An overview of the i-WAT technology, a peer-to-peer alternative currency system that has been proposed and implemented since 2003.

1. i-WAT — Retrospective Overview
of the Resilient Human Digital Currency
Kenji Saito
CoinPass, Inc. / Keio Research Institute at SFC
kenji@coinpass.jp / ks91@sfc.wide.ad.jp
i-WAT – Retrospective Overview – 2015-01-19 – p.1/36

2. The Economics of the Future
“The economics of the future are somewhat
different. You see, money doesn’t exist in the
24th century. . . . The acquisition of wealth is no
longer the driving force in our lives. We work to
better ourselves and the rest of humanity.”
— Capt.Jean-Luc Picard
(from “Star Trek – First Contact”)
i-WAT – Retrospective Overview – 2015-01-19 – p.2/36

3. The Economics of the Future
“The economics of the future are somewhat
different. You see, money doesn’t exist in the
24th century. . . . The acquisition of wealth is no
longer the driving force in our lives. We work to
better ourselves and the rest of humanity.”
— Capt.Jean-Luc Picard
(from “Star Trek – First Contact”)
This economics is supported by the replicator
technology
i-WAT – Retrospective Overview – 2015-01-19 – p.2/36

4. The Economics of the Future
“The economics of the future are somewhat
different. You see, money doesn’t exist in the
24th century. . . . The acquisition of wealth is no
longer the driving force in our lives. We work to
better ourselves and the rest of humanity.”
— Capt.Jean-Luc Picard
(from “Star Trek – First Contact”)
This economics is supported by the replicator
technology
If we ever need a medium of exchange in such an
economy, it would be something like i-WAT
i-WAT – Retrospective Overview – 2015-01-19 – p.2/36

5. OK, I’ve heard of i-WAT
Is it dead?
No, nobody can stop i-WAT
i-WAT – Retrospective Overview – 2015-01-19 – p.3/36

6. OK, I’ve heard of i-WAT
Is it dead?
No, nobody can stop i-WAT
It works if
There is an executable
If J2SE is available for reference impl., and
Someone has your ticket
Or if you are willing to issue one
i-WAT – Retrospective Overview – 2015-01-19 – p.3/36

7. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.4/36

8. i-WAT Overview
i-WAT (2003∼) is an Internet WAT System
i-WAT – Retrospective Overview – 2015-01-19 – p.5/36

9. i-WAT Overview
i-WAT (2003∼) is an Internet WAT System
The WAT System is a real-life complementary
currency which is decentralized and
autonomous
i-WAT – Retrospective Overview – 2015-01-19 – p.5/36

10. i-WAT Overview
i-WAT (2003∼) is an Internet WAT System
The WAT System is a real-life complementary
currency which is decentralized and
autonomous
i-WAT is a straightforward translation of the WAT
System onto the Internet
Designed specifically for digital networks
i-WAT – Retrospective Overview – 2015-01-19 – p.5/36

11. i-WAT Overview
i-WAT (2003∼) is an Internet WAT System
The WAT System is a real-life complementary
currency which is decentralized and
autonomous
i-WAT is a straightforward translation of the WAT
System onto the Internet
Designed specifically for digital networks
i-WAT requires no single central processor of
information
Can be started spontaneously by any group of
participants
i-WAT – Retrospective Overview – 2015-01-19 – p.5/36

12. The WAT System Overview
i-WAT – Retrospective Overview – 2015-01-19 – p.6/36

13. Design of “i-” Part
Electronic version of WAT tickets are transferred by
exchanging messages signed in OpenPGP
Tickets are represented in a partially signed
Canonical XML structure
Both parties of a trade need to have each other’s
valid public keys
i-WAT – Retrospective Overview – 2015-01-19 – p.7/36

14. Design of “i-” Part
Electronic version of WAT tickets are transferred by
exchanging messages signed in OpenPGP
Tickets are represented in a partially signed
Canonical XML structure
Both parties of a trade need to have each other’s
valid public keys
Drawer is responsible for guaranteeing that the
circulating ticket is not a fraud
i-WAT – Retrospective Overview – 2015-01-19 – p.7/36

15. Design of “i-” Part
Electronic version of WAT tickets are transferred by
exchanging messages signed in OpenPGP
Tickets are represented in a partially signed
Canonical XML structure
Both parties of a trade need to have each other’s
valid public keys
Drawer is responsible for guaranteeing that the
circulating ticket is not a fraud
Resilient, propagative
Can continue even when a secret key is lost or
compromised
Assists extension of the web of trust
i-WAT – Retrospective Overview – 2015-01-19 – p.7/36

