The open currencies system (OCS)

A peer-to-peer monetary and financial system

The OCS is a free, open-source and peer-to-peer monetary and financial system. The OCS's protocols and procedures provide a universal framework through which all economically relevant financial operations can be performed. The system's core is its monetary system which in the following is be described in more detail.

An OCS currency is a financial instrument which has all of the advantages properties of fiat money (e.g. Dollar, Euro etc.), but unlike fiat money is tied to an underlying use value due to the way it is created. Most of liquidity in circulation of a classic fiat money currency is created through fractional reserve banking. Fresh liquidity is created each time a classic loan is issued by a bank to a borrower. The resulting financial obligation of the borrower is what gives value to the money "printed" by the bank. This value is ambiguous due to uncertainty regarding the economic output the borrower will have to generate to serve the debt. This creates inherent instability of a fiat money system which is partially alleviated through large scale interventions by central banks.
In the OCS on the other hand, there are no banks and there is no money lending. Instead newly created liquidity is tied to actual economic rather than financial obligations. More precisely all circulating liquidity in an OCS currency is created and eventually deleted through the following basic mechanism:

  1. An operator (e.g. an entrepreneur or producer) submits a so-called operation proposal, i.e. a request to finance a well-defined economic operation. Such an economic operation can for instance be to buy some raw materials (with the funds provided), to produce some marketable product using them and sell this product, hopefully making a profit.
  2. The proposal is reviewed by other OCS participants (so-called referees) and if the proposed operation is deemed to be likely profitable on average, it is approved. In this case an amount in this OCS currency is created, which is equal to the amount requested by the operator, and added to his or her account.
  3. The operator is now required to perform the operation that was defined in the proposal and to make sure that the final proceeds are exchanged into the same OCS currency at the best available exchange rate/price.
  4. Finally, this liquidity is deleted by the operator, thereby "closing the cycle".
According to the above all liquidity in circulation of an OCS currency is tied and backed by ongoing economic operations. This not only gives real value to a currency but also provides an invaluable advantage to the respective entrepreneur: His or her obligation is of economic nature rather than of financial. The operator is not required to return any fixed amount of currency, but to conduct a well-defined economic operation and to sell the product at the highest price available. This shifts price fluctuation risks to the "community" and protects producers from unnecessary bankruptcies.

In addition to the above the OCS supports the issuance of obligations. An OCS obligation behaves very similar to an OCS currency in that transactions and related operations can be performed in it. However, unlike a currency an obligation has a well-defined unique issuer, who can freely define the nature of the obligation when it is set up. The issuer can create units of the obligation at will, but these units go along with liabilities defined in the description of the respective obligation. This feature allows businesses to issue and distribute securitized financial paper, like bonds or participation rights, at no or very low cost.

Formally, the OCS is a voluntary community whose members interact with one another according to the rules, procedures and technical protocols defined in its constitution.