Circles IP 2 - Dual Money System: Resolving the Credit & Commodity Money Question in CirclesUBI

It has been over a year and a half since CirclesUBI launched in October 2020. Since then, we have seen how Circles has worked in practice and the different ways in which people have experienced the system. The goal of CirclesUBI has always been to create a truly decentralised basic income system. This is a big promise, and one we can only achieve by critically questioning our own assumptions about what Circles is, what we would want it to be, and it’s real functioning on the ground.

The following proposal emerged out of discussions between different people working on different Circles projects as a way to create synthesis a common ways forward.

Two sided Money and One sided Money: Towards a Dual Money system

On the one hand, what makes Circles unique is that it is a two-sided money system. It is based on a Web of Trust and interconnected personal currencies with a decay/inflation rate, which can be swapped 1:1 in order to settle debt obligations and send/receive payments.

This way of conceiving Circles means that CRCs are essentially promises we make to other people, or IOUs (I-Owe-You). In this view, Circles is more like a mutual credit system, where people have trade balances with one another, and acts more like a mutual insurance or as a way of accessing the socially produced wealth people already create. The power of Circles lays in that, unlike most mutual credit systems, Circles can spread around the world through the different trust relationships people have with each other. In that sense, it is hyper-local and can be federated to the whole planet. Circles is a ‘two-sided money’, debt that does not have to be paid back to a bank or a state, but instead mutually created by peers who trust each other, where people’s balances with others are either + -

However, in practice, one of the issues that may cause confusion for some is the way we currently show Circles on the UI. The balances people on the Garden have as a positive number. This leads to confusion as people imagine and experience their CRC balances as constantly going up, which is more how a ‘commodity money’ system would work, or a ‘one-sided money’.

While on the back-end, things currently work as a credit network, we so far show CRC as a commodity token. This leads to confusion in terms of the language people use to understand CRC (does it have a market price? what is the value of a CRC?, why is a CRC worth more here than over there? etc) as well was what people feel they can do in the network. It is a very different behaviour when you are waiting for your tokens to accumulate than when you feel the need to give/take resources from a trusted community, which are two of the polar opposite experiences we have seen all throughout.

One obvious thing to do would be then to show CRC as credit lines/power bars/essentially ways where people can create more local community credit arrangements with the unit of account that is the most familiar to them.

Now, this would only solve part of the problem we are trying to address, which can be formulated in the following question:

How to create a planetary federated money system that acknowledges the different local value systems in the planet? In other words, how to express these differences for a system that is both global and local?

In our experiences running the Berlin pilot, we have seen that doing a mutual credit system is only part of the answer. People claiming the power to issue their own credit in a community is definitely revolutionary in it of itself, as more local economies can be strengthen through the creation of more regional value chains. In practice though, people and merchants alike are ‘locked in’ fiat and still need access to state money and capital in order to pay for rent and other living expenses which cannot be paid with CRC (yet).

In order to address this issue, the proposal is to create a secondary token, one which acts as a commonity money which is equally minted and distributed to all participants in the network on an unconditional basis. This token can have a market price so that it can be counter-traded for fiat money and still be connected and accessible via the Circles trust network. In this way, people and organisations can commit assets and other resources to back this token and ensure it’s price is meaningful for people all over the world and it gives more and more people ‘the power to say no’, as the basic income saying goes.

Circles.Land for example proposes to have this commodity token be based on time and have 24 units a day. Regardless of the frame, the parameters of this commodity money should be based on a similar principle as the current Circles system, that there is no max cap of coins to be minted but the issuance depends on the amount of people in the network, in order to avoid unequal distributions based on who has more wealth.

Thought in parallel with group currencies, many interesting revenue models become possible and would allow for this commodity token to NOT be a pump and dump scheme, but actually create meaningful investment that can strengthen local circular economies in complementarity with the current circles credit network. Managed as a commons, following Elinor Ostrom’s 8 principles, this would allow for communities to pull resources together in order to invest in their own well-being (infrastructure, basic services, expanding their production, etc) and use the credit network to acknowledge their current debt obligations with others.


Instead of trying to resolve the contradiction by having one token to act both as a commodity and a credit, this ‘split’ proposal would allow to separate form from function. Having different monetary structures to perform different functions would create more clarity in how Circles is communicated and used. The credit network would act as what it already does, a community exchange system within defined socio-cultural boundaries, while the commodity money would enable people to have access to capital with which they can ensure to meet more of their basic needs.

