# COFI retreat Notes

*Will actively add to this list throughout the retreat*

## Circles UBI technical challenges

Inherent features if the circles UBI System
* Individual tokens for UBI
* Trust and capacity network (trust limits)
* Transitive transactions

Circles protocol is a set of smart contracts used on Gnosis chain - we do not maintain the infrastructure where these services lives

To create a useful application we need intermittent Web 2 services for different reasons
* Path Finder (all the calculations of finding the paths are written in the Hub contract)
* Every user has their own tokens
* Calculations to find path are done in a blockchain not a service, The hub only does settlement of the off chain agreements
* You can have a multi-sig to initiate the transactions for controlling the safe
* Safe Contract - represents each account
* Token contract - has a public method
* User data is not on chain - stored on a centralized database
* Blockchain indexer - need indexer for off chain information
* Relayer- we have a relayer to pay transactions with xDAI, the circles code pays for all of the transactions

### Challenges with transaction fees payment
(Need xdai)

Current approach: Central payment service (relayer service)
Problems:
* Scalability
* Bottleneck
* Parallelization
* External dependencies

Possible Outlook:
* User payment (charity/invitation service)

Challenges with pathfinding for transitive Transactions
* Scalability: growing community = growing complexity
* Mathematically complex problem
* Indexing the capacity network - constantly changing
* Gas limits - number of stes

At the moment using a standard flow algorithm

Https://github.com/CirclesUBI/pathfinder2

* Essential that the indexing happens very fast and is reliable
* Final limitation of transitive transactions - the more steps you have in one transaction the more gas it uses - fixed limitation of execution steps constrained by block size

Challenges related to Web 3
* Asynchronicity
* Delay before transaction validation
* UX challenge
* Indexing of blockchain data
* Delay before the pathfinder has the latest state
* State contracts’ immutability
* Trust limits or UBI amount etc are challenging to change
* If I trust you at 50% we are created a big limitation because If I don’t have anymore tokens I’ve exhausted my trust limits
* Governance - who decides what is the new implementation of the contracts

## Money and Credit; a Crash course
Alex Campa

If you want to change the world you need to know what the system is

* Money is a tool
* Technology is not always a solution
* Money is deeply rooted in culture (is it okay to accumulate or be in debt)
* Is it okay for money to lose value over time or not?

What is money in practice?

* An instrument that is accepted as a matter of course in business

Commercial money is not:
* Social currency
* Ceremonial currency
* Kudos currency

Money != currency

Money-thing (or money objects)

* Physical things that came, by social convention

Money-Tokens - promises of money things initially
* Characterized by physical form, issuer, currency, amount and terms

Currencies went from material to abstract
* Material - a shekel of silver
* Abstract #1: a shekel of silver (but there is no silver around
* Abstract currency #2 - an Israel shekel today

Money is a particular kind of debt: a transferable and generally acceptable debt which should be reused for repaying any debts

Today almost all money is created by commercial banks (money = IOU)

Even when there was a gold standard most money was till credit

What is money, May 1913

Credit is the purchasing power so often mentioned in economic works as being one the principle attributes:

“Credit and credit alone is money”

Money myth:
* money originated from barter
* Coins were the first form of money
* The value of ancient coins was determined by metal
* Money is created by central banks
* We have a fractional reserve system
* Unit of account (expressed in a unit of account)
* Medium of exchange (medium of payment, debts are canceled is money)
* Store of value

Money Fact:
* For every unit of money in circulation, there is a corresponding debt (or promise)
* Money cannot be owned - money is a contract
* Money can only keep its value if its spent
* Money is borrowed in order to be repaid

Mesh credit Is mesh credit (unconcentrated credit)
* If you go to mutual credit system you have to accept some form of constraints
* Unconstrained credit

Credit acceptance: I define whose credit I accept up to what amount, and on what terms

Credit conversion: I define if I am prepared to exchange one credit for another, again up to what amount and on what terms

Credit cycle

Capitalist is someone who is in debt
He is poor and goes to a bank

The more government money there is in circulation, the poorer we are.

