Why Trust Matters

Let’s dig into Rya’s most unique feature— the Trust coin.

Bitcoin’s most important quality is the fact that it is a ‘trustless system’. This enables a network of participants that may or may not be malicious to transact with one another regardless of individual intentions. This is in contrast to traditional currencies, which require users to trust centralized organizations like banks and governments.

I think most of us remember the feeling we had after buying or mining our first Bitcoin. The realization that as long as you hold on to your private key, you are in complete and total control of your money. It’s the eureka moment in which many new users begin to understand the true power of decentralization.

Yet, there are other elements at play in real economies beyond just a solution for double spending; most importantly, leverage.

Leverage is one of the most important factors in the economy— businesses borrow money to grow, hedge funds stake equity and expand their portfolios, and governments create money by issuing bonds and selling them to a central bank. All of these activities require a relationship between borrower and lender, and relationships inherently require a certain level of trust.

In the Rya ecosystem leverage is expressed in the form of p2p loans and the aptly named Trust coin balance represents a user’s behavioral history. If a user returns a loan with interest the system grants them a Trust reward, if they default on a loan than the system enforces a Trust penalty.

The Trust balance replaces the role of stake (as seen in PoS) in the Proof of Trust (PoT) blockchain so accounts with higher Trust balances will be able to mint more Rya. When the economy slows, less people will borrow Rya in the p2p loan market, causing interest to rise. The system compensates by automatically distributing bigger Trust rewards to successful loaners which enables them to mint more Rya and leads to lower interest rates. This decentralized stabilization mechanism replaces the dated central bank seen in fiat economies.

Many new community members have asked how a lender can rely on the Trust balance of an account when deciding whether to provide a loan to a potential borrower. The answer to this is that they should not.

The Trust balance can be used as a rough estimation of a credit score, and could be used as a metric when determining whether to give a loan, but the intelligent lender should always evaluate the borrower using other measures as well in order to protect themselves.

The Rya project is an open source, community driven monetary system and cryptocurrency. The project was initially forked from NXT source code and then developed in a very different direction. It is published under a modified version of the Jelurida Public License. The project did not ICO and is instead distributing its initial supply to the growing community.

To read the whitepaper head over to https://ryacoin.io/. 

You can interact with the community on Telegram at https://t.me/RyaCommunity and on Twitter at https://twitter.com/RyaCommunity.

An economic overview of Rya

Hi everyone, in our second open letter to the community we want to talk a little bit about the principles which drove us to create Rya.

If you really drill down to the most basic cornerstones of Bitcoin ideology, you find the cypherpunk manifesto and the Austrian School of economics. The marriage between the cypherpunk obsession with privacy and the celebration of the individual associated with the Austrian School is natural and compelling. This, combined with lasting impressions from the 2008 financial crisis, caused millions of new converts to view Bitcoin as the cure for the weaknesses inherent in the centralized banking system.

It’s easy to forget that the economics powering Bitcoin adhere to a very extreme interpretation of Austrian economic theory — namely a fear of inflation. This is one of the reasons Bitcoin has a fixed supply of 21 million coins. In Bitcoin’s experimental infancy, this homage to gold standard probably seemed like a necessity. When something is valued at close to zero, inflation is a truly scary thing and creating a ‘hodl’ culture is beneficial for creating value.

However, the realities of cryptocurrency valuation and mainstream acceptance today open the door for a more relaxed expression of Austrian economics. Is it possible to adhere to strict cypherpunk tenets of privacy while using a monetary model that is not deflationary in nature? Perhaps even achieve a structure that is more price stable by design?

We at the Rya community believe so. The theory is simple — instead of naively fixing money supply and preventing inflation as seen in Bitcoin, the amount of Rya coins in circulation is based on credit, as seen in fiat. Unlike fiat however, credit is determined in a decentralized way in the free P2P loan market and not manually set by a central bank.

