Sikoba’s IOU platform can reduce communities’ dependence on money by unlocking hidden financial resources. The result is a boost to local economies, especially in developing countries. Participants who know and trust each other in real life grant each other credit lines in the Sikoba system. They can then pay each other without using fiat money. These peer-to-peer credit relationships are governed by contracts with specific conditions, fee structures, and repayment rules.
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I discovered the credit theory of money in 1987, from the books of the German publicist and writer Paul C. Martin1. This was just after a rather disappointing encounter with economics, a subject I had chosen as my 3rd year specialisation at the Ecole Centrale de Paris. The way economics was taught there I did not find very convincing. As to the approach to money, with a focus on M1, M2 and M3 monetary aggregates, it made even less sense. What I read in PC Martin’s writings mostly did.
Sikoba is a global and decentralised credit platform based on peer-to-peer IOUs and built
on blockchain technology. The project, which is the brainchild of monetary systems
expert Alex Kampa, is currently performing a token presale to fund work on specifications
and the development of a proof-of-concept. A crowdsale is planned for late 2017 to fund
the development of fully operational system, to be rolled out the third quarter of 2018. P2P payments are already above $1 trillion annually. From almost nothing 10 years ago, P2P lending has grown to $26bn in 2015 (excluding China) and is expected to reach $900bn in 2024.
Participants who know and trust each other will be able to use the Sikoba network to
extend lines of credit, denominated in currencies of their choosing, to each other. These
credit relationships will be capable of including fees, repayment rules and other conditions
specified via “credit scripts”. In turn, these credit lines established between trusted parties
will allow Sikoba network participants who do not trust each other to pay using trusted
credit intermediaries and credit conversion, a configurable algorithm which automatically adapts.
The major advantage of Sikoba compared to lending or value transfer platforms is that
participants can pay each other with IOUs even in the absence of fiat money, crypto currencies or other assets. Whenever possible, debts are erased by a process of clearing, which is a system of ongoing compensation between participants. Fiat money or crypto currencies will be used when there are no credit links between participants, or to repay outstanding balances when needed. Sikoba is being designed as a decentralised system with the goal of eventually becoming independent and self-organising.
Small transaction fees will be charged for using the platform, for which users will need to
purchase Sikoba’s SKO tokens. The system will be designed to keep transaction fees
permanently low, while SKO tokens should tend to become more valuable as transaction
volume grows. The marketing will focus on existing networks, business or social. Sikioba will provide an efficient and inexpensive solutions for the B2B trade credit system. It will allow groups of companies, that do business with each other on a regular basis, to do so on credit without the traditional costs associated with bank credit or factoring.
The entire edifice of Credit Mechanics rests on the concept of credit acceptance. The desire of an economic agent to issue credit means nothing without the presence of other economic agents willing to accept that credit. In the normal, unconstrained course of business, credit acceptance is voluntary. Governments can however impose laws of legal tender. In developed economies, this does not constitute any impediment. Legal tender money is generally backed by government credit which is the highest credit available and
would be accepted even without legal tender laws3.
A credit line between two users is created following a negotiation process. Suppose Bob and Alice do not yet have a credit relationship in Sikoba, and Bob wants to grant Alice a credit line. This will be done in two steps: creation of a context, followed by the creation of the credit line itself. Bob will first set up a context, which will specify general conditions for all credit lines to be granted to Alice. These conditions must include a general cap on exposure across all credit lines, and may include requirements to receive some information on Alice’s credit exposure, or knowledge of her KYC status.
Aleksander Kampa RESEARCH DIRECTOR
Stéphane Vincent, Phd CHIEF SCIENTIST
Nimisha Walji, Phd OPERATIONS
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