Describing Circles as a p2p credit system

Circles can be looked at in different ways. Circles can be seen as a commodity or an asset. An alternative view on Circles would be to look at Circles as a p2p credit system where Circles represent debt.

Let assume we have 2 users that each hold 100 of their own Circes (and they both have generated exactly 100 over their life time).

In the commodity money view they both hold 100. In the debt money view they both hold 0 while they both have a credit line with each other of 100. So if user A buys something from user B for 10 CRC in the debt view, user A is now at -10 and user B at +10. User A still has the ability to buy further things from B as its “credit line” is 100.

In this example A being able to take out debt additionally depends on B actually selling something for Circles and A actually needing what B sells. However - there is also the possibility that B puts up liquidity (e.g. in USD) against its own CRC. In this scenario A can indeed “take out a loan” (in credit money view or just sell Circles in commodity money view) by sending A Circles to B and using the B Circles to exchange them against USD.

A few notes: in the Circles as credit view users have a “global” credit line. So as more user trust a person (give them a credit line) the overall credit the person can get it not increased.

So Circles sets 2 important defaults:

  1. The credit line of a person is continuously increased - if if you never pay back your credit - you are always allowed to take out another 1 CRC or credit each hour.
  2. There is a negative interest rate on credit of 7% - in our words - debt is always “forgiven” at a 7% per year rate

So as you can see - Circles gives extremely friendly conditions. Further more, even the Circles of people that die (and thus certainly never repay their debt) are expected to still have value given by a social consensus of people in their network to still accept their Circles. So clearly, the “debt perspective” does not fully capture the intent of Circles. However - it can still be a useful perspective and trough this lens one can calculate things like a “credit score” of people.

This perspective also shows that some people/ some groups might develop a different social consensus around “who should I trust”. While right no people trust other that they “generally know”, there might be groups where “trusting” someone else would be the same question if you would be willing to load this person money (at the above described very favourable conditions)

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