Knowledge - Academy - Development
PO.Box 5213 Douala
Tel: +237 6 56 56 35 35
+237 6 95 95 95 92

Community Currency through Smart Contracts Model (no Blockchain)

In Sharing Communities, the authors discuss developing a model for using a community currency using smart contracts without the need to learn how to use a blockchain virtual currency. This model is to enable a peer-to-peer sharing economy within geographically bounded communities in as simple but trustworthy a way as possible. It is a socio-economic model that increases social bonding and collaboration and empowers individuals.

A sharing economy is the act of granting each other temporary access to unused resources for which online payment systems are used. The model proposed focused on peer-to-peer interactions. These sharing economy transactions are often micropayments, which are not feasible on blockchain platforms that require payments for each transaction. This is one of the problems that this model addresses through the use of smart contracts, which can automate and decentralize payments without any transaction fees. The transactions are based on reciprocity whether monetary or not, immediate or postponed, or mutual or not, and if done well, a sharing economy builds community.

These sharing economy platforms match supply and demand, provide user ratings, and an automatic payment system without transaction costs. To eliminate transaction costs, the virtual community currency acts as a unit of account through automated transactions by smart contracts. This community currency cannot be exchanged for official currency because it is simply represented on the platform as a debit or a credit in the virtual community currency. Therefore, it can only be used as an exchange medium within the platform.

Smart contracts can be written to customize transactions which are triggered by pre-defined conditions. Thus, they force the parties to abide by the terms of the contract. They can be set up to facilitate large numbers of microtransactions in a timely and cost-effective manner without needing a blockchain platform. Smart contracts record these transactions so that they are immutable. These applications can also be written for a decentralized system, which allows participants to decide on what data they wish to share. Smart contracts provide a level of transparency and trust necessary for building a virtual community currency that works.

One possible platform might be Hyperledger’s opensource smart contract platform. Through this, the community currency is a digital display of value accepted by payment for all community participants. The platform’s purpose is to ensure that the transactions are measurable and traceable so that the credits and debits owned by participants can be earned or spent through a computer application. It is a digital Local Exchange Trading System (LETS) with credits and debits created through transactions/exchanges. A reputational score can be part of the system as well as a means of arbitration for disputes and an agreed upon cooperative governance agreement defined by the members. Participants do not need a bank account or fiat money as the community currency is created through transactions.

The authors suggest a two-sided market focused on peer-to-peer non-monetary transactions. The platform used would provide a user rating system as well as a reliable and easy to use interface. This platform could use a current application or an in-house developed one for mediating transactions. They do suggest sponsors or funding bodies to pay for the operation of the platform. The number of participants is important due to the mechanism that the level of trust decreases as the number of users grow. This type of model is designed to increase collaboration and social bonding. Thus, a smart contract virtual community currency sharing economy model is decentralized, transparent, easy-to-use, and freely accessible with a high transaction speed and no cost. The process is automated and removes the barriers with the use of cryptocurrency.

Finally, the authors called for further research on implementing this type of model.

Szemerédi, E. & Tatay, T. (2021) Sharing communities – Community currency in the sharing economy; Society and Economy 43(1); pp. 38-59. DOI: 10.1556/204.2020.00027

Un(Block)chained: A Digital Community Currency Model
Smart Contracts since Szabo