tyaga.org

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.

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.  

I have recently come across Postel’s Law, which is typically quoted as: “Be conservative in what you do; be liberal in what you accept from others.”

This is also known as the Robustness Principle. It reflects tyaga’s vision of how independent currency brands should operate and interact: “Be strict in setting your own limits and performance, be tolerant in accepting other currency brand’s limits and performance.”

In other words, in order to promote the adoption and spread of independent currency brands, it is important to expect that most entities will likely have poor performance relative to its initial budgets. The important thing is to observe work with dedication and perserverance, and not to expect immediate success. A dynamic index is therefore a means for evaluating the progress of an entity through its currency brand, and not a means for avoiding transactions that could help another entity reach its goals. Something to think about when studying and promoting the use of dynamic indices.

I have revised the hastily drafted game-design representation of tyaga’s goals. In reviewing the simplified “game rules”, I was reminded of the standards that underlie the success of the World Wide Web. The web standards, listed in order of importance by Tim Berners-Lee, include the URI, HTTP and HTML. In other words, the Web is primarily defined by the use of URIs, a standard that is easily taken for granted while HTTP and HTML receive more attention.

It was also no accident that URIs use the Domain Naming System, which was designed to be globally scalable and was already widely supported. For the same reasons, Prowl also specifies the use of domain names to simplify the implementation of the similarly crucial concept of Independent Currency Brands (ICBs). The use of separate registries would have added unnecessary complexity and led to collisions as more market entities establish independent currency brands.  

After the concept of ICB, the second-most important design aspect in Prowl relates to accounting models. Just as web and gopher clients offered interoperability in each other’s early protocol versions, Prowl is also designed to understand different market transaction requirements and effects on account balances. For example, would transactors have to be members of the same community to transact (mutual-credit, cc model)? Would the ‘buyer’ accrue debt which would have to be settled later (lender-borrower model)? By default, Prowl reporters are expected to support the cross-verification of OCAUP-based transactions, where the buyer entity’s unused expense and seller entity’s unused revenue budgets decrease by the same amount. The default notary support for OCAUP is similar to the default support for HTTP in web browsers.

The third-most important design aspect in Prowl relates to the representation of transaction information. Prowl specifies default published record syntax, report structure and query-response conventions. However, Prowl should support other representations as they emerge. As inter-regional trade in ledger-based currency grows, Prowl would need to support currency activity representations in different dialects. 

The game-design representation also shows tyaga’s infrastructure building blocks as a list of ‘game equipment’. Through Prowl standards and PaCT payment sequence, establishing and using independent currency brands should become simpler and more fun.