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  • Posted December 13th, 2020

    Building the Credit Commons with Mutual Credit Clubs: Matthew Slater

    Building the Credit Commons with Mutual Credit Clubs: Matthew Slater

    This is the second in a series of interviews that will accompany a book I’m writing, that will be published by Chelsea Green – an employee-owned company, and part of the new economy that the book is describing, built around a mutual credit core. Here’s more on the book deal and here’s some introductory information about mutual credit.

    Matthew Slater wrote the Credit Commons white paper – an idea for federating mutual credit networks to create a new global, moneyless trading system He’s part of a group called Mutual Credit Services (MCS), formed to build this federation (new website coming soon).

    Hi Matthew – your Credit Commons idea was one of the things that turned me on to mutual credit in the first place. We’ve been talking about mutual credit on Lowimpact for a while now – the position is that humanity is on a very destructive path, which will be impossible to get off as long as we have this money system. I’d like to ask you some questions about the Credit Commons idea, but I also want to make sure the answers make sense to complete beginners. So if your answers are too complicated, I want to try to break them down and simplify them.

    First – why are you doing this? You have a huge knowledge of the finance sector and of money, you’re a coder, you’re very clever. You could have got a job in the city, and made loads of money. Why did you do this instead?

    I never fitted well into an institutional context, and a few times I tried to have a proper job, it didn’t make me happy and it didn’t turn out too well. So it was easy for me to commit my life to do something more meaningful. That’s the problem with ‘proper jobs’ – they’re rarely meaningful in any way that I’d understand. The reason I got into alternative money systems was because, certainly 12 years ago, hardly anyone else seemed to be doing it. There wasn’t any decent software around, and it looked like a niche I could make my own – which I have done.

    And what are you doing, exactly? (remember, for non-technical, complete beginners)

    My responsibility for much of the last 12 years is to build and run software for a large number of French-speaking complementary currencies – so LETS and a few timebanks – very local projects – most of them really small, less than 100 people. So I’m maintaining 300+ instances of my software for them. I’ve had more time to be able to devote to working out how all of those separate systems could trade with each other while maintaining their own sovereignty and independence – which tends to be important to those kinds of groups. They do that not by issuing a new currency, but by keeping a record of how much each group owes each other group. That’s what the Credit Commons protocol is about.

    And how successful have you been? Does it work?

    Well, I’ve built a reference implementation of the Credit Commons, and that works.

    What does that mean?

    It’s when you define the language, but then you have to write some software to speak the language. In the age of the internet, we define the language of the protocol first. The thing that connects everything together is more important than the actual software. Then you need some software to speak the language.

    Does all this allow different groups to trade with each other?

    I haven’t implemented it yet for all those groups I’m supporting. So it works in tests and it works for MCS, but it’s going to take a bit more plugging in and re-wiring to get all those groups talking to each other, and then to encourage other groups that don’t run my software to plug into it as well.

    So MCS is helping build mutual credit clubs. How do they relate to what you’re doing. How do they dovetail?

    A mutual credit club is a group of people trading together, keeping accounts using mutual credit, and I’ve written the software for that. So MCS has built an app so that the members of the MCS team can keep accounts among themselves, especially how much time they’ve given. They’re using my ledger software for that. So the hope of the project is that they’ll encourage lots of other groups to practice in this way.

    So as I understand it, MCS have produced the ‘front end’ to allow people to trade in their groups, and you’ve produced the underlying ‘back end’ that allows groups to intertrade. Is that right?


    Can other types of alternative exchange systems be part of the Credit Commons too? Or will they be in competition?

    Depends what level you mean. Any group using any kind of currency could exchange with any other group using any other kind of currency, as long as the relationship between them is a mutual credit relationship, because that’s what the protocol defines. So it doesn’t matter if you’re a timebank or a Transition currency, or a LETS or a cryptocurrency – you can trade with other groups of different types, using the Credit Commons protocol, as long as you can define and agree an exchange rate.

    So it would work with existing mutual credit systems and existing LETS systems, cryptocurrencies and timebanks?

    Yes. Although there’s plenty of competition for exchanges – i.e. systems that help different currencies to trade with each other. There are other ideas out there.

    Give me some examples?

    The closest competitor is Ripple – what I call mesh credit. There are several ideas about how best to do that. A popular one at the moment is called Trustlines, which works on the Ethereum blockchain. And it can work between individuals or it can work between groups. It just says that you have a load of accounts, and they define explicitly how much they trust each other.

