to be known, and therefore stable. In previous generation community currency systems, the currency would be pegged to the national currency. In a cryptographic currency, this could be based on a Basket of Commodities such as with Bernard Lietaer’s Terra currency, or another way of maintaining a relatively stable value.

A Step Towards a Cryptographic Currency System

Taking the concepts from Ripple Classic, Ripple, Web of Trust, and Ripple’s Proof of Consensus together with NEM’s Proof of Importance, we can foresee the possibility of issuing credit in an inclusive Cryptographic Credit Currency system.

We may find that more indicators of trust and reputation are needed, so perhaps apps built on the Ethereum or Blockstream platforms with Demurrage will provide the final pieces of the puzzle that will make Cryptographic Currencies essential in our daily lives in the future.

* I look forward to hearing your comments.

Which Digital Currency do you choose? Theirs or Ours?

The End of Physical Currency: which Digitial Currency do you choose? Theirs or Ours?

The neat thing about blogging is that you can basically timestamp your prediction and come back to it in a year, two or even five and see how your prediction turned out.

This week we received two announcements, one from Europe and one from America that the physical currency spending limits for all citizens are being lowered to an amount so low that buying almost anything these days will be required by law to be reported to a separate department in the government.

For example, if you buy a used sailboat for $5,000, and transfer the money to the seller’s bank account, you (or your bank) will have to report that transaction to what basically amounts to the NSA of the IRS in order to confirm that the transaction is legitimate.

According to the Economic Collapse Blog:

  • In France, starting September 2015 cash transactions above Euro 1,000 are prohibited, and currency exchanges without requiring proof-of-identity are reduced from Euro 8,000 to Euro 1,000. Further, cash deposits or withdrawals from your bank account above Euro 10,000 will be reported to the French “Anti-Fraud and Anti-Money Laundering” Agency Tracfin.
  • French Finance Minister Michel Sapin brazenly stated  that it was necessary to “fight against the use of cash and anonymity in the French economy.
  • In Spain, cash transaction limits are already Euro 2,500, and in Italy, Euro 1,000.

In America, if you regularly deposit large amounts of cash, say for example you own a used-car dealership where many customers prefer to purchase a vehicle in cash, then you may need to fill out a “Suspicious Activity Report”. They say only suspicious transactions need be reported, but then they say “there are minimum quotas for suspicious activity reports that banks must meet.  If they do not submit enough suspicious activity reports, they can be fined (or worse). So why not stuff the quota with a few Mom & Pop small business transactions as well?”

Just this kind of scenario happened with one unlucky person in Iowa:

“A widow’s bank account was seized by the IRS and she now faces criminal charges for depositing her legal inheritance money in lumps instead of all together.

Janet Malone, 68, had $18,775 seized from her — money that was legally earned and was legally bestowed to her by her late husband, Ronald Malone. The problem, according to the government, was the fact that she deposited it in several lumps instead of all at once.

According to the Associated Press, Mrs. Malone deposited the cash in increments between $5,800 and $9,000. The widow’s private financial affairs evidently set off red flags under the watchful gaze of the federal government.”

So why would governments be increasingly limiting use of their own currency?

  1. Capital flight controls: they don’t want their currency “heading for the exists” or circulating faster than better currencies.
  2. Citizen espionage: All these government employees need reasons to keep their job, what better one than to spy not just on everyone as a whole like they have been, but on every single one of us.
  3. Traceable currency: Trying to control a currency through interest rates is so 1800s; they want to be able to do a little bit more. Monetary competition between countries is getting more fierce as they are dragged towards a US Dollar-led monetary collapse. They want to be able to take stern measures if needed, and a traceable currency is the only way to be able to do this.

In short, governments are taking us towards a single currency in which all citizens and transactions are identifiable and traceable.

And we can be sure they are working to implement their own Digital Currency. In fact, some people say they should, including “James Angel, a professor of economics at Georgetown University. He thinks the government should create what he calls “bitdollar,” a bitcoin-like digital currency that’s backed by the US dollar.”

“The world’s governments already are looking for ways to regulate bitcoin. And the Canadian government has explored its very own digital currency, MintChip, which is something akin to Angel’s proposal.”

There is even more interesting and pointed information in this Bitcoin Magazine article which confirms that governments are working towards implementing a fiat digital currency. Ecuador already has one, the Philippines are now considering it.

Our options are to continue using cash for as many kinds of transactions as we can, and to use peer-to-peer currencies like Bitcoin, Ripple, and others that are not easily traceable by government agents whose job it is to track every single one of us.

