Ⓐ

Island Life

Bob and Rita live in a small house with a big mango tree and a patch of grass just outside the Valley. Rita works in the supermarket and Bob has a grill cart that he keeps mostly down around Sandy Ground and George Hill. Bob has two grown daughters: Sharon and Karen who live in the Valley. When the big cruise ship is in Bob takes his cart down to Eddie's bar and cooks up a mess of curry goat to sell to the guests. Sharon has a car that she drives as a taxi, so she'll usually give Bob a ride and pick up folks from the dock who want to tour the island or get a quick ride up to the Reggae Shack. Eddie's bar is pretty far up the beach from the dock, but Charlie the launch captain tells the guests that it's worth the walk for Bob's curry goat, and Eddie has a great place with tables in the shade and a good breeze.

In May when Rita's mangoes get ripe, they all get ripe within about 2 weeks. The tree is probably 80 years old and there are so many mangoes - she takes some to work, but mostly locals shop in the Valley supermarket, mangoes aren't anything special to them. Karen works in the hospital and she takes a couple of bags to share with her co-workers, but again they're mostly locals. Through Karen's co-workers some of Rita's mangoes end up in local restaurants, and of course Bob offers sides of mango with his curry goat. The guests rave about Rita's tree ripened mangoes when they get them, but the season for fresh tree ripened Haden
*The Haden mango is commonly grown in South Florida. There are very few Haden trees in this part of the Caribbean, which is part of Rita's challenge in marketing her mangoes: they don't match the typical island mango season or type.
mango is very short.

Notes:

= US$1.00
guest = tourist
While the people named in this story are completely fictional, the place names are borrowed from a particular British overseas territory.

Island Blockchain Genesis

One slow October day Eddie, Bob and Gene were hanging out and Eddie was talking about the bankers like Walter trying to make their next billion using blockchain. Bob said: "I wish I had their problems, I just want EC$3K so I can pay Dave to put an electric motor on my grill cart - if I could get up and down the hill easier, I'd sell a lot more curry goat." Gene is an old computer geek and he said: "you know, Bitcoin didn't start out as a billionaire's game, it got going as a grassroots project and grew up into what it is today - there are some kinds of blockchain that work well for smaller applications." Bob: "Yeah, how's that going to help me?" Gene: "Well, if you had your own blockchain and sold shares as promises for plates of curry goat, you could raise the money for your electric motor now, and deliver the goat later." Bob: "That sounds like too much contract and obligation for me, man. I sell my curry goat when it's ready, not on somebody else's schedule." Eddie: "Hey, I see how this could work. Bob doesn't need to promise the goat on any particular day, just that when somebody shows up at his grill cart and he's got curry goat ready, they can trade a pre-purchased promise for a plate of curry goat. Bob, I know you're almost always here when the Odyssey is in harbor, I'd front you EC$2000 against 100 plates - you move like 150 plates a month just at my place, right?" Bob: "yeah mon, you know I get EC$25 per plate at your place, too." Eddie: "I know, and I don't even ask for a cut because you help me sell drinks, but I also know when you roll that cart up the hill, you're getting more like EC$10 per plate up there. Plus, I'm fronting the money, there's still risk here even though I know you're good for it."
*Is Eddie a loan shark? Sort of. He's basically asking 20% one-time interest for a short term unsecured loan. Some banking regulations might not be exactly compatible with this, but it's basically a small agreement between friends.
Bob was still skeptical: "I don' know man, puttin' chains on the workers don' sound good to me." But the more Bob thought about it, the more sense it made.

Bob talked it over with Rita, and she was very excited about the idea. She invited Gene over and asked him how she might use blockchain to help her get her mangoes out to the resort restaurants when they are ripe, but not yet rotten. Gene thought for a minute and decided that Rita might make a conditional option the basis of her blockchain, so whoever holds mango credits in Rita's chain has the right to buy that amount of her mangoes at a fixed price, when they're available. Maybe Rita can find people who are willing to pre-pay a little now to get her mangoes for a good price when they are ripe. Since the whole blockchain is an open record, people purchasing mango options can check whether or not Rita has over-sold her tree's likely crop for the year. The option price can be EC$1 for a small mango, EC$2 for a large, the supermarket charges more than that for ordinary mangoes, and the resorts will pay much more for good quality fruit. Each credit on Rita's blockchain
*RFM: Rita's Future Mangoes
is worth either one large or two small "mango options." It's all a little foreign to Bob and Rita, but Rita was enthused enough that she took a class at the community college in contracts and finance to learn more and maybe help her explain to people who might purchase mango options from her. For Rita, even if people pay almost nothing for her options, it gives her a way to find mango lovers when the fruit is ready.
*Rita has friends with similar yard-trees around the island, so maybe if she can crack this mango marketing nut she might help them make a little money from their fruit too.


