LETS discussion summary

Development Ecosystem Development
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The community has been eager to start trading in a Local Economic Trading System. Before we form the first Ergo LETS group, there are several questions of practical organization to discuss. Everyone is welcome to contribute here or in the Ergo Discord LETS channel .

Shortly, LETS is a group of people who choose a set of goods and services that they trade using their own internal currency. An element of personal trust within the group enables people to choose the terms of trade on their own, instead of being dictated the terms by the global markets.

For further introduction, please see: LETS start the discussion | Ergo

In practice, a member who joins the group will announce what goods and services she wants to provide. She starts with a currency balance at zero. If she buys a service from another member, then her balance will go to minus. Minus balance is a commitment to provide goods or services to other group members. No one is ever forced to trade though. Every transaction is voluntary. Based on trust, members are expected to bring their balance to zero if they want to leave the LETS.

I have prepared a list of topics for discussion. I try to focus on one topic at a time in the Discord. Every few days, I will summarize the discussions by editing this post. If there are opposing views, we can have an indicative vote in the Discord. The discussions and votes are not final. Once all topics are covered, we will form the trading group, which is free to govern itself.

Topics:

  • Technical setup. Is the LETS system on Ergo ready to go? Or should we mint a token and use it to keep track of the trade balances? Should we make some tool (e.g. website) to track the trades and balances?

  • Currency. Time or money? Exchanging time by offering services is fair and makes price negotiation intuitive. However, it makes pricing of physical goods difficult. Money is more flexible. Should the money be thought of as dollars? Or ERGs? Or perhaps it should not be mentally pegged to anything. This would allow the relative prices of goods and services to form free of mental baggage from the global markets.

  • What should be considered in price negotiations?

  • Who can join in the first Ergo LETS group? Only trusted community members? All active contributors in these discussions? Anyone?

  • How large should the group grow in the future? Should the LETS scale up as one large group, or as a network of many small groups?

  • Credit limits. What are the min. and max. amounts of currency that a member can hold? (This will depend on the size and trust in the group)

  • How should the LETS be governed?

  • The first group will be a prototype. Should we allow public to see the chat and trades happening?

  • Name of the first Ergo LETS and name of the currency?

  • More topics to be added….

I personally have no experience of being in a LETS. My knowledge on the topic is also very superficial. Everything above are just my initial thoughts. Please share if you have sources for further reading.

I welcome everyone to contribute and voice their views on how to set up the best practices. In most of these topics, there are no right or wrong answers. It is more about gauging potential group members preferences. That is another advantage of the LETS. The flexibility of the rules enables individuals to organize their own economic interactions into LETS groups that match their preferences.

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I also have no experience of being in a LETS, so I did do a little looking into. Here are some more articles for everyone:

Here would be an article written by the ERGO team : (1) Ergo use case: Local Exchange Trading System (LETS) | Ergo

This video would be for anyone how would like to watch instead of read about LETS: A Small Town in British Columbia - LETS (Local Exchange Trading System) - YouTube (4)

I also found two articles which was pretty helpful as well:

(2) An FAQ on the LETS system

(3) Complementary currencies, LETS and Timebanks - REconomy : REconomy

After reading article (2), I found that the section about, " How much is a LETS Credit worth? " provided a good scope on the first 3 topics of technical setup, currency & price negotiations.

But then i noticed that in the video (4) that there were also part LETs credits that were being used along side the federal dollars. Lots of different systems that can be implemented. I’m interested to see also how all of the different systems can become interoperable. Maybe ERG can help with that, or a central letsTOKEN.

One take away from for me was that LETS really is about the community aspect.

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Thank you for the materials. There are indeed many different ways of setting the rules. I think that is good, and should remain as flexible as possible. Some default templates can be helpful of course.

The interoperability or the scaling aspect is maybe the most interesting topic for me. The LETS examples that I have seen aim for self-sufficiency and growth. I don’t think the best scaling solution is to grow the size of just one group. I would rather see a network of small LETS units. In you materials, the “(2) FAQ on the LETS system” Q5 touches on this with the notion of multi-LETS.

