Grassroots Currencies: Turning Mutual Trust into Liquidity (Full Version)
Global cryptocurrencies such as Bitcoin and Ether are unbacked and bear the cost of global consensus on every transaction. A grassroots coin is a claim on its issuer---any person, natural or legal, including people, communities, cooperatives, corporations, banks, municipalities and governments---who undertakes to accept their own coins for their offerings at the prices they post, and a transaction costs no more than operating a smartphone. A grassroots coin is a unit of its issuer's debt, which the issuer must redeem at par (1-for-1) against any grassroots coin they hold. Liquidity arises from mutual credit lines, formed by the voluntary swap of coins among persons who know and trust each other; coin redemption pegs mutually-liquid currencies at par and carries payments along chains of holdings. Here, we specify grassroots currencies by a grassroots social contract written in natural language (English), present its properties, and show two realisations of it: with pen-and-paper coins, and by formalising the contract and compiling it down an abstraction cascade to a working smartphone app. Grassroots currencies may thus allow local digital economies to form and grow without initial capital or external credit, harnessing mutual trust within communities into liquidity, operating solely on the networked smartphones of their members, merging gradually into a global digital economy, and helping `banking the unbanked'.