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.
Could you use Decentralized Identifiers to avoid a public graph? I administer a node on a blockchain network that uses them.
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 will always apply to a payment system.
 (Know Your Customer / Anti Money Laundering)
I’m not expressing a desire to see an issue corrected; I’m guessing at a trend.
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.
I’ve heard the name. I’ll check it out.
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.