Local Currency Based on Four Stages of Electronic Barter

What follows is a description of the 4 stages of implementation of a decentralized exchange of value, starting with simple barter and ending with a robustly liquid market with totally decentralized monetary authority. This system is currently at stage 2 of implementation and is geared toward use by mobile devices such as the iPhone, Blackberry and Android phones.

STAGE 1) BARTER EXCHANGE WITHOUT CURRENCY

Everyone knows what a simple 2 way barter is. No currency or money are involved. There is a simple exchange of things that people want that they don’t have themselves. In our electronic barter system, there is an additional feature that facilitates negotiation: The computer serves as a “middle man” who takes in secret bids and asks, and, without revealing anything to the trading partner, decides whether there is a deal here or not—and if so how to divide up the profit that would normally be kept by the middle man.

Here are some examples:

TWO PARTY BARTER REBATE CASES:

spread = bid-ask
rebateToBidder = spread*bid/(bid+ask)
rebateToAsker = spread*ask/(bid+ask)

CASE 1:
john bids 1 gross eggs for 1 haircut
jane bids 1 haircut for 1 gross eggs

spread on both is 0 so both rebates are 0.

CASE 2:
john bids 2 gross eggs for 1 haircut
jane bids 1 haircut for 1 gross eggs

gross eggs spread is 1, so:
rebateToJohn = 1 gross eggs * 2 gross eggs/(3 gross eggs) = 2/3 gross eggs
rebateToJane = 1 gross eggs * 1 gross eggs/(3/gross eggs) = 1/3 gross eggs

haircut spread is 0 so there is no haircut rebate

CASE 3:
john bids 2 gross eggs for 1 haircut
jane bids 2 haircut for 1 gross eggs

gross eggs spread is 1, so rebate the same as case 2.

haircut spread is 1, so:
rebateToJane = 1 haircut * 2 haircuts/(3 haircuts) = 2/3 haircut
rebateToJohn = 1 haircut * 1 haircuts/(3 haircuts) = 1/3 haircut

THREE PARTY BARTER REBATE CASES:

spread = bid-ask
rebateToBidder = spread*bid/(bid+ask)
rebateToAsker = spread*ask/(bid+ask)

CASE 1:
john bids 1 gross eggs for 1 haircut
jane bids 1 haircut for 1 pound shrimp
dave bids 1 pound shrimp for 1 gross eggs

spread on all is 0 so all rebates are 0.

CASE 2:
john bids 2 gross eggs for 1 haircut
jane bids 1 haircut for 1 pound shrimp
dave bids 1 pound shrimp for 1 gross eggs

gross eggs spread is 1 between john and dave, so:
rebateToJohn = 1 gross eggs * 2 gross eggs/(3 gross eggs) = 2/3 gross eggs
rebateToDave = 1 gross eggs * 1 gross eggs/(3/gross eggs) = 1/3 gross eggs

haircut and shrimp spreads are 0 so there are no haircut or shrimp rebates

CASE 3:
john bids 1 gross eggs for 1 haircut
jane bids 2 haircut for 1 pound shrimp
dave bids 2 pounds shrimp for 1 gross eggs

the spread is 1 for both haircuts and shrimp, so (leaving out the, by-now, redundant math):
Jane’s gets 2/3 haircut and Dave gets 1/3 haircut rebate.
Dave gets 2/3 pound shrimp rebate and John gets 1/3 pound shrimp rebate.

CASE 4:
Leaving out even more description, all spreads are 1, so:
All bidders receive rebate of 2/3 of the spread and all askers receive rebate of 1/3.

STAGE 2) BARTER EXCHANGE WITH PERSONAL CURRENCY

With “personal currency” all bids and asks are stated in terms of a monetary unit one controls, as though one were a sovereign nation with one’s own internal economy. All products of the “nation” are offered for “sale” at an asking price denominated in the “nation’s” monetary unit. Likewise, when bids are made, they are also made in one’s own monetary unit.