Money origination from public sector debt is backed by a promise to tax. We call this unproductive money if it is issued in excess

Sikoba - IOU system for businesses
(1) payment path options for different time horizons
(2) The goal of clearing is to reduce costs
(3) Transactions are not always transitive

* An expensive IOU can be replaced by 2 less expensive on during clearing
* A transaction between A and B can result in A being liable for interest payments between C and D)(whom neither A or B need to know). Then another transaction by some unrelated party can cancel the obligation
* A -> B -> C -> D -> E -> F

Conclusion - money should be created out of thin air
* Money as an expression of human will

An ecological argument against the gold standard
* In a gold based money system, the price of money should be set far above the market price
* Mesh credit structures and value theory

## Mesh Credit - Julio (circles UBI)

If you want to catch a fish you need a trap and once you have the fish you get rid of the trap

* Distributed credit network - p2p enables people to settle obligations from other participants in the network without the need for a central authority of financial institutions
* In a mesh credit network, each participant
* In a circle system trust flows in the opposite system as money, you only accept IOUs from ppl you trust but can send IOUs to anyone
Mutual or mesh?
* Translogical - scale free rippling effect (hyper local but potentially global)
* Transivity through trust - if people have ability to trust each other without
* 6 degrees of separation

Princess of the Yen - book

Value is what brings universes into being - essay from David Graeber
* Value is how we give meaning to our actions

Cacao
* Currency that was used in Maya region
* Used for trade - merchant class of people that believed in the goal of commerce and cacao

Commerce reincarnation Cacao - rotting money
* Cacao was a unique unit of account - cacao beans served as currency in Mesopotamia
* A money system necessitates a mathematical theory a political system
* If you think about money supply as a agricultural cycle - you run into problems (mayan number system is base 20

If you have a rotting money the way you relate to time is longer term cycles
* We need a different mathematics to think about different money systems today
* Mathematics supportive of the types of relationships we want to make with each other

Problems with Privacy - how to make sure no one is nudging
* How to anonymize circles web of trust so you only know your local trust graph but no one has and outsized view

How can you leverage the state money with the mesh credit system you are using which are supporting the local/regional economy
* Harder if you don’t have a way to relate circles to Euro
* Trust limit - willing to accept their money up to half the balance they have
* Prioritize mostly food and basic services

## MyChips.org - Designing Sound Money

Why is got choices sponsoring a money project?
3 pivots - levers in society or an economy which are very powerful which infringe our free will
* Money - design, implementation, distribution (potential to be very unfair)

Ideal Medium of Exchange
* Stable (no inflation/deflation)
* Trustworthy
* Convenient
* Egalitarian
* Infinitely scalable
* Decentralized -> distributed
* Private
* Independent
* Secure
* Sustainable

Banks make money out of us - we are the issuer at the end of the day

Making Ideal Money - Forms of Value (equity-ownership, Credit (debt))

Assets = Liability + Equity
* Forms of Money
* Equity
* Commodities (gold wheat)
* Bitcoin et a;
* Credit
* Tally Stick
* Central banking
* MyCHIPs
When we build money with either equity or credit money we have a certain set of features or benefits for each

Equity money lives on the assumption of private property rights
If you are going to own something your culture depends on a notion of ownership

* Assumption: private property
* Requires: public consensus
* Physical medium (commodities)
* More cumbersome
* Direct exchange - almost barter
* Difficult to digitize
* Digital asset -> double spending

Credit Money:
* Assumes: contract rights
* Requires: minimal consensus
* Logical Medium
* More nimble - contract can easily be represented in digital from and signed (challenges with trust and fungibility)
* Easy to digitize
* Challenges - Trust & fungibility
* Solution: distributed Lift algorithm

Design principles
* Scalable - if its open it will be scalable
* Open protocol - a way of achieving scalability
* Independent - independent of any other currency not dependent on any cloud architecture or non open source libraries or authoritative addressing (DNS)

Prototype application - tally invitation , when we trade with someone we are going to tally with them or trade with them
* Communicate the tally out of band

MyCHIPS features and benefits
* Totally distributed network
* No central authority needed
* Based on Private relationships
* Effectively fungible
* Standardized valuation
* Infinitely scalable
* Digital
* Divisible
* Efficient

Reputation based odd ons
* Every person in the network in order to function needs one upstream tally and one downstream tally
* Balance on these tallies can go in either direction
* You can carry a balance in either direction on any tally

Spicy but correct take: tokens are not money and never have been

Chip valuation
Graph view - can see a visual balance sheet of relationships, give someone a quick visual understanding of their trading partners

* A Site is a database - in order to be scalable it is always a 100% distributed, mesh networks are distributed
* If you get a rich enough topology in a site you can get a clearing function, Lifts. I can do clearing functions within a particular site.
* Distributed gift works its way up the network to find a destination

MyChips goes beyond credit clearing netting to zero. In the process of doing this we are working our way to the ultimate rewards of the system (fiat)
MyCHIPS says I want to put the credits where I want to put the credits not necessarily net to zero

Example:

Cdn.jsdelivr.net/gh/gotchoices/MyCHIPs/doc/figures/lifts.svg 


* You have lift pathways that are free and pathways that come at a cost
* We are accumulating credits in order to buy things - this may not be where you store your long term value - there is a way to create longer-term chip loans
* If your employer is solid its a fine way to store your money with a linear lift rather than circular
* We believe this falls under safe harbor of SEC in the US - net credit line established in the normal course of business

Project staturs:
* Economic design
* Theoretical design
* Algorithm design
* Protocol
* Reference server implementation
* Simulation and test environment
* Model CHIP unit of account
* Validate Lift protocol security
* Stand up example CHIPs service provider

Each tally has an encoded contract in it - a contract is hashed into the signed hash that you agreed to it is a legal document and can be enforced within the jurisdiction of your counterparty

As long as this is legal in your jurisdiction - the platform will allow you to do this.

## Obligation network

Figure out how much debt was in the network - calculate net internal debt, overall debt in the network which cannot be cleared. We send that amount of liquidity into the graph.

Banking the graph - calculate the net positions of each node. *0 is going out 100 is going in there is 20 that is excess. Excess goes to sink. You cannot get a single cycle you get whole cycles. The interest is replaced by the saved liquidity

If your invoice is in a cycle you have money coming out and money coming in.

* For every node what comes in goes out
* We start with a simple network obligation
* Add the source(s) and sink (t) nodes to balance the obligation network
* Finding the maximum

Liquidity is expensive. Credit issuance is an expensive process. Creating liquidity is expensive so we want to create as little as possible.

The Legal constraints are that you have to ascertain obligation - all parties must agree that it is true.

Rollback procedure was used zero times in Slovenia

## Open Sessions
* Informal systems gave a presentation on their [obligation clearing](https://drive.google.com/file/d/1yUMGCWJiocTLSizpxD0W4kKw4EnnHkey/view?usp=share_link) *algorithm*
* Circles discussed their issues with Pathfinding as noted above
* Interledger also reviewed their clearing algorithm which is done over a gossip network
* I reviewed Anoma's architecture during Privacy open session, Taiga specifically, as well as the overall architecture; Typhon, fractal instances, and scaling

## Mutual Credit Day

Mutual credit has a natural flow - it flows naturally to the next space

Charlie gives sue 20 credits and sue receives 20. Once we saw members going below zero we let users draw a larger line of trust down to -1000

We saw the recession hitting in march 2020 we saw about 25,000 exchanged per month to 0 credits per month. We enhanced education to help our customers find education, food, resources and currency was the indicator

People that started using so much that we crippled usage

Current resilience plan for non-profit organizations. Allowed orgs to go into -5000. The IRS in the US calls it trade credit

How could mutual credit be a protocol to use for everyone? We started looking at what are the common issues people are encountering? 
* scale - using for everyday expenses

## Resource - What is Mutual Credit and what is it good for?

Mutual Credit as an insurance

Private money risk - Alice might default even if she doesn’t default Carrol might not trust Alice

* Remove personal trust requirement
* The system collectivizes and hides risk - if someone defaults they default on everyone collectively (everyone with a positive balance
* This is a feature not a bug, the basis for insurance companies
* Differential tx fees - every system comes with overhead and risk and this needs to be paid for (IR in real world)
* If you introduce a large amount of risk into the system the tx fees you pay to the system will be higher
* Risk is ported from currency back to individual user
* The currency itself is now risk mutual - if everyone understands the system they are not exposed

How its done - Masa Protocol
* Underwriting is done algorithmically
* Standard implementation submit objectively verifiable information
* There is an underwriting mechanism and you could feed it your preferences
* Creates SBTs (soul bound tokens)
* Credit terms and limits are individual to you
* If someone defaults goes into pool that must be reimbursed by surplus credit
* Risk manager reads aggregated risk of all members and attempts to estimate projected default rate of the network
* Every time I increase the risk of the network I pay into the reserve - tx fees flow into the reserve

What happens if the defaults are larger than reserve?
* You have inflation of credits 

* A complimentary currency soft-pegged to fiat Reference currency - tx fees, debt conversion when defaulted, reimbursement
* Automated credit allocation - credit clears in 90 days or it can be any arbitrary time. After 90 days algorithm checks if you are in positive or negative. Have you a positive balance 90 days extended loan, if negative we see if you have rebalanced within 90 days.
* The system weeds you out if you default

Go to Market strategies
* Emerging markets and financial inclusion
* Fiat loans - the reason being it is difficult for avg person to understand the system
* Existing barter/trade networks - who have some local credit currency
* Employee benefit

Credit for SMBs particularly in emerging markets is expensive, often extractive, and prevents economic growth for those who need it most

Underemployment -> low effective demand-> expensive & extractive credit -> Liquidity shortage -> constrained growth -> underemployment

In places where there isn’t a well functioning financial system its likely 70% of their income is coming from an informal source. Already there is an informal economy exists for billions across the planet our tools can help them.