This dual monetary system would more clearly express what Circles is, what it is trying to do, and at the same time give people the power to do so.

If this is accepted, what this would mean on a technical layer is another discussion. This post is only meant to express the ideas behind the dual money proposal.


Thanks for the write-up! It certainly helps especially for those not having attended the workshops.
But honestly, I still don’t get it. So, what I understand is:

  • the current, personal CRC might be extended(?) to function as IOUs, similar to what Trustlines trust-/creditlines do?
  • would then still a automatic minting be in place? In Trustlines, a creditline is the base of the amount someone can spend, should it be similar to this? Would then “automatic” minting make sense at all?
  • the 2nd money, will it be one token (address) for all then? Is it distributed automatically or will it be exchange(d/able) for personal CRC?


Thank you for your clarification questions. It seems to me you got it! Below I try to answer:

“the current, personal CRC might be extended(?) to function as IOUs, similar to what Trustlines trust-/creditlines do?”

This is certainly one way to do it. If this were the case, it would mean the circa 8 CRC personal currencies people “mint” per day today would simply be their daily credit limit, which is mostly a UI change + adding a commodity money which is automatically distributed to all. Another way to do it would be transforming the current network into a commodity token, with a constant issuance mechanism similar to Proof of Humanity and add a second layer of credit limits you can set per month based on different places unit of account ( e.g. 1000 units). Making this design decision means weighting also what is more technically feasible and how to clearly communicate things to people.

would then still a automatic minting be in place? In Trustlines, a creditline is the base of the amount someone can spend, should it be similar to this? Would then “automatic” minting make sense at all?

Regardless of how something like this would be done, it would be similar to most mutual credit systems, including TL. The automatic issuance mechanism would make sense for the commodity tokens - here the importance of “automatic” money destruction/ demurrage becomes critical.

the 2nd money, will it be one token (address) for all then? Is it distributed automatically or will it be exchange(d/able) for personal CRC?

In my mind, it should be distributed automatically. The question about exchanges requires clear rules about what can be exchanged with what and how. In general, there should be clear system defined boundaries between local credit networks to make sure they do not become commodified and their commodity tokens. Group currencies are probably the best mechanism to bridge both worlds. What do you think?

Thanks a lot everyone for the great write-ups. I believe the most efficient way of moving on is defaulting the core rules of the commodity-like CRC’s as the global based layer, where it’s value is defined by the market participants and leveled out by arbitrage opportunities.

On top of that base layer as suggested in Earth Circle IP 1 - Circles 2.0 Architecture - #13 by samuelandert, we can think about the actual implementation of credit-based (trustlines approach) extension modules, which require opt-in according to the local rules a specific community is defining together.

So for a Trustlines approach there are many cases which would have to be defined:

  • is a Trustline two Creditlines as in Trustlines Project?
  • at least for Trustlines this binary option does not fit, the core concept of Trustlines is that there are different levels of trust, eg. familiy, friend, co-worker, neighbor, how to cope with this?
  • what happens if a Trustline is exceeded?
  • what happens if debt is not repaid (because the user exits)?
  • how to copy with “Hubs” which trust all or are trusted by all - they are a risk to the system?

I think there are more topics and issues for a mutual credit system. Maybe a meet with the Trustlines team would help?

From a purely social point of view, doing it this way will most likely lead to the people who already use Circles suffer violence. Why? Because it will mess with how they engage in trade, which a lot of them need. This would be analogous to when a government devalues it’s own currency. This decision cannot and must not be taken by “pure” technical considerations alone, despite the lure of simple fixes. We cannot solve social problems with technical solutions. After careful consideration, speaking for the Berlin pilot and the international assemblies that have been using CRC in various degrees, I’ve come to the conclusion that it would be best to add the commodity layer and change what is necessary on the current UIs/technical layers of the current system to adapt it to various places.

I would wait for the Bitspossessed to express their opinion on this as well as they know the system the most and can give a more technical view of these proposed changes.

I believe it’s not as simple as you describe it. The systemic technical layer as it is implemented right now (and a contract update is likely 6+ months away) has an immediate impact on the social layer by the way it’s designed.

The moment other communities around the world beyond Berlin become more serious and active in a larger scale other than just playing, they will have an immediate impact on Berlins pricing since it’s an open market.
If you would like to have more control about that, you have no other choice than creating larger entry barriers for more “gated communities”, where there is a stronger commitment to each other to be able to hold on the 1 to 1 pricing.