The Rya blockchain supports 2 different coins — Rya is transact-able and Trust is static in each wallet. Each P2P loan transaction has a direct impact on the Trust balance of the wallets that engaged in the loan. If the loan was defaulted on, the Trust balances of both the lender and borrower decrease, otherwise they increase. During the min(t)ing process the Trust balance of the min(t)er’s wallet has a direct impact on the amount of new Rya coins they can create. This modification to traditional PoS is termed Proof of Trust.

The resulting monetary model has a supply which expands and contracts based on the price of money in the economy in a fully decentralized and autonomous fashion. This is a different way of interpreting Austrian economics, but nevertheless sticks to the core principle of keeping the money market competitive and out of the hands of the government.

We believe that Rya’s dynamic monetary system can coexist harmoniously alongside Bitcoin, providing a more stable medium of exchange and unit of account for everyday transactions while Bitcoin remains the ultimate store of value.

The Rya project is an open source, community driven monetary system and cryptocurrency. The project was initially forked from NXT source code and then developed in a very different direction. It is published under a modified version of the Jelurida Public License. The project did not ICO and is instead distributing its initial supply through a series of airdrops. Main net launch is planned in the coming months.

To read the whitepaper head over to https://ryacoin.io/.

You can interact with the community on Telegram at https://t.me/RyaCommunity and on Twitter at https://twitter.com/RyaCommunity.

Why Rya did not ICO — A letter to the community

The goal of this letter is not to bash ICOs in general — there are many legitimate projects out there that raised funds through ICO — but rather to share the reason an ICO did not seem appropriate for Rya. Hopefully, this will help the community better understand the long term goals of the project and how we can reach them together.

When the ambitious idea of a holistic monetary system built on blockchain was first conceived it was immediately obvious that a passionate group of ideological early adapters would be necessary in order for it to succeed.

Unlike the myriad blockchain based products out there, Rya is a true currency. This means that Rya as an organization is not trying to sell anything. It’s simply trying to introduce a better type of money to the world.

The purpose of an ICO is to raise funds from a diverse pool of investors in order to build a decentralized product. If successful, the tokens used within the product’s ecosystem will have value. But as a currency, Rya’s ecosystem is the real world, and therefore, the value of Rya coins is strongly connected to usage in the real world as a medium of exchange.

For this reason, it made more sense for us, the earliest members of the community, to focus on the code and help grow the community by distributing the coins through a series of airdrops. It felt like the best way to ensure natural growth and long term success for Rya.

As Rya comes closer to launch, the goals of the community haven’t changed at all. We are excited to see new faces take on new roles and have no doubt that they will impact the project in unexpected and positive ways.

Learn more about the Rya project and how it proposes to create a better type of money at https://ryacoin.io/

Hit up the community on telegram at https://t.me/RyaCommunity

if you have any questions and stay up to date on Twitter at https://twitter.com/RyaCommunity

A holy grail for crypto: money supply tethered to credit

I’ve been involved in the crypto space for close to 2 years now as an investor. I am an engineer in real life, so I have taken the time to get into the nitty gritty of how blockchain really works and I have a big appreciation for the conversations many developers and crypto enthusiasts have about the best ways to speed up transactions or maintain privacy.

But when I talk about crypto with friends that don’t have a technical background, they typically ask questions like: ‘how can crypto ever replace real money’. It’s a frustrating question, and one many people with experience in the crypto space have probably heard many times. My answer to them is that so called ‘real money’ is no more real than Bitcoin or any other crypto. It’s all a matter of perception, faith and adaption.

However, this answer is never good enough for people that have a background or interest in economics. This is because FIAT money like the dollar is differentiated from Bitcoin in a critical way: there is an intelligent money supply system for the dollar while Bitcoin has a naive fixed supply of 21 million coins.

Bitcoin’s fixed supply is interesting. It’s the reason many folks call Bitcoin digital gold — it’s a rare and valuable commodity that is hard to mine. One day it will be impossible to mine more of. However, this fixed supply severely limits Bitcoins utility as a medium of exchange because it lowers consumerism and investment motivation.