    So the Ripple system wouldn’t dovetail with the Credit Commons?

    It would fit into the Credit Commons, but also, depending on what level you use it on, it could compete with the Credit Commons as well. You don’t want to have different infrastructures trying to do the same thing at the same level. That’s wasteful.

    Why do you think the Credit Commons approach will win, if there’s competition?

    I’ve identified a problem with the scalability of mesh credit, which is quite important, looking at world history. In a mesh credit system, there’s no way to get back to balance. If you have a lot more trade in one direction than the other direction, you build up a debt, and in mesh credit, there are no groups that can negotiate with each other to manage the debt.

    So it’s just a mesh of individual nodes – it’s not arranged into groups, based on trust?

    That’s right. That’s why the Credit Commons is a ‘tree’, in opposition to the idea of a mesh. A tree is more structured, and you can always go down the tree, to have something in common with someone else.

    Where have you got to? What else needs to be done? Could you do with some help? What kind of help?

    Well, a lot of software needs writing. A lot of that is augmenting software that I’ve written already. But I guess what’s really lacking at the moment is all the other kinds of complementary currencies, particularly all the LETS and timebank networks, coming to join in. A lot of them don’t have budgets at all. A lot of the complementary currency software is run by volunteers. So they don’t have a lot of capacity to do new and interesting things. I’ve been talking to some of those groups for a long time, and there are lots of other groups that I know less about and have less contact with, and reaching out to them to say ‘look, this is strategically valuable, that we can join all of these systems together. You can’t compete with the global economic system if you can only trade with a few of your friends.’

    So you could do with some help from coders, but there’s communication work that anyone could do?

    MCS is helping a lot, because they’re building a business around the idea, and they’re also finding new use-cases (projects), and accessing networks that I’m not close to at all. So people who want to contribute could go straight to MCS rather than to me directly.

    If clubs federate to the national level, the credit units can be valued in the national currency, for ease of understanding. If it grows to cover the world, will units still be priced in national currencies? But exchange rates change between currencies. How will that be taken into consideration? Could the credit units be valued in dollars in a global system? (it’s the global reserve currency, for the time being at least.)

    If we talk about it covering the world, let’s imagine that national currencies continue much as they are today. It’s possible in the Credit Commons to set an exchange rate between any two countries’ currencies – but you might not want to keep it updated every nanosecond. That would be against the spirit of the thing. The reason that you have nanosecond trades is mostly for speculation, and to allow people to make tiny margins.

    But would it all be automated?

    We’ll try to automate as much as possible, yes. The exchange rates could be automated, but they’d be automated according to an agreed algorithm. That’s the important thing – the exchange rates are ultimately negotiated, not like the crest of a wave on a market, that just happens.

    OK. I don’t know how you’d do that, but I trust you that it can be done. Could there be some sort of currency speculation? I’m guessing it wouldn’t be worth it with account positive and negative limits?

    Insofar as there is exchange rate variation, you could have currency speculation, and in practice, there would be a need to change exchange rates, because groups are not always going to get the right level, or the economies might change, and that’s a very important way to help restore and maintain the balance of trade. We’d keep exchange rate changes to a minimum.

    National currencies might collapse, or there might be hyperinflation. In time, will the unit of exchange be standard across the world, rather than based on national currencies?

    That’s a political question that I couldn’t answer. It depends on the evolution of things. It’s a possibility. There are great injustices in having different exchange rates, but there are also benefits as well, in terms of allowing things to adjust and find their own level. So it’s a difficult question.

    Here’s another difficult question. So, a haircut (for example) costs more in London than it does in Nairobi. But if someone got a certain amount of credit for cutting someone’s hair in Nairobi, then traveled to London, would they be able to use those credits to get a haircut in London?

    That depends on the exchange rates. I’m not here to set the exchange rates. In the nearest system that exists to the Credit Commons, called Community Exchange Systems (CES), they have a system of exchange rates that into account – i.e. time and the living wage. So in that system, you should be able to translate a haircut from one country to another.

    What’s the end game? The end of money? Would you like the Credit Commons to sit alongside the existing banking and money system, or to replace it?

