Blockchain Mutual Credit

Blockchain mutual credit is a form of money in which participants in a network create credit for each other as they trade, with balances recorded on a blockchain or other distributed ledger. When one member sells goods to another, the seller's account goes up and the buyer's goes down by the same amount, so all balances sum to zero and no coin needs to be issued in advance. Members usually have credit limits to control risk. The idea comes from long-standing mutual credit and barter systems, such as business trade exchanges and Switzerland's WIR Bank, founded in 1934. Blockchain projects use smart contracts to automate limits and settlement. Challenges include members who default, small networks and weak demand. Also see Barter, Credit and Netting.