Circles is very exciting. Some variant of the web of trust approach seems like the most promising way to protect against Sybil attacks. I’m worried that there are a couple potentially bad incentives in the system as written though. Apologies if I’m misunderstanding how Circles works.
It seems that if a user X belongs to a group G, then anyone holding X-coins can convert them to G-coins, not just X. (This is what I gleaned from the comments, though it seems like this is not fixed in stone yet.) This creates an incentive to make a new account for each group that you want to join, i.e., X1 for group G1, X2 for G2, etc. these accounts can all trust each other, so they are jointly liquid, and claim multiple incomes. The normal disincentive against trusting these accounts does not exist, because their coins can never be worthless; they’re worth at least as much as their corresponding group coins.
Another way to dodge the problem of trusting random accounts: make your ‘real’ account completely illiquid and stash all of your value on a ‘bank’ account that is trusted by no one else. No one can extract the value from the bank, because the only trust link to it is from your illiquid account. There’s also no disincentive to trust random accounts in order to claim the trustee bonus; in the event that they turn out to be bad, they can’t hurt you.