Swaptacular's Network of Trust

Imagine this: Paul is an owner of a restaurant. The business is good. Many people love Paul’s restaurant. Unfortunately, the old, but very expensive ventilation system has stopped working, and needs to be replaced. Paul applies for a bank loan. They make him sign a bunch of documents with lots of fine-print. Paul has no choice but to trust them. From now on, Paul and the bank are “partners”.

Sounds familiar?

You see, Paul is not a nobody. He is an influential and very well respected man in his neighborhood. Hundreds of people dine at his restaurant every day. And yet, a broken ventilation system forces him to make dubious partners. What a pity!

But this was entirely Paul’s own fault, you may say. Everybody knows that smart people save money for a rainy day! True. However, the problem is that every penny anyone saves, is someone else’s bank loan. So, for every smart Paul, there must be at least one “stupid” Paul, to bring the money into existence. Economists know that when everybody starts acting “smart”, inevitably, a recession is coming.

Choose who you trust very carefully

As I explained in a previous post, Swaptacular’s network is decentralized by its nature, and consists of five different types of actors:

In our restaurant example: Paul would be the currency issuer. Paul’s partners, employees, and customers would be the currency holders.

If Paul really is an influential and respected man in his neighborhood, chances are that he will be able to find enough buyers for the IOUs that he issues, so that he can replace the ventilation system without a bank loan.

Perhaps Paul’s customers will be happy to pay for their dinners with Paul’s digital currency, instead of money. Perhaps Paul’s employees would not mind to receive some portion of their salaries in Paul’s digital currency as well. After all, they could easily exchange it for the digital currency issued by the hair salon nearby.

The good thing is that Paul did not lose sleep. He chose his partners. He assigned the debtors agent with the responsibility to manage his digital currency. If Paul did not want to trust somebody else with this important task, he could set up and run his own debtors agent and accounting authority servers, over which he would have a complete control.

Paul’s partners, employees, and customers should not be unhappy too. They chose to trust Paul, and they assigned the creditors agent with the responsibility to manage their digital wallets.

Let the network do its magic

As the word of Paul’s success passes from mouth to ear, more and more businesses in the neighborhood may decide to act smart, and follow Paul’s lead.

• More businesses joining the network, means that more and more different goods and services will become available, not for money, but for tokens that businesses themselves can issue, backed by their produce.

• More goods and services available not for money, means that more and more customers will start paying for the stuff they need, not with money, but with the digital currency issued by the vendor.

• More employees receiving some portion of their salaries in the digital currency issued by their employer, means that more and more people will want to automatically swap the currencies that they have, but do not need, with the currencies they need.

Isn’t this truly Swaptacular! 😀