This seemingly minor change in the Stage 1 economy not only facilitates the division of spread-rebates previously described, it allows an individual to offer more than one item for sale in a single trading unit controlled by that individual “sovereign”.

For example, imagine that John has not only chickens that lay eggs, but he has dairy cows from which he obtains milk. Rather than placing two bids for a haircut, one in terms of eggs and another in terms of milk, he may prefer to place one bid for a haircut in terms of “Farmer John’s Dollars”, and then ask a minimum of 1 per dozen eggs and ask a minimum of 2 per gallon of whole milk. The spread calculations would proceed as before except in terms of personal currencies rather than fractions of actual goods or services.

STAGE 3) THIN MARKET PERSONAL CURRENCY EXCHANGE

Since at Stage 2, the “exchange rate” specified is only between items within a person’s own “nation” (say between the goods offered by John from his farm, etc.) there remains the obvious step of establishing exchange rates between personal currencies. In one sense, this is the same problem as establishing international currency exchanges, but the practicalities are far different and, in 2 ways, even more challenging:

a) Individuals (and even small businesses) traffic in the end items of trade—haircuts, eggs, milk, shrimp, etc., and any imposition of the notion of a “currency exchange” is only going to get in their way.

b) Even if they could tolerate a personal currency exchange, the resulting market would have so few bids and asks for various personal currencies that it would be difficult to establish reasonable exchange rates between arbitrary currencies. This is the problem with all markets in which there is a “thin” supply of bids and asks.

Fortunately, there is a way to meet each of these challenges in a way likely to be acceptable to individuals and small businesses:

A) When a personal currency bid is made for an end item, there is a partial sense in which the bid represents a currency exchange, since the item has an asking price denominated in the seller’s personal currency. It is only partial, of course, since there is nothing necessarily tying the seller’s currency back to the bidder’s currency—so the seller could ask arbitrarily high, or low, amounts of his own currency with no clear way of establishing an exchange rate. However, if there is a way of imputing a reciprocal bid by the seller for something offered by the original bidder, a corresponding exchange rate might be imputed with the same degree of confidence as that imputated bid.

B) This thin market imputation is the same problem as that faced by “recommender engines” increasingly used by online businesses, where the service provider predicts what a customer is going to prefer among its items for sale. In technical terms, this is called “imputation of missing data”—and the recent technical advances in this area have been impressive, with, for example, Netflix recently awarding a $1 million prize to a team of artificial intelligence experts who substantially improved the accuracy of their movie recommendations.

With such powerful imputation algorithms over sparse tables of data, reasonable imputations of personal currency exchange rates are possible despite the thin market.

STAGE 4) CREDIT CLEARING WITH EMERGENT UNITS OF ACCOUNT

The obvious final stage in establishing a robustly decentralized value exchange is the creation of liquidity through the issuance and clearing of credit to compensate for incomplete barter cycles. This is made possible through the exchange’s retention of rebates, denominated in the various personal currencies, for the purpose of compensating traders who are temporarily short-changed in the execution of partial barter cycles, as well as charging traders who are temporarily advantaged. The rebate formula is geared toward a completely-settled barter-cycle. However, the rebates are not issued immediately by necessity since to do so would telegraph the market positions of various traders, there by reducing the incentive to ask low and bid high, hence reducing the fundamental liquidity of the exchange. This delay can therefore serve a dual purpose:

a) Maintain secrecy of market positions to promote fundamental liquidity.
b) Provide a grace-period within which the cycles may be completed and temporary lines of credit cleared.

The result of this sort of exchange is the market-driven emergence of dominant units of account that meet the criteria set forth by Thomas H. Greco, Jr.:

* Traded in several relatively free markets.
* Traded in relatively high volume.
* Important in satisfying basic human needs.
* Relatively stable in price over time.
* Uniform in quality or amenable to the application of quality standards.

This will occur as traders find they are more-often rewarded when they establish bids and asks for such commodities in terms of their personal currencies, thereby supporting the thin-market exchange rate imputations.

