by Alan Rosenblith, Feb 18, 2009
http://newcurrencyfrontiers.blogspot.com/

If there is one over-arching trend in the information age, it is towards p2p architecture. P2P is more efficient since resources are not needed to maintain access hubs (think Skype, Limewire, etc). The evolution towards p2p is a continuation of what happened to scribes when the printing press was invented. Before books could be produced on a large scale, it made sense to have a class of people who devoted themselves to literacy. However, when the printing press came on the scene, universal literacy was enabled. This transition was slow by today’s standards, but it was very real. See Clay Shirky’s book “Here Comes Everybody” for a great description of this evolution.

While I am sure this is not news to most of you, its relation to the issuance of money bears some careful thought. The evolution that happened in reading and writing during the Renaissance is about to happen with how we issue currency. Almost all currency designs to date (dollars included) depend on either a scarce commodity (such as gold or paper notes) or a centralized authority to issue and/or track the currency (barter clubs, time-banks, etc).

The IRS classifies the latter as “Third-Party Record Keepers” and provides users with 1099B forms to make sure they stay above board. Fundamentally, p2p architecture in currency design will mean the obsolescence of third-party record keepers. Information about account balances will not need to be held and tracked in a central location, and participation in such systems (and the creation of new ones) will no longer be dependent on any form of central authority. But how is this even possible? Let’s take a deeper look at what the historic role of banks has been.

Banks have performed two main services since their inception. The first was to be a safe place to store gold, silver, or other commodity money. Since money no longer has any relation to precious metals (thankfully), and is issued entirely as credit, this function is no longer needed. The second service banks provided was and is far more significant. Banks have the authority to determine whose IOUs are meaningful and whose aren’t. Put another way, banks are the arbiters of trust in our society. Given the current state of affairs, one thing is clear: banks have failed miserably at this job. The reason is quite simple. They had a conflict of interest between being the arbiters of trust and making a profit. But who should be the arbiter of trust in a given community?

The answer is that, given how much information technology has evolved recently, the members of a community can be their own arbiters. Since the advent of Ebay it has been clear that online communities are capable of policing themselves. In Ebay’s case, the concern was whether sellers (or buyers) could be trusted to make good on their various promises. Instead of implementing a complicated and costly authoritarian scheme, Ebay let the users police themselves through reputation. Being a trustworthy member of the Ebay community provides users with more value than cheating the system. This simple process has proved the ability of online communities to police themselves according to their own unique criteria. What enables a seller to trust a never-before-met buyer is what will soon make possible the issuance of money on a p2p basis.

At heart, money is a promise (or IOU) to provide goods or services at some point in the future. Determining who will actually make good on their promises has heretofore been the primary function of banks. However, the advent of reputations systems like Ebay’s opens the very real possibility that people can determine for themselves who is trustworthy. So how does P2P currency differ from currency as it has been implemented thus far?

Money thus far has been a promise VOUCHED for by an authoritative body (such as a barter-club or bank). The central shift is that money will become a promise VOUCHED for by the community of users. The specifics of how this process plays out will be different for every community. The users of a given money will determine the basis for a reputable promise themselves. As this architecture becomes more commonly adopted, millions of currencies will take root worldwide. Issuers will be able to use real-life relationships in their communities as the basis for currency issuance. So will this be more reliable and cost effective than the current model?

The unqualified answer is YES! Who is better qualified to vouch for potential currency issuers than those who conduct business with them? Think how different this is from today’s model. People will be able to consensually participate in currencies rather than being held hostage by an authoritative them. P2P architecture will at long last bring democracy to the domain of money.

by The Transitioner – Pioneers http://thetransitioner.com

In one sentence

Launch the next currency system for humanity: a distributed platform for millions of free currencies to flow through the Net and our cell phones.

