[Webfunds-users] router server API / Protocol idea

Sun, 01 Apr 2001 10:28:38 +1000

Good to see something resembling activity on the webfunds list.

Also good to see this fine post. This is mind-blowing stuff. Just the
other night I finally got the *gist* of digital bearer instruments, how
they could work and how they could provide privacy and security and
people printing their own money from their pc onto a disk or card or
paper or something. Now this insight into multiple currency conversions
and the network shows how it is likely to all come together sometime
soon.

David Hillary

Vincent Youngs wrote:
> 
> There are some ideas I had before encountering Systemics that are similiar
> to theirs.  In fact, it was in my search for prior art related to my ideas that I
> found Systemics.  This is why I am so enthusiastic about the Systemics
> account server / exchange server - because I already had thought through
> the revolutionary potential of such a system, and was very happy to
> discover somebody was already implementing it.  I'd like to share my vision
> so you can see how similiar it is, and perhaps to think about how my idea
> of a router server might be implemented in the Systemics architecture.
> 
> Basically, my idea was to have account servers and exchange servers as
> separate off the shelf retail packages that would run on an ordinary server
> PC, and which would be modifiable for any financial instrument, currency,
> commodity, bonds, etc, with only a few user settings, no programming
> required.  So far, the same as Systemics.  I did not think through the idea
> of ricardian contracts at all as Systemics has done, and my idea of
> ensuring reliable instant clearing for exchange transactions was to have
> some kind of protocol between the exchange server and the account server
> where when a person entered an order on the exchange, the funds in the
> account server would be locked until the order was either executed or
> cancelled.  Systemics' solution to this problem is better than mine.  In my
> idea, any two account servers could be linked by an exchange server, or
> multiple exchange servers, without any involvement or even consent from
> the account server so long as they all obeyed the same protocol.
> (Systemics has already thought this through with the SOX protocol.)  So
> far, so good.
> 
> The next step in my thinking was to view account servers as nodes in a
> network, and exchange servers (trading exchanges) as links between
> nodes.  Because of the nature of trading exchanges, they provide
> maxiumum liquidity and convertibility between two instruments.  The more
> transaction volume on the exchange, the narrower the bid/ask spread, and
> the lower the cost of conversion between the two instruments.  Instant
> clearing will make this work even better.  So, an exchange server can be
> viewed simply as a link between two account servers.
> 
> An account server may be shares of stock, bonds, any commodity,
> currency, etc.  Also, there is no reason that shares of stock need to be in
> integer units.  Why not allow micropayments denominated in shares of
> stock?  Stock could be used as money this way.  Integer units of stock
> were necessary before computers to simplify dividend calculation, etc, but
> when a computer can automatically calculate dividends and credit
> accounts, then there is no reason an account couldn't have .00001 shares
> of stock, or spend the same.  What company wouldn't be pleased to have
> its stock circulating as money?  Liquidity is always an objective, and using
> stock as money would enhance liquidity.
> 
> By allowing micropayments of a wide variety of financial instruments,
> commodities, etc., this blurs the distinction between money and other
> financial instruments, and enhances liquidity throughout the system.
> Everything becomes indistinguishable from money and everything becomes
> usable as money.
> 
> So, in this network of account server nodes connected by exchange
> servers, the only thing that might distinguish a particular node as being
> "money" would be the number of other nodes that are connected to it via
> exchange servers, and the amount of transaction volume on the
> exchanges.  A dollar node, or an e-gold node, might be connected to
> thousands of other nodes (such as a node for every company's stock for
> instance).  A stock node might only be connected to a few nodes, such as
> a node for each currency which that stock is traded against.
> 
> This network of exchange has a robustness that exceeds the robustness
> of any particular currency or money.  Any form of money is just one node
> in a network where there are multiple paths to reach any node.  Therefore
> the failure of any particular money system is equivalent to the failure of a
> network node.  Just like the Internet, transactions will simply route around
> the failed node via a different path.
> 
> Now, this idea of a transaction network of connected nodes is getting
> closer and closer to being analogous to the Internet itself.  That's a clue:
> this network needs a router server.
> 
> The router server would be the final step in allowing anything to be used as
> money.  The router server would automatically route transactions from any
> node to any other node in the network, via the shortest path.  An Internet
> router keeps itself informed of the network topology and the cost, delay, or
> distance between other nodes in the network, and then it calculates the
> shortest route from this information.  In this transaction network, a router
