Re: Proof Of Forum, would it work with a 1-person community?

Yes, technically--but if you are part of a one person POF community, there's nobody else to do business with that is in the same community. It's not really clear what benefits you would gain over just doing business in something like bitcoin or dollars.

Why intercommunity trade is more costly than intracommunity trade

For example, if you're doing business with somebody that doesn't belong to any of the communities that you do, there's no economic reason for them to not just club you over the head and take your stuff and your money. Perhaps this is a rather extreme example, the the point is that in a flat economic domain (which is the sort set up when two parties have nothing in common except for that they each value the same token), the only motivations in play are essentially greed driven.

This leads to costs that you might not otherwise have to bear. Maybe you need to hire an armored car and a security guard, for example.

Contrast this with a scenario where the person you are doing business with belongs to either the same POF community that you do, or one who has some sort of peering relationship with yours (i.e. these communities circulate separate tokens, but grant favorable status to each other in some other way, like maybe they allow each other's members to resolve wallet addresses to real names). Let's suppose this person still clubs you over the head and takes your money and your stuff.

In this later case, supposing they want to get paid this month (or week, or however often forum is going to be held) they're going to be attending forum with some subset of your community, and they'll be doing so with a wallet full of your tokens. The idea is that you would only hold forum with people that have shared values, so either:

(a) The community you each participate in discourages clubbing people over the head (b) They don't

If (a), then you ought to be able to appeal to the shared values of other community members, and they are likely to help you see justice done (whatever that means according to your community). If you and your attacker attend the same forum, you may be able to convince that forum to withhold validating your attacker's presence (since his conduct is not in line with the community values)--which will mean that he doesn't get paid this month. Other measures may be on the table too.

Whether you can use the infrastructure to trace your stolen tokens to a particular forum (which will be full of people who know this guy) will depend on the currency design choices of your community, or on the peering relationship in place between your community and the attacker's. Whether you can then talk his fellow forumgoers in to telling you where he is likely to hold forum in the future will be up to you and those people.

If (b), then neighboring communities should consider why they value this token in the first place. We should value tokens whose communities are in some way contributing to a world that we want to live in, and we should devalue tokens whose communities are making the world worse. This is analogous to the way that the prices of cryptocurrencies tend to drop when an exchange gets hacked, or when something else happens that makes it seem risky to use those currencies.

Now maybe the community has not yet explicitly forbade head-clubbing. Still, your attacker should realize that by doing it, he will trigger neighboring communities to re-evaluate his community's constitution and potentially revalue their tokens (at which point he, and everybody else in that community would get a worse exchange rate when they spend the tokens they receive for attending forum).

In either case ((a) or (b)), the attacker has economic incentives to not club you in the head. This is achieved by giving you and him something shared to lose. It turns a zero-sum game into a non-zero-sum game.

Ok, but how would it work anyway?

At first glance, many of the transactions before might sound like too much work for humans to keep track of, so it's important to realize that most transactions in this section will all be moderated by software, and will be hidden from the agents. I'll call this software a universal wallet. Here's Charles Hoskinson talking about the idea: https://youtu.be/T2naZzzsaus?t=1654

Let's say that you set up your own proof of forum currency, and you hold forums of size 1 every month and you get paid 100 tokens for each forum that you attend. This is silly of course, why bother using software to assert to yourself that you were in some place at some time? But let's forget the initial motivations--the question is about how token exchange would work between your community and the outside world.

Well, you'd probably want to give the world a reason to value your tokens, so let's say you make and sell widgets. You get to pick your price, so you decide that one widget is worth one token. Whenever you attend forum you get 100 widget-tokens in your universal wallet. While you're not at forum, you might be making and selling widgets.

Until you have widgets to sell, your tokens aren't worth much, but if you are known as somebody who makes really great widgets, maybe you can convince Alice to sell you the raw material for 10 widgets at the price of 20 widget-tokens. You make the trade and build 10 widgets. Perhaps you sell 5 of them to Bob in exchange for one dollar a piece.

As it stands, the market thinks that widgets are worth one dollar, since Bob was able to get a widget for that price. For whatever reason, Alice didn't sell Bob the widget tokens, maybe she had her universal wallet configured to value them at two dollars.

Later, Alice decides that she isn't ever going to need twenty widgets, so she configures her universal wallet to value widget-tokens at 75 cents. Then, Charlie decides to buy five widgets--but since everybody's wallets are hooked up to the market, his best move is not to pay you five dollars, but instead to buy widget-tokens from Alice, so she gets $4.75 and you just get five widget tokens back.

You have 85 widget tokens, no widgets, and $5
Bob has 5 widgets
Charlie has 5 widgets
Alice has 15 widget tokens, $4.75, and a deficit of 10 widgets worth of raw material

As a currency designer, your challenge is to figure out the right parameters so that Alice continues to be willing to sell you the raw supplies for the widgets in exchange for widget tokens. On one hand, if they decay too quickly she won't have an opportunity to make a profit on her investment. On the other hand, if they don't decay quickly enough, they will be too common to be worth anything. Just to keep the math easy, let's forget about this fine tuning and say that every time forum is held, all wallets decrease by half.

