The only 100% fully decentralized peer to peer Monetary Systemunveiled: IOUTP

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Think Bitcoin is decentralized? Think again. 

**Now known as IRHN, see ir.hn for more info**

How do we create a monetary system where there is truly no centralized control? The way to do this is to not transfer money at all; but rather creating a mutual reciprocation system. The answer is to empower everyone to create their own IOU's that they accept back in exchange for money (or other things) and use the principle of "6 degrees of separation" and "pay it forward" in order for everyone to give one of their own IOU's to someone they know, and so on, until the IOU or money ends up at the person who requested it.

That's a mouthful but lets break that down.

1. Everyone creates their own currency.
In a simple form of this everyone has a database of codes that they accept back in exchange for product, money, or services. If the person who created a code gives it away; when the person with the code wants to redeem it, the code creator can destroy it (remove it from the database) and give the person that redeemed it some money or something else.  The codes are like IOU's.   Also if the person who wants to "cash out" the IOU from his friend also has an outstanding IOU given to the same friend, the IOU's just cancel eachother out.  So in essence as long as you are giving away the same value as you are recieving, then all the IOU's will just cancel out and will never need to be cashed out at all.  Just in case someone wants to recieve more than they give through the network, thier IOU's should still be redeemable for something.  But that is between the person and their friends as we will see below.

2. Leveraging the "6 degrees of separation".
People only give IOU's to people they know, and therefore they only accept IOU's from people they know. However if everyone is connected through only 6 different people, then the trust chain doesn't need to be long at all for IOU's to transfer between anyone on earth. IOU's are transferred only 1 person away. Lets say I give my friend Billy Bob a NatureHacker IOU then he gives his friend Jane a Billy Bob IOU in reciprocation. Kind of like a "Pay it Forward" type of system. This chain of paying it forward connects between the person giving something and the person requesting it. At the end of the line the person who requested something ends up with an IOU from one of their friends which can be saved or cashed out by them.

3. Mapping the IOU pathway from source to destination
Now that is all well and good, a cascade of IOU's that go from source to destination. However without a centralized network how do we know which pathway for the IOU's to take? Great question. The answer is, of course, leveraging our "6 degrees of separation" again. We can "scout" the landscape before ever sending the first IOU. If I, NatureHacker, want to send an IOU to "Billy Bob" then Billy and I talk to each other first. We develop a prompt and an answer. So lets say the prompt is his name "Billy Bob". When he hears the prompt "Billy Bob", he will respond with the agreed upon answer (password). The password we agreed to ahead of time was "1237". When he hears the prompt "Billy Bob" he will respond to that person (that said the prompt) "1237". Now the person who finds Billy Bob will give this answer back to the person who told that person to look for Billy Bob and so on until the password makes it back to NatureHacker. Now we have a trace that goes from source to destination. Now NatureHacker can send an IOU to the person who returned the code to him, and that person can deliver an IOU to the person that returned the code to them and so on until it reaches the destination.

So how do we scout for Billy Bob in the first place? We tell everyone we know to look for him. We tell everyone in our group of friends to look for Billy Bob and they in turn tell everyone in their circles to look for him. As soon as someone claims to be Billy Bob he gives the code which makes its way back to the sender and then the IOU goes out back through that pathway used to locate him.

The person initiating the transaction can be made to "overpay" a finders fee which is split among all the people along the correct path to the destination.  This incentivizes to make your friend network the best it can be.   For example lets say there are 10 nodes along the path from NatureHacker to Billy Bob.  NatureHacker could pay 1.1 IOU forward, person 2 pays 1.09 IOU forward, person 3 pays 1.08 IOU forward until we get to Billy Bob who gets 1 IOU.  Reducing the amount of people (nodes) along the path is therefore incentivized.

 Also not only will any correct pathway "win" but the pathway that leads to the destination quickest.  So if you want to win the transaction it would be best to prune your friend list to only include friends that end up having the people of interest most often so you don't waste time talking to lots of friends.

Now there might be a temptation to hack the code running on your system so you keep any IOU you get without paying it forward. If this happens you will never be along the correct path and people will "unfriend" you, effectively locking you out of future deals.  A self grooming network.

Also why not just give an IOU directly to Billy Bob from myself NatureHacker?  Well Billy Bob doesn't trust me.  The whole reason we have the IOU's always go to friends and come from friends are that people we select as friends we trust to pay up when we return to them one of their IOU's they issued us.  Instead of a central power as the trusted party, we use a de-centralized network of friends.  Also even if you trusted me our deal would be a one time deal and you would immediatly ask me to fulfil the IOU which makes it pointless.  But if you have 10 friends and have accumulating IOU accounts with only those 10 people and can deal with every outside person by just racking up more IOU's from one of your 10 trusted friends, then it becomes much easier to manage.

So that is about it. Of course these are all metaphors for technological communication, or it could be in the physical world as well but more likely digitally in this day and age. There would obviously be code involved in this process but it would be modular and run on each system itself. It would be like HTTP, each computer/server would run a copy of the code in order to make this communication happen. Now the question is...who is going to be the first to develop the code for IOUTP? (IOU TRANSFER PROTOCOL).