So, Gene and his friend Faythe set up a pair of recording servers.
*both for redundancy, and because more people know and trust Faythe than Gene, but Gene will be better at keeping the servers running smoothly. Gene sets up Faythe's server in her hall closet, but for his he uses a cloud service company (AWS, Azure, Google just pick one...), something might happen to Faythe's closet, but the cloud backup should be pretty Hurricane proof.
They set up Bob's blockchain to represent 1000 plates of curry goat. Again Bob was skeptical, he didn't want to ever be owing anybody 1000 plates of goat, but Rita explained how having too few shares avaialble would hurt market liquidity. Gene explained that Bob doesn't have to sell any plates of goat he doesn't want to, and when plates do change hands
*in the standard Assign Onward protocol
there is a small transaction fee that is shared equally among all shareholders, so if Bob holds the majority of the shares he also gets the majority of the benefit from trading fees. Also, those trading fees will help to cover the costs of running the blockchain servers. Now Bob is really skeptical, but Gene tells him not to worry: for the first year he'll take one plate of curry goat a month to cover the server costs for him and Faythe, and after a year they can look at the real costs and see what makes sense. Bob says: "oh, now I get it, you want your curry goat for free! O.K. - I'll play this game for a year and we'll see what happens." Rita offers Faythe some mango options for her trouble, Faythe graciously accepts two mango option-credits per month even though she's allergic to mangoes.

ICO: Initial Curry Offering

Eddie makes good on his word and purchases 100 plates of Bob's curry goat for EC$2000. Eddie has a deal with Charlie already set up and he sells Charlie 50 plates for US$500. All that Bob and Gene know (at first) is that Eddie has split off 50 of his plates to someone else, since Charlie didn't identify himself in the transaction and he paid Eddie in cash. Charlie is happy because he has a similar system setup on other islands where guests going ashore give him some money up front and he gives them credits in an app in their phone. Then, when they are at participating places like Bob's grill cart, they can exchange their credits for services and goods like a plate of curry goat. Charlie is charging guests US$12 (EC$32.40) per plate of Bob's curry goat, but they're still happy with the system because they don't have to carry a lot of cash, and they can learn something about the places they are going to before they get there. For instance, Bob isn't 100% reliably available every time the Odyessy comes into harbor, but with the phone-app guests can check to see not only if he's there, but also when he's running low on goat and his best guess of when he'll be closing up shop for the day.
*Bob doesn't take reservations, but some guests ping him anyway to let him know they're coming, and when they do that he can throw some more meat on the fire so it's ready sooner when they arrive
Bob has also completed some food safety and guest relations classes at the community college with great grades, and Gene linked evidence of these in Bob's blockchain which the guests' apps can verify against the college's open records, which include photos of a much younger Bob... So, now when they hit the dock and see Oscar's rusty grill right there, they can have more confidence spending their time walking up to Eddie's place to get the preferred curry goat plate from Bob, when he's around.

Ⓐ

Alice, Charlie and Bob

Alice is a regular cruiser from Albania, she knows Charlie from previous trips and this time she installed the Assign Onward Explorer app on her phone. When she came aboard ship in Barbados, she bought US$200
*I'm sure your typical cruiser spends much more during their port calls on a 14 day cruise, but it's early days for the AOE app, only a few vendors are using it. Alice usually trades in Euros, but AOE can show her prices in Euros, US Dollars, Caribbean Dollars, or Albanian lek if she likes.
in credits from Charlie that, through using AOE, she can trade for goods and services throughout the islands. These credits can be traded on-site for vendor credits like Bob's curry goat plates,
*Charlie makes a market in Bob's curry goat plates by pre-purchasing plates from Bob and making them readily available to people in exchange for other forms of value, usually cash or cash equivalents, but possibly also other commodities. Charlie usually sells directly to Bob's customers at the time they are getting goat from Bob, but he can also sell to other investors if their bid price is high enough for him. Charlie's main value to Bob is that he accepts things of value from Bob's customers to exchange for Bob's pre-sold plates, and Bob doesn't have to worry about what those things of value are, all Bob has to recognize is that he's gotten a plate-promise back in his blockchain where he no longer owes it to anyone.
and with other market makers who recognize Charlie's credits as a reliable source of value.

While Alice was in Dominica, her AOE discovered that Charlie and Ted have an exchange agreement and showed Alice all the services that Ted's credits offer, including a rainforest tour with a stopover in a hot spring for US$65 (standard cash price US$89.) When Alice arrived at the tour operator's office and confirmed her spot on the next jeep out, she traded Ted US$65 worth of Charlie's credits for one rainforest tour credit that Ted was holding.
*and Ted shared some of his margin on the tour price with Charlie, since Ted knows that Charlie has a strong influence on where guests go during their time onshore
Alice didn't want to make long term reservations
*weather in the Caribbean can be very unpredictable
and she didn't have to, she was able to confirm and hold space available through AOE before venturing from the dock over to the tour operator's office.