    I’m only capable of seeing the next step. In my ‘spare time’ I’m capable of seeing numerous end games. I imagine there’s a role for money as we know it in a future economy. But at the same time, I’d hope it was much better governed, and that there were other kinds of money. Maybe the end game is a plurality of money. One approach is to say that money should be a market, where people can choose what kind of money they use and therefore they’ll choose the best. So you have this idea of moneys competing with each other. It’s what Friedrich Hayek talked about, and a lot of the cryptocurrency people think of that as some sort of ideal.

    I guess as the Credit Commons gets bigger, tax is going to have to be payable in mutual credit. How likely do you think that will be? Can we get states on board?

    Well, complementary currencies historically have been able to engage with local governments, but only in a very limited way. So it would take some changes in the shape of the world for governments to take an interest. And also, a lot more volume would have to be going through mutual credit systems and the Credit Commons. It’s certainly possible, but the main thing that governments would have to keep in mind when they collect this tax is that mutual credit is designed to be spent locally – which is what’s happening in Preston. It’s all about spending local taxes on local businesses. It’s a good principle, but most local governments don’t do that at the moment.

    We’re talking with CLES, who take the Preston Model idea around local authorities. So – who will own the Credit Commons? How will it be governed?

    The whole point is that it’s used by the people who use it, and by each group that defines itself. So these groups are all plugging into each other. Nothing is owned by anyone who isn’t participating.

    But how will the global system be governed, if it becomes global?

    Since it’s all about how people in groups trade with each other, it will be governed by the people in groups. Maybe that sounds naive. Maybe there are always power interests that try to swoop in and take over. But there really isn’t a need for them. And there’s always a way to escape, because in the Credit Commons you can always go and form another group, and plug in somewhere else, if you don’t like the governance of the group you’re in. That’s my hope. But there are always ways to subvert power, so you have to be constantly vigilant.

    Is it a bit like the internet – you can build yourself a website, and you’re away?

    A bit like that, but bear in mind that the Internet (as the Credit Commons would) depends on large-scale hardware that’s very difficult to own.

    Because it’s distributed?

    No, because it’s expensive, and requires specialist maintenance, and it’s in the hands of a few big companies. It’s core infrastructure. With the Credit Commons, you have the core infrastructure – the fibre optics, the servers etc. – which we can’t control. But in terms of the monetary system, there isn’t any core infrastructure – there’s only the protocol, and everyone has their own bit of software, that speaks the language defined by the protocol.

    I’ll try this one more time – so there’s no need for any global governance?

    You need a top level global governance – you could call that the root node. Let’s say it’s organised geographically, by continents, and all the continents need to trade with each other, so they get together and agree an exchange rate system. That’s the global governance. It’s very light.

    Since the formation of MCS, do you think the Credit Commons has become more likely? And has it meant that your strategy has changed?

    It’s good to have someone other than just me trying to make it happen. I think that makes it much more likely. MCS has some great people in it, with different networks and different ideas to me, and I’m thrilled to see it all going on in parallel to what I’m doing.

    Are we going to be able to get this in place before ecological and societal collapse?

    Depends on when it happens. It seems unlikely. But anything we can get in place will certainly help.

    I asked this of Dil. I think you might have another perspective: Finally, would a credit commons, a mutual credit economy, have to grow forever, like the current economy does. Could it stabilise so that we can live without destroying nature?

    The size of a mutual credit economy is however much trade people want to do. There’s nothing in it that demands more trade, or says that more trade is better, or more trade is more efficient.

    And no interest.

    Interest in itself doesn’t drive growth. There could be interest, but not when it’s just for trade / exchange.

    That sounds like another big conversation. If it works, it’s going to reduce the need for banks. Do you think they’ll fight back? How? And what can we do about it?

    I’d look at the relationship between banks and cryptocurrencies to get an idea how banks might fight a propaganda war. But I think that on the whole, banks haven’t felt too threatened by cryptocurrencies. There was some maybe unnecessary propaganda against Bitcoin at first, but then they started to see that it wasn’t going to be a threat to their business model. And it hasn’t been so far. Looking at what Bitcoin could become – it’s not a payments system.

    It’s a speculation system, really.

    So the kinds of attacks I’d expect for something like this, and I’m not an expert, would be propaganda attacks – negative reviews, false stories, scare stories, emphasising things that have gone wrong – in the press.

    But if it’s a completely distributed system, without a centre, there’s nothing for them to physically attack or close down is there?

    That’s why people are bullish about distributed systems. I’m not bullish about distributed systems in an evangelical way, but I do think we need to be balanced and apply judgement on a case-by-case basis, about what things should be distributed and what centralised. Some types of centralisation is more efficient, and we shouldn’t throw that baby out with the bathwater.

