Stop The Power: How to Do Business Without Banks

By raincoaster on August 4, 2014 • ( 4 )

Without money we’d all be rich

Today we welcome a repost of a very interesting guide to going off the Big Bank Grid thanks to our friend AnonyOdinn. Could this be the solution to transaction stacking, conspiracy, and endless fees for using your own money? We shall see…

Here we start with a very simple premise: Let’s do business without the banks involved. To do this, software possibilities are evaluated here on several criteria:

Does it exist? (If it doesn’t exist or hasn’t been released in any way yet, it won’t be featured here.)
Are there simple instructions for how to ‘build,’ install, and use it? (If it’s not clear to me how to use it, that will sure limit its use – to make adoption widespread, it’s got to be easy. I want to be able to go right to where it is, install, and be able to start using it.)
Is it open source? (We need to be able to see the code that it is based on, which must be freely available.)
Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models? (It must not be reliant upon a website or someone’s servers, as these could limit or censor transactions, be shut down, and/or impose various unwanted fees and charges.)
Can it be integrated into services and sites that I already use, and / or work with currencies that I already use, or, does it involve the use or development of a ‘community’ or ‘local’ currency?
Does it “work well with others” (is it inter-operable with other similar systems)?

These are the basic criteria, but some remarks will be added to note if the systems covered below offer any privacy or anonymity, or whether that is absent in the system at this time.

“do you know what your money is up to?”

The idea here is to provide a basic starting point for software resources that enable communities and societies to completely depart from the bank-based model of finance. To be able to understand or use different types of currencies, such as bitcoin and bytecoin, is important. But without means for dis-intermediation – that is, if you have no way to trade without banks and governments being involved in various steps of the process – then your hands are tied. This post is to help loosen the ties that are binding us to centralized systems of commerce which often have made it nearly impossible to divest our resources from activities that we do not support, which banks and governments nonetheless engage in without our consent. Consent is important in whatever we do, and systems of finance and business should be no different.

Here, distinct systems are evaluated briefly:

OpenBazaar
Mastercoin Decentralized Exchange
Counterparty
Ethereum
Cloakcoin (Onemarket)
Hyperledger
BitXBay
NightTrader and BlackHalo
Banco Palmas
Bangla-Pesa
Community Exchange System

OpenBazaar

1. Does it exist?

Yes.

2. Are there simple instructions for how to ‘build,’ install, and use it?

The answer to this is yes as well. You can take it for a test drive without installing anything. Or, you can install it by following the OpenBazaar instructions, which are pretty clear.

3. Is it open source?

Yes.

4. Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models?

OpenBazaar is decentralized to the extent that each person who installs it will serve as a node. The more nodes there are in the network, the greater the decentralization effect becomes with this tool. It does not rely upon a website nor upon a system in which your data lives on someone’s centralized servers. It offers multiple possibilities, such as service contracts and a distributed currency exchange. It will reduce barriers to entry as compared to status-quo web-based models, as fees and charges would only be those that are inherent to the currency system you are using in tandem with your use of OpenBazaar. It also offers a decentralized reputation system.

5. Can it be integrated into services and sites that I already use, and / or work with currencies that I already use, or, does it involve the use or development of a ‘community’ or ‘local’ currency?

OpenBazaar will be able to be used with the Bitcoin OTC web-of-trust (although the OpenBazaar developers do not recommend it at this time) and with use of bitcoin (as a currency). It is also being designed for exchange between one kind of cryptocurrency and another, and also will be able to accomodate exchanges between decentralized cryptocurrency and fiat (centralized currency), as shown here, without the involvement of any bank or other institution. It may also accomodate trade of local currencies for other, more widely accepted currencies, although the system’s full capabilities have not yet been explored (as it is currently in ‘alpha’ and is undergoing testing).

6. Does it “work well with others?”

OpenBazaar is still in ‘test mode’ at this time, though it is anticipated that it will have a high degree of inter-operability.

privacy / anonymity: Decentralized identity system does not provide anonymity, but provides options for users who want a high degree of privacy regardless of transaction type.

Mastercoin Decentralized Exchange

1. Does it exist?

Yes, and it is operational ~ although it is undergoing testing, and the developers recommend only using small amounts at this time for test transactions on the exchange.