I’ll be checking back on this article to see how things have progressed, but in the meantime, get educated about Digital Currencies, get your own wallet, and convert some of that increasingly worthless paper for some of our money.

Digital Currency Council Professional Certification

Stephen DeMeulenaere, DCC Certified ProfessionalI’ve been wanting to write another blog post, and it’s high on my list of things to do. But I thought it was really important to take a moment and get my Digital Currency Professional Certification with the Digital Currency Council based in New York.

There are a lot of charlatans & scammers out there that are preying upon people’s ignorance of how these systems work, so it’s really important to have a certification examination that helps to separate those who know, from those who don’t.

The test was a difficult 100 question test that covers even minute details about Bitcoin that only an expert-level person would know, and certainly could not just google info about during the test. Congratulations to the Digital Currency Council for making this possible.

Will Digital Currency Efforts Reach ‘The Last Mile’ in 2015?

Aside from its ups and downs: up in investment, down in price, few would disagree the Digital Currency field had a momentous 2014. Investment poured into dozens of new companies in North America and Europe, and the crash of Mt. Gox and sale of Silk Road bitcoins barely had an effect on the market.

There was also a lot of talk about the need for these Digital Currency companies to go “The Last Mile” and bring their services to the developing world, where mobile phones dispersion far outnumbers bank accounts, and the cost of sending money overseas takes many billions of dollars out of the hands of poor, hard-working migrants, and handicapping local development. We heard very often about how this company or that company is aiming to break into the remittance market in Asia, banking the unbanked in Africa, drop Bitcoins onto an island in Latin America, etc. etc.

Well, I’m standing here somewhere along this Last Mile in Southeast Asia, Bali, Indonesia to be exact, and I can tell you that despite all of the efforts (see below) we, the tight-knit team of Bitcoin/Ripple/Stellar/NXT and other digital currency supporters and promoters have been making across the country, we haven’t yet seen anyone from North America or Europe step up and join hands with us to go the Last Mile to get digital currencies into the hands of ten of millions of Indonesians, let alone Thais, Cambodians, Vietnamese, Burmese, Bangladeshis, etc. etc.

The intention is there, it’s just that nothing concrete has been contributed. I’ve been contacted several times this year by representatives from several different organizations asking me for advice, feedback, picking my brains for useful tidbits from my 17 years of residing in Asia. Not only from small companies producing ATMs or POS Devices, through major coin developers, and right on up to the Bill & Melinda Gates Foundation.

The Bitcoin Indonesia exchange the leading company in the country has been seeking financing the past two years. (If you’re interested, contact me, I’m trying to help them to find financing!) Nobody has contacted them, and it’s not like we can just hop on a plane and fly over to New York or San Francisco or London or Amsterdam, with cap in hand, not on our own meager Rupiah currency which is getting gang-raped by currency speculators as I write this, or over the sky-high visa walls that are keeping Fortress America safe by not letting anyone in that doesn’t have a Christian or European-sounding name.

We have done a lot in Indonesia in 2014 to attract attention and hopefully attract funding. We hope that in 2015, more than one of you reading this will take notice and come and visit us over here, and joining us in reaching the Last Mile.

Short List of Accomplishments in 2014

Accomplishments in the Works for 2015:

  • Attending Inside Bitcoins Singapore, Inside Bitcoins Hong Kong and Bitcoin 2015.
  • Coin Academy Training workshop in Singapore. 

So now you can see there is a lot happening over here, all the more reason to plan your next holiday in Bali, Indonesia! Comment below to contact me directly.

Why @Permacredits does not fit the Philosphy of Permaculture, but @Freicoin does

In line with my effort to remind people new to the cryptocurrency movement, that there was a movement for decentralized currencies before Bitcoin, I just wanted to be sure everyone knew that the currency for the Permaculture Movement, Mutual Credit, has been used in the Permaculture movement for decades before Permacredits, the new cryptocurrency which claims to be the currency of Permaculture, arrived on the scene.

There is one big difference between Mutual Credit and Permacredits, which makes the former a match with the philosophy of Permaculture, and the latter, Permacredits not. Here are the reasons why:

- Permacredits are assets. It is incorrect to call them credits. These assets must first be purchased with scarce US Dollars, which were themselves issued as debt. The philosophy of Permaculture is about reciprocation, not about imbalance or debt.  The Transaction Stack (Blockchain) of a Mutual Credit system is always balanced at zero, there is always enough credit available as is needed.