FIAT money supply is controlled by a regulatory body like a central bank. While no one will argue that regulators are perfect (in some countries they do an awful job and are corrupt to boot) they at least systemically introduce more money into circulation to fit the state of the economy as a function of credit. Sure, over time FIAT currency loses value, but its a decent enough store of value that you can rely on it in the short term, and it’s easy to invest your money long term to sustain growth or to use it day to day.

No crypto has so far succeeded in providing a money supply regulation solution that is tethered to credit and that is a major roadblock for widespread adaption. Lately, I have seen more projects that are trying to address the issue of money supply but my response has been generally lukewarm.

There are now projects which propose to tether supply to the dollar such as Dynamiccoin, which is antithesis to the core concepts which drive most crypto enthusiasts. After all why should we care what the dollar value is? Until just yesterday while browsing Bitcointalk.org, I had yet to see a truly promising project which tries to solve this issue.

I came across the Ryo project in the announcement forum for altcoins (https://bitcointalk.org/index.php?topic=4711929.0). The announcement post for the project talked about this exact issue, so I decided to take a closer look.

I was very pleasantly surprised. The project has a concise and well written white paper and propose to tether money supply to credit as a function of p2p loans. In essence, the project wants every person to function as a sort of mini central bank. It’s a very cool idea which seems promising in theory. The team is totally anonymous and claim to have been working on the project for a year privately. Technically, they say that their code is based off Nxt which is of course a mature project.

I will be following this project to see where it goes, as well as continuing to search for other interesting solutions to this holy grail for the crypto space.

By Brian Merkel

Why Rya?

Bitcoin has a fixed supply of 21 million coins which causes its price to go up in the long run, just like gold (HODL). This makes it an extraordinary store of value, and a less than ideal medium of exchange. But we also want to be able to use a decentralized currency for our everyday needs: buying a cup of coffee, taking a micro loan or paying for our internet bill.

Fiats monopolistic money market will obviously never be decentralized, and regulators can’t make perfect decisions all the time. They try hard (in some countries...) to make fiat a useful medium of exchange, but in the long run fiat currency tends to lose its value.

We are creating Rya to be both a stable medium of exchange and a fair store of value. The money market for Rya has a normal demand and supply curve and the rate at which money is created is dynamically adjusted to fit economic conditions. This way, we are neither limited by fixed supply nor require regulation.

Rya uses new software and has its own blockchain and wallets for pc/mac/mobile. Nxt’s source code and Proof of Stake model had a big influence on Rya (especially the underlying blockchain tech). We will have a small premine which will consist of a percentage for the founding team / future dev efforts. It will also include a series of airdrops - initially to Nxt owners and later on in a tbd format.

As promised, we are airdropping 0.4 RYA for each Nxt token - a total of 40% of the initial Rya supply. We will also be airdropping 0.04 Trust for each Nxt. Remember, Trust is an internal token in the Rya platform with a purpose in the minting process and it cannot be traded or transacted with.

A Trust Based Monetary System (part 2)

4. A Crypto Credit Score

 

The FICO credit score is designed to measure the risk of default by taking into account various factors in a person’s financial history. In recent years, it has often been criticized3. One of the main arguments is that the rating takes into account factors that are not under the person’s full control. Thus, the credit score harms social mobility, fixes and even increases inequality.
                      The Trust token functions as a crypto-credit-score that will take into consideration only the account’s economic activity in the Rya ecosystem without revealing the owner’s (or multiple owner’s) identity. Essentially, an account’s Trust token balance serves as a basic credit score for that account. If an account holder defaults on a loan it impacts both his Trust balance and the balance of the linked account (the lender). This motivates all parties to have a decent relationship.
                      Beyond the Trust metric, it is also possible to scan the complete loan transaction history of the network. This enables complete and total transparency to stakeholders in a loan transaction - something not readily available in the FIAT monetary system. In these ways, the Rya system brings blockchain’s social values to the traditional credit score, helping accelerate the shift of power from central authorities to non-hierarchical peer- to-peer structures.
                      It is important to note that we do not expect the Trust token to provide a full credit-score solution. Due to factors such as anonymity and the ability for an untrustworthy person to quickly create a new account with a fresh Trust score, it is clear that no rational lender will engage in a loan transaction on the basis of the Trust balance and transaction history of the potential borrower alone.
                      We predict that lenders will vet potential borrowers through other means as well - be they traditional credit bureau scores that have been adapted for crypto technology, or new yet to be seen solutions. 