> server could do something similiar.  It could keep itself informed of all
> account servers and all exchange servers, and the transaction fees
> charged by all account servers and exchange servers, and the current bid
> and ask prices posted on all exchange servers.  Then the router server
> could use this information to calculate the shortest path from any node to
> any other node.  The router server could then automatically execute the
> necessary transactions on exchange servers to move a specific amount of
> value from any source node to any destination node.
> 
> Here is an example of how this could work in practice to enable any node
> in the network to be used as money.  Suppose a man who lives in Ethiopia
> decides, for whatever reason, to keep all of his assets in the account
> server of a particular company's stock, call it XYZ company.  Maybe the
> man works for this company, or it is his favorite company, and he doesn't
> want to keep any of his assets in anything other than XYZ stock.  Fine, he
> can spend XYZ stock anywhere in the world, just like money, thanks to the
> router server.  He has a smart card and a contract with the router server.
> Say he is travelling in France, and he is shopping at a store, and for some
> reason this store only accepts payment in e-palladium, nothing else.  No
> problem, the man presents his smart card at the checkout counter and
> pays for his purchase in shares of XYZ.  The router server takes care of the
> rest.  The router server calculates the shortest network path to convert
> shares of XYZ into e-palladium, and the exact amount of shares of XYZ
> needed, and routes that transaction through a series of exchange servers
> and account servers to arrive at the e-palladium server used by the store in
> France.  The transaction could start first at the XYZ server, where the
> router server sells the correct amount of XYZ stock from the man's account
> on the XYZ stock / Ethiopian Birr exchange and puts it into a temporary
> account owned by the router on the Birr account server.  Then the router
> moves the Birr across a Birr / Dollar exchange server into a dollar
> denominated account server.  Then the router moves it across a dollar / e-
> gold exchange server into an e-gold account.  Then the router moves it
> across an e-gold / palladium exchange server into an e-palladium account.
> Then it transfers the correct amount of e-palladium into the account of the
> store in France, the transaction clears, the clerk hands the man his smart
> card back, and the man walks out with the merchandise he has just
> purchased.
> 
> One problem with routing the transaction forward from the XYZ share server
> like this is the uncertainty in knowing exactly how many shares of XYZ to
> sell.  Although the router server can calculate a very good estimate, the
> bids and asks on some exchange servers may change by the time the
> transaction passes through them and the final amount of e-palladium at the
> end of the chain may be off a little bit from what was required.  The solution
> to this is to route the transaction backward as a debit, instead of forward
> as a credit.  The router server knows exactly how much e-palladium is
> needed (a debit amount of e-palladium), so it purchases the exact amount
> needed on the e-palladium / e-gold exchange.  Now the debit is on the e-
> gold server, and again the router knows exactly how much e-gold is
> needed, so it purchases the exact amount of e-gold needed to clear the
> negative e-gold ballance on the e-gold / dollar server.  Then it clears the
> negative dollar balance by purchasing the exact amount of dollars needed
> on the dollar / Birr server.  Then it clears the negative Birr balance by
> selling the exact amount of shares of XYZ needed on the Birr / XYZ
> exchange.  Of course, most of these account servers will not allow
> negative balances.  That could be worked around by the smart card
> company itself keeping positive balances on major nodes and temporarily
> loaning from its own positive balances.
> 
> It is true that credit card companies already allow instant conversion
> between major currencies, and perhaps CashBox will allow something like
> this,but the solutions offered by these companies are limited to the
> markets that they themselves are willing to make.  Such plans only allow
> spends from such limited nodes as these companies decide to hard-wire
> support for.  The router idea on the other hand does not require any hard-
> wiring of specific nodes, and allows spends from any node to any other
> node.  No matter how remote any node is, every node is an integrated part
> of the money system.  As soon as somebody licenses another account
> server and issues their own financial instrument, and that instrument is
> linked to the network by at least one exchange server, it is immediately
> welcomed into the worldwide network and recognized as another form of
> money, spendable anywhere.
> 
> At this early stage, the router server is not necessary, and routing between
> different account servers will be done by hand, using the trader wallet and
> the exchange server.  However, it would be really cool if the programmers
> working at Systemics would put whatever is needed into the SOX protocol
> that would be needed to support router servers.
> 
> ~ Vincent
> 
> _______________________________________________
> WebFunds-Users mailing list
> WebFunds-Users@webfunds.org
> http://www.webfunds.org/mailman/listinfo/webfunds-users