Incentive-Compatibility in a Distributed Autonomous Currency System
Peer-to-peer complementary currencies can be powerful tools for promoting exchanges and building sustainable relationships among selfish peers on the Internet.
i-WAT is a proposed such currency based on the WAT System, a polycentric complementary currency using WAT tickets as its media of exchange. Participants spontaneously issue and circulate the tickets as needed, whose values are backed up by chains of trust. i-WAT implements the tickets electronically by exchanging messages signed in OpenPGP.
This paper claims that the design of i-WAT is incentive-compatible as to protection against moral hazards, or threats caused by selfish peers because they may take advantage of the rules; such hazards are defused in i-WAT if the participants react against misbehaviors of others by pursuing their own benefits.
A reference implementation of i-WAT has been developed in the form of an XMPP instant messaging client. We have been putting the currency system into practical use since June 2004.
KeywordsTrust Model Moral Hazard Game Tree Reference Implementation Empty Promise
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