Similarly, when Alice arrived at Sandy Ground, she could see on AOE that Bob's grill cart was open for business at Eddie's bar, so she walked up the beach and when she arrived she traded US$12 credits back to Charlie for a plate of Bob's curry goat, which she immediately assigned back to Bob in his blockchain. All Bob sees is a valid plate credit coming back to his blockchain, he doesn't need to question where it came from, the fact that it is validly signed
*and confirmed with Gene and/or Faythe as not double-spent
is enough for him to know he's already been paid for this particular plate in the past. Alice trusted Charlie with $200 at the start of the cruise, but Charlie will gladly refund any credits Alice doesn't spend whenever she wants,
*and maybe, if Charlie trusts Alice enough, he might even extend Alice additional credits through AOE while she is ashore, assuming that Alice will pay him for the credit soon enough in the future
and the cruise line vouches for Charlie's fair dealings up to a certain limit of liability.
*to make their customers feel trusted and welcome, the cruise line might also protect Charlie from customers skipping out on credit paybacks up to a certain limit. If the customers are paying US$5500 for their cruise, they might protect Charlie for up to $500 per passenger, assuming most passengers will not default and that the benefit of treating them like royalty will outweigh the cost of any defaulters. Of course, the cruise line can also initiate collection proceedings starting with the method of payment used for the cruise tickets.
Even if Alice didn't know or trust Bob from previous trips, she only purchases a plate from Bob's blockchain moments before she's getting her goat directly from Bob. Alice only has to trust Charlie, Charlie is the one who is trusting Bob,
*at first, Charlie is making such a fat margin on Bob's plates that he quickly reduces his overall risk level. He got the first 50 plates for US$10 each and sold them for US$12, so after he sold 42 plates the next 8 are all profit.
and Bob has basically nothing to lose: he is paid up-front.

Free Market Forces

It isn't long before Bob gets word that his curry goat plates are selling for EC$32.40 through Charlie, so Bob raises his cash price to EC$35 while he's at Eddie's and the new guests all feel good about the "discount" that they are getting through Charlie and their phone-app.
*and besides, back home they might pay US$12 to US$16 for a similar entree in an ordinary restaurant
Bob doesn't notice any dropoff in sales with the higher prices, so he's already starting to like this blockchain thing. Charlie goes through his first 50 plates in a couple of port calls, so he buys the other 50 from Eddie. Bob has the money for his electric motor now, so he goes to Dave to get it installed. Dave has heard about Bob's blockchain and wants to talk about it, and also buy some plates if Bob will sell them to him. So, Bob pays Dave EC$1800 cash, and gives him 60 plates for the EC$1200 balance, keeping the EC$1200 he thought he was going to be spending that day. Bob's not crazy about owing so much goat-debt, but so far it's not cramping his style.

Dave has got a friend Ziggy who works down at Blowing Point just outside customs, he is familiar with the AOE app Charlie uses and trades similar credits with guests coming in on the ferry. There's not much that guests can do with Ziggy's credits here yet, but on the other side of the Ferry they use them many more places. Ziggy bought 30 plates from Dave for EC$750 and lists them on his AOI app. Now, when AOE shows Bob's grill cart, plates are listed as available for US$12 in Charlie's credits, and US$11.40 in Ziggy's credits.
*Charlie and Ziggy don't see eye-to-eye on guest service, so Charlie refuses to set up a referral arrangement with Ziggy like he has with Ted. Ted is a little more sympatico with Ziggy, so he does have an exchange agreement with him - including a 10% referral fee that makes Ziggy's credits not go as far through Ted as Charlie's do. Tit for tat, Ziggy also charges Ted 10% referral fee, so guests with Ted credits buying BCG from Ziggy will pay $12.54 for their plates. Since Ted and Charlie have a 5% referral agreement, buying Charlie's BCG with Ted credits costs $12.60.
Ziggy knows how to work an angle, but the game gets more complicated later.
It isn't long before Dave figures out how to advertise his remaining 30 plates
*by setting up a referral arrangements with Charlie and Ted, both at a 10% referral fee, initially.
and he sets an ask of US$10.90 for his BCG.
*cheaper than Ziggy's BCG through Charlie or Ted credits which end up costing guests US$11.99 after commission, but not for guests who buy Ziggy credits because Ted hasn't approached Ziggy for a referral agreement, yet.
Bob's cart is out of commission for a week while Dave sorts out the electric motor attachment, but the guests who use AOE aren't too upset because Bob's not advertising any curry goat available, so most of them just don't know what they are missing, and Bob's not too upset because he's got the EC$1200 from Dave to get him through until the cart is rolling right again.