5. Proof of Trust: Introduction

Trust is the tool used in the Rya ecosystem to secure the blockchain. This methodology is introduced as Proof of Trust (PoT). Let’s compare it to its predecessors.
In the Proof of Work model (pioneered by Bitcoin) security is provided by peers doing work. They expend their resources on computation in order to prevent double-spending transactions. The cost to a malicious peer intent on changing the networks transaction history is prohibitively formidable. Tokens are awarded in exchange for work in the mining process.
                       Due to the fact that the rate of block generation is typically meant to remain constant, it becomes more difficult for a single peer to earn rewards as the network grows and more mining power becomes available. This creates a sort of arms race among miners – to continue to reap meaningful rewards, miners must invest in ever better computational resources and base themselves in locations with access to cheaper energy sources. Over time this inevitably results in a centralized and exclusive group of miners.
                       In the Proof of Stake model used by Nxt, network security is governed by peers having a stake in the network. The incentives provided by this algorithm do not promote centralization in the same way that Proof of Work algorithms do, and data shows that the Nxt network has remained highly decentralized since its inception: a large number of unique accounts are contributing blocks to the network, and the top five accounts have generated 42% of the total number of blocks5. Most importantly, energy consumption is the PoS model is significantly lower than in PoW due to its inherent architecture.
                       Proof of Trust is based not on a peer’s token stake in the network like with PoS, but rather their creditworthiness or trustworthiness in the network: their Trust token balance. Beyond the economic benefits we gain from this variation, PoT still maintains many of the inherent advantages PoS has over PoW, low energy consumption amongst them.

 

6. Proof of Trust: Block Creation and Minting 

Rya’s underlying blockchain technology is heavily influenced by Nxt. For this reason, we may trivially refer to technology that is well defined in Nxt literature throughout the following sections. We strongly recommend the technical reader acquaint themselves with the Nxt blockchain (specifically nodes, blocks, transactions and forging) before proceeding so as to have proper context.
                     It’s important to note that Nxt has a wider range of features (voting, asset exchange, etc.) than Rya. It’s reasonable to assume that if a feature is not at least mentioned in passing in this paper, then the feature is not relevant for Rya at this point in time.
                     While Nxt has a static number of tokens, Rya has a dynamic money supply. Users working to secure the blockchain are rewarded with both transaction fees and newly created Rya. This is a departure from the forging process in Nxt in which the reward is comprised of nothing but transaction fees. Thus, we replace the term forging seen in Nxt with minting so as to best reflect the fact that when a new block is created new Rya is minted in the system.
                    In the Rya blockchain, a new block is minted roughly every minute. The block creation and authority selection process is nearly identical to Nxt. We have three parameters which determine whether an account is eligible to create a block, which account actually creates a block and which block is prioritized in case of conflict:

1. Base target value. This parameter is unique to each block and is equal to the previous  block’s base target value multiplied by the amount of time it took to mint that block.
2. Target value. Unique to each minter. Equivalent to a multiplication of the base target value by the amount of time that passed since the last block was minted (in seconds) and the Trust token balance in the minter’s account. 
3. Cumulative difficulty. Derived from the cumulative difficulty of the previous block plus a function of the base target value of the block. 