- Like many other cryptographic currencies modelled on Bitcoin, Permacredits are scarce commodities that can circulate as a currency. They are a store of value that can function as a medium of exchange. Permaculture is about entropy in nature, and a store of value is not in line with it. Mutual Credit systems allow each member an interest-free credit line, as long as they are willing to accept the currency when asked, and reciprocate it in turn. They do not need to be purchased first. The philosophy of Permaculture is about abundance, not about scarcity.

- The method of applying of negative interest, called ‘demurrage’ mimics the natural entropy that occurs in nature, so that stores of value cannot be used to misrepresent and misallocate natural resources, while also incentivizing circulation over hoarding. Mutual Credit systems separate the functions of money as a medium of exchange, and put it above money as a store of value. Their value is in circulation, not in hoarding.

The only cryptographic currency that abides by the natural law of entropy in the design of money is Freicoin, which applies the principle of demurrage, which separates the functions of money between a medium of exchange, and a store of value. Permacredits, if they were to be in line with the philosphy of Permaculture, would be based on Freicoin. Therefore Freicoin is currently the only true Permaculture cryptocurrency. Demurrage is an essential feature to ensure the entropy of the supply of money is in line with natural processes.

I’m writing this not to be critical of Permacredits per se, but to dispel the notion that Bitcoin is a ‘one solution fits all’ model. Bitcoin is not an ecological monetary system. The Bitcoin Blockchain, although revolutionary from a digital payments perspective, is not revolutionary from a monetary perspective.

Bitcoin Myth #2: Bitcoin is the first movement for decentralized currencies

I often hear people speak of 2009, the year Bitcoin was born, as being the year that the movement began.

Since I’ve personally been very active in the movement since 1991, and have good friends & colleagues who have been very active in the movement since the 1970s, I thought I’d bring the folks who came to know of the decentralized currency movement though Bitcoin, up to speed about what we’ve been doing the past 40 years.

Well, actually that would take a long time, so I hope you’ll start looking up Community Currencies, Complementary Currencies, Local Currencies and Mutual Credit for a start.

Firstly, EF Schumacher and his friend Ralph Borsodi are two thinkers who helped revive the idea of a government-free money. Borsodi’s Constant, launched as an inflation-free currency in 1974, kept the ball rolling which had been rolling for decades previous, until the Local Exchange Trading System was designed by Michael Linton and others and released to the public.

The movement for non-government currencies has always been decentralized, just not to the extent that was technically capable from 2009. But, the idea that it was possible has been talked about for decades previous.

What’s important to know is that there was a movement before Bitcoin, and if you did not know that already, then welcome!

 

Bitcoin Myth #1 – There was no Open Public Ledger (Blockchain) before Bitcoin

I hear and read this quite often, that Bitcoin’s Blockchain is the first example of an open public ledger. An open public ledger is a list of all transactions that have taken place in an economic network being made fully available to all members of that system.

It’s not true. Both Local Exchange Trading Systems and Time Banks have had open public ledgers in their systems going back over 35 years. In fact, it’s a central tenet of Mutual Credit Systems that the system’s ledger must be open.

Myth busted.

2 Paths to Mass Adoption: Tipping & Training – @ChangeTip & @CoinAcademy

In behind all the technical discussions, philosophical debates, political lobbying, there’s the popular topic of mass adoption, how to make it easy for anyone who knows how to basically use a mobile phone or computer to secure their device, and acquire, spend and receive Bitcoin.

When I started writing my blog again, I focused on volatility as one of the main obstacles to mass adoption. Now I’d like to flip the coin over for a moment and look at the two main paths to Mass Adoption: Tipping and Training.

I hapchangetippened to have a chance to ask my question directly to the CEO of ChangeTip, Nick Sullivan, just last week (November 27, 2014) at a pre-Thanksgiving lunch at Hubud, the co-working center in Ubud, Bali, Indonesia, before Pantera Capital announced in their December Newsletter that they had led 3.5 million USD in funding for ChangeTip.

As I happened to be sitting next to him, I ask Nick which he thought was more important for mass adoption: apps that made it easier for people to use Bitcoin, or suitable forms of education that helped people feel comfortable using Bitcoin?

He replied thoughtfully that it was a mix of both, that good apps encourage people to learn, and good learning programs encourage people to use good apps. People will have to learn more by using apps so in effect both are needed.

As co-founder of Coin Academy, one of the main Mass Adoption-focused Bitcoin and Digital Currency education platforms, this raised my hopes that we would also be in someone’s thoughts about how to best educate the masses to start using Bitcoin, and make great use of ChangeTip!