Posted by James Bowery on Monday, January 4, 2010 at 11:24 AM in
Comments (10) | Tell a friend

Comments:

Posted by Wikitopian on January 04, 2010, 11:59 AM | #

James,

This project is remarkably similar to one I began and abandoned last year, that I called “Wildcat Banker”. You’ve taken the same fundamental concept and gone much farther than I did, though I have one insight that I believe you’re lacking…

To be successful, interacting with the system at the most basic level needs to be within the reach of people who are entirely ignorant of the underlying concepts and their implementation. The direction I was going with it was in trying to set up a version that works with SMS text messaging. It’s a bit vulgar and amusingly tangential to our activist efforts, but I kept envisioning how it could be used by a Black drug dealer.

Since its utility could presumably be in adding liquidity to a black market environment, it may be wise to tailor the implementation and interface in a manner which could be utilized in contemporary economic niches where cash is scarce and having cash on hand is a liability.

Posted by James Bowery on January 04, 2010, 12:37 PM | #

Wikitopian writes: To be successful, interacting with the system at the most basic level needs to be within the reach of people who are entirely ignorant of the underlying concepts and their implementation.

That is handled in stages 3 and 4 by hiding from the end user any of the mechanisms of currency exchange and credit clearing.

What the end user sees is nothing but the amounts of his own bids and asks for various items he is interested in buying or selling, and whether the deals went through or not.

Or are you referring to the fact that the system, since it does not use SMS as currently implemented, requires a higher-end cell phone than most people have?

Posted by James Bowery on January 04, 2010, 12:40 PM | #

Wikitopian writes: Since its utility could presumably be in adding liquidity to a black market environment, it may be wise to tailor the implementation and interface in a manner which could be utilized in contemporary economic niches where cash is scarce and having cash on hand is a liability.

The purpose of this system is resilient community support—which is different from black market support. Basically, the black market has become the dominant elite’s mode of operation via regulatory capture of Washington, D.C. What is needed is legitimacy at the local level.

Posted by Wikitopian on January 04, 2010, 12:59 PM | #

James,

Or are you referring to the fact that the system, since it does not use SMS as currently implemented, requires a higher-end cell phone than most people have?

Yes. I guess that’s what I’m saying. I would make it so that, given very little preparation or explanation, an individual could initiate transactions on a prepaid wireless phone.

The purpose of this system is resilient community support—which is different from black market support.

I suppose our visions and goals diverge, here. I’m envisioning a framework that would empower people to engage in transactions while in the midst of a tyrannical regime. Hypothetically, local groups like churches or other natural clusterings, could implement the hosting “banks” and there would be too many of them operating in too many basements for the government to successfully track. For me, contemporary black markets serve as sandboxes to test the theory on actual humans engaging in transactions in an illicit context.

I’ll take some more time to look over your work and will maybe understand things better than I do right now.

Posted by tc on January 04, 2010, 09:34 PM | #

So this time we establish a digital currency, meticulously arranged…already built on excisting and completely unaccountable proprietary jewish digi networks…no paper trails this time:-)

Are we that fucking insane?

Sure, Mr GW, if ANY of the societal or economical networx would be in our hand, we could start out - but is is not the case. Our antagonists have organised this game before we have even realised, that there is one going on, and most of us still doesn’t have a clue. To this very day.

I mean what is it with You man? You are highly intelligent. How come, you can’t just come to grips with the playing field - that we have been dealt? It - under the current rules is a check-mate. There are no considerations, minor adjustments, or revelations, that would result the desired effect.

You are like my friggin’ dad man. He keeps on goin’ on about the gvmnt’ being incompetent, f-‘d up loonies…and can’t, or won’t recognize, that these peeps are highly competent mercenaries, who know exactly what they are doing and why. What do You think they’ll do? Say OK, gig is blown, here is the money back…and we’ll dig up all the bones belonging to the dead 100 000 000…and while we are at it, the deeds as well, the mining right, taxes and tariffs…take back the bs rules and regulations to keep Ya good folks in order?