Meanwhile, Rita's mango options are not popular with the guests at all, since there aren't any mangoes to be eaten until after they will be leaving. Through Karen's friends at work she does hook up with a couple of resort restaurants and sells a few dozen options, but it's a slow business and the price the options are bringing is really low, just EC$1 apiece this year, since most of the resort chefs have never tasted Rita's mangoes. Still, it's something, and enough for her to at least pay Sharon for the gas to drive her around.

Advertising through coupons

Bob's cart is back, motorized and he is feeling fine. Getting up the hill is no problem now and he can even drive the cart home every night and out again in the morning, no more fooling around with Eddie's storage shed. His curry goat is still only fetching EC$10 at the top of George Hill, but once in awhile a guest in a rental car will find him with AOE and GPS and offer him plate credits on his blockchain (BCG
*Bob's Curry Goat
). Bob recognizes that he was paid EC$20 per plate for these credits, and pretty quickly he starts offering his curry goat plate at "standard" EC$35 with a little fruit garnish and a bottle of water when he's not at Eddie's, while the locals still know to offer him EC$10 for a plain serving of curry goat. Competition between Charlie, Dave, Ziggy and a couple of smaller market makers in Bob's plates has settled around EC$27 per plate ask price, and EC$25 bid
*Bob is always free to sell for lower than ask prices like he does for his more abundant, but less wealthy local clientle. If the bid prices get too low, Bob has the option to bid higher and buy back any plates that investors are ready to get rid of for cheap.
- it's a relatively thin ~8% margin, but the traders don't really have to do anything to make EC$1.98 per plate besides invest their money against the risk that Bob quits selling goat (or honoring his blockchain promises) someday, and most of the investors know Bob so they feel o.k. with trusting a couple hundred dollars each to his future business. Bob is sharing ~EC$2 per plate with his investors, but in return his investors are fronting money to Bob, helping Bob to get more business through advertising and possibly promotion,
*When someone like Charlie, Dave or Ziggy invests in Bob's plates, it gives them an incentive to help Bob's business grow.
and maybe helping Bob to find a better price for his product.
*not to mention getting his electric motor a couple of years earlier than he would have if he tried to save for it up-front.
Investors are not going to make millions this way, they're only getting EC$2 per plate of curry goat that Bob sells, but with an 8% per month ROI,
*Of course that 8% per month ROI is just a guess at what the market might settle at. The actual return should be higher than more traditional investments due to the higher risk, and also to cover the overhead costs of evaluating and dealing with such small entities.
if investors can support enough businesses like Bob's, they should do very well compared to more traditional investment strategies.

Meanwhile Oscar down at the dock is feeling left out, as usual. Oscar shouldn't be too surprised with that round of food poisioning he caused last year, and his grill leaves visible rust in the food a lot of the time, but he's still got a great location and when he shows up he always sells some goat. Charlie knows that Oscar is bad news and he manages to warn a lot of people on their way in from the ship, but not everybody listens. Faythe and Gene won't set up a blockchain for Oscar, but Ziggy is not so discriminating and he's helped Oscar out with a blockchain much like Bob's. Still, Oscar hasn't taken the time to complete any food safety or guest relations classes, so he can't provide authenticated links to those, and his guest reviews don't look great at all compared to Bob's, so he really only gets blockchain business from the guests who arrive at Blowing Point and drive down to his rusty drum at Sandy Ground when Bob isn't working. Ziggy makes a small market in Oscar's goat plates, but he only asks US$8 per plate and bids EC$10. Since nobody else wants to touch Oscar's business, Ziggy makes this huge margin and Oscar is still happy for the extra business that comes his way through Ziggy. Ziggy is taking a risk that Oscar will be shut down by the health department, maybe permanently, so he only holds a few plates of Oscar's goat at any given time and just buys more from Oscar as they are sold.

After his experience with Bob's plates of curry goat, Dave gets together with Faythe and Gene and sets up his own blockchain for his electric bike rental service and pre-sells a few ride credits to Charlie, Ziggy, and even Ted. Dave does a pretty reliable business of about 100 e-bike rentals a month. Dave took that finance class with Rita and it helped him to decide to limit his "market float" to around 100 credits out so that people who invest in his bike rentals can get a cash return on their investment in a short time.
*if they ask competitive prices for their shares.
Some of Dave's investors will automatically re-buy up to a certain number of Dave's bike rental shares at a particular price when Dave offers them for sale, so many times Dave still gets paid immediately by the investors when a customer redeems a rental credit from the blockchain. Exposure through the AOE app gives Dave's bike business a boost, both because more guests learn about his bikes through the app and because they can conveniently and confidently reserve them when they want to. When Dave has plenty of bikes available he allows 30 minute holds.
*low risk for Dave: if additional customers without reservations show up he has bikes for them too, and if the unknown reservers are no-shows, their bikes return to available status within a short time.
When he's getting down to the last few bikes available, his reservation system switches to first come first served.

