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October 14, 2011, 02:53:09 AM |
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Actually not quite because it still doesn't allow for central control, but anyway. Basically the idea is to have no currency base. Everything is 100% credit. Although there are obvious problems with this, but you never know maybe there would be a way to work around them. So here's how it'd go.
A lot of people on here are aware that banks are essentially legally able lend money that doesn't exist. It's purely credit. Simplistically when they give you a loan, they create an account for you and pretend to put money in it. They can do this since in bank accounts the money is nothing but numbers in a computer. Then you can transfer these numbers over to another bank or use it to buy a house. As you pay off the loan the lender essentially throws away the principal part of your payment and keeps the interest as free money. So basically you are paying the bank interest for them to create money for you, which you will promise to send back to them over a period of time. That way they can "destroy" the fake money they gave you and they keep the interest as profit. I say lets cut out the middle man: the lender.
So with Credit Coin, or Credits for short, you are able to make money out of nothing. The catch is you have to pay it back. Basically when you create this money you are promising to destroy it over a period of time in small chunks. This way the money supply would be completely controlled by demand for money. No single credit would permanent so there would be no monetary base.
So of course what would happen if you were unable pay? Well the credits you created associated with that payment would go bad or essentially disappear. Haven't decided if the credits should become "debts" or just simply go away. It might be a good idea if they became debts, that way if the person responsible for paying them could still pay them back and the unlucky person who was holding them could sell them to someone for less than they would be worth as credits. The buyer would be gambling that the debtor would eventually make the payment. The holder of the debts could also forgive those debts.
On the other end of the stick obviously people shouldn't be able to create as many credits as they want willy nilly. Then someone would make an account make a million credits send it to another account and then spend it before it went bad. Someone would only be able to create a small amount at the start, slowing building up trust with the system through payments back to it. Alternatively someone could just use credits and never make any, but they would never build any trust with the system. Not sure what algorithm could be used for "trust building".
There could be interest on these loans to be paid to miners for processing all the transactions. Interest could be dependent on a few things: trustworthiness, loan length and payment periods (how long you decide to put between payments). Obviously the longer loan times and further payment periods the higher the interest. If you're new and don't have enough trustworthiness to borrow enough money to say, buy a house, you could always borrow from someone who trusts you and has more trustworthiness with the system. So there is still room for lenders here.
As for the block chain this is what would be happening. When you create credits, they are completely new. Just like freshly mined coins in bitcoin. When you make a payment back to the system those credits, which you earned, not made, don't go into oblivion, they actually travel to the people who are holding the credits you made and it replaces them. Miners would be getting credits payed to interest in this system so they wouldn't actually be creating money. Just getting paid for doing the footwork of the system.
Basically it's possible for the entire system to collapse, although the likelihood of this is low. Usually there will still be demand for money so the system should always have some volume. There's a lot more too this but I don't have time to write it all. Suggestions, thoughts and criticisms are welcome. I don't have the time to program this so it probably won't happen unless a bunch of people jump into help.
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