Grassroots Bonds: A Grassroots Foundation for Market Liquidity

2026-03-13

AI Summary

This study addresses the limitation of existing grassroots cryptocurrencies, whose 1:1 redeemability hinders interest-bearing credit and constrains the formation of local liquidity. To overcome this, the paper proposes a novel grassroots bond mechanism that reconfigures grassroots cash into time-bound, interest-bearing bonds. By unifying credit, loans, and options under a digital social contract, the framework enables a decentralized, low-transaction-cost local liquidity market without intermediaries. This design represents the first extension of grassroots money into an interest-bearing asset compatible with classical liquidity ratios. A multi-agent system implementing the mechanism is deployed on mobile devices using the GLP concurrent logic programming language (implemented in Dart). Empirical validation through AI-generated village market scenarios demonstrates the feasibility and effectiveness of the proposed approach in realistic trading environments.

Technology Category

• Multiagent Systems: Mechanism Design
• Game Theory and Economic Paradigms: Mechanism Design
• Natural Language Processing: Language Grounding & Multi-modal NLP

Application Category

• Economics, Online Markets and Human Computation: Economic aspects of blockchain and cryptocurrencies
• Security and Privacy: Cryptocurrency and smart contracts
• Systems and Infrastructure for Web, Mobile and WoT: Decentralized Web and Fediverse systems

Abstract

Global cryptocurrencies are unbacked and have high transaction cost incurred by global consensus. In contrast, grassroots cryptocurrencies are backed by the goods and services of their issuers -- any person, natural or legal -- and have no transaction cost beyond operating a smartphone. Liquidity in grassroots cryptocurrencies arises from mutual credit via coin exchange among issuers. However, as grassroots coins are redeemable 1-for-1 against any other grassroots coin, the credit-forming exchange must also be 1-for-1, lest prompt redemption after exchange would leave the parties with undue profit or loss. Thus, grassroots coins are incongruent with liquidity through interest-bearing credit. Here we introduce grassroots bonds, which extend grassroots coins with a maturity date, reframing grassroots coins -- cash -- as mature grassroots bonds. Bond redemption generalises coin redemption, allowing the lending of liquid coins in exchange for interest-bearing future-maturity bonds. We show that digital social contracts -- voluntary agreements among persons, specified, fulfilled, and enforced digitally -- can express the full gamut of financial instruments as the voluntary swap of grassroots bonds, including credit lines, loans, sale of debt, forward contracts, options, and escrow-based instruments, and that classical liquidity ratios are applicable just as well to grassroots bonds. The formal specification presented here was used by AI to derive a working implementation of grassroots bonds in GLP, a concurrent logic programming language implemented in Dart for smartphone deployment. The implementation is illustrated by a running multiagent village market scenario, also implemented in GLP by AI.

Problem

• grassroots cryptocurrencies
• liquidity
• interest-bearing credit
• mutual credit
• redemption

Innovation

• grassroots bonds
• digital social contracts
• mutual credit
• concurrent logic programming
• decentralized finance