About the Credit Commons

Here’s a (non-technical) explanation of the Credit Commons Protocol. If you think of a game, like chess, then the protocol represents the rules of the game. It can be written down in a non-technical way, that describes how to play chess. People have played chess by post, with pencil and paper, speed chess, chess where the pieces are human, with many different kinds of chess boards and pieces – and in Star Trek they even played something called ‘tri-dimensional chess’. But the rules (in our case, the protocol) still apply to all these different versions of the game. If you’re not using the rules, you’re not playing chess – you might be playing something else, like draughts (checkers, for Americans).

The rules of the Credit Commons game are:

1. If you want to trade with somebody, you have to already be in a club; and members of the club have to have agreed about credit limits.

2. When you want to trade, you say so in a certain format, like: I want to owe that person this much – and the other person has to agree.

3. If you want to stop trading, you have to bring your balance back to zero.

So in the chess analogy, a Mutual Credit Club is like a chess club. Members agree to come together around a protocol. They can add a lot of things on top of the protocol, depending on their own preferences and agreements, how their software works, their fees, their name, logo, website etc. But if someone turns up from another country, they’ll immediately recognise it as mutual credit, in the same way that a chess player would recognise chess, and be able to join in, whatever colour or size the chess pieces are, or whether it’s speed chess etc. But if you decide that in your chess club, each player has two kings, then you can’t join in with international chess tournaments, because it’s not chess any more. The rules of chess are controlled by the World Chess Federation, who don’t ‘own’ chess – they just look after the rules about what chess actually is, and make it possible for anyone to play against anyone else. There will be a similar group controlling the Credit Commons Protocol for global mutual credit trading.

Thomas Greco coined the term ‘Credit Commons’, to describe a global system of mutual credit networks linked via a protocol.

Matthew Slater and Tim Jenkin then wrote the Credit Commons White Paper, in 2016.

It’s a good idea for all the reasons that mutual credit is a good idea. But the Credit Commons has sustainability and democracy built in.

Although clubs don’t have to be tied to a geographical locality, there are reasons that physical location matters. One is that a more sustainable (shorter supply chains) and less economically-extractive economy must be more localised. Another is that imbalances in trading networks need political solutions – i.e. human beings talking with each other, which is more easily achievable at the local level, or, at the next level up (the bioregion), rather than a giant nation-state (some current states could be seen as bioregions – usually the relatively ‘sane’ ones, like Denmark for example). Nation-states that cross many bioregions have difficulty finding unity because their inhabitants are experiencing many different realities. And although the digital economy is growing, people will always need housing, food, water, clothes, energy, material goods etc. that require fields, forests, oceans, mineral resources, sunshine, rain and wind that are all embedded in localities.

What we’re hoping to help develop is an economy where people’s utilities are provided from their bioregion, as locally as possible (and there’s no reason why every region couldn’t manufacture its own electrical goods – even though global supply chains may be required for their raw materials). The Credit Commons provides a strong re-localising impetus, because every network will probably be charging a small transaction fee. Transaction costs (as well as transportation costs) will be slightly higher the further apart (and therefore the more ‘layers’ the trade has to pass through) the two parties in a physical transaction are. There will always be an incentive to look more locally for what you need.

As Will Ruddick of Grassroots Economics said: ‘If the entire world gets a decentralised financial system with inter-connected mutual credits, I think that could be amazingly beautiful, and move us past this ‘Stage 1 Civilisation’ where we actually start to look at what we want to do as humans, rather than just make money’.

So now we can see two layers to the system: the Protocol – the fundamental rules – which everyone in the space has to agree on; and the Implementation – the specific local culture/agreements layered onto the Protocol. Implementations can vary wildly, without breaking up the system, as long as they can speak the language of the Protocol, so that different groups can interact with confidence.

The Protocol itself is written in plain English – or at least logical English. It’s like the rules of chess that come with the chess set that you buy. This is public property – ‘Open Source’ – anyone can use it freely. If you understand open-sourced code, you can see the Credit Commons documentation and repository on GitLab (which also includes ways to ask for help if you get stuck). You can even copy and alter it to make your own version; no-one will stop you – although groups using your altered version may not be able to interact with others. Contact us if you’d like help and support in setting up a club.