    Anything else you want to say in the book? Any articles you’ve written, or any other introductory info anywhere that people could read about this (maybe with links to more in-depth info if people want to go there)?

    Yes – I’ve written an article recently – a blog post called The Mutual Credit Society.

    OK, I’ll re-blog that soon to accompany the article. Anything I’ve missed in this interview you think should be in the book?

    Well I know how to contact you if I think of anything.

    Thanks Matthew. Any questions you have for Matthew – please post them on the blog, or on YouTube – but they’ll have a better chance of being answered on the blog. This is the second in the series of interviews accompanying the book, so if you want to follow them, subscribe to the blog and / or the YouTube channel.

    The views expressed in our blog are those of the author and not necessarily lowimpact.org's


    • 1weavingtheseisles December 14th, 2020

      Hi Dave and Matthew, great work as ever, thank you.

      Matthew, could I ask you to cast your eye over the below micro-example of a mutual credit scheme that I explained to my emerging group? Please can you confirm that your ledger/software works in the way I describe, i.e. with the periodic cash clearing facility?

      Many thanks.

      Eloïse Sentito (friend of Dave’s and now in discussion with Dil, Peter Jones and Chris Cook too)

      ‘US member Hannah has listed a beautiful hat for sale at 200 McUs on the relevant platform. As a new US member, Amy has a balance of zero and no credit rating/reviews yet but she simply approaches Hannah offering her her asking price in McUs. Hannah accepts Amy’s offer (alternatively this part of the transaction could be automated just like in any e-shop, e.g. where you simply press a Paypal button to purchase) and then Hannah’s own mutual credit account is automatically credited by the software with 200 mutual credit units. There’s no risk to Hannah’s 200 McUs of Amy not being able to pay – Hannah receives them regardless.

      Amy is now 200 credits in debit. One of two ways she can clear this debit is to sell 200 McUs’ worth of her goods, skills or services to anyone within the cluster before the end of our accounting period.

      Let’s say that in the same accounting period Amy sells a story to UK member Peter for 150 McUs. Now she only owes our community pot 50 McUs, and Peter owes it 150.

      Now let’s imagine that our cluster is so small that there are only these three members. In perfect circularity, let’s say that Hannah has hired Peter to co-host a webinar on the user experience of a new network she’s creating. Hannah pays Peter 300 McUs.

      By the time the 30th of the month comes around and there are no further transactions by these members, Peter’s balance is 150 McUs in credit. Hannah’s is 100 McUs in debit, and Amy’s is 50 McUs in debit. The software calculates that the 150 owed to Peter must be paid in normal money by Hannah and Amy, where Hannah will pay him 100 pounds/dollars and Amy will pay him 50 pounds/dollars. So where our cluster has made 650 units’ worth of transaction, only 150 units of normal money have actually changed hands.

      Alternatively, had Amy not sold anything in this period, she would have to pay 200 in normal money instead of in McUs to Hannah, whose McU balance would then reflect that according to her other transactions, and that would change the netting off amounts in the above end-of-month calculation.

      As membership grows and as we each get better at judging our market and budgeting accordingly so that our sales and purchases balance at the end of each month, less and less normal money will ever change hands. Please note though that this mutual credit system is a transition model TOWARDS a moneyless marketplace – it will not be moneyless as such; we need to keep using a certain amount of normal money even here as long as the rest of the world is using normal money. As our little marketplace grows, depending on our eventual organisation structure (co-operative, with shared/rotating duties, or business, with paid roles), sellers will also need to pay transaction fees to cover admin costs. These will be below percentage that Visa, Paypal, eBay etc. charge, that is between 3% and 16% of the price of the goods/services/skills being sold.’

    • 2matslats December 16th, 2020

      Yes weavingtheseisles that’s exactly correct. Mutual credit in its simplest form doesn’t have accounting periods, but MCS is proposing them as a way to further help business cashflow.

    • 3weavingtheseisles December 21st, 2020

      Thanks very much Matthew. Eloïse

    • 4weavingtheseisles January 12th, 2021

      Hi again Matthew, Dil, Dave et al.

      In my Facebook group, ‘Towards a Moneyless Marketplace’, Peter Jones, Hannah Regier and I are discussing the nitty gritty of the banking model at play here. Please can you confirm that I’ve understood correctly when I say the following?