Sharon thinks that AOE is too much like Uber or Lyft and she doesn't want to use it with her taxi business. She also thinks the margins charged by market makers are just too high for what she might get from them. Some taxi drivers have used AOE and their own blockchains as a way to get some quick investment cash, maybe fix their car in a pinch, but most established taxi drivers stay away from it. Some new taxi drivers use it to try to help them establish a clientle, new guests see them on their AOE GPS locator and call them because they are close. Of course there have been some people with private cars trying to provide taxi service through AOE, but it's usually not too long before a taxi regulations officer calls them up on AOE and asks them for a ride and then their licenses. Some freshies
*Freshies: new taxi drivers. Some with, some without all the required licenses.
will even come to the taxi regulators' office when they call them over with AOE, they usually only make that mistake once.

Seasonal variation

In April the big cruise ship heads back to Europe and Bob's lucrative curry goat business slows down. Thanks to AOE (and Ziggy) he's getting more guests from the Blowing Point ferries now, but instead of selling 200 plates a month at guest prices, now he's selling more like 100. Rita warned him about this and told him to reduce his shares outstanding, but Bob didn't listen, so now his investors aren't getting return for almost twice as long as they were in-season. Some take it well and just wait, but others drop their ask prices down to what they paid or even lower after they don't get paid off in a couple of months. It's a learning process, next year will be better, and meanwhile Bob still has his cash business.

Charlie never intended for his credits to circulate on island, but some of them do. When the ship is leaving for the season he tries to settle up, and for any outstanding credits he purchases local issues like BCG - that way when the ship sails for Europe, locals may not be able to get cash from Charlie any more for their CCC, but they can still trade their CCC for BCG on the ship's server (when the internet link is working, which is most of the time...) Ironically, one year Charlie sailed with almost US$1000 in outstanding CCC left in the islands, and it was Ziggy that got it straight. He e-mailed Charlie and they worked out an exchange where Charlie wired Ziggy the money after Ziggy transferred the CCC back to Charlie. Big hearted Ziggy paid people $0.85 on the dollar for their CCC, for most of them it was better than waiting until November to get the cash, but others hung on to their CCC until the ship returned in November and settled up 1:1 with Charlie then. Charlie doesn't pay fixed interest like Ziggy, but he does a lot of transaction volume, so while he was cruising in Europe the folks holding CCC back in the Caribbean did get a little 2% boost on their CCC holdings from all the transaction fees.

For Rita, mango season is coming up soon. Rita estimates that she harvests about 150 large mangoes a year, and she's only sold about 100 options so far, a lot of work for not much return, but what it's really about for Rita is opening a market that didn't exist before. In May the fruit starts falling, and Rita sets out with Sharon to go calling on their mango option holders. Some politely purchase the mangoes they have options for (after all, EC$2 is a really good price for one of Rita's big tree ripe Hayden mangoes), others decline for whatever reasons, but a couple of the resort restaurants start absolutely raving about how much better Rita's mangoes are than the ones they get from the grocery. They exercise all their options and then purchase the rest of Rita's stock for the summer at EC$6 per large mango.
*There's a small conundrum here: Rita has a few option contracts outstanding which she was not able to verify with the option holders whether they wanted to exercise at this time or not. The language of the contract is clear: when available, so after Rita's stock for the year is sold, option holders will have to wait until the following year to potentially exercise their options, until the options expire. If Rita over-subscribes her tree, it could create a severe devaluation of the options as people realize that they may potentially never be able to exercise them. Rita openly describes this problem to potential buyers, yet another thing that keeps mango options cooler in the market than curry goat plates.
A few of Rita's mango options
*mostly the ones she gave to Faythe.
were actively traded and found their way onto guests' AOE app. A couple of guests actually showed up at Rita's house and bought mangoes from her on-the-spot for the ask price
*generally speaking, no sane guest would buy and hold something like a mango option, but a hustler like Ziggy might pick up a couple for cheap and try to turn them for a big margin.
of the option plus the EC$2 exercise price. While the direct guest trade was mildly entertaining, it clearly wasn't going to replace Rita's day job. Anyway, having found restaurants who want all of her mangoes, Rita winds down her mango blockchain, mission accomplished.

Informal Island Regulations

When Ziggy setup his cash-credit-exchange blockchain,
*Trading symbol ZIC: Ziggy's Island Credits.
he put a fixed 10% annual rate of return on it thinking that would attract some long term investors, and it did. He also set it up with an EC$100,000,000 total credits available thinking: why not? Ziggy didn't get millions in investment, but after a few months he did get a few hundred thousand, and he also got a visit from Walter.

