8 Aug 2015

N-Euros with IOUs! The next stage....

During my discussions with Steve Clarke and Ciaran Mundy at the Bristol Pound, I talked about the two different Cyclos-based systems that I have set up  - the OWEM IOU based system that I set up last year and my more recent N-Euro system.

One comment that they made concerned one problem they saw with my OWEM system. Suppose I send you an IOU for £20 because you mowed my lawn, but after one year, the debt is still outstanding. What could you do to recover the debt? My standard response would be to say that you would be well advised to never mow my lawn again, because I can't be trusted! You will have done some work for me, for which you have got nothing in return - either from me, or from someone else for whom I may have done something.

This is not a total catastrophe when the sum involved is just £20, but with larger sums it could become a real problem and discourage people from joining in.

So, my second reaction was to say that it might be possible to include a mechanism that forced the IOU to be paid off with "real" money, once some predefined period has elapsed,  if and only if the IOU has not be cancelled out in the meantime.

Obviously, before you could implement such a system, you would want to have both the IOUs and the "real" money in the same system. And that got me thinking.

Maybe I should combine the IOU features of OWEM with the more classic money transfer mechanisms that I have already put into the N-Euro system?

So that is what I have done! With a bit of fiddling around in the configuration of the N-Euro system, I have now arranged things so that anyone signing up to the N-Euro system is systematically provided with two separate accounts - a standard N-Euro account, and an N-Euro IOU account. 

Here's a screen shot of my N-Euro account where you can see the status of my two accounts.

As you can see, my basic NEuro account has a balance of N€ 120.00, and my NEuro IOU account is currently at N€-85.00. You can also see that the total IOU value that I could use is N€ 9,915.00 simply because the administrator of the N-Euro system (i.e. Me!) has arbitrarilly decided to set the upper limit for emitting IOUs at N€ 10,000. I am a very generous person.

The next screen shot shows why I am currently at N€-85.00. It's because I have sent IOUs to various Citizens and Businesses that I created within the system and the overall balance is now N€-85.00.
Obviously, all these numbers have just been made up for illustration. But hopefully you can see the point. By having two different accounts - one containing "real" NEuros, and the other keeping a tally of the IOUs, it is easy for people to know where they are. For example, I'm currently at 120-85 = N€ 35.00.

A next stage could be to set a limit to the duration of any particular IOU such that, at the end of the period, the N-Euro system would make an automatic transfer between the two "real" N-Euro accounts and cancel out the IOU.

This sort of mechanism would probably not be too difficult to implement within the Cyclos system.

Think a bit about how this could work. You could start by giving every citizen a basic allowance of real NEuros of say N€ 100.00. Most of the time, you wouldn't need to use your actual N-Euros at all - they would be just there to implement a mechanism that would be used only if all else fails.

Those who have heard about the OWEM system will know that one of the really neat aspects of such a system is that in many cases IOUs will simply cancel out on their own.

Let's go back to that £20 IOU that I sent you for mowing my lawn. The simplest ways to cancel the IOU would be for me to either provide services or goods to you worth £20 - for example, I could lend you my car for a couple of hours, or give you 10 kg of cherries from a tree in my garden. At that point, you send me an IOU for £20 that cancels the debt.

But the IOU can also be cancelled out via other people. Thus, suppose I send you an IOU for £20 because you mowed my lawn. But I give 10 kg of cherries to my neighbour (worth £20) and my neighbour lends you his car for a couple of hours. We are all quits, and no actual money has been transfered anywhere. It was all done with IOUs. The trick is to find loops in the IOU network. But the whole thing becomes even more interesting when there are loops involving tens or even hundreds of people, possibly including plenty of people who have never met, and probably never will. The N-Euro software will be able to do all that IOU cancellation automatically.

And, if in the end, as a last resort, it is necessary to make an actual money transfer, then the N-Euro software could look after that too.

I suspect that with just a very modest amount of base money injected into the system, the amount of economic activity that could be built upon that could be very significant indeed.

I've been talking about N-Euros here, but I should stress that you could do exactly the same thing with any monetary system - Euros, Dollars, Pounds, Bristol Pounds, Bitcoins.... you name it, Cyclos could do it.

I've still got some development work to do to get this fully functional. And above all, I need a few more people signing up for N-Euro or OWEM accounts so that it can actually start doing something useful. Paying Citizen1, Citizen2 and Business1 gets a bit tedious in the end. How about having  some real transactions with some real people?   You can sign up here for N-Euros, or here for OWEM.

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