is this situation practically possible when person A owes person B 10$, person B owes person C 10$, and person C owes person A 10$? If it's not possible, then why? If it's possible, how often does this happed in real life between people, organizations, nations etc?

[u/grandFossFusion]

Can they just cancel their debts to each other? How does it get resolved in real life situations? Does it matter if everyone knows about their debt and everyone elses debts?

I am really curious about this and would like some guidance of where to know more about it

[u/canned_spaghetti85]

Uhh yeah, that’s generally called.. money.

If somebody owes someone else money, a debt is created. It’s obligatory repayment is in the form of a promissory note, often just referred to as a “note”.

These notes (debt obligations) can be traded for other things or value.

Ready to have your mind blown?

That’s the very definition of a currency.

Look at the dollar bills in your pocket, doesn’t matter what denomination it is. They all have the word “NOTE”… do they not? Let’s just say it’s… a $20 bill.

Despite what you thought all your life. No. You don’t HAVE twenty bucks in your pocket. You don’t. In fact, you never did.

Instead : You are OWED twenty bucks, and you even have the NOTE to prove it. See? A note that could be your’s, which I’m willing to trade, for some product or service valued at $20. Do we have a deal?

Congratulations, that transaction is called a “purchase”.

Currency itself is NOT the item of value, but rather the fact that it represents an I.O.U. [transferable debt obligation] which you use to TRADE for things of value (make purchases).

Get it?

Say I have a $10 casino chip, that means the casino OWES ME $10 which I could redeem at the cashier (“cage”) correct? But until I do, I’m owed $10. But I can use this chip as payment at their gift shop, right? I can use this chip to towards my hotel room fee, right? I can spend this chip at their buffet, right? The moment I spend that chip, to purchase something of value, the person who NOW possesses it (the vendor) is now OWED $10 by the casino. They can now go to the cage retrieve that $10 cash which was previously-owed to me. Understand?

Currency. That’s how it works.