Just like Nxt, peers compete to generate hits. A hit is the first 8 bytes of the output of a SHA256 hash on an input of the 64-bit signature generated unique block metadata and the accounts public key. If the hit is lower than the accounts target value, then the account can proceed to generating the next block. Because the target value grows quickly over time, blocks are expected to be generated very fast at equilibrium (~1-minute target time) and energy consumption is low.
                    Because it is possible to view each minters Trust balance, it is theoretically possible to predict which minter will most likely generate the next block (due to having the highest target value). The equivalent scenario in Nxt (with stake) opens the door to a shuffling attack, a common threat in PoS systems. The idea is that a malignant user could constantly move stake into an account with the highest chance at generating a block and dominate the network.
                    Fortunately, this threat does not exist in PoT due to the fact that Trust cannot be transferred from account to account or quickly created in an account. Thus even if an attacker predicts which account will next generate a block, it won’t do them any good. Therefore, there is no requirement for stake to be stationary in an account for 1440 blocks before the account can mint in the Rya system as seen in Nxt.
                    When an account generates a block it broadcasts the new block to the network. Network conflict is resolved by adapting the chain of blocks with the highest cumulative difficulty.

7. Proof of Trust: Transactions and Rewards

There are three type of transactions in the Rya system:
1. Payment transaction - a transfer of Rya tokens from one account to another.
2. Loan transaction - a transaction containing loan metadata (length, principle, interest).
3. Message transaction - a transaction containing a verbose message.

Both payment and message transactions are equivalent to their Nxt versions while loan transactions are of course unique to Rya (Nxt stake loans serve a totally different purpose). The fee for a payment or message transaction is one Rya minimum, while the fee for loan transaction is one Rya added to one percent of the loan principal (see ‘Concerns’ for details on why). When an account creates a transaction, it is broadcast to the rest of the network for processing.
                   A transaction is considered unconfirmed until it has been recorded in a valid block (transactions have a confirmation deadline of 24 hours, just like Nxt). As more blocks are added to the chain it was recorded in, the amount of confirmations grows. We define feesInBlock as the sum of transaction fees paid in the current block.
                   Let’s address the coin reward for minting. Tokens are awarded to the minter of a block as a function of T, the Trust belonging to the account. The tokens are made up of transaction fees (recirculated Rya) and new Rya created from redeemed loans:

Note that the component of the reward that actually constitutes new coins in the system is positively influenced by the amount of Trust. This elegantly expresses the idea that in the short term higher system wide Trust will lead to more Rya.

 

8. Concerns 

One of the known threats in PoS systems is the ‘nothing at stake’ attack. This is a scenario in which a clever attacker generates blocks on every fork in the network for a very low cost, assuring they will get the reward for the fork that becomes dominant. This threat exists in PoT as well (as a function of Trust, of course), and in fact may be more severe due the fact that neither the money supply nor system wide Trust is capped, making it tougher to monitor malicious changes in the system.
                   We do not anticipate this threat to block the functioning of the system however. Due to the fact that the rewards for an individual block are low, such an attack would likely be damaging for the perpetrator (who necessarily has some level of investment in the system).
                   Next, we must address the ‘self-loan’ attack. This is when a malicious peer gains Trust by loaning Rya to themselves or to a co-conspirator. This is possible because both a single peer can own multiple accounts and a single account can be owned by multiple peers. There are a few different aspects to this.
                   As a basic precaution, we designed the trustReward for a loan to be dependent on the success or failure of all other loan transactions in a block. It is therefore impossible to determine how big the reward will be until the block is successfully minted. This element of uncertainty weakens the ability of the attacker to plan ahead.
                    Let’s take a look at both short term and long term ramifications of the self-loan and its impact on the Rya system. In the short term, the Trust reward for a lender and borrower must be smaller than passive Trust that can be gained by simply holding the Rya in one account. Otherwise, the self-loaner will be able to benefit more than an honest user (by earning more Trust and Rya).
                    We propose two ways to enforce the above. Our current solution is that the fee for a loan transaction is one Rya added to one percent of the actual loan. This enforces high short term loan cost. Another proposal is to postpone the delivery of the Trust reward for a period of time after the loan has been redeemed. This would demotivate the self-loaner, as he would gain less Trust in the short term than the honest user.
                     In the long term though, it always pays off to loan Rya. Just as it does not pay off to statically hold money in the FIAT economy due to price inflation, so too it’s not worthwhile to simply hold Rya in the long term. This is one of the features in the Rya system for encouraging consumption in the short term.
                     This means that both honest and dishonest loans will be preferable to holding Rya in the long term. However, the most preferable action (in a perfect market), is an honest loan because the lender will also enjoy the benefits of interest.
                     Another threat is the ‘history’ attack. An attacker can transfer a sum of tokens as payment and then attempt to mint a new chain that does not contain the transaction. If this fork becomes dominant in the system, then he gets his tokens back for free. If it does not, he has lost nothing. In PoS systems this attack is usually limited to attackers with very large stake, but in PoT this attack could be perpetrated by any minter with a high Trust token balance, something which could be achieved with a few well timed self-loans. When the system reaches equilibrium and becomes a common medium of exchange, this scenario will be become less likely as it will be tougher to gain high Trust proportion. 


