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0 pointsirq-17y ago0 comments

Normally money is fungible and we trust the money, not the people. Pirates want gold because the gold will be accepted even if they won't be trusted.

This seems like an impossible obstacle -- every buyer and seller must have a connection (of trust), and the connection must have enough credit! Is the hotel manager in Shanghai going to have a connection to every customer? Is the local restaurant going to have thousand of trust connections so a relay can be found?

The other issue is the zero sum of credits and debits. How can money be added or removed from the system if "the total amount of credits in the system always remains 0"? How can you convert $100 USD to credits, spend the credits and someone else can get the $100? Does any money put into the system also need to removed at the same time? How would that work?

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all27y ago

> The other issue is the zero sum of credits and debits.

Let's say I've got 100USD. You've got a node and a pile of trusted friends. I spin up an account and pay you 100USD.

Initially it looks like this:

Me->Dollars: 100, Credits 0

You->Dollars: 0, Credits 0

What do I get in return? A line of credit that you extend to me. So now it looks something like this:

Me->Dollars: 0, Credits: 100

You->Dollars: 100, Credits: -100

It is up to you what you do with the cash, but there is now a debt on my account to you for what you provided to me. In this sense, a positive number of credits is "debt owed to another" and a negative number of credits is "debt that is owed to you".

Suppose I have a friend, CM, who I trust. If I want my 100USD, but you already spent your cash, I go to my friend and buy the cash with credits;

Before we trade

Me->Dollars:0, Credits: 100

CM->Dollars:???, Credits: 0

And after

Me->Dollars:100, Credits: 0

CM->Dollars:???-100, Credits: 100

Notice that you still have -100 credits. Essentially, I bought your trust. Because I gave you cash, you know that I'm good to pay you the money I've already given you. This debt owed to you will remain in the network until you are paid an equivalent amount in credit.

I can see now that lenders will be "debt sinks" that exchange cash for credit within the system. So, while the balance of the whole system is essentially 0, there will always be an imbalance because there will be those who take cash in exchange for "trust" and credit.

> Is the local restaurant going to have thousand of trust connections so a relay can be found?

No. The restaurant will trust a node that trusts many other people. I can see that as well as "debt sinks" on the network, there will also be nodes that specialize in taking on "trust" so that others don't have to. Like a bank. There will likely be a fee (in credits or cash, you choose) associated with assuming other's risks.

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