The current 1 to 1 pricing the Berlin Pilot has chosen is only as strong as the economic input people are willing to provide. The moment other community pilots use it differently as it is going to happen in Munich, Berlin will face an immediate impact (or what you call “suffer violence”) due to the systemic open design of Circles.

But It’s not like you described it „a government“ which devalues it top down, but the community does this bottom up naturally by the way they engage in trade based on the economic input they are willing to put into the system.

The challenge the Berlin Pilot will be facing very soon, when the 1CRC to 1€ subsidy is used up, is that you simply won’t be able to hold on to your current pricing.

In the current technical implementation as of today, you won‘t be able to have any control about the value circles will have in the day to day business other than social contracts and “commodifying like” incentives. In the discussed trustlines approach, which I think the current Circles implementing is not, you will have much more granular control elements of incentivizing the behaviors you want to inspire.

Thank you for your comments.

Yes, we agree the technical layer will impact the social layer but I think you’re mixing up some things.

The current implementation is already a mutual/mesh credit like system, as what people are exchanging is their goods/services for units which represents their obligations with each other:IOUs . It just that the balances are shown to be a “one sided money”.

The research pilot we do with the targeted subsidies is essentially a way to lower risk for businesses so that economic circuits can be created within the network and decrease the redemption scheme accordingly. It’s basic economic planning. The social agreement of prices is a method we decided to use based on successful historical experiences to anchor local currencies (Sardex, WIR, etc) without having the same economic power as the state currency. The redemption program in it’s current form is not meant to last forever but to create the conditions for a Circles economy to become a viable alternative and prove that Circles can work in reality, with the coming strength arising from group currencies and the commodity layer.

You are assuming that the current implementation will be turned into an “open market” and that this is somehow a challenge to the pilot we are currently running. You are correct that this approach would be a threat, but the risk would be to the whole project. In the currency pluriverse we have today, how would you ensure that the prices of the different personal currencies remains more or less equal to have the goal of a federated planetary network? The open market? This assumption has to be questioned. One possible outcome is exactly creating the gated communities which you speak of, where liquidity is only added to some but not all tokens and you end up with a situation where different people’s personal currencies are priced very high while others not at all. What sort of basic income is that? Is this what you want to achieve? I assume not so how would you resolve this issue given your proposal?

What I’m arguing is that it is much more simpler to add the commodity money layer on top of the current one in the form of one token that is issued equally to all and add liquidity to it via Circles Exchanges and other mechanisms, similarly to what POH does.

My argument is that the current implementation can and should be changed so that the UI can reflect the credit nature of circles and be adapted depending on each community’s preferred unit of account. In that sense Berlin and any other territory could portray the current issuance balances in a way whereit makes sense to them and have the commodity layer on top.

Due to the systemic design of circles there is simply no way to ensure that every circle is the same. We can only try to achieve that through our story telling and social contracts.

So let’s turn the question around.

How do you want to ensure that every one using circles, who is not part of the Berlin pilot will follow Berlins pricing in a dezentraliced Open network?

People will start to use it anyway in a way they want and not what Berlin wants. I think this is one powerful strength and not a fallacy of circles, adding further resilience and stability to the globally perceived value of circles. Some start with lower prices, some start with higher prices. Arbitrage will even out everything eventually anyway, if you want it or not.

if you want to have more control about that you need a different system, the current implementation has simply no solution for your dilemma.

When you say that the current implementation cannot possibly have people getting the same price for their CRC, you are assuming that the current network is a commodity one. Again, you’re conflating/interchanging commodity for credit money and viceversa. This is what I mean when referring to Alex’s question about how to implement it.

This is the issue this proposal is trying to solve. With the current credit system, with UI/technical changes people can set their unit of account and limits to then decide socially how to trade and set prices (which is what people are already doing), whereas with the commodity money proposal made here, there can be a planet-wide layer with a price set by the assets (material and digital) that back it up. When thinking about design issues, it’s important to put the social first and then make the corresponding technical choices. :slight_smile:

I do Understand the differences between the two worlds you are trying to separate.
I am not sure if this complete separation is something we want to achieve and if the term commodity money for a global base layer is the right definition. Circles in its pure core is a credit based system, but through adoption around the globe can become more hybrid and receive the one or other commodify-like trait, as different communities start to experiment with different ideas.