To be useful, and able to connect with accounting software (such as QuickBooks) and payment gateways (equivalent to Paypal), the ‘plain English’ Protocol also needs to be stated in computer code – in software. The modern way to do this is to make two sets of code – the ‘back end’ (an Implementation of the Protocol) and the ‘front end’ (the app that a user will see on their screen). Things are set up this way so that the front end can adapt to local needs (like local chess clubs), while the back end can be as simple and robust as possible – doing nothing else but implementing the unchanging Protocol (the rules of chess).

The back and front ends need to interact, of course – instructions from users need to be interpreted as actions defined by the protocol. (As with the chess example, clubs can choose to have different ‘front ends’ – for example, one might be an ordinary chessboard; another might be a computer screen; another might be an entirely text-driven system, where a player types things like ‘Knight to King’s Bishop 3’. For the back end to know exactly what move is intended, any action, whether on a board, a screen or via text, has to be converted into a description that it will understand. What’s required to do this conversion is an API (application programming interface). Again, this is free and open-sourced and available on GitLab. This makes it possible for programmers to write their own implementations of either back-end or front-end code (or both), in confidence that their code will be able to interact with other Credit Commons implementations. Again, non-techies needn’t worry about this.

Local ‘town’ groups will be nested within ‘county’ or regional networks, which will be nested within national networks, and so on, up to the global level.

Small businesses will usually access the Credit Commons via the local club in their town.

But larger businesses might operate at the national level, in which case, they will have an account in the national group. So a national group will typically include county / regional groups, plus larger businesses operating at the national level.

There are many, many monetary models, projects, currencies and ideas – but interoperability is key if we want to bring about a real change in direction. That is, unless one idea takes off and leaves all the others behind. ‘Take off’ is about right I think, because it feels as though we’re at the same stage with economic change as they were with aviation just before the Wright brothers did their thing. Something is about to happen, but we’re not sure what; and what comes out on top may not be the best idea. It may be more about getting people’s attention, and making things happen on the ground.

Right now, imagine that you have £100 in your current account to spend. What kinds of businesses will accept it? Sole traders, partnerships, giant corporations, co-ops, the public sector? Does it matter who they bank with, or if they take cards, or only cash, or if they take online payments or not? Does it matter where they are geographically, or if they issue and accept gift vouchers, or take cheques, or accept Paypal payments, or if they offer credit?

You don’t have to worry about any of this – you assume that you can arrange to pay your £100 to them, one way or another. Alternative money systems have never been able to roll out all the infrastructure needed to make it possible to pay anyone anywhere, any time. All the new smartphone payment apps you can find now are not providing new infrastructure but just plug right into the existing banking system. However, technology is now more able to collapse all those layers of infrastucture (think cash, BIC/SWIFT, bank tranfers, IBAN, SEPA, Tranferwise, Western Union).

It’s increasingly possible to provide all the payments infrastructure you need for a whole currency in a single smartphone app. It has to be the same with the Credit Commons. Any group using any kind of currency can exchange with any other group using a different currency, as long as the relationship between them is a mutual credit relationship, because that’s what the protocol defines. So it doesn’t matter if you’re an existing mutual credit network like Sardex, Quipu Markets or Moxey, a for-profit barter network, a non-profit mutual credit club, a trade credit club, a timebank, a community currency without negative balances, a LETS or even some cryptocurrencies – you can trade with other groups of different types, using the Credit Commons protocol, after you define and agree an exchange rate.

Diversity of currencies and of platforms might be a good thing – we don’t want all our eggs in one basket. after all, although requiring additional protocols adds complexity and cost. But if it’s cheaper for most people to use mutual credit, without interest, bank fees or overdraft charges, and if we can make it really easy to use, then things might change rapidly. No-one knows what will happen with the monetary system – which ideas will complement each other, which will absorb or be absorbed by others, which will win if there’s raw competition. But one thing’s for sure – there’s going to be change. Let’s hope it’s for the better.