Intro to Commitment Pools

Cultivating a Service Network into a Living Garden

Imagine: 

• A system where service providers can create digital vouchers (aka gift cards) and anyone holding them can exchange them for each other and other pooled assets. 

• Each service provider makes their own digital vouchers (also called gift cards, points, IoUs or formal commitments) on Sarafu Network (an open source Celo interface). Anyone can purchase these vouchers – and even give them to others. Anyone holding them can go to those service providers and use them as payment. For instance, $10 dollars worth of vouchers could be used for $10 off a haircut

This system, called a commitment pool, allows for balanced and fair trade within a network. To create a commitment pool, curate and select vouchers from trustworthy service providers, cap the number of vouchers to ensure balance, and assign a value to these vouchers.

• Curating: You designate which service provider’s vouchers you want to give access.

• Limiting: You create a cap on the number of their vouchers that can be in the pool.

• Valuing: You value their vouchers relative to national currency (or any other metrics you like). If the vouchers are denominated in national currency already then they can all just be of equal value.

Example below:

1. Curation: Let's say you’ve given drawing rights to the pool to a salon, car repair and bakery. Each can be given a limit of $400 of their vouchers that can go into the pool. Above we can imagine that each service provider has created $400 USD worth of their own Vouchers.

2. Seed Round: Since the pool has just been created, it has nothing inside it yet. Let's say you add $600 dollars to the pool as a seed round. (You could also add your own vouchers for your own services - or any other digital asset you hold. Or a community group could all seed some of their vouchers in and collectively manage the pool)

3. Exchange in: Any of the allowed service providers can now exchange their own vouchers for anything else that is in the pool. With $600 seeded into the pool, each service provider could exchange $200 worth of their vouchers for $200 in the pool. They have now been prepaid! They got $200 dollars each and have left their vouchers (a formal commitment) to offering their services in the pool.

4. Exchange out: Remove the vouchers from the pool - by adding more dollars or your own vouchers to the pool. Now that there are hair cut vouchers in the pool/, you can remove them by adding $100 dollars (or any other accepted voucher).

5. Redemption: Use the voucher you removed as payment for services by sending it to the service provider as payment. Note that the pool holdings don’t change because of this – only that the service provider accepts back their own vouchers. (Fulfilling their commitment to provide a service)

6. 2nd Exchange in: The salon can now exchange their vouchers for the dollars in the pool once again.

7. Cross Exchange: Now let’s say the hair stylist needs some car repair. They can exchange some of their vouchers for the Car Repair Vouchers in the pool.

8. Cross Redemption: The stylist can now use their car repair Vouchers as a payment for that service.

Notes:

a. Direct Transfer: Now recall that the vouchers are transferable to anyone as a gift or payment directly without using the pool at all. (You can send them to anyone). 

b. Open Exchange In: Anyone with those specific allowed vouchers can now put in their vouchers into the pool – in order to take out an equal amount of anything else (dollars or other vouchers) that are in the pool. Note that they can only do this up to the Limit of how many of each asset are allowed into the pool.

c. Open Exchange Out: Anyone with USD can also seed or donate those into the pool or exchange their USD for any other assets in the pool.

d. Pool fees: Your pool can have fees for each exchange - keeping a small part of the incoming vouchers before exchanging. This can help to counteract expiration rates of vouchers.

This system can continue on and on. It is based on the ancient practice of rotational labor associations and predates any form of money as a recourse coordination system. Instead of seeding the pool with money, a group would seed it with their own commitments and value them based on time and effort. A member could offer their commitments for service in exchange for their neighbor’s commitments to helping them with farming or repairing their house.

Why would you create a Commitment Pool?

• Enhanced Economic Liquidity and Flexibility: Commitment pools improve liquidity and flexibility in economic transactions, allowing participants to exchange goods and services without immediate cash, adapting to changing community needs and opportunities.

• Financial Inclusivity and Support for Local Economies: By utilizing digital vouchers instead of traditional cash, commitment pools lower financial barriers for participants, particularly benefiting small service providers. This support boosts local economies by encouraging economic activities within the community.

• Community Empowerment and Mutual Support: These systems foster a culture of mutual service, reciprocity, and trust, enhancing community cohesion. Participants not only support each other's businesses but also contribute to collective resilience in facing economic challenges. Many Governance Models are possible - problems happen and a group managing a commitment pool needs to be able to make collective decisions.

• Transparency and Efficiency in Resource Utilization: The digitization of vouchers on decentralized ledgers ensures transparent transactions, building trust among users, while also leading to more efficient use of resources, reducing waste and optimizing community assets.

• Innovation and Sustainability: Commitment pools encourage participants to think creatively about economic solutions and promote sustainable practices by reducing dependency on external economic systems and focusing on local resources and services.

What would you want in your pool?