And I think it is good this way. I am not a fan of changing anything about the current implementation towards something more like trustlines, since you would loose a lot of its great genius.

In the Berlin Pilot you use circles more like how trustlines is designed, but the system is open and others will start to interpret it differently potentially becoming a threat for you due to its systemic design.
Again if you want to protect your 1 to 1 value you have chosen, you need to create additional entrybarriers and higher commitments around this smaller group of people.

I do think the global circles Ubi layer as implemented today in its purest form should not be compromised and is quite perfectly designed already.
Do you agree on this?
If yes, then we need to find mechanisms to protect your Berlin 1 to 1 pricing with different additional mechanics, since the system is not able to do this at the moment for you.
If you don‘t agree on this, then we need to have a complete different conversation.

What is Munich going to do differently, and why does this pose a threat to the norms set in Berlin?

Let’s get into the details.

What ‘open market’ are you referring to?


However, in practice, one of the issues that may cause confusion for some is the way we currently show Circles on the UI. The balances people on the Garden have as a positive number. This leads to confusion as people imagine and experience their CRC balances as constantly going up, which is more how a ‘commodity money’ system would work, or a ‘one-sided money’.

I guess 1st & foremost, I disagree that the balance of Circles being displayed as a positive number over time (if not spent!) conveys any information (including emotions/reactions like expectation) regarding debt, commodities, or fiat.

These are units displayed, not their “value”. The value per unit is constant, not changing as with commodities traded in high-bid turnstile exchange markets.

Hey, nice having you in the conversation.

We will be introducing a different social pricing norm, which is much lower than the 1 € = 1 CRC norm Berlin has chosen. We are proposing to start at 240 CRC = 30$-60$ (monthly UBI, 1$-2$ per day) and slowly try to grow this over the course of the next 10 years towards something like (240 CRC = 150$-300$) with the goal to create a stable global partial ubi for the first world and a true full ubi for the poorest.

The moment different communities, that are still interconnected via trust like it is between Berlin and Munich, start using Circles with different values, our social pricing contract in Munich will have an immediate “negative” impact on how the Berlin Circles are perceived in value.

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I see. Are you in this Munich group?

[Side note: I’m wondering what the arguments were to go away from a simple continuance (null argument) of 1:1 with units in existing value norms. Also, while the intent is admirable & sound, if you’re establishing a CRC community in an area where people are living on $1-2/day, then the CRC exchange norm would not be in euros or dollars. I think you’ll find in practice, that the local currencies in those places has already been devalued far below par with the leading fiats of the world. For example, here in Chile we have 1000 peso bills, which are called ‘Lucas’, and are the accepted value for CRC, putting them near 80% of euro/dollar, which should be close enough for p2p exchanges, plus distance/freight considerations.]

Ok, let’s look at the incentives in this kind of imbalanced unit-value trade:

Lets fix the ratio at 4:1 (Munich:Berlin) for convenience.

Clearly, sellers from B have an advantage as every 1 of their CRC is worth 4 in the M community.

Mcrc users pay 20 CRC for a <sic $5> sandwich in Munich.
If they travel to Berlin they would pay 5 CRC.

This is assuming a normal fungible currency, whose value could easily flow/be transported back to Munich 1:1.
That is not the case with Circles.

Anyone in Berlin who accepts a Mcrc token does so knowing that whoever accepts them will ultimately connect back (via transitive trust) to a 1:4 value loss in Munich. This goes for everyone who makes a trust connection to a different local group who has decided to ‘break Schilling’s peg’.

So people are going to:

  1. not make such trust connections, or
  2. require the 4:1 exchange (IE, a 20 Mcrc sandwich in Berlin), or
  3. regular trading partners would likely split the difference, or disregard the difference in pegs altogether, using CRC as their UoA. Both ways cancel out the difference.

This has to be repeated at every p2p transaction, it cannot ‘scale up’ without a centralized matchmaker who enabled instantaneous arbitrage over any distance. That can’t happen with the trust connection requirements being what they are.

In other words, local p2p arbitrage is ok, it will work itself out through micro-agreements, trust limits, etc.


In perfect theory this sounds right, but you forget about that the world is more interconnected than that you can define clear boundaries between “Munich” and “Berlin” communities. Another thing is that you can not expect that every participant in the network is able to develop the same knowledge and understanding what it means to trust someone and its implication on the value.

