tyaga.org

Quick updates on development progress: The documentation for the revised accounting system and IPP is about 30% done, but it got boring pretty quickly. So I switched to the user interface design and development, and decided to have view-related code on the client-side as much as possible. This decision necessitated the use of a Javascript library or framework for more rapid prototyping. I have tentatively settled on mootools after trying out jquery. Both libraries are relatively easy to work with, but it is easier to model desirable ‘transaction device’ UI features using mootools’ class functions.

There have been interesting discoveries along the way with regards to binding ‘this’ and lexical closure in Javascript. I’m trying not to get side-tracked into reading too much about the ‘functional’ programming approach, although Javascript may not be the best example of that approach.

After posting this, I realized that I forgot to mention other projects that I visited recently:

The cyclos documentation and interface is really impressive. Like CClite, Cyclos has the concept of a ‘System’ account-type, which gets debited when credits are issued to members (at least that’s how I understand it and I could be wrong). The System account-type is very similar to an ’unused revenue’ budget in the revised accounting system that I am working on.

However, in a cc-implementation, a System account is primarily used to track the total credits that could circulate or are circulating in a system and tends to be a static quantity that is dependent on the number of members and debit limits. In contrast, an unused revenue budget tracks how much credits an entity intends to receive from the market and is dynamically (a) increased whenever the total expense budgets is increased, or (b) decreased when inflows are received. The unused revenue budget is expected to reflect inventory or productive capacity rather than the number of members in an entity. 

The other projects that I visited in the last weeks are opentransact, flowplace and the marketplace module for drupal. There are also many discussion groups, including agile-banking and ripple-users, with participation levels that are somewhat encouraging.

The three main goals for this year are:

1) By spring: Finish coding and doc’ing the updated demonstration of a budget-centric accounting system to serve entities that issue independent currency brands. The transactional back-end is pretty much done, with inclusion of xtype accounts for double-entry of inter-entity transactions and IPP support to facilitate payments across independently administered ledgers and accounting systems. The administrative and user interface should be updated soon.

2) By summer: Conduct smaller studies prior to an actual exploratory study. I’m still working out the details of these intermediate studies, but I’m confident that these low-risk steps will yield useful information for conducting effective studies in the future. 

3) By year’s end: As some of the implementation concepts and strategy take concrete shapes, a more user-friendly website is being planned to offer accessible materials to general audience types. I’m sure most readers are not interested in following the always-changing technical implementation details, and perhaps there are even less who are interested in the philosophies and principles discussed at satconomy.org. At the same time, I am not really looking forward to creating yet another website, so this is lower on my priority list.

One way to look at ‘coupling’ is the relationship that a transaction record implies between transactors. For example, the use of community currency implies membership in the same community or in communities that have an agreement in place to accept each other’s currency. In Ripple, direct transactions occur only if the transactors have preset limits with each other and payments have to be routed through pre-established accounts. These requirements may be viewed as ‘static binding’ or predetermined configurations to set limits on who could trade with whom.

In the case of mutual credit community currencies, it is not hard to see similarities with the pre-WWW philosophy that hyperlinks are to be made and maintained through a centralized database. A requirement that transactors must have an account with the same mutual credit accounting system highlights this similarity. But the similarity extends beyond considerations of ledger boundaries and into logical or abstract rules for initializing who could trade with whom. As long as the ability to transact requires a predetermined relationship, the ‘localized hyperlinks’ mindset applies even if the accounts were maintained in separate servers or accounting systems.

Under tyaga.org’s implementation scenarios, a transaction does not automatically imply that the transactors are members of the same community or that they have established credit limits with each other prior to the transaction. Anyone could potentially trade with anyone else. It is up to a potential recipient to accept or reject a currency brand at the time of transaction – essentially, the concept of dynamic or late binding as applied to a currency system design. This is similar to the WWW philosophy of allowing any web page to link to another page at-large, which is a less-controlled way of doing things but inherently more flexible and scalable. Even though mutual consent is required for an inter-entity transaction, such consent is only applicable to one instance of payment and does not imply past or future guarantees of currency brand acceptability between two brands. 

