BitCredit -- better(?) Bitcoin.
I'm just nobody, but I understand a lot about economics and sociology. I've been great enthusiast of Bitcoin, but I'm pretty sure it will not going to work.
But I have been thinking for years about this idea of anyone being able to issue their own currency and Ripple project and Bitcoin were great inspiration for me, or even necessary steps that I'd never think of myself. Please read on and share your thoughts.
= Problems with Bitcoin
Some problem with Bitcoin is:
* fixed-like inflation rate (and at the end lack of money creation)
* new users can't enter the system without buying-in
* one BTC will never be even roughly attached to anything real which will make it value unstable, always
One must realize that inflation (expanding money supply) is necessary for stable economy. It's not the inflation that we don't like -- it's the fact that governments can irresponsibly create inflation. I've know that we can divide Bitcoins with possibly unlimited precision but that is not going to help. I heard once much better solution -- that if at some point monetary base will have to be expanded we can always create alternative Bitcoin blockchains with different inflation and let them run competing, side by side. This is some sort of a solution but in the essence it will lead to something that I'm about to propose.
For the wide adoption of system anybody should be able to join the system without buying/borrowing currency first from earlier users. This is a must. With Bitcoin some people will never join the Bitcoin because they will be reluctant to pay earlier-adopters for their bitcoins.
And the last argument is the strongest -- Bitcoin will never have stable value. There is nothing to compare amount of Bitcoins in circulation to. There's not even a way to estimate it. One day everybody is using Bitcoin, second day some new currency shows up and all users abandon Bitcoin for it. No promises, no connection with real life at any single point.
I'd like to propose the alternative that address these problems. I hope it will find minds opened enough to give it some thought and possibly discuss narrowing and fixing possible issues. I don't have a time to write long papers and proofs of work. I only hope that I can shortly describe all what's in my mind in a way appealing enought that community at least discuss it.
= Credit
First, some brief theoretical introduction. What money really is is a Credit. In ideal world one could go to the shop, take a bag of beacon and leave a note to the shop owner with a text "I owe you equivalent of one bag of beacon". At some point he would then be obligated to repay the note with something valuable.
As this is not practical people have created money to quantify value of things and exchange standard notes instead of custom ones. But the example shows ideal way to create monetary base (number of such notes in economy): flexible and adjusted to a need of economy. When someone needs a credit he leaves a note backed by his reputation and afterwards repays his dept. No bank required -- only a trust between two parties and a promise of repayment.
This is more or less what nations (states) are doing. They can create whatever amount of their own notes, backed only by their reputation and power of their economy.
My opinion is that digital currency should allow people do exactly what states are doing, only on personal/community level. This way remove the power of money creation from the state and democratize it.
Instead of creating one currency: Bitcoin, we should create a system in which anybody can create his own currency if she/he is willing to.
= How is it going to work
There will be a chain, backed by a power of miners collecting fees from all transactions. This concept is very strong idea of Bitcoin. However -- there will be no mining rewards, only fees. And miners can potentially be doing something more than only creating hashes (read on).
Users will be able to create their wallets just like in BTC. However they will be able to pay with their own currency (called user-currency), creating it out of thin air. This will allow then to have a negative balance on their own currency. This balance will obviously be visible in the blockchain so that the total amount of emitted user-credits will be known to anybody at any given time.
This might sound ridiculous at first but think about it. The fact that someone can issue his own user-credits does not mean his getting richer, because he must first find people that will accept his user-credits. So -- he will have to back his user-credits with something. If his your friend he can promise you some amount of national currency your using for each of his user-credit or some amount of work he will do for you. You can even sign a legal deal about it. This is a point that ties the virtually created user-currencies with real-world value.
Possibly personal user-credits might be little too diverse, but image communities or companies issuing their user-credits. They could pay their employees and suppliers in company's user-credits, while selling their products for it. The point is: anybody with strong enought reputation enough would have a way to emit own currency easily and in instant. Even states would be allowed to do so, but once people notice the state monetary police is not good, they can switch to other currencies very easily.
Obviously the transactions in the BitCredit system will be in different user-currencies. Any wallet will have multiple balances in different user-credits. All of them will be zero or bigger and only user's own user-credit balance can be negative.
By exchanging of currencies every user will be able to pay in whatever user-currency the seller is willing to pay. Obviously this multiverse of currencies will be to complex for a human to easily operate in. This is a part that requires more thought and researching.
However I believe that I've found a simple solution: let the whole thing operate just like the currency markets do. Users should be able to put BID/ASK request that miners would be recording and matching with corresponding calls. This way markets supply-demand mechanism would drive relative prices of every user-currencies created. Also -- with mechanisms like Ripple project's (
http://ripple-project.org/) network of trust being constantly processed for profit by miners and some in-user-software "currency acceptance preferences" -- the currencies in users wallet could be automatically converted from the one that the user trust less to the ones that he/she trust more.
= Advantages
This system is basically as anonymous as Bitcoin, except for users wanting to issue their own user-credits. As they have to be backed by something (like reputation at least) their identity will possibly have to be well known. Even this is not mandatory: imagine WikiLeaks paying with their own user-credits. Also, this does not prevent however two or more isolated parties to user their own currency in the total anonymity not revealing their identities to the outside world.
In this system money are created according to the needs of economy while no party is forced to use any specific user-currency, thus forcing currencies to be more competitive and preventing inflationary policy of the governments or central banks.
It's much easier for anyone new to join the BitCredit system than to join Bitcoin. Monetary base can be easily expanded and investitions can almost self-fund themselfs.
As there are many user-currencies, each of them backed by someones reputation and trust between users, the system is much more stable and preventing speculation bubbles. There is no problem with shops not being able to accept Bitcoin due to unstable prices as they can accept specific user-currencies that are known to be stable, and user software will take care of obtaining such currencies automatically for buyers.