A LETS system leverages personal trust between people. Having the personal connection gets difficult already at the size of 300 people or so (Reference to Yuval Harari’s Sapiens book on historical tribe sizes). Such small units would not be able to be self-sufficient, so they need to trade with other groups. Trading between groups can have the personal trust factor as well, if some members are part of both LETS groups, or have friends there. This would keep up the personal trust component, albeit weaker than trading in own group. All this would work in parallel with the global economy, because there might still be a lot of goods that the network can’t provide. (I would still not put a cap on the LETS sizes, because I think it is good to keep the flexibility. Small size is just what I think would work best from systemic perspective.)

As a whole, the network scaling approach would enable people to freely choose the amount of LETS in their life. I could take part in just one LETS trading one good. Or I could trade half of my needs in three different LETS groups and rest in the global economy. Or I could try to fully sustain my needs in one LETS group that only trades with other groups, and not the global economy.

The trade-off between the global economy and the LETS is between economic efficiency, and having more say in the organization of one’s own economic life. The global economy will almost always have an edge in prices, diversity of goods, and quantities. However, an individual does not have much say in regulating work conditions, environmental impact, or any other aspects of the production. In LETS, the regulation is much more direct. If people in the LETS group do not approve using child labor, then a producer won’t find buyers for such goods.

People care about many things beyond prices, and LETS enables them use the information of group preferences very flexibly. The regulation is not limited to production practices. For example, some people might prefer laissez-faire capitalism, others communism, and the rest some degree of socialism in between those two extremes. The preferences of the people forming a LETS group determine which set of regulations will work best for them. In contrast, a country has to try to fit one set of rules to widely varying set of preferences. Also, the country is not even truly independent in deciding those rules, because its set of choices is limited by the pressure from the global markets.

Finding the best design of currencies for the network model will need a lot of discussion and trial and error. My initial thought is that a LETS unit has its own currency that is only good for trading in-group ($IG). $ERG can be the global currency. Currencies for trading between groups is difficult. Two or more LETS groups could have their own between-group ($BG) currencies. I could offer my service in another group, which gets settled in the $BG currency. A negative balance of $BG represents a commitment for my group to provide goods or services to the partner groups. My trade between groups would then also be reflected in my $IG balance. The exchange rate and other specifics would need to be decided depending on how my group wants to share gains from between-group trading. Having the network model and multiple currencies may sound overly complicated, but there are some strong arguments for it:

  1. Autonomy. The global economy, or other groups can’t put so much pressure on internal group decisions. For example, countries are currently racing to bottom in lowering corporate tax rates. People might prefer higher taxes, but that choice is not on the table, because the firms would flee the country. Smaller units would naturally limit the firm sizes, and their influence on governance.

  2. Resiliency. The between-group currencies would create a buffer between units in the network. Risks of my group would be limited to the trading partners. If one fails to meet their commitments, then it will be a loss for my group, but the impact will be tiny from the systemic perspective. In contrast, the global economy or scaling up just one LETS group, would run the risk of a systemic failure. In the worst case, that risk can be concentrated to a single entity like a central bank board.

  3. Decentralization. The personal trust factor in the LETS trading roots the economic system into something truly decentralized in the real world. The fact that we can only have a personal connection to a limited amount of people works as a guarantee, that power can’t become concentrated. Any global system, even PoW cryptos, are subject to governance decisions (e.g. taproot vote in bitcoin). Someone else is deciding how your monetary system runs. As mentioned, the global trading system will probably still have to run in parallel to LETS, and Ergo can serve that need. However, there is a compromise in terms of decentralization because the concentration of access to mining power is not naturally decentralized like personal trust is.

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How would an average user track their LETS balance and everyone elses? It seems that it would require a GUI.

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What do you think about a LETS group locking an amount of ERG to partially back-up the internal group currency? Could this increase trust between LETS groups?

If LETS group A wants to trade with LETS group B, then B could provide good/services in exchange for LETS group A’s internal currency. If group B becomes dissatisfied with group A and wants to take group A’s currency off of their balance sheet, group B could petition group A for trading in for some of the ERG reserves. It appears to me that a core benefit of LETS is to leverage reputation to generate markets whose total value exceeds the sum of its parts. Similar to the US selling bonds to foreign countries, which is essentially a foreign country betting on the reputation of the US.