2. Are there simple instructions for how to ‘build,’ install, and use it?

Yes, the instructions are very simple.

3. Is it open source?

Yes.

4. Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models?

It is decentralized to the extent that its users install the Masterchest wallet (or a similar wallet for the project which can be installed on your computer), but if users choose web-based wallets predominantly, the project will not be so decentralized. It isn’t available for all operating systems – read the requirements carefully. It’s currently described as “very, very experimental” by its developers, so in these early stages, proceed with caution. A forum for technical questions is available, as well as a tutorial on how to decide what wallet you’d like to try out.

If you use bitcoin, your Mastercoin address will be the same as your bitcoin address. However, the process of installation involves sending any available bitcoin you have in bitcoin-qt reference client to your Mastercoin address. It doesn’t presently work with other currencies (such as community or local currencies).

6. Does it “work well with others?”

Presently, this question is difficult to answer. The project holds promise to work well with others, and there are signs that there may be a collaboration between the Mastercoin Decentralized Exchange and the Ethereum project.

privacy / anonymity: Does not offer anonymity, and divulges a fair amount of information ~ like most bitcoin transactions, isn’t private. This may change at the end of 2014 (when Zerocash, an anonymity project not related to Mastercoin, is released), but the effect of Zerocash release on Mastercoin privacy post-2014 is not known at this time.

Counterparty

1. Does it exist?

Yes.

2. Are there simple instructions for how to ‘build,’ install, and use it?

Yes, there are simple instructions that would introduce anyone to it, slightly more detailed instructions that most people with a little knowledge can handle, as well as even more detailed instructions (covering Windows, Linux, and Mac / OSX) for those who are more technical. As an added bonus, this project actually works!

3. Is it open source?

Yes.

4. Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models?

Counterparty is decentralized and various projects have already launched based on it, including Permacredits, Swarm, and Tatianacoin (full list here). It takes some of the legwork out of launching a project that involves finances in a nearly unlimited amount of ways that one could imagine. Not requiring a website to operate, the decentralization effect will be greater to the extent that more people build it from source or install a client on their computers instead of using a web wallet.

The potential for Counterparty to be integrated into various sites and services (any that you can think of, really) is quite strong. While the developers have issued the typical cautionary statements (the kind you’d hear if you are walking around a construction site), the fact remains that Counterparty has an API that anyone who manages a website or is an administrator for a major site (such as Etsy, just as an example) should really check out. In their words, this is “a full-fledged JSON RPC 2.0-based API, which allows third-party applications to perform functions on the Counterparty network without having to deal with the low‐level details of the protocol such as transaction encoding and state management.” In other words, the answer to question 5 for Counterparty, is yes.

6. Does it “work well with others?”

Counterparty is designed to serve the needs of creative whims of any community or project authors. I’ll say the answer to this one is yes.

privacy / anonymity: This will differ depending on the projects that are built using Counterparty. Each project will have different features and aspects, and some will offer greater privacy, with others offering less.

Ethereum

1. Does it exist?

Yes.

2. Are there simple instructions for how to ‘build,’ install, and use it?

The best way to answer this question is to look at the Ethereum ‘Readme’ document which has instructions for installation on Linux systems. It’s simple and straightforward, so the answer is yes in terms of whether there are instructions which make it easy to install. However, it’s still in testing, so right now use of it is more for those who are technically oriented and enjoy experimentation. Instructions are also available for Windows and Mac / OSX users, or for those building it from source.

3. Is it open source?

Yes.

4. Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models?

According to the Ethereum site, “Ethereum can be used to codify, decentralize, secure and trade just about anything: voting, domain names, financial exchanges, crowdfunding, company governance, contracts and agreements of most kind, intellectual property, and even smart property thanks to hardware integration. Ethereum borrows the concept of decentralized consensus that makes bitcoin so resilient, yet makes it trivial to build on its foundation.” (…) “Contracts are the main building blocks of Ethereum. A contract is a computer program that lives inside the distributed Ethereum network and has its own ether balance, memory and code. (…) Contracts are maintained by the network, without any central ownership or control.”

