Free Banking for Peers

Moritz Schramm
2006 Americas Conference on Information Systems  
Since every peer represents an autonomous individual, individuals tend to behave in a selfish manner, and the constituent attribute of a peer-to-peer network is not to impose a certain code of conduct on its members, these networks often suffer from malicious, collusive, or at least non-cooperative behavior. Consequently, there exist plenty of different approaches that try to create appropriate incentives for the peers within the network in order to prevent a " Tragedy of the Commons" . All
more » ... e approaches face an accounting problem: How can the peer' s behavior be recorded and evaluated while avoiding the introduction of a powerful central authority? The market-based mechanisms among these approaches often rely on " tokens" that are defined and traded within the network mirroring the exchange of resources. The accounting concept necessary for a market-like environment is a currency system, but it is questionable in how much these " tokens" do -or can -provide the functionality of a currency. In consequence, this work proposes the usage of individual deposit money on the basis of these tokens. The resulting currency system works without a central bank, and the creation of money in such a system is called " Free Banking" . The deposit money owns full currency functionality and its usage bears minimal transaction costs. The main problem is to prevent that the system descends into runaway inflation. This paper presents evidence that this problem is solvable, although the solution must include technological as well as institutional aspects.
dblp:conf/amcis/Schramm06 fatcat:f7xxnytulzgazkzonxklbstcce