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Here is an article from Kushti where he shows how LETS can be implemented on top of Ergo:

Now it would most likely lead to requiring a GUI, but I wonder if everyone would require one or they can just call in to one person, (for a lack of a better term) to the “accountant” to input the trade for everyone. Maybe each LETS groups can find ways to compromise with their communities.

Examples:

Heres actually another interesting video where a trading morning is underway where everyone convenes at a location to conduct their trades. Community trading with the LETS system - YouTube

People can maybe walk around with their phones and scan QR codes to trade or maybe once a trade is complete they can attend a stand where they input the trades ¯_(ツ)_/¯ .

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Yes, the collateral/back-up is part of the “trustless LETS” design on Ergo. I see it as a way to increase trust in case there is a lack of personal trust within the group. For example, a group of complete strangers could set up high collateral requirement for joining the group. In contrast, a group of friends with high personal trust might not need collateral at all. Both cases and all gradients in between will be useful. The same design can be used in trade between groups by using the between-group currency.

In your example, the internal tokens are held outside the LETS group. This means that they will have external value, which is against the LETS designs that I have seen. The reason is that the external entities will gain influence over the group A autonomy. Also, group B redeeming tokens for ERG will create external price negotiations. What would be the advantage of your idea compared to groups A and B being just one LETS group?

“It appears to me that a core benefit of LETS is to leverage reputation to generate markets whose total value exceeds the sum of its parts.” Agreed.

“Similar to the US selling bonds to foreign countries, which is essentially a foreign country betting on the reputation of the US.” Disagreed. This creates external obligations, speculation and systemic risks. The currency between groups would be the buffer that mitigates those problems. No betting between groups, just trade that both find valuable.

(Pooling money for larger investments is an important advanced topic though. This merits a discussion for sure. If the LETS groups are small, and they want to be free of global markets, then they will probably need to work together for some goods.)

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Similar to the US selling bonds to foreign countries, which is essentially a foreign country betting on the reputation of the US.”

Now that I think about it, this seems to go outside the scope of “trustless LETS.” It would essentially be creating a localized government, as one of the core abilities of a government is to issue currency.

The reason is that the external entities will gain influence over the group A autonomy. Also, group B redeeming tokens for ERG will create external price negotiations. What would be the advantage of your idea compared to groups A and B being just one LETS group?

The fear of influence of the external value of collateral on a LETS group is spot on. External collateral does kinda defeat the purpose of LETS, as it is operating outside of a reputation, human-human trading organization. My perceived advantage of trading LETS tokens on open markets with external collateral is that it would allow a LETS group to generate external investment. Potential increase in collaboration between group A and group B could also be an advantage. If I’m in charge of a LETS group, I am more likely to connect trade to another LETS group if they are, for example, providing LP between their internal currency on ergodex.io.

I think what I am visualizing is beyond the scope of LETS. I see LETS as a way for people to combine wealth on the basis of trust, and to elect from amoungst themselves representatives to negotiate trade with other markets. This would expand LETS to become voluntary trade unions. Part of what has got me thinking about this is the currency crisis happening throughout Southeast Asia right now. Governments aren’t holding enough foreign currency reserves, and the result is that people can no longer afford to import foreign goods. (this is a good argument against the idea of even being reliant on external currency reserves) A good example to look into is Sri Lanka: in one month they just experienced more inflation than the US has in multiple years combined. Now people can’t afford food because their incompetent government can no longer facilitate trading with India for food. The creation of parallel economies could mitigate these risks of national-level trade market busts.

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People can maybe walk around with their phones and scan QR codes to trade

Ugh, this truly is the cryptodystopia. I hate having to bring my phone around with me to participate in society. I guess we can’t help that this is the future, so we may as well be cyberpunks and front run the governments using QR code cuckery to force people to show vaccine passports.

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I get the feeling that you are talking about a DAO that attempts to accumulate wealth by trading with the rest of the world. I think that is a large trend happening in crypto right now (e.g. wonderland). In my view that leads to a dynamic where money and power centralizes (UST, FRAX and few others just made a cartel to control stable coins). Finance and economies become more interconnected. Eventually the system breaks apart, because it is too centralized to have the necessary trial-and-error feedback loops. This is the development path of what we see in the world today.