Loose coupling, as described in a previous post, is expected to lower the barrier of setting up new currency brands, leading to more spontaneous currency brand creation (i.e., more ‘new web sites’ in the current analogy). Dynamic binding, as described in this post, is expected to lead to more diverse market selections and higher frequencies of inter-entity transactions (i.e., more ‘interdomain links’.)

As with all design trade-offs, however, there is a price to pay for such high expectations. Tyaga.org’s design approach for achieving flexibility and scalability comes at a substantial cost of stricter reporting requirements and greater dependence on service providers to make make sense of huge volumes of transaction data. The challenges of reconcilable reports, auditors and currency brand indices arise since each entity is allowed and encouraged to set its own currency limits as budgets, without having to predetermine transaction boundaries or specific entities as revenue sources. 

In assessing my project plans for this year, I reviewed the core requirements that the implementation is trying to address. In an effort to simplify the core requirements even farther than the one-page ‘game’ representation, I have arrived at the following three main concepts:

1. An independent currency brand corresponds to, and is issued by, an entity with a self-determined mission to provide certain goods and services to the market or general public.

2. Independent currency issuance is defined as an equivalent increase in the unused revenue and expense budgets of an entity.

3. Published reports are necessary to audit the whole currency lifecyle, including the corresponding inflows and outflows between entities.

Among these main concepts, the definition of currency issuance might seem the most arbitrary to others.  I now realize that this same definition also implies the other currency activity definitions in the ocaup accounting model. So instead of having to explain and defend the whole ocaup model (which really is not that complicated), I really only have to explain why #2 is so important to the design of accounting systems and payment protocols that affect inter-entity transactions.

First, it must be noted that all currency design require an accounting restriction of some sort. Community currencies impose geographic or shared-interest boundaries on where currencies might circulate. Ripple requires payments to be routed through a pathway of neighboring nodes. Traditional currencies impose restrictions on who could issue fiat notes into general circulation. So having a set of accounting restriction to guide the issuance and use of currency is nothing new and all are likely to be viewed as arbitrary. But why insist on #2?

The short answer is that #2 leads to looser coupling between currency brands. Loose coupling facilitates the ability to noncooperate with a particular entity by not accepting its currency brand.

For example, imagine a politician with a campaign budget that is funded by donations. If the politician’s ability to raise her campaign budget is tied to the ongoing donations that she receives, then she is more likely to care about satisfying the special interest of big donors such as lobbyists. In contrast, if she is able to fund her campaign budgets independently of donations that come in within a given period, then there is less pressure to attract or retain large donors. She would worry more about the acceptability of her currency brand to market participants and the general public. Because of #2, her currency activity is tied to the self-determined limits that her organization has set to conduct its campaign.

The other implication of #2 is that inter-entity currency flow is allowed as long as the payments do not lead to an increase in the unused budgets. In fact, considering that each entity fulfills a specialized role, #1 and #2 acknowledge that inter-entity transactions are to be expected and supported. Loose coupling does not have to lead to isolated currency systems.

When each market entity decides to issue its own currency as unused budgets, it would be impossible and counterproductive to predict which currency brand is going to be offered as payment for a transaction at any given time. Even if each person carries only one or two currency brands, a seller is faced with the prospect of receiving payments in many different currency brands from different customers (employees of google.com, seattle.gov, etc.) Clearly, an inter-entity payment protocol must factor such currency brand diversity in implementation use-case scenarios. Real-time advisories on currency brands would be the best approach since revenue sources would not be unnecessarily restricted through pre-emptive brand rejection based on potentially stale information.

To summarize, currency traceability to an entity, loose coupling between currency brands, and auditable reports of currency activity are important design goals that facilitate informed cooperation and nooncooperation with specific entities.

Since there are not a lot of development updates for this quarter, I will spend some time looking back at 2009 development ‘highlights’ instead. (The embarrassing fact that these are highlights says something about my odd interests in life.)

