About the Open Credit Network
The Open Credit Network is a new type of organisation, built on trust.
In our startup phase we’re operating as an unincorporated cooperative association, governed by the core team. During future phases we will seek incorporation, widen our governance to include active trading members, and update our Membership Agreement accordingly.
The Open Credit Network provides a new type of trading system that does not depend upon scarce, debt-based money.
There’s lots of theory and some very careful design behind our plans but none of that means anything if it doesn’t work at the simplest level – straightforward benefits for the members. So that’s what we’ve set out to do – to make it easy and rewarding to trade with other members via mutual credit.
(click the + signs to expand the sections below)
In the Open Credit Network, members trade with each other without using standard money. Each trade is valued in Open Credit Units – (OCU), and each exchange results in some OCU moving from the account of the buying member to the account of the selling member. The buying member’s account balance goes down (into the negative if necessary), and the selling member’s account balance goes up. In return, the selling member transfers whatever was agreed to the buyer in goods and/or services.
And that’s it. The buyer has something they needed, and the accounts reflect the agreed transfer of OCUs, just as you would expect from a bank account. Except that you have the money when you need it (as do your customers), and there’s no interest to pay. So OCUs work just like money for trading within the Open Credit Network, but they work for you, and for the network, not for the banks.
If that seems as if it ought to be impossible – as if there is some trick, remember that money isn’t a fact of nature; what makes money work is one crucial thing – trust. We all agree to trust that having some numbers in our account gives us a claim on our network to buy things we need (usually that network is the big network that accepts GBP). We don’t need to trust any particular member – it is the network as a whole that we rely on.
The Open Credit Network is designed to maximise trust, so that we can trade together in confidence. All businesses have to manage risk – risk of late payment, risk of poor service, and in the end, interest rates are justified by the risk of unpaid loans. So increasing trust reduces risk, which reduces costs, and makes trading within our network a little more rewarding.
Here are the differences, that make this work:
- Your business has money when it’s needed. Every active member has a ‘line of credit’, automatically. No application forms, no ‘computer says no’. As long as your account remains within limits, credit to trade is automatic (negative and positive limits are used to keep everything safe).
- Your customers have money when they need it, too, on the same terms. So you do more business, and get paid on time.
- No interest is charged, or paid – a negative balance won’t continually cost you, and positive ones don’t earn anything: it is the trade itself that is the point – it should make both participants feel better off (Yay!).
- The platform encourages everyone to keep the money flowing – OCUs are not designed for savings. If you want your credit limit expanded, it will be judged on the volume and regularity of your trading, not on your account balance.
- Trades can happen without the need for any hard cash at all – although ‘Blended Trades’ using a mix are allowed, of course.
- A negative balance is not considered as a debt. As long as you are an active member, you cannot be forced to ‘pay back’ a negative balance, which simply represents a commitment to trade goods or services to zero out the balance in the future. All trading is voluntary.
- Transaction fees are low (and charged in OCUs, not cash) – and simpler than card payment fees. NB: Currently all trades are free.
What does this do? It gives every business access to instant purchasing power within the network – ability to get things you need. At the same time, it connects every business to a network of other businesses with purchasing power – able to buy from you.
The net result is more business for all, without the need for more cash.
The Open Credit Network is a network of trust: members believe that the network will accept OCU for things they need in future. Your credit, and the credit of other members, arises from your shared trust in the network. Build that trust, and everyone can access more credit. Reduce that trust, and its value shrinks.
There is one important thing to say about this: trust gets more fragile as networks get really large (which is why we need the Bank of England and the Treasury to manage GBP). Open Credit Networks rely on strong trust, so networks can’t get too big.
This does brings a problem – variety. We live in a complex economy, where even the simplest things come via long and interwoven supply chains. Small networks cannot provide this complexity. This means that the usefulness of OCU is limited by what network members can provide.
Which is why the Open Credit Economy will need to grow – not as one big network, but as many, many networks; each at human scale, all connected together to build a new economy that works without the banks and provides more and more variety as it grows.
Talking about growth, this is not the sort of growth that is destroying the planet – growing the Open Credit Network means less trading in hard cash. The OCU money is designed to support a steady state economy – enough for everyone, but no need to make more. Network membership provides enough liquidity to meet needs, without charging interest means it can support an economy that works for people and planet.