One fine Tuesday, after the guests from the last ferry of the afternoon finished clearing through customs, Walter rolled into the port parking lot in his big limousine and had his two bodyguards step out and invite Ziggy into the limo for a drink. Ziggy knew who Walter was, but had never met him before. Walter was smiling and very gracious as they drove off, a bodyguard made a Painkiller for Ziggy and Walter was sipping something that looked expensive, but they hadn't passed the first goat on the road before Walter got down to business: "So, Ziggy, my man Victor tells me that you're doing well with your blockchain, lots of investors." "Yeah, not bad." "You keeping their money safe, so you can return it when they want?" "Oh yeah, I keep enough cash on me to pay back the guests when they're leavin' and the rest stays in the bank in the valley. I meet people at the bank when they want to withdraw, never a problem." Walter was still smiling: "Ten percent interest, that's a pretty good rate, the bank doesn't give you that, do they?" Ziggy: "No, I make money from the credits I hold and I share some of that." Walter: "you keeping good books, know what your margins are?" Ziggy: "not a problem, I've got a hundred million credits in my blockchain, don't look like runnin' out is gonna happen." Walter quit smiling. Ziggy drained his Painkiller and asked for another. Walter: "you ever hear of Ponzi?" Ziggy: "yeah, that's what those guys in New York did, right?" Walter: "exactly. We don't want no $100M Ponzi stories gettin' around about our island, do we?" Ziggy: "no mon, that would be bad." Walter: "You have no idea how bad that could be for me." They sat in silence for a minute while the driver turned toward the west end.

"Say Ziggy, would you mind if my man Victor helped you keep an eye on the books - makin' sure that you've got enough to pay back your investors and that you're getting a good margin for yourself?" "that would be... fine, Walter." "Oh, don't worry, Victor works for me, you wouldn't have to pay him, we just want to be sure that you don't get in over your head, right?" Ziggy: "Yeah, right on." Walter: "Hey Ziggy, we're not gonna mess with you. We just want to make sure that you're doin' o.k. and don't get into any trouble that could hurt us too." Ziggy: "I'm cool man." Walter: "Great. So, where you goin' now?" Ziggy: "Long Bay would be good for me." Walter: "Thought so. Victor will be in touch soon, you just be straight with him and he can help you." Ziggy: "Will do... Will do."

Charlie is paid by the cruise line to captain the launch boat, so his cash-exchange for
*Trading symbol CCC: Charlie's Cruise Credits.
blockchain credit regulation experience was much more corporate with policies, agreements and limits of liability to sign, recording of fingerprints, etc. They also had much more direct statement of penalties for fraud or unhappy guest experiences. Those policies and penalties are part of why Charlie won't establish an exchange agreement with Ziggy.

Ted is directly regulated by the Dominican Ministers of Finance, Tourism and Trade. He had a sit down meeting with each of them in their offices before he was granted a permit
*not a government endorsement, mostly just a tax on his operation. Trading symbol TCC: Ted's Caribbean Credits. Ted also got a visit from Walter who promised to help with the ministers should there ever be a problem.
to operate his cash-exchange. Charlie's cruise line considers Ted's Dominican permit and operating history good enough to allow Charlie to establish an automatic exchange agreement with Ted.

Victor's validation record

Even before Walter approached Ziggy, he had Victor start keeping a periodic proof of all the AOR blockchain records hosted by Faythe, Gene, Hans, Ziggy, Ted, Charlie and a number of other blockchains hosts around the Caribbean. Victor did this by taking a copy of all blocks published in the chains since his last proof and hashing together all of their most recent hashes, then publishing that little rolled up hash on a couple of the major worldwide accepted public blockchain records. This rolled up hash then becomes a permanent proof to the world that none of those blockchains have been altered. On rare occasion, a shady AOR operator will attempt to alter history on their hosted blockchain, and Victor's monitoring software calls them out almost immediately as having changed.

Victor developed this application into AOV, the Assign Onward Validator, providing independent validation of a large number of small blockchains. Eventually, Faythe, Gene and most other AOR blockchain hosts recognized the added value of Victor's AOV records and they configured their AOR to refer guests' AOE to Victor's AOV for additional assurance of their blockchains' integrity.

Ongoing trading

After a few years of operations, it becomes clear which businesses are stable ongoing concerns and which ones should be treated as high risk investments. The stable ones like Bob, Dave and the Rainforest tours develop relatively stable trading prices, a degree of confidence
*Of course risk always exists. Something tragic could happen to Bob, or he could just up and decide to retire, making his plate-shares worthless. People who know Bob have confidence that he would wind down his investment debt in a controlled fashion, after all he's never let it get above 250 plates, or about US$2500, so nobody should be too devastated by a collapse in Bob's curry goat market anyway.
in future returns, even for tiny concerns like Bob. Stable shares can start to be traded in a "similar to cash" fashion. Ziggy may be short on cash,
*thanks to Victor's watchful eye and Walter's persuasive mentoring, Ziggy won't use his investors' cash
but he's got EC$1000 in Ted's Credits, EC$1000 in Charlie's credits, plus he's holding 20 curry goat plates from Bob another 10 from Oscar and 6 Rainforest tours, and Ziggy might be wanting to buy an e-bike from Dave for EC$3000. Well, Dave might accept Bob's plates in lieu of EC$540, and the Rainforest tours for another EC$560, but Dave would have to be a little crazy to accept Oscar's plates at face value or anything close. So, Ziggy might get his bike from Dave for EC$1900 of Ted & Charlie's credits, plus his Bob and Rainforest shares, and within a month or two Dave should be able to recover the whole EC$3000 plus some margin from the shares he received.