* Launch pool - crowdfunding campaign for kickstarting networks
* How can people get a network started in their community?
* 2 scenarios where fiat enters system - revolving pool contract and fiat loans via credit pool

We are live on Celo and we are currently building our SDK which will make it possible for other partners in Africa to launch

Partners
* SA harvest - deliver 30 million meals across SA
* They are interested for 2 reasons -they see this as an opportunity to involve people in a productive system
* Impact market - UBI system
* Virtual barter - easily integrated into existing tools

### Current Problems
* Need to get real world adoption in Africa - which is expensive due to travel

## EthicHub

* We are helping communities connect with lenders and capital worldwide with harder money
* A way to connect trade/crypto with local communities that need to buy things in fiat
* 1.2 Billion smallholder formers lack access to affordable credit despite having productive activities
* Poverty Cycle: Scarce expensive working capital -> prevents them from saving and investing -> yields low productivity and underpriced crops
* Issue is communities don’t have collateral to ask for a loan - micro finance does not solve this because you have to pay every week or every month which is problem for farmers who have year long cycles wrt crops

Money is a vehicle for well being and the current system is preventing people from achieving well being

* For millions of small farmers with no data for credit scoring nor assets to use as guarantees, EthicHub created Crow Collateral to enable them access to affordable loans
* Undercollateralized credit scoring
* Tokenize real world assets
* Crowd collateral
* There are 4 stakeholders
* Ethic Stakers provide collateral for loans
* Low risk Lenders- provide capital to earn 8% annual interest
* Loan originators - entities providing loans and services to farmers
* Auditors- search for loan originators providing due diligence

How it works - a tuple system
* Lenders buy Buys - fixed interest in stable coins fixed maturity receive NFT bond-> lending pool-> commuter contract (liquidity surplus is allocated in Defi), Loan originators
* Stakers, Auditors Originators provide collateral

The compensation system is capitalized in 3 different ways
* New loan originators have to have some skin in the game (buy ethic and stake on behalf)
* Auditor who provides DD has to have skin in the game
* Community provides remaining collateral for loans

Leveraging on crypto economics to create a virtuous incentive loop
* Platform - a trustworthy platform attracts investors
* System is reflexive which we think is good not bad
* Anyone can invest but borrowing is only by invitation

There are 3 auditors in the system
* First auditor is ourself
* Second auditor for lending protocol (NGO working in 10s of countries to onboard cooperatives to be onboarded)
* Third auditor - Organic certificate provider to farmers

### Biggest challenges
* Need investing to go forward
* For adoption the issue is knowledge and understanding at the institutional level
* Lack of liquidity for token - Ethic is a proxy token and we can still change supply

## Circles UBI x Informal x Anoma

circles - users
mtcs- agorithm
anoma- stack

* network flow problem how can we approach it from privacy from the get go
* privacy without network science network science with privacy
* bolting privacy on afterwards is usually wrong
* max flow min cost algorithm in rust
* decision problem where there are conflicting solutions
* in Slovenia they use randomness
* we can run as a smart contract in cosmwasm and it works but not private
* algorithm finds the full cyclic structure in the graph
* input is list of obligations output is the setoff notices
* algorithm underneath is finding the cyclic structure
* works up to a limit bc of gas environment and restrictions
* made a version on secret
* moving towards tsp running TEE elected using on-chain process obligation encrypted to key elected tsp will pull down to sgx does computation outputs encrypted. Reduce dependence on sgx
* dont have to check it for correct execution. setoff notices output a proof
* use sgx to output a snark
* we also have another track of liquidity injection
* defined by 2 types of edges but from the algo pov its all the same
* internal and external liquidity
* inside and outside money
* external liquidity with outside money
* lending protocol being used
* looking at unsecured lending protocols maple and centrifuge. We could pose the network as borrowers of the protocol
* circles moving to co-payment functionality
* the type of clearing does not create new obligations only reduction of existing ones
* third liquidity injection - mutual credit (internal)
* the trust graph in circle is an existing graph if acceptances and tenders
* circles has not expectancy of redemption in fiat
* if we layer an obligation graph on top maybe that is another mechanism
* we are looking at the use case for the business and not the end users
* are we committing to co-payment only or? we are still with basic pathfinding and now this is a whole new level
* how can we think about group currencies being part of the circles entropy product?
* physical social and cultural impact
* not having healthy circularity pathfinding
* how do we help business expansion
* UBI is a social dividend use it or lose it every month decays