16. i-WAT Protocol
i-WAT – Retrospective Overview – 2015-01-19 – p.8/36

17. i-WAT Protocol
i-WAT – Retrospective Overview – 2015-01-19 – p.8/36

18. i-WAT Protocol
i-WAT – Retrospective Overview – 2015-01-19 – p.8/36

19. Data Model
Message for transferring a ticket contains a <signed/> and <signature/>
XML-stanza pair in canonical XML format
The pair is stored in the local storage of the recipient of the message to represent
an i-WAT ticket
debtor, creditor and user attributes are PGP public key user IDs of the drawer, a
receiver and a user, respectively, which are typically their e-mail addresses
A signature is encoded in Base64
i-WAT – Retrospective Overview – 2015-01-19 – p.9/36

20. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.10/36

21. Reference Implementation
As a plug-in for an XMPP client called wija
Which has an all-inclusive GnuPG GUI front-end
and public key exchange mechanism
i-WAT – Retrospective Overview – 2015-01-19 – p.11/36

22. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.12/36

23. Safety and Risks
Safety of WAT/i-WAT is that the debt does not
disappear without redemption
i-WAT – Retrospective Overview – 2015-01-19 – p.13/36

24. Safety and Risks
Safety of WAT/i-WAT is that the debt does not
disappear without redemption
Expected cost Cn for the nth receiver by the security
rule:
Cn = (V × (1 − pn) + CTn × pn) ×
n−1
i=0
pi
where the probability for the ith participant to go
bankrupt is pi, the cost of regaining trust after going
bankrupt is CTi and the value of the ticket in
concern is V
i-WAT – Retrospective Overview – 2015-01-19 – p.13/36

25. Safety and Risks
Safety of WAT/i-WAT is that the debt does not
disappear without redemption
Expected cost Cn for the nth receiver by the security
rule:
Cn = (V × (1 − pn) + CTn × pn) ×
n−1
i=0
pi
where the probability for the ith participant to go
bankrupt is pi, the cost of regaining trust after going
bankrupt is CTi and the value of the ticket in
concern is V
Strategy
maximize n, minimize V , eliminate the ticket
i-WAT – Retrospective Overview – 2015-01-19 – p.13/36

26. Natural Reactions
Some evasive actions to minimize this cost
i-WAT – Retrospective Overview – 2015-01-19 – p.14/36

27. Natural Reactions
Some evasive actions to minimize this cost
Elimination
Always try to use a ticket the partner has
drawn (making sure that a ticket is eliminated
whenever there is a chance)
i-WAT – Retrospective Overview – 2015-01-19 – p.14/36

28. Natural Reactions
Some evasive actions to minimize this cost
Elimination
Always try to use a ticket the partner has
drawn (making sure that a ticket is eliminated
whenever there is a chance)
Stretch
Always try to receive a ticket whose chain of
endorsement is longer than those of others
(making sure that n is reasonably large)
i-WAT – Retrospective Overview – 2015-01-19 – p.14/36

29. Natural Reactions
Some evasive actions to minimize this cost
Elimination
Always try to use a ticket the partner has
drawn (making sure that a ticket is eliminated
whenever there is a chance)
Stretch
Always try to receive a ticket whose chain of
endorsement is longer than those of others
(making sure that n is reasonably large)
Matchmaking
Prefer selecting a partner from the drawers of
acquired tickets (increasing the chance of
eliminating a ticket)
i-WAT – Retrospective Overview – 2015-01-19 – p.14/36

30. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.15/36

31. NEO: New Economic Order
Design of an economy in the presence of replicators
i-WAT – Retrospective Overview – 2015-01-19 – p.16/36

32. Overview (1/3)
There are three classes of resources that can be
exchanged in the real distributed systems:
i-WAT – Retrospective Overview – 2015-01-19 – p.17/36

33. Overview (1/3)
There are three classes of resources that can be
exchanged in the real distributed systems:
Atoms
ex. physical goods such as food
i-WAT – Retrospective Overview – 2015-01-19 – p.17/36

34. Overview (1/3)
There are three classes of resources that can be
exchanged in the real distributed systems:
Atoms
ex. physical goods such as food
Bits
ex. data files
i-WAT – Retrospective Overview – 2015-01-19 – p.17/36