9. Conclusion

 We have shown that it is possible to create a fully decentralized and cryptographically secured money capable of fully replacing the FIAT monetary system and banking hegemony. By utilizing a free market to determine the price of money and by binding system wide credit to the creation of new Rya, we provide a substantively adjusted money supply solution and ensure that the amount of currency in circulation will be appropriate for the state of the economy.

A Trust Based Monetary System

Abstract. Rya is a cryptocurrency and monetary system designed to be both a store of value and a medium of exchange. Using a free, decentralized monetary market, the Rya  system  tethers  money  supply  to  credit  without  the  need  for  a  monopolistic regulatory institution. Money supply is adjusted dynamically depending on economic cycles making  for a  better medium  of exchange. Rya  and  its Proof of Trust (PoT) model  is  therefore  expected  to  be  a  fuller  and  more  complete  substitute  for  Fiat monetary systems than any cryptocurrency yet.

1.   Introduction

Bitcoin and other cryptocurrencies have proven the feasibility of peer-to-peer payments over a communication channel without a trusted third party. Blockchain technology is a cryptographic proof designed to be a substitute for a central mint that protects buyers and  sellers  from  fraud  (e.g.  the  double-spending  problem).  While  existing  blockchain technology performs this task well, banking institutions and governments still have a monopoly on credit and money supply. This has limited cryptographic currency from bringing about a full monetary revolution.

In today’s climate, evolution of new cryptocurrencies stems mainly from the need to deal with technical and methodological problems in existing cryptocurrency systems. Some  examples  of  improvements  are  better  security  mechanisms,  higher  transaction frequency and more efficient use of resources. However, no cryptocurrency system has attempted  to  incorporate  the  combination  of  interest  rates  and  money  supply  that constitute a full money market. While several cryptocurrencies have been able to create a system of payments sans a trusted third party, not all the features of FIAT monetary systems (debt and fractional-reserve banking) have been fully expressed.

In  a  traditional  monetary  system,  money’s  real  demand  (rather  than  nominal demand) depends on interest rates and income is in equilibrium with money supply set by the central bank. A decentralized credit and money creation solution should perform as a stable monetary system in which the money market has normal demand and supply curves. It must also have a term spread of interest rates which reflect the risk for credit recipients, the average duration of transactions and the preferences of credit providers.

2.   Money Supply Let us first examine Bitcoin’s naïve Proof of Work based model for money supply through the following equation:

Audited criticism held against Bitcoin is that the structure of the system has a capped money supply which will be maxed out in the long term. The resulting deflationary money trend is bad for the economy.