## Hudson Valley Current

(Hudsonvalleycurrent.org)

Fielding needs from the community fielding things we need to find

The current residence program - non-profits can apply for this line of trust and go to negative 5000 in currents
* Hybridization and ability to create value with revenue stream
* Building engines called undercurrents
* 1.5M currents have been exchanged since 2014

Needed a general store to generate currents - started the HVC general store trying to inject things into it

HVC livelihood magazine - monthly publication distributed monthly about food, art, and exchange (mid town live), became a driver of the current, the user of last resort
* Currents spent on advertising and marketing
* Food started driving the currency - started a catering company

Slogan - “Being in the negative is positive”
Currents - “Its just money”

## Collaborative Finance - Local currencies
Nicolas Franks (attac, CADTM NGOs)

Local, complementary & citizens monies - MLCC
* Set businesses out of the network because that gives values to businesses that are in
* We use Cycles for IT operations
* Belgium and French networks widespread territories for complimentary currency
* We don’t disrupt current existing system but we can get into everyone’s pocket
* Challenge is we have to fit in with the law while making it scalable and acceptable in the eyes of the people and politicians

Fitting in wit the Law
* Not fiat backed currency perse
* Conditionally convertible (need to be registered member of charter)
* Not a payment system…. Yet (can avoid AML law compliance requirements about identification of users)
* As we want to grow and scale up this is the first challenge we will face
* Certainly we are not electronic money
* But we are a consumption voucher indeed

### Partners with cities and municipalities
* 2000 business are members of this network
* Work on building up business and sharing between them
* Where do we get coupons and how to get in peoples pockets
* Have worked with politicians

Covid 19 relief programs
* City of Charleroi - competed with private banks offering complimentary currency
* 4 million complimentary currency was spread over the town. Every person with a mailbox and address received a coupon to spend at all of the shops in the town

Heavy Flooding in Belgium

Playing with Fire
* Risk of institutionalization or even instrumentalization by Public authorities, NGOs, private actors
* Teasing compliance requirements

Moving on with plurality
* Mutual credit?
* Invoices off-setting
* Non-convertible units
* Utility coins
* Reserve tokens
* Investment tokens

Existing business clusters - 50% of the business trades happen within the individual municipality

We need….
* Credit risk assessment formulas
* VAR- credit score methods
* Greco’s rule of thumb
* Sizing of reserve
* Blending features; CC + MC’s
* Ease of onboarding (gamification?)
* Marketplace + matching instances
* SEPA endgame

We only get one chance to properly engage into these aspects

We need to create New Narratives and also target our audiences. Know your audience. Different messages to municipalities and people

Bottom Line
* How best to incorporate values within alt monetary systems insure sustainability and resilience
* Creating the context, incentives for cooperation
* Matching properties of new technologies with actual counterparty clearing needed
* Increase reliance yet keep fundamentals

## Grass roots economic foundation
[e-mail]

* Co-developing Sarafu-Netowrk for 13 years across Kenya

Developing network across Kenya but also getting into other countries in Africa
* Worked with 65,000 households in Kenya creating 75k unique currency vouchers which has seen roughly 1 million blockchain transactions so far
* The process of implementing virtual currencies with these communities is a long process
* Completed an interactive exercise setting up a local web of trust with a string and a circle of people. Each person was a node in the network and the edges were what was offered.
* The other interactive game we completed was market based bartering exercise spending beans for services

Credit supply -> credit spending, giving and selling into circulation-> Markets, projects, support-> Expiration -> Resistance

Introduction to indigenous mutual aid and CICs
* History of resource coordination
* Modern day vouchers
* Move of CIC from paper to digital (importance

Understanding the local economic commons mapping the current reality
* Resource mapping-identify needs
* Goods and services

Understanding vouchers and their use cases
* Distribution
* Market use cases
* High and low balance (audit)
* Voucher settlement
* Chama book (records of balances)
* Expiration
* Dispute resolution

Introducing to visioning process
* Vision introduction
* Importance
* Exercise

Voucher creation and declaration form introduction
* Voucher concept in the community
* Community commitments
* Participants auditing
* Voucher deceleration
* Filling out voucher declaration forms
* Sarafu Network account creation
* Voucher creation/issuance
* Benefits of voucher system