LETS enables to opt out from the exploitation of the centralized power. The group isolates itself, which means that the parasites from the global economy do not have access to the value created within the LETS. From systemic point of view, decentralization is established, which fosters resiliency, development (many units trying different things) and more freedom for people to choose their economic regulations.

Discussing scaling of LETS is pushing the limits of this idea. It is debatable whether it should be scaled up at all. I do see the potential benefit of gradually increasing LETS activities in overlapping groups, instead of going all-in into a self-sufficient local group. The latter is preferred only by a subset of people, while scaled up LETS could serve preferences more flexibly. Nevertheless, I am highlighting the importance of having the ties of personal trust within and between groups. Without some factor enforcing decentralization, the scaling effort might just lead us back to the globalized economy we see today.

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@Ulmo
I think there’s a good chance you’re completely right. For what I am describing to be better than the legacy system, there would have to be a large amount of inherent cohesion and specific needs/circumstances. Do you think what I am describing could be better for specialized groups such as an ethnic/linguistic/etc minority? Is there any case where it could be better? This is basically libertarian socialist or voluntary fascist thought, which historically has failed in every case except oppressed ethnic minorities such as the Zapatistas in Mexico.

Certainly with the freedom to choose the systems we participate in, LETS groups would have no requirement to interact outside their group.

You’re completely right that personal trust is paramount, thanks for bringing it back to that. It’s the human in us that gives us the power to overcome the inhuman bureaucracies that have committed genocides and squeezed regular people for all of their value.

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Thoughts on First LETS group:

Given the history of LETS being popular within during crisis times, and that the ERGO community would be international. Many people would be experiencing different situations which would result in different levels of motivation to join/trade. Not to mention that services/goods would be different versus if everyone lived in small community.

This is why i feel the initial group should be open to all. Possibly as a sign up sheet up to a certain number of individuals could be the initial cohort.

Ideas:

  • first come first serve

  • Maybe also having some trusted members join initially could also help as well such as the first 5 out of 20. I could see having trusted members put up a list of what they can offer and what they are possibly looking, then advertising that to assist in the sign up process.

  • vetting individuals on what they can offer and what they are also seeking to get enough matches to have trades

  • a collateral that would have to be put up to join and then returned once the test is over

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What could people trade on this LETS group, given that it isn’t localized, physically? Who determines what a reasonable credit is for me if, for example, I send you silk cloth from India?

Perhaps the LETS group could be limited to those who have an X number of months posting in Ergo forums, or other forms of group participation.

I look forward to this system, and I hope we can really take this to the far extents of its potential. If we want Ergonauts to be a community, we will need to build some real, personal connections. Personally, one of the ways I would want to see this would be in person meetings to exchange goods as part of the LETS. I know people like anonymity through these internet communication methods, I do too. But if we want to experiment in parallel economies, we will have to break through that barrier and know each other personally.

Once this takes off, I would like to meet in person with an Ergonaut, or otherwise find a way to physically exchange goods while recording it in the LETS ledger. To anyone reading this, reach out if you want to do that some time in the future. There’s a reason business meetings still take place in person: when you get to know another human personally, trust increases exponentially. Making these connections in the next few years could turn us into a real community, which is worth more than any amount of ERG.

I know it’s sketchy to go from internet to in-person, it honestly scares me. But people literally have sex with strangers they meet online (Tinder), so this doesn’t seem far off.

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If you mean a wealth accumulating non-isolated DAO, then I would guess that a specialized group would have the strongest competitive edge. In a similar manner like firms specialize. Ethnic similarity may or may not be advantageous depending on the circumstances.

For LETS, a group will want people with different specializations. It broadens the set of available goods. So professional diversity will be large. Ideological diversity will probably be small. It is easier to make things work if people in the group are same minded. Ethnically the group diversity can be anything. Totally up to the preferences of the people in the group.

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Thanks for your response. It’s encouraging to see useful, original thought on this forum :slight_smile: