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    My hunch is that within 10 years someone’s going to build a debt-oriented distributed payment system that handles privacy well and it’s going to actually be all the things Bitcoin proponents claim it is/will be: a household tool that upends world financial systems by reducing costs + friction involved in moving money; a change big enough it’s hard to predict how it’ll change the economy.

    By “debt-oriented” I mean that the system works by starting from existing high-trust offline relationships like owing my buddy $10 for dinner. An IOU is very cheap to issue + track. That can grow to collateral-backed loans (cars, houses), but the powerful thing is when debts can be used as a network. I imagined something that added promissory notes to hawala. Cancelling an open trail of the directed graph of debts effects a payment in the opposite direction, and a bearer instrument is a currency. I hadn’t heard of mutual credit (phew, that page was written by a fan), but it sounds very close.

    The hard part is privacy, both in practice and policy. In practice: if the system is built on canceling a graph of debts, how does it avoid publishing a public graph? If I’m tracking that I owe my buddy $10 for dinner, how easily does that become a database of all of my friends, a bullseye of where I live based on local businesses, and a record of my income and net worth? In policy, government legibility in small transactions removes a useful bit of slippage (can’t legalize marijuana or gay marriage if payments create a database of anyone involved while it’s still a crime) and lack of transparency is ruinous in the large (corruption, money laundering, embezzlement, on a scale that’s hard to imagine outside of the first world).

    So that’s why Offst caught my eye. It’s rough and unfinished and flawed, but it’s in a design space I expect something very big to come from.

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      Could you use Decentralized Identifiers to avoid a public graph? I administer a node on a blockchain network that uses them.

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        I’m all for alternatives, but what do you think is the primary issue with the current payment system (or currency system in general)? It’s already based on debt - I like the concept that currency itself is just instantiated debt.

        Privacy and payments will always have a certain built-in tension. One of the primary functions of a nation state is to ensure tax collection, and it will apply regulation to ensure that tax collection is maximized. Thus issues of KYC/AML[1] will always apply to a payment system.

        [1] (Know Your Customer / Anti Money Laundering)

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          I’m not expressing a desire to see an issue corrected; I’m guessing at a trend.

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          What do you think of lightning network? Once a channel is funded, it’s entirely off chain until one of the peers want to settle, if ever.

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            I’ve heard the name. I’ll check it out.

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              Specifically for the privacy aspect this is the best part: https://github.com/lightningnetwork/lightning-onion

              I do think it would be possible to take purely the lightning protocol and “fund” channels between trusted peers, most likely friends, with arbitrary amounts and skip the blockchain part.