Towards a universal trade protocol

In this great talk by Bernard Lietaer, he talks about why the presence of complementary currencies actually INCREASE the stability of a nation’s official currency: Bernard Lietaer – Why we Need a Monetary Ecosystem, INRIA 2014

I’m 100% in agreement that we need complementary currencies to increase the sustainability of our trade networks, both alternative forms (like the e-dollar) of the main competitive debt-based national currencies, but also, and especially, other types of currencies based on different rules (such as to facilitate cooperation over competition, or to incentivize local trade over global trade, etc).

You might enjoy a very short paper that summarizes these ideas that I wrote for an economics class in 2008: Complementary Currencies Increase Economic Sustainability (PDF)

One recurring question I have is: to what degree would having a universal protocol for trading different currencies facilitate there being more of them commonly and easily used and exchanged?

One reason I’m enamoured with Ripple’s and Stellar’s designs is that they facilitate trade between currencies (which can be virtual currencies or proxies for other things). One potential problem is that they enforce the use of their own monopoly currency in order to transact these other currencies. This is why I’m curious as to the potential of a plain ‘bare bones’ trade protocol based on the federated consensus protocol (FCP) that is free from any direct linkage with an underlying transaction currency. This might be useful for facilitating trading information flow between disparate actors completely free of any single central currency or network. The primary driving question for this is whether it would be intrinsically useful and valuable enough in its own right to motivate use and validation without the incentive of the built-in transaction fees that are provided by XRP/STR currencies. This is similar to how the internet itself operates. ISPs and internet backbones are incentivized to provide data flow based on out-of-band financial agreements. The beauty of ripple/stellar/ethereum is that they build the validation incentive right into the system. But they are precomposed of several layers of protocols into one system. My question is what value is there in refactoring the trade protocol layer into its own standalone protocol.

Ethereum takes the transaction currency (the Ether) a huge leap further by enabling logic to be validated with it. In some ways this is orthogonal to the idea above of the benefit of a bare-bones implementation of an FCP-based trading protocol. Ethereum has its own consensus protocol and makes it possible to define a Ripple-like trading network directly on the Ethereum block chain. The potential problem is that it again creates a dependence on the Ethereum central (monopoly?) currency in order to transact.

My curiosity remains as to whether there’s some benefit to there being a pure definition of an FCP-based trading protocol, one that’s completely free of any one underlying monopoly currency system. In some ways it would be a pure protocol in the sense that it would exist primarily as a white paper or protocol description document. It would exist materially first as a reference implementation that runs based purely on intrinsic motivation, and later by various implementations on top of any or all specific information exchange systems, block-chain or otherwise. Perhaps it would just be what Ripple and Stellar already are, but without the XRP/STR layers.

The potential benefit from having this sort of generic FCP trading protocol is akin to having a universal DSL (domain specific language) for currency trading. My sense is that this would foster greater ability for intrinsically motivated parties to get up and running with trading a new currency. Cyclos provides a great product for getting up and running quickly with a new currency, but it does so solely through creating a new walled and isolated garden. A universal protocol for trading currencies would facilitate more communication between different and disparate currency systems.

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