Satconomy

While reputation may be derived from many relations and concepts, these bases are frequently observed in the design of reputation currencies: ownership, membership and trusteeship.  

Owner reputation is a primary basis of lender-oriented currency design. The benefactor evaluates how likely the recipient is to return or compensate a trade. For example, the recipient might own cash and thus immediately return a favor by giving the seller reusable currency tokens. The currency design is, therefore, aimed at facilitating direct reciprocity.

Member reputation is a primary basis of community-oriented currency design. The benefactor evaluates if a recipient benefits a common cause or resource and how likely that member’s contribution to the community will continue. Even though indirect rather than direct reciprocity is facilitated, there is a strong expectation of a closed-loop circulation of currency within the community. 

Trustee reputation is a primary basis of brand-oriented currency design. The benefactor evaluates if a potential recipient belongs to an entity with a worthwhile specialization and acceptable market performance. The emphasis is on indirect reciprocity without any expectation of closed-loop currency circulation within a predetermined boundary.

To illustrate the concept of trusteeship, imagine a hospital whose mission is to provide healthcare. If the hospital has a reputation for effectively allocating its limited resources to serve patients, then a benefactor would have a good reason to support and accept that hospital’s currency brand. The benefactor should not be concerned whether or not it would eventually benefit directly from using the hospital’s services. Rather, the benefactor should focus on establishing its own reputation as a trustee by effectively fulfilling its specialization.

The preceding comparison does not imply that reputation currencies may emphasize only one conceptual basis. Different reputation bases leads to different approaches to improving market access. On the one hand, it is easy to see that a brand or trusteeship-oriented currency design provides access to the widest market possible since currency use is not limited to direct reciprocity or within community boundaries. On the other hand, it may be argued that a trustee’s reputation offers the least guarantee on redeemability since trusteeship is not as easily qualified or quantified in comparison to ownership or membership.

One of the key differences between satconomy and other ledger-based currency systems arises from the concept of ‘obligations’. In other posts, I have used the term ‘debits’ as a quantification of obligation, and I’ll continue that usage here.

In Ripple, debits represent the obligation of a participant to the neighbor node that it used as a payment intermediary. It doesn’t matter in this analysis whether or not there is an actual manual settlement of ‘debts’. The main point here is that the obligation arises as a result of a market transaction, or what some alternative currency proponents refer to as property transfer.

In LETS, obligation also arise from a market transaction. The difference with Ripple is that the debits are owed towards the whole community, and anyone that belongs to that community may cause a member to accrue debits or cancel it through a market transaction. In contrast, Ripple credit-debit issuance and cancellation are specific to neighboring nodes.

In satconomy, obligations arise even before any market transactions take place and without prior contractual arrangements. Even before an entity’s obligations are quantified as debits, the obligation is already there, qualified as mission statements or organizational goals. Debits are declared as soon as an entity issues equivalent credits for member contributions towards its goals.  Again, no market transaction precipitated the recording of new credits and debits, or at least it would be absurd to call the process of product creation as a case of ‘property transfer’, when technically the credit issuer and recipient within the entity end up becoming co-trustees of the entity’s product inventory and debit account. 

In satconomy, debits represent the quantification of an entity’s obligation to the market as a whole. Not because other market participants have necessarily made any demands on the currency issuing entity, but simply because that entity has made it an obligation to specialize in delivering certain goods or services to the market. There’s nothing new in this concept of ‘self-determined duty’, entrepreneurs are always trying to research and develop new product offerings all the time without explicit prompting from the market.

But someone might argue, how could a currency issuing entity cancel its self-accrued debits when it owes no one in particular? By selling its products to other entities that it perceives as engaging in sustainable market activities. All that happens in a satconomic market transaction is the cancellation of equivalent credits and debits (quantified obligations and contributions). No new ledger entries are recorded out of expectations for future reciprocity in a market transaction.