Medium of Exchange

Almost all money is somebody’s promise.

A banknote, a bank deposit, a gift card, an IOU between neighbours: in each case someone has said they will pay.

This is a derivation of the smallest object that can carry a promise, and a demonstration that the rest of money is built by combining copies of it.

Today, making money is a licensed activity. The usual answers are to fix the institution, which keeps the licence, or to escape it with money fully backed by something scarce — which builds something real, and stays small, because it creates almost no money. This takes a third route: a grammar instead of a money. One object, general enough to write fiat, a bank deposit, a bill of exchange, a stablecoin and a neighbour’s word.

The object

  one object   a backing    B = (K, P, R, E)
                 K  who owes
                 P  what one unit pays
                 R  what must be handed over alongside it
                 E  who says a claim has not already been spent

  one carrier  a claim      a quantity held against a backing.
                            Bearer: whoever holds it, owns it.
  one holding  a wallet     a set of claims, plus any bare assets

  the law      nothing you owe (your written maximum) grows
               without your signature.
               nothing you hold leaves without your signature.

  asymmetry    what must accompany a claim is fixed when the backing
               is signed. what it pays may move with time.

The four fields are derived in three steps, and each step answers a failure in the one before. Out of the object and the law come some of what merchant law took five centuries to find, plus banks, market makers, credit ratings, derivatives and a private lender of last resort — each as a role anyone can take, rather than a licence somebody has to grant.

Read

Money from First Principlesthe paper Why, the derivation, the law, what emerges, and the limits. Stands alone, and locates every money you already know inside the object. There is a glossary at the end.
Constructionthe protocol Reference card, invariants, claim layer, sequencing, dishonour, threat model, build order, and every alternative refused. For building it.
Extensionsprofiles What need builds on the core: triggers, pro-rata, references, unitload, the Chaumian profile. Each with the need that summons it and the price it charges.

Build

reference-tstypescript The transparent setting: encoding, issuance, swaps, sequencing, presentation, dishonour, succession, recovery. 784 tests, one file per invariant.

npm install @mediumofexchange/reference@next

Early, and the API moves — hence the next tag. The wire format is not stable. Nothing here has been deployed, audited, or used for anything that matters.

Names

Money from First Principles is the paper, and keeps its name. An argument is cited, not versioned.
The Medium of Exchange Protocol is what Construction and Extensions define: the object, the law, and the machinery around them. This is the thing that gets built.
mediumofexchange.org is this page, with the org and the @mediumofexchange npm scope behind it.