Potlach Protocol

= a proposed decentralized architecture for gift economies

Description

Draft 0.1, March 2001, described at http://www.potlatch.net/2001/03/02.html

"Fundamentally, money is nothing other than a promise to pay. An IOU is equivalent to a unit of currency backed by the reputation of the issuer. We propose a micropayment system in which individuals create and transmit small payment certificates consisting of digitally signed XML promissory notes containing at least the following information: the identity (or persistent pseudonym) of the issuer; the identity (or persistent pseudonym) of the recipient; a time stamp; and an amount, which may be arbitrarily small. Popular artists and creators will accumulate these notes until they reach a convenient negotiable sum, and then sell them in aggregate to a third party, who will take on the responsibility of aggregating payments from specific issuers and presenting them for settlement. One's reputation in this system is established as a function of one's reliability.

Here is a scenario: Sheena has been downloading and listening to music created by Dee-Dee, and wants to show her appreciation by giving Dee-Dee a penny every time she listens to a track. Sheena doesn't want to have to make a conscious decision every single time, much less fill in any credit card or personal information, she just wants to set it and forget it. Fortunately she is using a new music player that is capable of doing this: transparently in the background it generates a steady stream of tiny XML files, digitally signed by Sheena, which it transmits directly to Dee-Dee or Dee-Dee's business agent. If some of Dee-Dee's other fans are doing likewise, then every few days we might expect that Dee-Dee will have enough of these heterogenous payment certificates to be worth cashing in. Dee-Dee will be able to choose from among a number of different agencies offering offering variations on this basic service - eg. one may require a service fee, another may pay "face value" simply to get the data, some may guarantee payer anonymity, etc. The point is to create an open market for aggregation. Regardless of which service Dee-Dee chooses, whoever buys these certificates will collect Sheena's payments together (presumably she has been sending these payments to other artists as well) until they have accumulated an amount worth presenting to Sheena for settlement. At this point Sheena can be sure that Dee-Dee and the others have been paid already, and she can check against a list of the certificates she sent to make sure that neither the artist nor aggregator has duplicated any. If Sheena settles with the aggregator, she gains reputation, both among the general community, as someone who is dependable, and specifically with the artists to whom she is contributing, literally getting "in their good books." And if she is unwilling or unable to settle, then Dee-Dee is eventually presented with some bad notes with Sheena's stamp on them, so she will have done nothing but waste a small amount of everyone's time, and lost reputation." (http://www.potlatch.net/2001/03/02.html)