While tyaga.org’s philosophical foundations have remained stable and consistent (see satconomy.org), the technical details of the implementation have not always been easy to follow. There really is a lot of art involved in system design, even in an ‘objective’ technical field such as information systems. On a more encouraging note, the accounting system, which was called Entity Module in early 2008, has really become more stable this year. The code is much easier to read and the naming conventions have been mapped to the revised ocaup terminology. The seemingly unnecessary effort to implement transaction recovery outside of built-in database functionality is also paying off, especially as the protocol emphasis shifts towards allowing long-duration web-service type transactions. I still have not released the revised code pending the addition of other functionalities, primarily held up by the issues discussed next.

The effort to build on top of the Prowl demo was, to put it mildly, not very successful. In hindsight, it is easy to see that by using the publication of records as a form of ‘instantaneous reporting’ at the time of transaction, the payment messaging requirements had become too tightly coupled with reporting requirements. To drastically lessen this dependency, I am currently investigating a different approach that should be better in many ways than PaCT. In general, the same conceptual ‘parts’ are used but re-arranged for better modular ‘fit’ and orthogonal development. I expect this new approach, tentatively called Inter-entity Payment Protocol (IPP), to be demonstration-ready by early next year.

Finally, there have been brief but encouraging discussions with other currency design enthusiasts. The potential for collaborations is definitely brewing, but there has to be a good, even if not exact, matching interests on the importance of representing market entities in a currency brand index. More often than not, other projects emphasize visualizing individual contributions and personal reputation metrics, while the emphasis in this site has always been on enabling performance evaluations of specialized organizations that provide products and services to the market. In other words, tyaga.org’s information system design focus is on auditable budgets and inter-entity transactions between organizations, NOT internal transactions between members of the same organization or barter community.

That is pretty much 2009 in a nutshell. I will outline general projects ideas and work plans for the year 2010.

Now that I have finished concentrating on other projects and commitments, I look forward to continuing tyaga.org’s development work. One of the web sites that I visited recently was the community way (CW) in Comox Valley. The information design aspect that caught my interest was the ‘current numbers’ page with links to a graph and spreadsheets.

What follows is not a critique of the reporting system design as used by CW – for all I know, that design serves CW’s needs perfectly. I also do not question the community emphasis of the CW currency system and I sincerely would like to see such a system succeed wherever it is implemented. My goal in offering the following comparative analysis is to better explain the technical nuances behind tyaga’s evolving IS design requirements.

It has become obvious to me that the use of offline transaction instruments, such as minted notes, checks, or store-and-forward devices, could not be tracked efficiently and would not be conducive to the development of dynamic currency brand reporting systems. So while my earlier design notes referred to the importance of offline devices, I have since revised the technology requirements to focus on online devices. The most promising device in this regard is a basic cell phone with SMS capability, which is already widely deployed and inexpensive to own. While a QR-code app is not required to post transactions through SMS, a camera phone with that capability would simplify data entry and transfer between transactors.

Another design change, as described in a recent post, is the use of public keys for better non-repudiation and auditing capabilities. The example index on this site clearly illustrates the required tracking and metrics at the level of an entity, as represented by its currency brand, and not simply aggregated for a whole community as shown in CW’s current numbers graph. I am not sure of CW’s requirements for auditability, but tyaga’s design requirements include the auditability of any published performance and evaluation information for each entity.

Finally, it is clear that an under-developed reporting system does not hinder CW’s implementation. In contrast, a robust and dynamic reporting system is required to implement tyaga’s concept of spontaneous, targeted non-cooperation against specific currency brands. A currency brand index, constructed with dynamic information from reporting systems, should help participants make informed decisions on whether to accept or reject a currency brand in a transaction.

Again, I applaud CW as one of the rare, actual, working implementations of alternative trading systems. At the same time, I am reminded that there are not many development or implementation efforts that seek to address tyaga’s main information systems requirements.

For the rest of the year, I will investigate a substantially different approach to PaCT. I have learned important lessons while working on Prowl and PaCT this year, which has prompted a series of changes since early this summer.