Now let’s examine the FIAT money market. The quantity of money in the FIAT economy is determined as a fixed multiple of the quantity of bank reserves. This number is determined by a central bank (i.e. the US Federal Reserve). The supply curve of money is a vertical line at that quantity. In other words, the money market is monopolistic (both in terms of the basic interest rate and money supply).

We  aim  to  create  a  monetary  system  in  which  money  supply  is  substantively adjusted in order to best serve current economic conditions. To achieve this, the Rya system is built to be a perfectly competitive free money market and money supply is controlled by a decentralized regulatory mechanism. Unlike Bitcoin, which only allows the transfer of present value, Rya allows peers to transfer future value as well (i.e. credit). We aspire           to   have     economic            conditions       in         which         the        following  holds          true:

𝐷 (𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑚𝑜𝑛𝑒𝑦) = 𝐼 (𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡) = 𝑀𝑅 (𝑚𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑐𝑜𝑠𝑡) = 𝐴𝑅 (𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒)

3.   The Trust Token

In  order  to  express  future  value  in  the  Rya  system,  we  propose  a  double  token architecture. While Rya is the cryptocurrency through which transactions can be made

(like any other currency), we also establish a token called Trust. Every account has a Trust token balance which cannot be transferred from one account to another.

The  primary  purpose  of  the  Trust  token  is  to  tether  money  supply  to  users economic behaviour over time. To this end two key conditions are met. Number one, an account’s Trust balance is impacted by his credibility in the system (find out more ‘The Trust Token as a Credit Score’ below).

Number  two,  the  Trust  token  plays  a  key  role  in  money  creation  in  the  Rya ecosystem. A users Trust token balance directly impacts their effectiveness at minting new Rya and thus the Trust token represents potential for new money creation.

Before we discuss how peers earn Trust, let’s establish some basic terminology:

1.   C - Rya coins

2.   T - Trust

3.   goodInterestInBlock - the amount of interest successfully paid back to lenders in the current block in the blockchain.

4.   systemTrust and systemCoins - the total amount of Trust and Rya respectively.

5.   loanSize – the size of a Rya loan (principal).

6.   loanInterest - the interest on the loan.

7.   trustReward - the reward in Trust granted for a successfully returned Rya loan.

8.   trustDeposit - Trust required to lend Rya.

Trust can be gained just by holding Rya. We suggest that a peer who does not take any action with his money (e.g spend or lend Rya) is equivalent to a person who deposits FIAT money in a savings bank account.

The Trust token enables decentralization by shifting the way interest is set and money  is  minted.  We  strive  to  replace  the  monopolistic  central  bank  and  fractional- reserve  banking  controlled  by  governments  today.  We  are  progressing  to  a  simple formula which provides a more stable economy and a higher level of transparency to stakeholders.

A peer can gain Trust tokens (and the right to create more Rya in the future) each block by holding Rya coins. Mathematically, this can be described as:

The second way to gain Trust is by lending/borrowing Rya. Loans in the Rya ecosystem are simple transactions: one peer borrows a set amount of Rya from a second peer for an agreed upon number of blocks. If, by the last block in that time frame the borrower has successfully returned the principle plus interest (in Rya) to the lender, then both parties are rewarded - we will call this a trustReward.

In order to loan Rya, a proportionate amount of Trust must be deposit by the lender.  Once  deposited,  this  Trust  is  reduced  from  his  active  available  Trust  token balance,  impacting  the  peer’s  ability  to  mint  blocks  and  engage  in  additional  loan transactions. In other words, a peer must risk Trust (in the short term) to gain Trust through a loan transaction:

The reward component is built in the following way:

S  is  the  group  of  all  loan  transactions  successfully  returned  in  the  current  block. Correspondingly, F is the group of all loan transactions that were defaulted on in the current block. This reward is divided between the lender and the borrower.

There is an intuitively pleasing side effect to structuring the reward in this fashion. Over time Trust will necessarily be funneled to the group of peers that are involved with successful loan transactions and away from the group of peers that are not. So we can be sure that Trust token balances will function as accurate crypto-credit-scores in the long term.