A protocol for recursive mutual credit accounting

The Credit Commons Protocol supports independent entities to keep track of their exchange on a ledger which they control. Ledgers can be recursively nested, allowing trading blocs of all scales to exchange with each other without using money.

When trading partners record trade imbalances using any unit of account they please it is called mutual credit. This accounting is used commercially by business barter systems, and socially by LETS and time banks. Nested mutual credit allows exchange between independent groups, and groups of groups, being indefinitely scalable.

Currently there is a Draft API and an open source (GPL) reference implementation. The reference implementation is running at https://demo.creditcommons.net.

The white paper


The current reference implementation is a proof of concept and does not claim to be secure up to normal standards of financial software. Efforts are underway to to fund a rewrite.

Existing complementary currency networks, numbering 20K users are working towards implementing the Credit Commons for trading between local systems. Community Forge, CES, CES Australia, which have been using a shared ledger since 2011.

In addition UK based Mutual Credit Services is seeking allies and partners to build a new, global, peer to peer, business barter network.


A blockchain is a way of keeping many copies of a ledger and ensuring they are all synchronised and true without a single 'trusted' authority which can surveil and censor transactions, and create the medium of exchange at will. Rather, the Credit Commons invites each group to host its own ledger and to manage it in any way they please, with its own unit of account, transaction workflow, risk management etc. Such groups can then exchange with other groups simply by agreeing an conversion rate and credit limits. The protocol enforces that ledgers are kept in sync with a hashchain built from every transaction that hops between any two ledgers. Each ledger builds and stores its own independent version of the hashchain, whilst the protocol obviously enforces that hashes must match for any given hop.
Cryptocurrencies are based on the idea of money as property, as a token which derives its value from its usefulness and the demand of people to own it. The Credit Commons is based on the opposing Credit theory of money, which views money as a relationship or contract between creditors and debtors. Thus there is no 'objective' reality, only shared agreements, the tokens claim to no value except what which people will give for them. Credit is not scarce, but exists in the degree to which we trust one another. Within the credit theory of money, the Credit Commons is based on mutual credit rather than government or bank credit, and the protocol enables independent mutual credit systems to be compatible, potentially creating a global system of non-monetary exchange.
No monetary backing is needed to exchange with mutual credit. There is nothing to stop groups keeping a pool of cash and offering to buy back credit from members, but in principle the exchange being supported is the exchange of goods and services. Members who don't produce or don't consume goods and services would struggle to participate, and may need to provide or accept cash in lieu of exchange, in accordance with their group's rules.
Business already use mutual credit when they join barter networks like Bartercard. The businesses account in the system shows on their balance sheet as an asset or liability. Rules vary by country, but generally all sales, whether paid in 'trade credit' or money, are taxable in money. The credit commons protocol makes it easier for groups of businesses to keep accounts themselves without using a third party, and then to exchange with other groups of businesses. This intrinsic connectivity between ledgers, has the potential to disrupt the business barter sector, making it more accountable, more efficient, and more useful.
Extensive research was done on other technologies and protocols. Normal banking protocols, when published, and Interledger Protocol are complicated to implement since they involve a lot of law and security which do not apply to non-monetary payments. Also almost all payments protocols assume that accounts are bounded by zero, rather than having adjustable positive and negative limits; these technologies would need modifications and also elaborate configuration by specialised engineers to maintain the tree structure.
The history of international trade serves as a warning for how trade imbalances lead to power imbalances and colonialism and on a smaler scale trading partners rarely produce and consume the same amount as each other. Many commercial barter networks in the past have exacerbated those difficulties when their owners take more out of the exchange than they put in, bringing the sector into some disrepute. The Credit Commons has no magic solution to this problem, but rather than trying to resolve it after the fact, stresses that balancing trade is a key element of governance, further that trade which has no likely counter trade should be done with money, outside of the network. Net-producer groups should work with net-consumer groups to build equitable, balanced and hence sustainable trading relations. A sustainable and just economy is one in which trade is balanced, by policy.
The layered structure of the Credit Commons could resemble today's political and financial hierarchies, in which ideas and control tend to concentrate in the hands of a few, which makes it easy for powerful enemies to compromise the system. This argument gives too much weight to the structure and not enough to the culture. Even systems designed for resilience, such as the United States federal government, and Bitcoin are routinely corrupted. The Credit Commons offers a number of appealing safeguards, but vigilance must be ongoing. The safeguards are:
The messy world of credit relationships can be much more accurately modelled with a 'mesh' like Ripple than with a tree like the Credit Commons. For a comparison of the two systems, see Ripple, Reciprocation, and the Credit Commons. Payment meshes provide greater flexibility but also have two major drawbacks. Firstly they requires a complex, probably centralised transaction routing service, while in the credit commons there is only one route and one exchange rate between any two accounts. Secondly any node in the mesh has a large number of bilateral relationships andn must balance trade with respect to each one, while in the credit commons, each node is a member of a group which shares a common currency, and trade must be balanced in one account only i.e. the group's account. Thirdly there is no way, within a mesh, to identify or manage collective trade imbalances, which is a political process, but the credit commons has groups built in, with each group being obliged to balance its trade. Also note that there is no obligation for all trade to flow through the Credit Commons, which is after all only a tool for exchange. The system is complementary to the money system and designed to be used alongside it.
it depends what you mean by money! Insofar as money is really a medium of exchange, it could, because when real goods are exchanged, the value of them cancels out and no money is needed for settlement. This is a good thing when money can only be accessed at cost through privatised third parties. in theory, it may not be desirable for the Credit Commons to completely fill even that niche, since financial ecosystems are likely to thrive with as much diversity as possible. Thus Credit Commons is NOT a plan to take over the world, rather its proponents hope that globally acceptable peer-to-peer credit should be available to everyone, but not used for everything.
Because the Credit Commons is a protocol, not an app. Any software could implement the protocol and act as a Credit Commons node, but no one app is suitable for the needs of every organisation. The Credit Commons reference implementation is in php/mysql so it is easy to read, and easy to modify. This could also serve the existing networks described in the white paper who have no budget for software engineering.
REA accounting is designed for networks of businesses, who have typically made up supply chains, but new kinds of cooperative economic networks are emerging. REA tracks components and money and other inputs with a view to planning and accounting for all resources. It can connect to the Credit Commons if mutual credit is one of the 'resources' being used, say alongside dollars. Note that within a typical supply chain you wouldn't expect to be able to balance trade, because the link where the raw materials providers purchase the finished goods and thus close the loop, is missing.
Credit Commons nodes can charge fees for transactions passing accross them, or for membership to cover adminstrative and governance costs. Those fees are of course not in money, but in trade credit which can only be spent back into the network. Network administrators and maintainers therefore should be committed to consuming as much as possible from within the network, and to growing the network for that purpose.
The system lacks the speculative dynamic which underlay the whole cryptocurrency boom. When the value of tokens is decided by the market, it has no upside and no stability, making it a perfect object of speculation, and a poor medium of exchange. Instead these currencies' stability will mean they will be desired only by people who need to exchange - prosumers - not by hoards of people hoping for something for nothing. The benefits to individuals are marginal, but the systemic benefits could be profound. So saying, in order to finance the next stage of the project without becoming beholden to financial powers, a model for investment is being worked upon. It will involve pre-purchasing goods and services from the network. The money will be used to grow the software and the network, and as the network becomes larger, transaction fees will be collected - in mutual credit, and distributed to investors who can use them to purchase from the network. Investors therefore should be people who wish to consume the goods within the network, and the credit would be discounted to reflect the risk of the network not materialising. If you have expertise in crowd investment and want to help, please get in touch.
There are many linkages. The Credit Commons is a money system without the Monetary Growth imperative which is intrinsic to fiat money. It also supports localised production and consumption. By building relationships and community it could in the long term help reduce much unnecessary or addictive consumption which comes from the atomised society and scarcity mindset. However the founders of the project are much more concerned with adapation to rather than than mitigation of, climate change. The coming decades will be shaped first by extreme weather and peak oil, (not to mention pandemics), and then by our reaction to them. The Credit Commons is therefore offered as a possible tool for citizens to maintain a complex economy as large socio-economic systems warp and fail.

Some of these questions arose in our first Ask Me Anything session. (47 mins) Download

Find out more

Author Thomas Greco on 'reclaiming' the Credit Commons (2010).

Tim Jenkin, Matthew Slater and Dil Green Interviewed by Low Impact.

Walkthrough of the reference implementation software