      ‘Essentially the cornerstones of the MCS offer are:

      1. Straddling monetary systems by using two of them (a multilateral barter system and a cash clearing system) both within and between clubs and (hopefully) other likeminded groups;

      2. Federatability between clubs and (hopefully) other likeminded groups;

      3. Software that automates all this, both within and between clubs and (hopefully) other likeminded groups.’

      I’m trying to gauge just how much banker/accountant work will be required by anyone co-ordinating a club or other group. My sense (and hope!) is that thanks to your software our network’s economy will be smoother-running and less labour-intensive than perhaps some of you anticipate: this would be because the cash clearing system will prevent trading volume variations from unbalancing the network’s economy.

      Is this correct? I know I’ve raised this a number of times now, in different ways, but I need to keep clarifying since different assumptions lead to different approaches/solutions and I don’t want to mislead my community!



    • 5Dave Darby January 14th, 2021

      Hi Eloise

      From my perspective, those 3 points are spot on. For a club of businesses trading with each other, any outstanding invoices between them could be cleared at the end of the month (or any other agreed time period), reducing the amounts of payments that need to be made. This would mean the convener receiving invoices internal to the club, and calculating balances. Then, again at an agreed time period, the balances could be brought back to zero (or to within agreed limits) with just one cash payment each.

      This should reduce cashflow problems, as well as bank charges and the need to chase invoices.

      As far as I know, this kind of trade credit club can be federated into the credit commons along with pure mutual credit clubs; and (again, as far as I know) clubs could start off as trade credit clubs (because it’s easy to understand and it can be seen as a pure business benefit), and after it’s been working for a while, and businesses get to know and trust each other, it could just become a mutual credit club. It can all be decided by the club members.

      I’ll get Dil / Matthew to confirm this, and to say something about the software.

    • 6matslats January 14th, 2021

      Hi weavingtheseisles

      The banking/accounting work should be pretty light with well designed software. The human energy of running a club should be mostly focused on the politics of ensuring balanced trade within and between the groups.

      The reduction of bank payments and of money movement in general could reduce transaction costs and hassle, depending on what payment infrastructure a business uses, but we are more focused at the moment on reductions to businesses risk which come firstly from reduced dependence on cash for settlement, and secondly from building up customers and suppliers within the network, in whose interest it is to trade with each other reliably.

      I’m not sure that the cash clearing would work between groups – it is a separate piece of infrastructure, so would have to be set up as needed.

      Hope that answers your questions.

    • 7weavingtheseisles January 26th, 2021

      Belated thank you very much Matthew and Dave (sorry, I always select ‘notify me of new comments via email’ but never receive these notifications, I should check my WordPress settings). The implementation model I’m working on is different from your small clubs model, but hopefully will harmonise nonetheless. Naturally the more work I do on it the more work it needs; the more time I put in the more time it needs, and the better it gets the scarier it gets — aaargh! However I will I hope before too much longer present some reasonably well-polished plans to you!



    • 8weavingtheseisles January 26th, 2021

      PS One of the aspects that’s terrifying me at the moment is a crucial question about our roles (and rights, and responsibilities) as, in effect, bankers (albeit in a new model of banking):

      A club convenor or equivalent (I’m seeing myself as becoming a modern market reeve) is effectively a branch bank manager; MCS could perhaps be described as a central bank (or at least as having these functions as conducted by its software). Would you agree? In which case I assume that both my business and MCS would each have our own dedicated bank accounts (with normal high street banks) in order to deal with the ‘normal’ money component of, respectively, the local community pot and the wider community clearing facility? (And/or, most terrifying of all, would MCS require a banking license?! That sounds pretty crazy; perhaps a payment system such as Paypal is a nearer equivalent to what we’re talking about, and presumably they don’t have a banking license?)

      If this seems like a nonsensical leap in the wrong direction, I might need to fill you in on all my thinking so far, in which case I’m sure we will discuss it thoroughly when I put the details of my proposal on the table. But I gather from Peter Jones that MCS is likely to be registered as a private business, in which case your thinking is probably evolving in the same direction as mine and the above banking questions will make sense! So if you’ve an in-principle short answer to the above already, then that would help me along!

      Thanks guys.

    • 9Dave Darby February 2nd, 2021


      MCS will have a bank account, but will just helping set up mutual credit clubs, and won’t need a banking licence.

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