Sovereign Cryptocurrencies: Foundation for a Grassroots Cryptoeconomy

The ecosystem of cryptocurrencies benefits the few and exacerbates economic inequality. Here, we present an egalitarian and inclusive alternative based on the novel concept of sovereign cryptocurrencies, offered as a foundation for a grassroots cryptoeconomy: Economically, sovereign cryptocurrencies provide for grassroots liquidity without external capital or credit, as mutual credit lines can be established via sovereign coin exchange among members of the cryptoeconomy. Computationally, sovereign cryptocurrencies provide for the emergence of grassroots cryptoeconomies at different locations and over time, and for their subsequent interoperation once their networks are interconnected. Any person may issue its own sovereign cryptocurrency and participate in the grassroots cryptoeconomy via a single-signature account. Any organization, including corporations, cooperatives, banks, municipalities, and governments, may issue their own sovereign cryptocurrency and participate in the grassroots cryptoeconomy via a multisignature account, commensurate with the organization's authorized signatories. The linchpin of a sovereign cryptocurrencies network is coin redemption: The obligation of the sovereign to redeem any coin it has minted against any sovereign coin it holds. Coin redemption resolves double-spending (equivocation) without consensus or even broadcast and provides for chain payments and arbitrage, thus equalizing the price of sovereign cryptocurrencies with sufficient mutual liquidity among their sovereigns. Unlike mainstream cryptocurrencies, which are purported to be trustless, the value of a sovereign cryptocurrency hinges on trust in the computational and financial integrity of its sovereign