The main lesson has to do with the importance of non-repudiation in a payment protocol such as PaCT. I have been trying to avoid designing PaCT around asymmetric encryption, with the idea that anything involving public key distribution, verification and revocation would lead to too much system complexity. Unfortunately, the ‘independent-witness-on-demand’ idea produces its own set of complexities while not giving as strong a sense of non-repudiation as a digital signature from each entity. In addition, it is more appropriate to move the concern of transparency to the separate stage of periodic report publication and audits.

I plan to revise code and documentation to reflect a refined strategy to be built around a core manifest or declaration document. Each entity with its own currency brand publishes a url to its manifest. The manifest will contain three main elements: certificate, accountant and report.

• Certificate element: describes an entity’s public key and a list of certificate urls (x.509, pgp or some other format) for verification purposes. As with any pki or web of trust schemes, a seller must trust the issuer or endorser of the certificate and support the representation format used.
• Accountant element: describes an entity assigned url for submitting transaction records. A designated accountant will be able to produce or verify digital signatures on an entity’s behalf. There may be a list of urls when different accountants are used for different currency units and transaction processing protocols.
• Report element: describes the corresponding urls to a list of audited and pending reports. Child elements will include transaction period, currency unit, auditor, content-type, etc.

More details to follow in upcoming posts.

I have to admit that, instead of coding and doc’ing (documenting) indoors, I have been mostly enjoying the long string of sunny days in Seattle. The slowdown was prompted mostly by having a settled mind on the general course of action for this project. In particular, I am planning the information system around exploratory studies, and the earliest study is not likely to occur before the middle of next year. So while the expectations and excitement remains, the timeline for implementing currency ideas is not nearly as pressing as other project priorities this year.

In the meantime, besides sporadically working on the development of currency system tools, I will spend more time exploring the nuances and likely concerns in a trusteeship-based economy. For starters, I have written about addressing potential issues involving durable goods transactions. These analyses will likely come in handy when confronted with valid concerns and skeptical participants.

A series of flowcharts is now available to guide the development and coding of PaCT applications. The flowcharts illustrate the steps that a reporter application takes to cross-verify and witness a published transaction record.

Automated auditing applications could then query reporter applications to ascertain that published reports contain cross-verified transactions. In this way, greater confidence could be built into information summaries as provided by currency brand indexes.

Recently, while researching reputation attacks that could threaten currency brand indexes, I happened across another perspective that I feel compelled to study and learn. 

Nowak and Sigmund’s article in Nature magazine discusses the evolution of indirect reciprocity in the context of hunter/gatherer populations. An idea that immediately comes to mind is that currency is an attempt to externalize image scores. Others have also realized that connection, and besides another blog, there is even a published article on money as externalization of confidence (unfortunately for me, I do not read Japanese).

In hindsight, I could see how Prowl is just another attempt to scale indirect reciprocity by tracing reputation to a market entity’s domain name, exposing helper-recipient interactions to declared and random observers through PaCT, and promoting auditable reputations through parsable reports. The extended sequence of PaCT even illustrates how a reporter may query for advisories on whether to accept or reject a transaction opportunity, which is analogous to the decision to help others or not. It should not matter whether a transaction is called a sale, charity or paid service — the recipient (e.g., buyer) still receives a benefit and the originator (e.g., seller or donor) still accrues the cost in hopes of improving her long-term fitness (through redeemable reputation tokens or supporting others who make life better, more satisfying.)

Reading through research and literature published on the evolution of cooperation, it’s amazing to see theories and scoring strategies objectively compared using accepted frameworks for modeling, simulation and experimental studies. I see the concept of scoring strategies (image scoring, standing, etc.) as analogous to currency design. Good currency designs, like good scoring strategies, are more likely to persist in simulations and actual implementations. 

My take-away lesson from evolutionary game theory is that overall fitness determines selection, and not the amount of tokens or currency that is owned by an individual. That perspective runs contrary to most economic game theory that uses the accumulation of money as the quantitative measure of success. Evolutionary selection by accrued fitness seems more natural. I was inspired enough to create a basic simulation program for modeling the spread of benefits/costs in a population that uses a particular currency design. However, I am still unsure of how to model selection in a saturated market population. I don’t think evolutionary selection is representative of the situation wherein market participants are cognizant of various currency designs that they would like to earn and use.