Security in mutual currencies
Sometimes, agents may opt out for a community driven by a mutual currency when not enough feelings of confidence arise. We can measure the level of safety in a community by these parameters:
Number of members. Imagine a community of neighbors that requires some common services like electricity, security, and cleaning. When a neighbor misses paying a bill, the rest of the neighbors must pay that bill. When the number of neighbors is too high, the risk of having to pay a big percentage extra in bills per neighbor is lower than when the community has just a few members.
Amount of reserves. When the community has saved a decent amount of value, contingencies may be higher to hurt the community.
Transaction value. When the transaction value is too low, credit risk is also too low.
Debtor reputation. Agents are more open to giving credit to someone if their past experience with her is good or if her past references are also good. At the same time, if the other party has tons of wealth, agents are also more likely to give her credit.
Creditor reputation. Agents are more likely to ask for credits from well-known or highly recommended products or service providers.
Credit limits. Establishing credit limits for participants reduces risks. Even negative credit balances can be avoided for consumers, as is done in the Holofuel use case previously explained.
These parameters must be moved to their best to have a trusted mutual currency system. DIMCredits aids in overcoming point number 3 by increasing security in communities with large transaction amounts.
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