A while ago, I wrote about transferring money through chains of IOUs. I’ve since discovered that such transfers are now sometimes being called “transitive transactions”.
So, for example, if Alice wants to pay Frank $600, but Frank doesn’t trust Alice’s IOUs, they might find a path through existing trust relationships, so Alice gives Bob an IOU for $600, Bob gives his own IOU to Charles, Charles gives one to Denise, Denise gives one to Edith, and Edith gives one to Frank. Alice has paid $600, Frank has received an IOU for $600 from someone he trusts, and everyone in between has given an IOU for $600 and received an IOU for the same amount from someone they trust.
But Charles will be upset if he thinks the transaction is going ahead, and gives his IOU to Denise, only to discover later that Bob didn’t agree to this transaction; and Denise will be equally upset if Charles then demands his IOU back, but she’s already given hers to Edith. Or, Alice will be upset if she gives her IOU to Bob, but discovers later that Frank never received the money, because Denise, who neither Alice nor Frank know or trust, ran off with the money. So how do all these people coordinate, so that they all agree on whether or not the transaction is going through? Continue reading A responsible transitive transactions protocol