The basic answer to this question is yes. Ethereum hasn’t yet been released for widespread use beyond testing, but based on what we’ve seen so far, Ethereum may significantly reduce barriers to entry when compared to status-quo web-based models.

Not yet, but it is estimated that at the time when a refined version is made available sometime in Q4 2014, Ethereum would, for example, be able to empower anyone in the world (who has some programming knowledge) to codify and trade a local or community currency which would already exist, or generate a new one. At such time when large numbers of people actively use it to manage property, it has implications for ‘smart property’ such that both records and notions of ownership (via use of Ethereum) will likely change, along with decentralized management of the same.

6. Does it “work well with others?”

There is strong potential for Ethereum to have inter-operability with the Mastercoin Decentralized Exchange, and possibly with OpenBazaar as well. This remains to be seen, but the possibility exists for syntactic and semantic inter-operability with similar systems.

privacy / anonymity: It is felt that the projects built using Ethereum will be substantially different from one another in terms of the privacy or anonymity that they offer, and so the ultimate condition of privacy or anonymity in the context of Ethereum can’t be well-understood until projects begin to emerge that are based on Ethereum.

Cloakcoin and Onemarket

1. Does it exist?

Yes.

2. Are there simple instructions for how to ‘build,’ install, and use it?

Yes. The instructions may take a little time to complete, but most users will find them simple. There’s a bitcointalk forum post on it, and the website has further details and instructions.

3. Is it open source?

Yes.

4. Is it decentralized or distributed in some way, and if so, does its decentralized model reduce barriers I have to entry when compared with status-quo web-based models?

Yes, it is decentralized, and offers the possibility of peer-to-peer exchange, along with the option of converting currencies you may be using to Cloak for use in that system. According to the developers, “There will be NO centralized service for storing listings. These listings will propagate amongst the wallet holders. It will also include (a) reputation system tied to the address that wants to receive payments for goods or services. You could think of it as a decentralized ebay.”

It may not work with services and sites you already use at this time, although it is intended to work with currencies you already use, including bitcoin and other decentralized virtual currencies.

6. Does it “work well with others?”

The project has recently been re-released, so the answer to this question is not known at this time.

privacy / anonymity: Some privacy is offered by an optional tool which is offered through the project which suggests that IP addresses can be masked while using Cloakcoin. However, with the use of bitcoin in most standard applications, including transfer to the Cloak system, is not private or anonymous, although this may change in late 2014 with the entrance of the Zerocash project.

Hyperledger

This project is open source, streamlined, and simple. It is ridiculously easy to use, and its command-line interface can be installed with Rubygems by pretty much anyone. Hyperledger is “under active development,” so it’s at a stage where you could take part in helping shape what it becomes down the road. It meets the criteria of applying decentralization, facilitating integration, and “working well with others,” based on a brief initial review. If you are serious about dis-intermediation options, check out hyperledger and share your experiences with others.

BitXBay

BitXBay is a late add to the list (this post was edited on July 19, 2014 to include it). Though it has not yet been fully evaluated, it is presented here as a recent release, and due to its recent addition of a Readme and Instructions, is now being included on this list. It exists, is open source, has straightforward instructions, and is decentralized. It presents anonymity options that, due to its recent release, have not been thorougly evaluated as of the date of this post edit, but which merit exploration, as it uses Bitmessage for participants’ communication. A blogger has tested and completed a sale using BitXBay at the time of this post. Like some similar solutions, bitcoin is used for transactions in BitXBay, which implies that anonymity is unlikely to be present until either a Cryptonote-based implementation or Zerocash-based implementation is provided at some point down the road.

