The Ethereum blockchain and ecosystem are getting a lot of attention from investors and developers these days, as everyone wants to be a part of what could be the next big thing. DAPPs, or decentralized applications, are some of the most intriguing concepts of what the Ethereum blockchain is capable of right now. One such DAPP is called Community Currency, which could have widespread implications for the financial ecosystem in the future.
Community Currency On Ethereum Blockchain
Although Community Currency is only a proof of concept DAPP on the Ethereum blockchain right now, the codebase presents some exciting opportunities for people looking to shake up the financial industry. As the name suggests, this project is aimed at those Ethereum users who want to venture into the world of peer-to-peer lending, endorsing credits, issuing reputation, and even set up a treasury or establishing monetary policy.
Distributed ledger technology is designed to be accessible to everyone, especially those with limited or no financial access. Community Currency is one of the first decentralized applications to take things to a new level, by offering a ready-to-use source code that lets anyone create their own financial community.
Anonymity plays a role in the Community Currency project, or to be more precise, in the market aspect of this proof of concept. Anyone in the market can make transactions — including anonymous accounts — by paying with the positive balance in their wallet. There is also the option to pay with a remaining balance in their Credit Lines. A credit deadline is established, by which the wallet balance has to be positive again. This concept will sound rather familiar to anyone who has ever dealt with bank loans or mortgages.
Endorsing Peer-to-peer Credit Lines Vs. Reputation
But what makes Community Currency exciting is the option of issuing peer-to-peer credit. Commoners can endorse such a credit to any other commoner, although the amount of funds — as well as the duration of this credit — are determined by the issuer’s reputation on the platform. At the same time, money lenders have to make arbitrary decisions on whether or not to issue a credit to a certain individual, as it will put part of their reputation at stake.
Unlike the traditional financial ecosystem, credit has no interest rates under the Community Currency proof of concept. Moreover, the “credit line” issued to the commoner will detract all available balance from the borrower’s account to repay the outstanding balance. Assuming the balance is insufficient, the credit endorser is penalized, whereas the borrower account is blocked. Any new income sent to this wallet will be used to repay the outstanding debt first and foremost.
However, if the credit line was paid back successfully within the allotted time, the lender will see their reputation restored and rewarded with a percentage of the reputation cost. This process should lead to well-weighted decisions rather than extending credit to anyone who asks for it.
A New Monetary System With Incomes And Expenditures
On paper, the Community Currency concept offers plenty of options, including the creation of a new monetary system. Any financial ecosystem revolves around incomes and expenses, which can be set up accordingly. For example, incomes can be generated by taking a small cut of every transaction in the currency network, or by minting new money by the Treasury.
A Treasury can be organized as a decentralized autonomous organization — DAO — to execute proposals voted on by the commoners. Monetary mass — the total amount of currency in circulation — can be modified by minting or destroying money as needed. But there is also the option to exchange this currency with legal tender, by using an exchange rated set up by the commoners and executed by the Treasury.
The Community Currency proof of concept is freely available on GitHub, and anyone can test the code on the Ethereum blockchain if they wish to do so. Enthusiasts can create their own Community Currency and set up their communities as they see fit.
Are you excited about this Ethereum DAPP? How would you use the Community Currency code? Let us know in the comments below!
Images courtesy of Ethereum, Shutterstock, Proof of Work Media