[PIG] Kaifairco: Towards dismantling the privacy-coordination dilemma with mutual credit and credit clearing

Team member names

Ajinkya Kulkarni
David Dashyan

Short summary of your improvement idea:

The dominant modern technological paradigm posits that there must be a significant compromise in privacy to achieve sufficient levels of coordination. The threat of losing autonomy over one’s data disincentives participation in coordination protocols. We want to use advances in applied cryptography to mitigate this threat, allowing participants to reap the benefits of coordination without the looming fear of surveillance. Community credit protocols are especially vulnerable to surveillance, and would serve as an interesting domain to develop tools that enable large-scale coordination without unnecessary sacrifices on privacy.

What is the existing target protocol you are hoping to improve or enhance?

We are researching oblivious distributed solving protocols with applications in mutual credit, credit clearing and trust networks. Such protocols involve data of several participants, with each participant only having access to data that is relevant to them, with the caveat that the protocol is actually useful when computation is done over data that not every user involved has access to.

Multilateral trade credit set-off (MTCS) is a specific kind of community credit protocol which seeks to enable liquidity saving by clearing cycles in credit graphs in closed communities.

For example, in the credit graph below, the cycle v2, v3, v5 has a setoff of 1 unit. When this cycle is cleared v2 only owes v3 1 unit as opposed to 2 before the clearing. Now, there is cycle v1, v2, v3, v4, v0 which has a setoff of 1 unit. After this cycle is cleared, nobody owes anyone anything.

image source

It is easy to see that a 100% setoff rate over a reasonable period of time essentially eliminates the need for liquidity, effectively removing the need for centralized money-issuing authorities.

What is the core idea or insight about potential improvement you want to pursue?

MTCS has previously been deployed in a centralized client-server architecture. Not only does this burden the service provider and puts network participants at risk of surveillance, but it is a single point of failure.

Recent advances in zero-knowledge cryptography enable public verification of computation results without revealing the data itself to a third party.

What is your discovery methodology for investigating the current state of the target protocol?

We base our analysis on peer-reviewed academic research on credit protocols, particularly the seminal paper by Fleischman et al. as well as pioneering projects that have implemented large scale credit clearing projects that have been operating in Sardinia, Yugoslavia and more recently in Slovenia.

To the best of our knowledge, no privacy-preserving credit clearing protocols have been deployed.

In what form will you prototype your improvement idea?

We will publish the code under a permissive license, alongside benchmarks and documentation.

How will you field-test your improvement idea?

There are several publicly available datasets that have been collected during local currency and credit pilots over the years. We can utilize those to test the performance of the implemented components on real world data.

Who will be able to judge the quality of your output? Ideally name a few suitable judges.

Experts with relevant domain knowledge that includes cryptography and distributed systems researchers and members of collaborative finance community.

How will you publish and evangelize your improvement idea?

We will publish blogposts highlighting our key contributions, benchmarks, plans for further improvements. We are part of a thriving Collaborative Finance community that have a keen interest in building privacy-preserving credit protocols and these contributions would be of great relevance to them.

What is the success vision for your idea?

Technical success criteria:

  • Benchmarking prototype showcasing the methods to publish verifiable claims about graph properties.
  • We estimate that in the duration of Summer of Protocols we would be able to complete the public verification with hidden input data module.
  • Documenting the findings in forms of project docs and blogposts.
  • Bonus goal on implementation side
    • research and prototype a module for solver side confidential computing

Long-term vision:

  • Successful adoption by communities of individuals and SMEs

Credit clearance could fundamentally change how people view debt and obligations, while also generating liquidity regularly and in periods of crisis. This would shift the conversation from “liquidity injections” to “liquidity savings”, leveraging payment graphs and cryptography as the building blocks for the future of money.