In chapters 1-4 of this series we have shown how ReSource builds on the principles of Mutual Credit and expands them to create a decentralised, autonomous blockchain protocol that provides businesses with access to interest-free liquidity while shielding them from fiat inflation.
This traditional implementation of Mutual Credit is a powerful tool for the empowerment of SMBs and the support of collaborative, human-centric economies. However, this is not the end of the story.
At its core, Mutual Credit is a clearing and settlement engine that can be enormously beneficial in many use-cases that require the cooperation of numerous independent, and sometimes competing, actors. DeFi and the emerging DAO economy are surely among these use cases, but the same holds for more traditional industrial scenarios.
Mutual Credit clearing, in its various applications, allows large numbers of participants to collaborate, produce value together and share the fruits of their labor in proportion to their contribution. If the blockchain is the “Trust Machine”, then Mutual Credit is the Collaboration dApp, running on top of it while maximising its capabilities.
To illustrate this concept, below are two uses cases in which ReSource boosts the efficiency of various industries while introducing entirely new ways of doing business.
Telecommunication
Telecom Routing is an excellent case study, illustrating how ReSource can render an impossibly messy situation, involving various conflicting interests and nerve wrecking overhead, into one of seamless cooperation, benefiting all involved.
A cellphone user roaming through different areas in their home country and abroad will unbeknownst to them make use of the infrastructure of several different providers which route their data back and forth to ensure continuous service.
“Routing data” in this case essentially means that the user’s direct service provider needs to contact its competitors, use their infrastructure, send data from one network to the next and compensate multiple parties while doing so. This service provider, at its turn, will have to do the same for its peers, when their users roam and are in need for routing services.
These competing providers are driven to constantly buy and sell mobile minutes and data to and from their peers. This necessitates countless peer-to-peer contractual relationships between each and every one of them, with each party aspiring to pay as little as possible, while charging as much as they can get from their peers.
To facilitate these complex trades, large amounts of liquidity must be reserved and withheld from other productive endeavours, while all participants are constantly exposed to the threat of one of the parties extracting a net benefit from these mutual trades, which would result in a net cost to the rest of the network.
A mutual credit system, using mobile minutes as its unit of account, could streamline these relationships, remove friction and lower costs for all participants, including the end user, while ensuring that no one is in the position to exploit these mutual trades to their advantage. A service provider in need of mobile minutes in a specific area, would just overdraft its account, purchase minutes from one of the relevant participants, and pay back later by providing its own mobile minutes to whomever may need them the future.
As an added benefit, no cash reserves must be allocated for the purpose of purchasing mobile minutes and data - each party pays for consumed mobile minutes in mobile minutes provided to the rest of the network.
This same logic can be applied to all industries in which a fungible good is traded back and forth between different prosumers, such as the energy market, data and information markets, or even industrial and agricultural staples such as raw materials and fertiliser. Whatever the mutually traded ReSource may be, Mutual Credit ensures that it is readily available when needed and payable in kind when convenient or necessary.
Complex Supply Chain Financing
The same logic can be extended to any network of market actors that maintain complex and interdependent relationships, such as industrial verticals and entire supply chains. In such networks, value may travel up and down the supply chain until it is finally presented to the end-consumer as a finished commodity. A mutual credit based bookkeeping logic, conjoining the various participants of such a supply chain, can serve as a “railway” on which value bounces back and forth frictionlessly until it arrives at the consumer.
Such a relationship between various prosumers in a supply chain could be described as a game of “musical chairs” - the different actors create, exchange and settle mutual obligations constantly, dipping in and out of mutual debt without having to exhaust their cash reserves, but the moment the music stops, meaning a finished product has been shipped to the end consumer, some parties may be in net deficit while others may be in net surplus of units of account. A simple cash settlement between the indebted party and the holder of the surplus units will now clear all mutual obligations of the entire network.
If the entire supply chain needs external liquidity to kickstart production, this “game of musical chairs” can be used to significantly simplify otherwise complex deep tier supply chain financing programs. In such a case, an external creditor would join the network and commit to sell and buy the used units of account against an external currency, such as fiat or crypto.
In this case the creditor would function more as a market maker who buys at a discount and sells at a premium. This way supply chain participants with a surplus of internal units of account could swap them for fiat, BTC or ETH and use them to access goods and services external to the trading network. Participants with trade deficits on the other hand would have to use fiat or crypto to purchase units of account if they can’t settle their debts within the trading network.
This way credit would be made available to the entire supply chain, used only by whom and as far as necessary, thus reducing the cumulative cost of credit significantly.
If you want to learn more about the different use cases for the ReSource Protocol, or have ideas of your own -
Your friends at ReSource.