In more depth

Money is an information system. It’s made to measure and balance flows in the real world. Money needs not to be scarce otherwise it turns the world into artificial scarcity, even when it’s abundant. Money should be in right supply to account flows so that every marketplaces in the world — companies, neighborhoods, towns, regions, global communities, etc — can grow their wealth (all levels of Maslow pyramid) without constraints.

Money is about to follow the same path the media did these past years. Millions of free currencies will soon circulate on the Net and through our cell phones. They will not be controlled by states or central banks, they will be issued by those millions of marketplaces willing to free themselves from conventional debt-based, interest-based money (85% to 95% circulating today). Everyone will issue and use these free currencies simply because most people and organizations are undermonetized.

Dotcoms (eBay, Google…) will likely be the first to understand that their real business model stands in this new paradigm rather than the old scarcity model in which they grew.

The Free Currencies Project consists in creating the open global interoperable infrastructure for these millions currencies to be easily issued and put in circulation, in a peer-to-peer way. It is aimed become the next planetary tool for accounting, transacting and hoarding wealth. It will belong to the commons, it’s open source. It will be easy to use via computers and cell phones, making it accessible to the most part of humanity. Like email it will work peer-to-peer via servers, domain names and accounts (MyName^LocalCurrency.usa.ny.albany ; MyName^EthicalMarket.world, etc) provided by community currency service providers (CCSP).

User interfaces will be sexy, user friendly and irresistible. Think ‘Skype’ as a inspiration for the simplicity of the user experience and the viral model.

What problem or issue does it address?

Most people, most marketplaces are undermonetized. Conventional money does not allow full market potential to be reached, marketplaces cannot fulfill their capacity to exchange and build wealth. Offer and demand are not met not because of a lack of wealth (competencies, time, resources, energy, people are there…) but only because of a lack of transactional tool.

Conventional money self-aggregates in the hands of the few (Pareto law of condensation – the more you have, the more you invest, the more you get) it leaves other economic areas empty. We call this phenomenon ‘undermonetization’, it creates artificial pauperization.

Consequences are:
* concentration of power (undemocratic)
* poverty, violence, harsh competition, predatory behaviors
* natural resources unnaturally drawn from undermonetized places to places of concentrated money
* secrecy (don’t share what has value, make it scarce)
* artificial rarefaction of what is not scarce (so it can have market value)

The Free Currencies solves this.

Who will benefit the most and how?

The entire humanity:
* human relationships: no more competition and predatory behaviors because of scarce money (let’s leave competition to what is really scarce), this shift most human contracts to higher consciousness
* the economy: optimized flows of wealth across the planet at local and global levels because of the right supply of money
* the planet: the incentive to hunt or hoard scarce money by producing useless products sold through illusionary marketing (90% of consumerist market) is deactivated. Less junk production & consumption, an incentive for people to focus on higher meaningful activities, i.e. useful products and services = less pollution and more sustainable projects
* dotcoms: they can now enter in the real open source economy, i.e. generate wealth that is not based on scarcity models

What are the initial steps required to get this idea off the ground?

The work is already quite advanced. Some key steps:

1. Beta testing on early marketplaces (Q4 2008 and 2009)
2. Achieve the coding
3. Achieve SMS transactions on mobile phones
4. Build the best GUI possible
5. Elaborate viral incentive marketing
6/ Optional: build strategic partnership with telecoms and major dotcoms (if they get it before it’s too late)
7. Market release

Objective is to reach millions of users in less than a year. Speed (implementation & market growth) will depend on funding in conventional cash. If no conventional cash we will do it no matter what.

Optimal outcome. How to measure it?

* Most humanity shifts to free currencies, people can easily use their cell phone to make transactions in any of these currencies
* Developing countries realize they don’t need conventional money ($ or €) to exist on the international scene.
* A shift in consciousness occurs at planetary level. People realize that most problems (unsustanability, concentration of power and wealth…) existed as an unfoldment of conventional money.
* Banks lose their privilege to issue private credit money but understand the incredible benefit of providing services on these new markets.
* Major dotcoms and telecom players understand their core business relies in free currencies rather than the old model. eBay uses these currencies for its marketplace. Telecoms provide cell phones with built-in interface for free currency transactions. Google takes 1st mover advantage in and provides cutting-edge global currency services.