NightTrader and BlackHalo

NightTrader and BlackHalo are late adds to the list (post edited on July 19, 2014 to include them). These have not been evaluated as part of this post development. NightTrader is described by its developers as “an encrypted messaging system which creates a totally new system of client networks, which allows them to communicate without the use of centralized servers,” and presents by way of its Market tab, “a decentralized exchange/trading floor implemented in all Halo clients (BlackHalo and BitHalo).” It is intended to serve as “a platform for an anonymous decentralized exchange,” featuring two-step sending, multisignature wallets, and a peer-to-peer method of exchange. BlackHalo is “a smart contracting client which eliminates the middle man, or the trust you have to put in total stranger when doing transactions,” which presents the option of “micro-trading,” intended to “allow…parties to structure their trust in increments,” with other features. A whitepaper on BlackHalo describes this tool further. The developers acknowledge that they have not presented a solution that offers anonymity, and state in part of their webpage that “The only thing more anonymous than this implementation is Zero-Knowledge Proof, which is currently in development. Using zero knowledge proof, we can create coins that are perfectly anonymous. Eventually we plan on adding these special coins to the wallet.” This statement is a reference to the type of anonymity that will ultimately be offered under Zerocash, and may be an oblique reference to existing cryptonote-based coins. BlackHalo and NightTrader are in beta at the time of this post, are presented by their authors jointly (NightTrader is shown on the BlackHalo page), and are under active development.

Additional Notes Regarding Anonymity Solutions

The following notes are added here regarding anonymity solutions which may apply equally to use of various decentralized systems where transactions are to take place. (The five bullet points below may be most useful to software developers who are considering incorporating anonymity into their systems or offering anonymity as an optional feature.)

Output Distribution Obfuscation (posted July 16, 2014), by Gregory Maxwell and Andrew Poelstra. (Involves use of cryptonote-based bytecoin (BCN) ring signatures, described as a possibility for bitcoin.)
SNARK-based unlinkable transactions via Zerocash (May 29, 2014), by Zooko Wilcox-OHearn.
Zerocash model (the extended version) to be released as an altcoin, with anticipated release in November or December of 2014.
Anoncoin is working on a similar implementation to that described above, which is in testing. Some objections to Anoncoin’s approach were raised in late March 2014 by Zerocash developers, and work to improve Anoncoin is thus ongoing.
OnionShare – a system to “securely and anonymously share a file of any size,” by @micahflee.

Remember:

To be clear: If you don't have access to your own private keys, it's not a wallet. It's a bank.

— Hive (@hivewallet) July 6, 2014

Giving Protocols – Concepts for a Compassionate Economy

As has been mentioned before here, I encourage people (in particular, developers) to consider sx tools (see Donations panel) and ABIS to incorporate conceptually and directly into your cryptocurrency systems and wallets in development, to foster a greater degree of giving and a more compassionate economy.

Other Examples

Shown below are examples of other services which don’t meet criteria of being open-source and/or completely decentralized, but which merit mention because they are already in use and could potentially transform into a more decentralized model (via use of the tools described above, or others) as time goes on and thus become more prominent alternatives for more people around the globe.

Leaving your bank: Transitional and Final dis-intermediation steps

If you’re not sure how to leave your bank, and are ready to close those accounts, here’s a step-by-step guide from Transition Voice. These are the same basic steps which appeared on the original Move Your Money site (which has since been suspended, and last appeared active in June of 2014 at the time of this post – a site snapshot is provided here for reference). These steps involved moving money from large banks to small credit unions (for perspective, see also Bank Transfer Day), but in these times, we should be preparing for a more profound transition that doesn’t involve institutions. If you are looking for a resource or guide on how to exchange your centralized currency (government-issued, government and bank controlled fiat) for cryptocurrency using website-based (and high-traffic) exchanges, some recommended guides are provided here (in English, Spanish, and Italian). Additionally, you may wish to examine exchanges that don’t require verification to trade (convert) government-issued currency to cryptocurrency, in addition to any in-person trading opportunities you may find. Ultimately, however, your objective should be an eventual transition to fully decentralized systems (such as those featured in this post) which don’t rely upon websites or any institution at all.

In the near future, our only visit to a website (with respect to financial information) should be to observe how to download a wallet-based solution that enables us to manage and control all of our financial information directly within our computer, and transmitting that information in a decentralized and peer-to-peer fashion, without ever needing to access a website or walk into a building to access resources or transmit them to another person. An upcoming post will describe more in detail how common barriers to giving can be reduced or eliminated through use of exactly this sort of process.

Your Turn

Thanks for reading. Now it’s your turn: This page was just a starting point, it’s up to you to use these tools, find or build better ones, and spread the word about how to stop the power (and empower others).

~by @AnonyOdinn, co-author of abis.io

Featured image by Tobin Black on Flickr