Check Mate…mate. Getit?

We start a new game NOW…our rules, our bones, which we don’t forecast. Nevertheless, our adversaries DO KNOW what they are. They’ve been playing them, while we slept…and died.

We have tried EVERYTHING else.

Posted by James Bowery on January 04, 2010, 10:00 PM | #

I’d really appreciate it if you would avoid the unqualified ‘we’ when I’m around you.

Thanks.

Posted by Bizx on April 19, 2010, 12:30 AM | #

Your blog post about Bartering for businesses is nice, You can buy and sell products and services with other members through BizXchange using barter services

Posted by Fred Scrooby on April 20, 2010, 05:12 PM | #

Rob Freeman has posted an entry over at The Occidental Quarterly Online which hearkens back to GT’s vision of withdrawal from the usurper-hegemon’s economy (which white men are being gradually phased out of anyway, preparatory to their planned extinction, the plan apparently calling for white women to be bred to Jews and non-whites — it’s a modified Kaufman Plan) by means of shifting our own focus from global, alien, and distant (“them”) to local, familiar, and near (“us”), and also hearkens back indirectly to the concept of local currency (I believe the Channel Island of Jersey has its own currency by the way and does very well with it) and perhaps barter exchange till we get to the stage of a local currency and even after we get there. Again, 1) whether this route is doable or not I don’t know, and 2) I favor anything that works.

Rob Freeman is a guy with scant patience for “talk without action.” Recently over at Hunter Wallace’s under his other name, “Kievsky,” he told me off for posting “long boring comments and having low reading comprehension,” he deleted my comments, and he ordered me never again to post comments on his entries there. I suspect this very strong antipathy might have stemmed partly from his perceiving me as a “talk without action” guy, the same way GT perceives me and, it is my impression, perceives most of us here. So, Rob Freeman is a guy who wants to do something hands-on right now, this minute, he has zero patience for “just talking,” and at the close of his piece which I paste below invites collaborators provided they’re serious and he deems them “trustworthy.”

Here’s the article:

Recently I was at a supermarket that uses the American flag for its logo. The ladies at the deli were handing out samples of buffalo chicken salad, and I asked if I could buy a pound of it. They said, “No, it only comes in sandwiches that were made at a warehouse in Massachusetts.” We can assume the sandwich assemblers were recent immigrants, possibly illegals. Then the ladies at the deli complained that their hours had been cut. I was infuriated. The process of outsourcing jobs and insourcing illegal and legal immigrants has massively accelerated.

What other conclusion can we draw from this article in the Hindustan Times entitled “US healthcare expansion means big business for India.” So let’s get this straight. We are borrowing money from China, to pay India to administer our healthcare system? While there are millions of unemployed?

War has been declared on us!

When white Americans have been outsourced and insourced out of our jobs, we won’t be able to fall back on the Welfare State. Welfare is not for people like us. People like us work to support the welfare state. When we have no work, there will be no welfare state.

Besides, the people I know, in the culture I grew up in, cannot stand to have our work taken away from us. We are proud, independent, hard working people, not a flock of “Social Services Sheeple” who can be bought off with food stamps and free cheese.

Outsourcing and insourcing are not products of “market forces.” They are products of sheer inequities of power. The reason you are being laid off and your job is being shipped overseas is because the people who control the commanding heights of the economy have the power to do it to you. If outsourcing is the imperative of impersonal market forces, why does it not happen to your bosses too? Simple: the reason corporate fat cats are not laid off and their jobs shipped to Bangalore where some bright young MBAs will do them for pennies on the dollar is because you don’t have the power to do it to them.

But you have more power than you think.

The key is economic relocalization: white Americans need to stop being employees who exist at the sufferance of evil elites and far-flung, vulnerable global networks. We need to retrain ourselves to look for opportunities to produce things for ourselves in as localized a manner as possible, and to encourage and support others in our communities who are doing the same thing.

We need to begin now, to get economic relocalization to reach critical mass while we still have the freedom to do so. We need to create something that is resilient enough that it can’t be outlawed or expropriated or crushed under the iron heel. We do not have much time left.