As a currency is a flow, it is easy to measure the wealth that was generated.

by Judith D. Schwartz, Time, Tuesday, Dec. 09, 2008
http://www.time.com

Most of us take for granted that those rectangular green slips of paper we keep in our wallets are inviolable: the physical embodiment of value. But alternative forms of money have a long history, and appear to be growing in popularity. It’s not merely barter, or primitive means of exchange like, say, seashells or beads. Beneath the financial radar, in hip U.S. towns or South African townships, in shops, markets, and even banks, throughout the world people are exchanging goods and services via thousands of currency types that look nothing like official tender.

Alternative means of trade often surface during tough economic times. “When money gets dried up and there are still needs to be met in society, people come up with creative ways to meet those needs,” says Peter North, a senior lecturer in geography at the University of Liverpool, author of two books on the subject. He refers to the “scrips” issued in the U.S. and Europe during the Great Depression that kept money flowing, and the massive barter exchanges involving millions of people that emerged amidst runaway inflation in Argentina in 2000. “People were kept from starving [this way],” he says. (Find out 10 things to do with your money now)

Closer to home, “Ithaca Hours,” with a livable hourly wage as the standard, were launched during the 1991 recession to sustain Ithaca, New York’s local economy and stem the loss of jobs. “Hours,” which are legal and taxable, circulate within the community, moving from local shop to local artisan and back, rather than “leaking” out into the larger monetary system. The logo on the Hour reads: “In Ithaca We Trust”.

Alternative (or “complementary”) currencies range from quaint to robust, simple to high-tech. There are “greens” from the Lettuce Patch Bank at the Dancing Rabbit Ecovillage in rural Northeastern Missouri. In Western Massachusetts one finds fine-artist-designed BerkShares, which are convertible to U.S. dollars. According to Susan Witt, Executive Director of the E.F. Schumacher Society (the nonprofit behind the currency) more than $2 million in BerkShares “have been issued through the 12 branches of five [local] banks.” And in South Africa, proprietary software keeps track of Community Exchange System (CES) “Talents”; one ambitious plan is to make Khayelitsha, a vast, desolate township of perhaps a million inhabitants near Cape Town, a self-sustaining community.

The currencies are generally used in conjunction with conventional money, as in using local currency at the farmer’s market and regular greenbacks at the supermarket. “It doesn’t try in any way to replace cash,” says Christoph Hensch, a Swiss national and former banker now living in Christchurch, New Zealand. Rather, it offers a way “for people to share and redeem value they have in the community.” He says the currencies are most useful in geographical areas or social sectors where money doesn’t flow sufficiently, citing for example New Zealand’s Golden Bay, which is so remote that it sometimes nearly functions as its own economy.

Advocates of alternative currencies say that they are a means of empowerment for those languishing on the margins of fiscal life, granting economic agency to people like the elderly, disabled, or under-employed who have little opportunity to earn money. For example, in some systems one can “bank” Time Dollars for tasks like childcare and changing motor oil. It’s not whether you’re employed or what financial assets you have that matter, says Les Squires, a consultant on social networking software who has been working with groups developing alternative currencies. Each person has “value” which is “exchangeable” based on time spent or a given task.