One reason that everyone should be wary of Oscar's shares is that he has over-subscribed, consistently selling 20 more plates per month to unsuspecting investors than he redeems, so after a few years his float is up over 500 plates.
*Oscar thought he might turn his plates into a currency of exchange and make some money off of transaction fees, but without a reliable underlying income stream like Bob, or a reliable backing store of value like Ziggy and Victor, nobody in their right mind would use Oscar's shares as a trading medium. Even the Assign Onward apps can all easily spot OGP (Oscar's Goat Plates) as an issue in distress, something to sell if you have it, and not buy if you don't.
If you're an unfortunate investor left holding one of Oscar's plates, first you're going to have a hard time finding a cash exchange agent like Charlie or Ted who will even touch Oscar's shares. The word is out on Oscar's plate-shares, but somehow he and Ziggy still find new buyers every so often. Ziggy might do a quick exchange of cash for an Oscar share, when he's sold all that he's holding already, and when Oscar is in a mood to accept plate-shares instead of cash, but knowing Ziggy you'll be getting far below market rate for the share. So, those 500 plates sit advertised on Oscar's blockchain with an ask price around EC$9 per plate, a bid near zero, and nobody with any sense will touch them. Luckily when an issue is this distressed, it's easy for the AOE software to recognize and simply filter it off of normal listings, saving the guests from having to think about such things while they enjoy the island life. Oscar might try a re-issue of a fresh blockchain, abandoning his previous investors, but this is where some identity and history is worth publishing as a business, and checking as a potential investor. Of course, some day Oscar might turn over a new leaf and start running an upstanding business, and a bad blockchain experiment for a couple thousand dollars shouldn't be a black mark for life any more than a bankruptcy - everybody deserves another chance to prove they're ready to do right by other people. Still, people should rightly be slow to trust any new offerings from Oscar until he's established some history of doing good.

After a couple of years, and a couple of cellphones that got trashed in the rain, Bob thought he might want to switch back to a cash business. He tried increasing his ask price for BCG up to EC$34 per plate, and sure enough the investors mostly sold their BCG holdings without rebuying more - so Bob had a lean stretch while he was missing the investor income stream. But worse, Bob also noticed that his guest priced sales volume started dropping off too. Seems that Ted and Ziggy have invested in several local restaurants and when they weren't making a good cut from Bob's plates, they started recommending other places to eat. Charlie didn't care about the commissions, but Charlie's ship left for Europe in April and won't be back until November. So, Bob decided to drop down his ask price until Ted and Ziggy started buying in again, seems like around about EC$25 he gets investor interest - same price he used to charge cash, go figure. Bob also thought about just selling his BCG direct to guests through AOI/AOE without investors holding them, he could take any of the common cash-equivalent credits and exchange them for cash with Ziggy every week or so, or Charlie when Charlie is around, but he'd still be losing the promotional end of things, so he keeps his AOI tweaked to allow investors to make a little margin off his BCG, and he gets to enjoy their cash while they do so.

After the initial excitement died down, and buy & sell quants like Quincy got into the game, investor margins started dropping. Ziggy had accumulated almost EC$1.5M in the bank from investors eager to earn his promised 10% annual ROI, and the more investors he got, the harder it got to support the 10% ROI from his other operations. Finally, Victor laid it all out for him and Ziggy agreed that he was going to back off his ROI from 10% down to 3%
*Still better than the bank pays, but not by much.
in incremental steps over the coming year. That gives Ziggy an additional EC$105K per year in his pocket, and he won't be missing the liability of any ZIC investors who decide to pull out. Walter advises Ziggy to pre-announce 90 days before starting the change, which Ziggy does, and while his ZIC investors are disappointed that the ride is ending, they are also all very grateful to Ziggy for being up front and reliable about everything. Surprisingly professional of him, they say.

