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February
01 , 2005
| Money is a fascinating topic. It can be exchanged for goods
and services. It carries cultural and historical significance —
for example, the Confederate currency of the U.S. Civil War era.
Money can be a symbol of political dominance, as is the U.S. dollar
worldwide. Money is often tied to feelings of national and political
identity: witness the U.K.'s reluctance to adopt the Euro. Money
is even collected for its intrinsic worth. How many of us have a
jar of coins from our travels? But the role and nature of money
is undergoing profound changes as a result of the confluence of
information technologies, virtual communities, and mobile access.
The
Root of All Money
Any currency that can maintain its value among its users can function.
Historically, many alternative, or local, currencies have worked
and many still do. Ithaca Hours, for example, is a local alternative
currency that is still in use in the U.S. today (http://www.ithacahours.org and http://www.ithacahours.com). As long as buyers will use
a currency and sellers will accept it, you have an exchange potential,
and thus a market. Furthermore, once you remove the connection between
a currency and a commodity, such as gold or pounds sterling, then
the currency is based on fiat, or faith. As long as the backer of
the currency has fiat, which even governments occasionally don’t,
then the currency can hold its value. Because of the move to fiat
though, today a Bill Gates "dollar" would work just as well as U.S.
dollars. There is no inherent reason for fiat to be held by a single
individual, however. Fiat could just as easily be distributed across
a community, so for example we could have Linux "dollars."
Kropotkin wrote about "mutual aid societies" and now we see TeleCommunities
like Solari,
social networks of people helping each other, trusting each other,
empowered by the tools of the digital revolution. Having a shared
currency is another way that these communities will be able to strengthen
their ties and keep their community interacting. We already know
from observing small village "banks" in developing countries that
members of communities with strong social ties have higher incentives
to pay back loans, for instance.
The most widely used alternative currency model is called LETS
(Local Economy Trading Schemes). The LETS system is in use in
Canada, Switzerland, Denmark, Sweden, and elsewhere. Interestingly,
LETS is an interest-free monetary system, as is NeuMoNe
(The Neutral Money Network). Combine a LETS currency with social
fiat and you get something like Openmoney:
"a means of exchange freely available to all." Openmoney stands
in opposition to centralized currency because a government-monopolized
currency is "from ‘them’, not ‘us’." Openmoney is basically creating
an internet-enabled version of LETS, including a transaction kernel
and software for administration.
The
Distance to Here
Still, simply because the possibility for new forms of exchange
exists does not mean that we will succeed in implementing them.
There are a number of challenges we must overcome in the realization
of community currencies. We have to overcome old ways of thinking
about money, and look to new ways of realizing exchange potentials.
First, the single most important obstacle is that governments
still retain a monopoly on the establishment and maintenance of
"real" money by law. As long as governments do not see alternative
currencies as competing currencies, they are not likely to intervene.
But if alternative currencies become widespread enough to threaten
government currencies, then we may see a clash of financial systems.
Second, we have to learn to make a distinction between what the
word "local" used to mean, and what it can mean today. "Local" currencies
in the past were local in geographic space, but today virtual currencies
are "local" in a user space. Technically, alternative currencies
were always "local" to their community of users, but thanks to mobile
communication technologies geographical limitations are disappearing.
For the present, though, a lot of changes are proceeding apace.
The BBC reported that the online world of Everquest was the 77th
richest country in the world, calling it a "Virtual
kingdom richer than Bulgaria." And when you consider that of
the 100 largest economies in the world 51 are corporations and only
49 are nations, the distance to online communities as economies
with their own currencies is trivial. Air
miles are already the world’s second largest currency, a private
currency.
Evolving
Into The New Economy
The first thing you see in an economy are primary exchanges, both
barter and money-for-commodity exchanges. The first thing we saw
in online local economies were people exchanging "real" money for
virtual commodities. Gamers were buying virtual objects (magic swords
and the like) on eBay for "real" money. An important evolution occurred
when people started using their virtual currencies to buy
real objects. One gamer had acquired various real-world discount
cards for a particular game, which he sold for virtual money inside
the game environment, and then snail-mailed the discount cards out
to the buyers.
As these alternative economies evolve, you see the development
of second-order financial services: banks, currency exchanges, and
the like. We
already see this online. For instance, gamingopenmarket.com
advertises itself as " the smartest way to trade your game currencies."
Virtual cash exchange markets have all of the same problems as “real”
money markets: money supply, inflation, speculation, financial bubbles,
even counterfeiting and fraud.
The
Mobile Explosion
There is a big push right now to more adequately integrate mobile
and financial services, an initiative sometimes called "mobile commerce."
For example, MobeyForum
is dedicated to "open, non-proprietary technology standards" whereas
groups like the Mobile
Payment Forum have made no such commitment. The European Commission
views mobile payment as an opportunity for a pan-European initiative.
So, here’s a scenario for the future. You go to a rock concert,
and you’ve never seen the opening band before. You like their music,
so you get on your mobile device (PDA, cell phone, etc.) and hit
the band’s "mobile commerce" exchange. Your software negotiates
with their software to determine what currencies they accept and
what currencies your various bank accounts carry, including automatically
getting you the best currency exchange rate at that instant. The
system discovers that because they are opening for a major musician
who has his own currency based on his popularity, the opening band
has agreed to accept the headliner’s currency for the duration of
the show for people who are actually at the concert. You verify
that you are there using some kind of brokered authentication (GPS
or a ticket number); the two systems complete the transaction for
you, and you have access to the music.
Enabling the back-end for a truly decentralized marketplace with
buyers, sellers, traders, and sharers is the open-source "killer
app" of the next century. PayCircle
is a non-profit organization that is working towards open APIs for
payment systems based on XML, SOAP, Java, etc. Also, MusicForward
is making the first steps toward the scenario above by developing
a system that allows for music communities to create and use their
own currencies in a virtual music market. There’s even a Yahoo
Group (IJCCR) for the discussion of the "emerging array of community
currencies." Also, The
Interra Project, sponsored by VISA founder Dee Hock, is launching
"a payment card and transaction platform, that rewards customers
for purchasing from locally owned and sustainable businesses, donates
automatically to community organizations and facilitates connections
to like minded members in a self organizing manner," and, in fact,
operates very much like a "local" alternative currency.
In "The Future of Payment Systems" Bernard Lietaer suggests
that "complementary currencies don’t have to be necessarily small-scale
social affairs. If implemented correctly they could potentially
play a non-negligible role in a much larger economic arena as well."
So essentially we could see an explosion of currencies instead of
the consolidation of a "world currency," and we need open standards
(similar to TCP/IP) that are fundamentally different than historical
approaches. The challenge as always will be pushing for an open
currency system as opposed to one that is monopolized by private
corporations or governments.
Paul
B. Hartzog is a political scientist and the creator of the
postmodern theory of Panarchy.
A self-styled futurist and techno-shaman, his interests include
Complexity Theory, Cooperation, International Relations, Environmental
Politics, Information Society and Economy, Information Technologies,
Sustainable Development, Network Culture, and Ethics.
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