35. Overview (1/3)
There are three classes of resources that can be
exchanged in the real distributed systems:
Atoms
ex. physical goods such as food
Bits
ex. data files
Presences
ex1. time slots for computing resources such
as CPU, storage or bandwidth
ex2. working hours of people
i-WAT – Retrospective Overview – 2015-01-19 – p.17/36

36. Overview (2/3)
If these are equally treated as commodities, the
economy of the system is likely to collapse, because
i-WAT – Retrospective Overview – 2015-01-19 – p.18/36

37. Overview (2/3)
If these are equally treated as commodities, the
economy of the system is likely to collapse, because
Bits (data) can be reproduced at a negligibly
small cost, whereas
i-WAT – Retrospective Overview – 2015-01-19 – p.18/36

38. Overview (2/3)
If these are equally treated as commodities, the
economy of the system is likely to collapse, because
Bits (data) can be reproduced at a negligibly
small cost, whereas
Presences (time slots) cannot even be
stockpiled for future use
i-WAT – Retrospective Overview – 2015-01-19 – p.18/36

39. Overview (2/3)
If these are equally treated as commodities, the
economy of the system is likely to collapse, because
Bits (data) can be reproduced at a negligibly
small cost, whereas
Presences (time slots) cannot even be
stockpiled for future use
Producers of bits will have incomparable purchasing
power
We have clarified this point by a simulation
i-WAT – Retrospective Overview – 2015-01-19 – p.18/36

40. Overview (3/3)
We have proposed a novel way for applying the
reduction over time feature of i-WAT:
i-WAT – Retrospective Overview – 2015-01-19 – p.19/36

41. Overview (3/3)
We have proposed a novel way for applying the
reduction over time feature of i-WAT:
Bits are freely shared among participants,
whereas
i-WAT – Retrospective Overview – 2015-01-19 – p.19/36

42. Overview (3/3)
We have proposed a novel way for applying the
reduction over time feature of i-WAT:
Bits are freely shared among participants,
whereas
Their producers are supported by peers, being
given freedom to issue exchange tickets whose
values are reduced over time
i-WAT – Retrospective Overview – 2015-01-19 – p.19/36

43. Ticket Value
Value of an i-WAT ticket is expressed as a tetrad
V0, Vm, Vx, f presented by the drawer
V0 is the face value (initial value) of the ticket
Vm is the minimum value
Vx is the maximum value
f(t) is the differentiation (derivative) of a function of time F(t)
i-WAT – Retrospective Overview – 2015-01-19 – p.20/36

44. Ticket Value
Value of an i-WAT ticket is expressed as a tetrad
V0, Vm, Vx, f presented by the drawer
V0 is the face value (initial value) of the ticket
Vm is the minimum value
Vx is the maximum value
f(t) is the differentiation (derivative) of a function of time F(t)
Effective value Vt of a ticket at time t:
Vt = min(max(
t
0
f(t)dt + V0, Vm), Vx)
i-WAT – Retrospective Overview – 2015-01-19 – p.20/36

45. Ticket Value
Value of an i-WAT ticket is expressed as a tetrad
V0, Vm, Vx, f presented by the drawer
V0 is the face value (initial value) of the ticket
Vm is the minimum value
Vx is the maximum value
f(t) is the differentiation (derivative) of a function of time F(t)
Effective value Vt of a ticket at time t:
Vt = min(max(
t
0
f(t)dt + V0, Vm), Vx)
Typically, it holds that either f(t) = 0 for all t (regular
ticket), f(t) < 0 for all t (reduction ticket) or f(t) > 0
for all t (multiplication ticket)
i-WAT – Retrospective Overview – 2015-01-19 – p.20/36

46. Semantics of ROT
i-WAT – Retrospective Overview – 2015-01-19 – p.21/36

47. NEO: New Economic Order
In ROT,
i-WAT – Retrospective Overview – 2015-01-19 – p.22/36

48. NEO: New Economic Order
In ROT,
Receivers need to agree to contribute to reduce
the drawer’s debt,
But they may want to get rid of the ticket as soon
as possible
They need to know that other people are also
willing to help (likely to receive the ticket)
i-WAT – Retrospective Overview – 2015-01-19 – p.22/36

49. NEO: New Economic Order
In ROT,
Receivers need to agree to contribute to reduce
the drawer’s debt,
But they may want to get rid of the ticket as soon
as possible
They need to know that other people are also
willing to help (likely to receive the ticket)
In NEO (an application of ROT),
i-WAT – Retrospective Overview – 2015-01-19 – p.22/36