The more the two communities become interconnected (especially when online shops and international trade come into the equation), at every p2p transaction the value slowly gets automatically adjusted, pulling the value of Munich Circles up and the value of Berlin Circles down until it settles in the middle where the amount of goods and services offered matches the amount of circles supply.

But let’s see, what the reality will bring, no need to further theorize about it.

Sure, I agree that some will learn the hard way, and get burned (having to spend 20 crc for a 5 crc sandwich) or be stuck with unspendable tokens. But I did not forget about the internet! Recall both the effort required to overturn misinformation, and the number of extra people someone will tell their bad experience about vs a good one. Negative info tends to get much more traction.

Volatility is one of the things that is hampering the adoption of crypto. If it’s not happening on central exchanges, it will not go away, it gets distributed out to the users who accepted those trades. This is equivalent to ‘negative marketing’ (FUD) which will not help anyone involved.

I also agree that over time, given enough people who are able to work the discrepancy out between them & create liquidity, the prices could end up somewhere in the middle.

So the question is, knowing that, why would the Munich community take such an aggressive stance against Berlin? This means that Munich gets an increase in value while Berlin is supposed to take the hit?? As I stated above, the ramifications are obvious, leading to 1 of the 3 outcomes I listed, tending toward #1 over the long term, if loss in value becomes the norm for such trades.

A. “Hey Miss Berlin store owner, can you trust me so I can buy your product?”
B. “Sure (looking over A’s trust connections) - where are you from?”
A. “Munich.”
B. “Oh, sorry, we can’t accept the Munich CRC at 1:1, so we don’t trust those accounts.”

Giving trust in the Circles network contains the stated agreement that your tokens will be accepted on a 1:1 basis by other users. Trust will not be given so readily without this, and would be revoked if someone were tricked into accepting Mcrc at 1:1 to Bcrc.

If this information is well known, which it will be, there will be no network effect advantages gained by the existence of these 2 communities. This happens far before the statistical results that you offer as assurance that it will all work out. No one is going to spend their CRC in Munich (or any other place) that offers them 1:4 exchange rate for their CRC. Nearly all the Munich value will be transferred outside of that community, much like absentee corporate owners do all over the world now. The trust boundary replaces geo ones: it will lead to blacklisting of Munich CRC wallets. People do not want to haggle over the exchange rates of their alt currency. Protocol is a form of consensus: take that away & the consensus goes with it. This cannot scale without a large volume liquid central market! (which Circles cannot have) IE, you can’t even speculate that the price will go up & you can make profit. Every person who accepts less than 1:1 for their CRC will have to negotiate out of a 1:4 loss on the other end. This is not the way to entice people into our alternative world. Maybe you haven’t noticed, but the number of people who dismiss crypto out of hand as wild-assed speculation & ponzis is growing at least as fast as happy adopters.

PS. Where does this rise in Mcrc’s value fit into the idea that it should be priced at out the lowest poverty level incomes? It seems to invalidate that intent.

Why not just let those communities establish their own values, rather than deciding from Munich?
Or failing that, how about changing the code on the Munich group so that you only receive 1/4 of the tokens per month via protocol?

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I totally agree.

It’s not about being aggressive against something existing, but being more honest and real, about the balance between the actual money supply and amount of goods and services, we are able to purchase for it.

Eventually the value of circles will be dictated by what merchants are willing to provide for it and not the fictive pricing norm we put on top of it.

The social pricing norms we are defining as a starting point in different communities are just a recommendation of reference, which hopefully help with initial trust. But over time the market will figure its own value out and balance it by itself.
Starting a reference value much lower increases the chances of being actually able to balance supply and demand and create a more stable global base currency across communities.

I have a proposal to balance out the global perceived value, which will be automatically defined by the people using it through offer and demand and more strict local agreements, which would like to stick it to a clearer defined reference unit according to their rules.

What if we allow to wrap the global base circles into specialized local circles (each local circle can create their own rules of entry commitments), which defines an exchange rate between the global circle and the local circle. f.e. as in the example of @MalthusJohn you would be able to set the exchange rate to 1:4 between the global and the local layers. The pathfinder then can automatically pick up that information and respect the exchange rates during the transitive payment process accordingly.

Like this we can:
a) reuse the same trust network
b) keep the beauty of individual circles
c) can maintain the pluriverse of different perceptions and efforts communities create around circles
d) relativ easy to implement technical wise, without needing to change the core system
e) quite a simple upgrade path for the existing Berlin Pilot to be able to protect your current pricing dynamically

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