If we lose the country it’s our own damned fault. We are sitting atop more than enough resources; it’s just a matter of redirecting the resources into decentralized/localized rather than centralized/globalized economies.

Millions of ordinary laboring entrepreneurs can do things cheaper, better, more efficiently and more resiliently than Walmart and the US government. I have seen this with my own eyes time and again.

My focus is relocalization of the food supply, because this is the most basic form of local economy. We have to rebuild civilization from the ground up, and it all started with agricultural surpluses.

Right now we are no more than desperate hunter-gatherers of Federal Reserve Notes. All production and distribution is controlled through the fiat currency system, a diabolical network that can rob you of the fruits of your labor not only with printing presses, but merely with the stroke of a computer key.

Relocalization of the food supply will organize people on a micro-social level and teach us social intelligence again. With social intelligence we can turn our private car system into an ad hoc mass transit system, among other things. The only reason we don’t do that now is we lack social intelligence, which allows corporations and government to easily administer a centralized, granular control over us.

Agricultural relocalization will teach us the social intelligence we need to take back control of our own commerce. From this will proceed small workshops, “smith-shop” repair shops, flea markets and second hand trade – a million ways to ameliorate the painful economic contraction by withdrawing from and replacing the consumer-corporate economic model.

So the real mission is to increase social intelligence. Books won’t do it. This is something that must be learned from practice, from a radical change in “lifestyle.”

With social intelligence we can put Walmart out of business and laugh while the US government drowns in a vat of its own debt. That’s not our debt. We didn’t sign any loans to China, or agree to borrow money from Central Banks to give it to Israel or bail out Goldman Sachs or go to war on Iraq and Afghanistan.

If you are the sort of person that makes things happen, get in touch. I am not going to spell out the details of my easily replicated economic relocalization activities in this article, but I will talk to any individual I deem trustworthy. That is relocalization in practice.

[ http://www.toqonline.com/2010/04/an-economy-of-our-own/ ]

Posted by Fred Scrooby on April 20, 2010, 05:38 PM | #

The New Kaufman Plan:

By the way, look at the photo accompanying the original Rob Freeman article at the link: three non-white males, one non-white female, and one white female. Where’s the white male? Nowhere. The modified Kaufman Plan doesn’t call for any white males. It calls for them to be phased out along with the phasing-out of the Euro races. The better-looking, more desirable white women will go to the Jews running the Plan, either for highly profitable porn or high-priced prostitution, or in some cases marriage to Jewish or non-caucasian men, and the less desirable white women will go to Jews for lower-priced prostitution and for marriage to non-caucasian men.

You laugh. Yeah I know it sounds ridiculous, all of that, but, I dunno, I really and truly wouldn’t recommend laughing. I’d recommend thinking. These photos are planned and posed with extreme care, following explicit instructions in regard to what to depict, what’s wanted, how to place the different-race individuals used as models, etc., orders coming from “on high” (who do you suppose “on high” might be?) and passed down to photography studios. You’re being educated right now, with every photo of this nature you see, that you, the white man, are to be terminated. Better believe it while there’s still time (just barely time) to do something about it because the day will come when that photo will be an accurate reflection of the only reality out there. Anyone who can’t see things moving in precisely that direction — and all according to plan, none of it by accident — is blind. Now you know how the Germans felt when they heard about the Kaufman Plan. This is that plan, “with modifications.” The end result? The same for both plans, mutatis mutandis: you’re exterminating a race which a particular group of overlords don’t want around any more.

Posted by Fred Scrooby on April 21, 2010, 01:14 PM | #

The Island of Jersey’s own pound,

http://en.wikipedia.org/wiki/Jersey_pound ,

and coinage,

http://en.wikipedia.org/wiki/Coins_of_the_Jersey_pound .

Apparently the nearby Channel Island of Guernsey does something similar:

http://en.wikipedia.org/wiki/Guernsey#Economy .