50. NEO: New Economic Order
In ROT,
Receivers need to agree to contribute to reduce
the drawer’s debt,
But they may want to get rid of the ticket as soon
as possible
They need to know that other people are also
willing to help (likely to receive the ticket)
In NEO (an application of ROT),
Participants agree that information is shared for
free,
But the providers of information are supported
by their allowance to issue reduction tickets
i-WAT – Retrospective Overview – 2015-01-19 – p.22/36

51. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.23/36

52. Post-Catastrophic Recovery
Not charity, but helping each other as peers
i-WAT – Retrospective Overview – 2015-01-19 – p.24/36

53. Helping Recovery
Rest of the World
Disaster-Affected Place
i-WAT – Retrospective Overview – 2015-01-19 – p.25/36

54. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.26/36

55. FAQ
All work presented so far were before 2008
How do we see them now?
i-WAT – Retrospective Overview – 2015-01-19 – p.27/36

56. Human Intervention
Doesn’t i-WAT require human intervention to work?
⇒ Of course, it’s a human digital currency
But automation can be pursued
Strategies are designed so that they can be
executed by software agents
Dispute resolutions can be standardized, and
also done by software
i-WAT – Retrospective Overview – 2015-01-19 – p.28/36

57. Physicality
Security rule requires that bankruptcy of a drawer is
monitored, which cannot be automated
⇒ Many smart contracts should have the same
problem
Think, for example, of the execution of a will
defined as a smart contract
i-WAT and platforms like Ethereum require true
cyber-physical environment
i-WAT – Retrospective Overview – 2015-01-19 – p.29/36

58. Fault Tolerance
Transaction depends on drawers
They determine quickness or whether transactions
are ever processed
⇒ True
There can be improvements that bring other
community members to participate in the
verification and validation processes
Still, the drawers are in the right position to make
decisions
i-WAT – Retrospective Overview – 2015-01-19 – p.30/36

59. Handling PGP Keys
Isn’t it difficult to use anyway?
⇒ Maybe
But sort of proved that usability of PGP can be
improved
We would need such tools anyway
i-WAT – Retrospective Overview – 2015-01-19 – p.31/36

60. Where We Are
Introduction of i-WAT
Reference Implementation
Safety and Risks
NEO: New Economic Order
Post-Catastrophic Recovery
FAQ
Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.32/36

61. Bibliography
i-WAT – Retrospective Overview – 2015-01-19 – p.33/36

62. Book (1)
“NEO in Wonderland”
(2009)
Genre:
“Sci-Fi Monetary Fantasy”
Digital currency that
changes money
i-WAT
Which creates a drama
Free English translation
http://grsj.jp/neo.pdf
(CC-BY-SA 3.0)
i-WAT – Retrospective Overview – 2015-01-19 – p.34/36

63. Book (2)
“The Internet Changes
‘Money’ ” (2014)
Genre:
“Short Story”
A fantasy on who Satoshi
Nakamoto is
Discussion on Bitcoin
and i-WAT
And how the Internet
changes everything
i-WAT – Retrospective Overview – 2015-01-19 – p.35/36

64. Papers
Major articles and a thesis
Kenji Saito, “Peer-to-Peer Money: Free Currency over the Internet,” LNCS,
Vol.2713, 2003
Kenji Saito, “WOT for WAT: Spinning the Web of Trust for Peer-to-Peer
Barter Relationships,” IEICE TRANSACTIONS on Communication,
Vol.E88-B, No.4, April 2005, pp.1503-1510
Kenji Saito, Eiichi Morino and Jun Murai, “Reduction Over Time to Facilitate
Peer-to-Peer Barter Relationships,” IEICE TRANSACTIONS on Information
and Systems, Vol.E89-D, No.1, January 2006, pp.181-188
Kenji Saito, “i-WAT: The Internet WAT System - An Architecture for
Maintaining Trust and Facilitating Peer-to-Peer Barter Relationships -,”
Ph.D. thesis, 2006
Kenji Saito, Eiichi Morino and Jun Murai, “Incentive-Compatibility in a
Distributed Autonomous Currency System,” LNAI, Vol.4118, 2006
Kenji Saito and Eiichi Morino, “Brighter Side of Risks in Peer-to-Peer Barter
Relationships,” Future Generation Computer Systems, Vol.26, Issue 8,
2010
i-WAT – Retrospective Overview – 2015-01-19 – p.36/36