So after forum, it looks like this:

You have 142.5 widget tokens, no widgets, and $5
Alice has 7.5 widget tokens, and $4.75, and a deficit of 10 widgets worth of raw material

You spend the $5 researching ways to make better widgets, and you inform Alice of the upgrade--she configures her universal wallet to value widget tokens at $2.75, even though you both think that the market will bear $3 (she want's to undercut the market so that she can recoup her investment quickly--before the next forum is held). Also, you buy another 10 widgets worth of raw material, but now that widget-tokens are worth more, you just pay 3.5 widget-tokens for the material. Then you make the widgets.

You have 132.5 widget tokens and 10 widgets
Alice has 11 widget tokens, $4.75, and a deficit of 20 widgets worth of raw material

Bob and Charlie come back, they each want 5 improved widgets, which they can get from you for $3 each, but if they buy widget-tokens from Alice they can get a price of $2.75 Collectively, they pay Alice $27.50 for the tokens, which you exchange for widgets.

You have 142.5 widget tokens and no widgets
Alice has 1 widget token, $32.25, and deficit of 20 widgets worth of raw material

Forum is held, no prices change, you buy another 10 widgets worth of raw material

You have 170 widget tokens (I rounded), and 10 widgets
Alice has 4 widget tokens, $32.25 and a deficit of 30 widgets worth of raw material

Bob and Charlie want another 10 total widgets. Alice makes $11 more dollars, since they'll buy tokens through her at an advantageous rate, but now she is out of widget tokens. They now must buy widgets from you in exchange for dollars. You make $18.

This is where our simulation ends:

You have 170 widget tokens and $18
Alice lost 30 widgets worth of raw material and made $32.25

As long as the widget is worth more than the raw material it is made from, Alice is in the black on her investment. You're now profitable as well, and further iterations would make you more so--especially if Alice continues valuing widget-tokens, in which case you can operate at a scale beyond what your $18 will allow.

For the most part, this is economics as usual--except instead of getting a loan from the bank, or bothering with selling stock or somesuch, you got your capital from something like an ICO.

I think it might be a little better than an ICO for a couple reasons:

Securing funding and building your supply chain we're part of the same conversation, so that's fewer relationships you have to maintain.
As an investor, Alice needs less work to be kept in the loop, she's doing business with you--she knows how it's going.
Being both wealthy and educated enough to wisely invest dollars into a niche industry like widget creating--that's rare. But people like Alice, who know their industry and occasionally have both a surplus and a relationship with somebody who can be trusted to put it to good use--that's more common. All it took for her to decide to become an investor is a little manual reconfiguring of her universal wallet, beyond that it was business as usual.
Nobody had to bother with paying any of the extra costs associated with banks or stock exchanges (presumably, the keeping the universal wallet software running will be a lighter burden to bear than supporting Wallstreet).

Does anything change if you change your mind and allow people to join your community?

Not when it comes to exchange with the people outside your community. You would gain several other people who are as interested in the value of the value of widget tokens being high as you are. On the other hand, they would also have the same opportunity to make decisions that affect that value as you do, which could be a liability.

You could focus on building widgets yourself and let the newcomer handle your relationship with Alice. There would be more widget-tokens in circulation, which would affect prices, but as long as the new addition to the community was able to "pull their weight" as it were, then there's no reason to expect that the same dynamics wouldn't occur, albeit with different numbers.

On the other hand, if you invite people into your community that don't contribute, their forum payouts won't be working as designed. Probably this will cause the value of widget-tokens to drop--so be careful about inviting freeloaders into your community.

What about Alice's incentives?

Alice and Bob are the real heros of this story. Alice's initial decision to value your tokens before there were and widgets allowed you to get production off the ground, and Bob's decision to use tokens that were already valued by some other system gave your widget a price point and allowed the universal wallet to ensure that Alice got paid back for her initial investment.

The question I'm still chewing on is this: should you invite Alice into your community?

On one hand: yes. If she had a greater incentive for the value of widget tokens to be high, she would likely give you a better price on the raw material (and work harder to ensure its quality).

On the other hand, she has her own thing going on--she's not actively engaged in widget making--having her on the payroll might water down the value of widget tokens (which, once things are up and running, you and your other widget makers may want to exchange for things like food or vacations).

Another reason you might not invite Alice into your widget-community is that some would view that action as anticompetative (the break you get on material prices would discourage newcomers from competing with you). If this entity were powerful enough to extract fines from you then you would have to either pay them, or form a relationship with a community that could protect you from that entity.

Even if the offended party can't extract fines from you, they can meet in their own forums and decide to set artificially low values for widget tokens. So if your anticompetative behavior has offended the local community of bakers, say, then the number of loaves of bread that a widget token buys would be diminished. Or if you've offended the mechanics, maybe it costs you more widget tokens to fix your car.

As long as your universal wallet has other tokens, then these adjustments wouldn't bother you--you could just send dollars on these things--but it would mean that your wallet portfolio gradually gets less diverse. Once you run out of other tokens, you--or anyone on a similar situation that carries widget together--will be forced to pay the substandard prices, or cease the anticompetative behavior.

MatrixManAtYrService / Righting