We are in early stages of this project. We encourage and welcome you to participate to the fullest extent you wish – do let us know if you’re interested in membership!
Members can participate in trading, of course, but also in governance and development of the network. The Open Credit Network is being developed as a multi-stakeholder project in common ownership, building tools which will available to all so that it can grow freely and speedily, using a common set of principles and procedures for networks to trade with one another.
For wider discussion of the Open Credit Economy, see ‘Mission’ below.
In this startup phase, the Open Credit Network is an unincorporated association, operating on co-operative principles. Details are in the Members’ Agreement.
During the Startup phase, Membership is restricted to business that have responded to the Expression of Interest form, and which have been identified by the team as being able to participate fully in a trading chain.
A Trading Loop is a number of members who can form a trading chain, so that each can trade with the next, for roughly the same amount of OCU.
At this stage, with a small number of participants, it is important to make sure that no member is left with a large positive or negative that they can’t trade out of.
Further, it is required that all members are incorporated businesses. Unincorporated businesses – which includes sole-traders are subject to additional regulation under the Consumer Credit Act. We are making progress on this, but we aren’t quite there yet.
The decision of the OCN Team as to eligibility for Membership is final, at this point.
All Members must agree to all the terms of the Members’ Agreement, which sets out the basic framework for membership of the Network.
This is as simple and readable as we can make it, so please do have a look.
Members will be sent a invitation link to an application form.
The full text of the Members’ Agreement is here.
In the Startup Phase we have implemented the simplest systems required to make the Network function. There is no complex tech.
We have a series of simple google forms and spreadsheets which do all the work. The are accessed and viewed through the Members’ area of this site – your account, other members accounts, all trades, wants and offers.
- You can see what other members of the Network are wanting to trade.
- You can see all balances.
- You can see a history of all trades to date.
This open-ness is all part of building trust.
The Open Credit Network is a membership organisation which runs on trust. What is important is trust in the network, rather than in each and every member.
There is no requirement to trade with any particular member – all trading is voluntary.
It is in each Member’s interest, though, to have a good reputation among other members, and the Members’ Agreement emphasis the responsibility to treat other Members in good faith and to act always to build and preserve trust in the Network.
Nevertheless, it is inevitable that things will go wrong from time to time – whether through force of circumstance, through misunderstanding, or even an attempt to take unfair advantage.
The Network intends, as far as practical, to deal with disputes ‘in house’, although Members must understand that the agreements to trade that they make between each other are their own responsibility, and are governed by UK law just as with any trade.
The team will seek to understand the situation and to do what is practical within the Members’ Agreement to resolve the situation.
While we know that building a single network is not enough – for all sorts of reasons – we also know that building a great network that really works for all its members must be the start.
So that’s step one. We’re going to work our socks off to make this network really hum along, so that each member feels it really works for them on as many levels as possible.
And although our deep purpose is systemic shift, we know that the part of this that absolutely must work is the trading – we are focused on making something that works for small business – that makes business easier, less stressful, more connected, more productive.
Only once we feel that we understand what it takes to keep this network dynamic and valuable will we look to move things forward – with regional and local clusters, selling to individuals, connecting with commons organisations, building tools for mutual assurance, assets and larger scale investment, making it possible for many other groups to start networks that can connect together.
Why are we doing this? Why is it worth the bother?
The short answer is that we think that the existing money system – through which all economic development has been channeled for a few centuries – is a powerful driver towards a civilisation crash.
We feel strongly that money which works in a different way is a key requirement for an economic system which doesn’t incentivise people and businesses to destructive short-termism.
Our intention is to do all we can to build an economic system that is complementary to the existing hard currency one – a model that people and businesses increasingly choose to use – not just because it offers a chance for economics that don’t threaten the biosphere, but more directly because it works for them and not the banks.
Through its basic nature, the Open Credit Economy is designed to support and reward a scale of business that provides enough, but doesn’t emphasise greed or incentivise accumulation for its own sake.
Open Credit provides a sufficient money supply for our needs and capacities – not too much (growth and inflation), not too little (depression and poverty), but just enough for a sustainable economy that supports people without wrecking the planet.
At the same time, it reconnects economy to place, as groups are always on a human scale.