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Step by step: You consume, and send an IOU to the other node. That other node makes a small amount of profit, and shares it as dividends. That other node then uses that IOU to consume from another node who accepts your IOU. That node makes some profit and shares it as dividends. That other node then uses that IOU to consume from another node who accepts your original IOU, and makes profit that is shared as dividends. Your IOU eventually circles back to you, and the loop closes. An entire circle of production and consumption is finished. A ripple. You consumed the output of another node, and promised that other node something in return. It´s first once the ripple-cycle is finished that you´re back at equilibrium. The profit that´s been collected in each step has been shared with everyone in the IOU network, and every node has felt safe throughout the entire cycle of production and consumption. references: Ryan Fugger's original whitepaper |
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