Alternative currency comes in many forms. In addition to time banking, there are Local Exchange Trading Systems (LETS), systems of mutual credit that vary by location. This model was developed by Michael Linton in Canada, though it seems mostly to have taken off in the British Isles; an estimated 40,000 people in the U.K. use these for at least some transactions. (See TIME’s Top 10 Everything of 2008)

Similarly, the Community Exchange System (CES) is an online money and banking system and trading marketplace that tracks credits and debits. While LETS’s function as clubs that set their own guidelines, CES is administered through an online program that connects local groups to create a global network. The CES website points to more than 100 exchanges in fifteen countries. According to Squires, the Internet has made alternative forms of exchange more viable, as databases can keep account of credits. In the rarified world of monetary theory, think-tanks are abuzz with ideas about future forms of money. One visionary, Jean-Francois Noubel, the co-founder of AOL-France, foresees “millions of free currencies circulating on the Net and through our cell phones” as money follows the distribution path that media has over the last decade. Bernard Lietaer, a Belgian economist and author who helped develop the Euro, has proposed the “Terra,” a transnational currency backed by established commodities that would co-exist with conventional notes, the monetary equivalent of Esperanto.

In recent years, the impetus for alternative currencies in established economies has stemmed in part from localization movements. Periodically ditching the dollar (or the pound, or the yen) in favor of homegrown currency doesn’t merely fortify the local economy, it also builds community: people have a stake in their neighbor’s well-being because that neighbor represents both market and supply chain. Some argue that such transactions are more secure than others because knowing the person you’re dealing with (and his family and friends) serves as a kind of social collateral.

The use of Berkshares has helped to solidify local ties, says Susan Witt. “It’s cash, so you have to pay your bills by walking into the store or dentist’s office,” she says. Local pride does have its challenges. In September, the town of Lewes in Sussex, England, issued the Lewes Pound — complete with a special edition beer from Harvey’s, a local brewery, to celebrate the introduction. There was an immediate run on the currency, limiting its circulation; Lewes Pounds were going for 35 pounds sterling on eBay. The organizers quickly went back to press and dealt with the situation. As Susan Witt is the first to say, “local currencies are not easy.”

Some are moved to create currencies for environmental reasons — minimizing the use of energy. With diminishing oil supplies “we will not be able to move goods around the world as cheaply,” says Peter North. One strategy, he says, is to produce more locally, and one way to facilitate that is through local currency. This was one inspiration for the Lewes Pound, and for the Totnes Pound in Devon, England. Both towns are part of the Transition Town movement, which seeks creative, upbeat community-based approaches to dealing with climate change and diminished oil reserves.

Paper-money currencies, like Berkshares or the Lewes or Totnes Pound, slip fairly seamlessly into the national economy; their use is taxed like ordinary money. More abstract exchanges are a bit more complicated to deal with. But the tax concern is not insurmountable. “If you use local currency for your main income-generating activity, you must pay income tax,” says Hensch, who consults in complementary currencies. Likewise, if you have a business, you’ll pay sales tax on any local currency — in New Zealand, that would be Green Dollars, a LETS system — you bring in. But if you trade in “neighborhood help”, like lawn-mowing, that would not be taxed.

The rules vary country to country. In the U.S. any business transaction must be recorded and reported to the IRS; tax levies apply as if the trade were made in cash. As Les Squires puts it, professional services are subject to income tax but for noncommercial transactions barter rules hold. “If I bake a cake for you, that’s not a taxable event,” he says.

Andrew K. Rose, Bernard T. Rocca Professor of International Trade at U.C. Berkeley’s Haas School of Business, sees local currencies as limited by their unwieldiness. “Money is primarily just a convenience for enabling exchanges between two parties. The more widely accepted, the more convenient it is,” he says. If you need to use different currencies in different locations, the money then becomes less convenient.

Do large financial institutions have anything to fear from the use of alternative currencies? Not at all, says Rose. “It’s got to be so tiny. It has no effect at all,” he says. Besides, he notes, the Fed doesn’t care about currency, or even the number of bills circulating in the economy. “The Fed cares about monetary policy and [it] deal[s] with that in different ways.”

On 26th moolidoo followed the conference “The Future Of The Money: how millions of currencies are about to change the world” organized by Jean-François Noubel and Fernanda Ibarra of The Transitioner – Pioneers in Mexico City.

Here the slide (in Spanish) of Jean-François Noubel’s speech