Limiting access

Quincy is a retired quantitative analyst living in a beachside villa in Quintana Roo. He, and many more like him, tried playing the market in all the island issues. Originally, Gene had the AOR blockchain servers configured wide open to share any and all block history with anyone who wanted to see it - which enabled AOE users to freely investigate what they were getting into before purchasing any island issues. Eventually, all the speculator requests for data became too much and Gene switched on pico-payment requirements for blockchain queries. What that did was require a tiny payment of 1/1012 of a credit in an issue to obtain current or historical blockchain information about the issue. Say you're holding 2 BCG - if you're requesting current BGC information from Faythe, you would typically establish a BCG query account with Faythe, depositing one one millionth of a BCG which then entitles you to download up to one million
*at a cost of a pico (10-12) credit per block downloaded. Any normal AOE user should never need to download more than a few blocks so establishing the account is a one-time operation for them.
BCG block records. If you're not holding any BCG, you'll need to buy that one-millionth of a share of BCG from Faythe using some other issue that she recognizes. Typically, when an AOE first engages with Faythe's server, it will make a single transaction that buys the one-millionth unit in every issue hosted by Faythe.
*As an absurd hypothetical case, if Faythe hosted 1000 issues, and each issue traded for an average of $100 per unit, then the cost to sign on to Faythe's server for basically unlimited access would be $0.10. Of course, in reality, Faythe might host 100 issues traded for an average of US$20 each, so the real price was far less than a penny.


This initial requirement to have an island issue before accessing island issue information cut down considerably on the worldwide traffic to their servers, but over time a community of quants and wanna-be quants built up who passed the trivial hurdle and started abusing the server bandwidth again. To deal with them, Gene and many other Caribbean AOR blockchain serving hosts got together and established a higher charge rate (Needs development:) where new guests could sign on to the broader Caribbean network of AOR servers for a one time fee of EC$1 which would give them enough microshares in every issue on every server to cover the blockchain query needs of 99.9% of typical guests,
*guests using AOE have no need to query historical information, they will just be querying current information for the issues of interest to them, typically ones with AOS vendors located near them or on their planned route.
and the 1/1000 who use more server bandwidth can purchase what they need in additional EC$1 bundles. For locals who use AOE and AOI extensively and vendors who use AOS longer term, the pico-payment level was increased to a level where EC$30 worth of shares will meet the needs of 99.9% of them for a year. The quants who "tread lightly" on the servers should also be able to get by for about EC$30 per year, but the hacks who continuously re-query servers for all their block records will burn through query fees much faster. This not only slowed down the frivolous requests for blockchain history, it also provided more focused unique identifiers of the players requesting the information. Whereas locals would tend to focus in a few issues, the quants tended to stay up-to-the-minute on a broader market bundle, which would cost proportionally more, closer to EC$250 per year for the bigger players. (Simulation of how this affects small issues like BCG will be interesting.)

A Web of Trust

Trust started with Bob trusting that people wouldn't hassle him too much about his blockchain and the promises he made on it. Then Eddie got together with Charlie and they figured that they could market 100 of Bob's plates for at least EC$2000, probably more, so they fronted the money to get it started. Bob, Charlie and Eddie all put some trust into Gene and Faythe to keep the servers running reliably.
*In reality, Assign Onward servers are just little computers, pretty much all you have to do is keep them powered and connected to the internet, but even that can be a challenge for many people.
The web really started growing when Charlie and Ted setup their exchange agreement, so all the issues that Charlie and Ted deal in could be exchanged, Dave often accepted "Ted Credits" in exchange for bike rentals. Charlie and Ted never did fully connect with Ziggy, but Ziggy did tie into Bob, Dave and Oscar's shares, so once in awhile a guest with some leftover "Ziggy credits" would use them to buy some other things that Ted deals in using Bob's curry goat plates as an exchange medium. Rita's mango options never really took off, and Oscar's goat shares almost got him and Ziggy hauled into court, but that didn't really hurt any of the trust developed between the reliable players.

The local tax authorities like the transparency of blockchains so much that they offer a big tax discount to vendors who report their income via blockchains.
*Looking at it another way: the tax man knows that cash businesses tend to forget quite a bit of income when it comes time to pay the taxes, so rates for mostly cash businesses are a bit higher to make up for this common forgetfulness.
They've had a bit of a problem with some scammers selling worthless credits to guests fresh off the boat, so they instituted some licensing and regulation on cash-exchange blockchain operators like Charlie and Ziggy,
*Ted operates out of a different jurisdiction that has its own licensing requirements, but Ted's credits are accepted by AOS vendors (the ones who have chosen to trust Ted) all over the islands.

Victor still checks up on Ziggy informally, maybe a little less often now that the government is checking up on him too.
but there has been relatively little trouble with vendors like Bob, Dave and Rita, so the only regulation that has been imposed on vendors working with blockchain systems so far has been to complete a 1 hour course taught by Gene at the community college - even Oscar did that and passed.
*Oscar was a problem vendor even before blockchain, if anything the number of guests reading reviews on AOE has encouraged Oscar to clean up his act, a little.


As the web grows, trustworthy partners form stronger ties and benefit each other with favorable margins. New players can earn trust and slowly work their way in, but nobody should be trusting an unknown player with more than they are willing to lose. With all the records out in the open, rates and patterns of default start to emerge which can allow larger investors to offer cash to the market without knowing the players first-hand, instead relying on statistical rates of default and return to guide their investments.
*The same type of "rates of default" guide institutional investment today, with much less hard data about past performance.