digital community currencies
July 18, 2017
Most people in the world use their country’s national currency. The United States dollar, the Swiss Franc, and the Japanese Yen are examples of national currencies. A national currency is issued by the highest authority in a given geographic region, and is the currency the government of that region accepts for the payment of taxes.
But national currency is not the only currency that people can or will use. In most countries, it’s completely legal and acceptable for small communities or businesses to issue and use their own currencies, often pegged 1:1 to the national currency. We can see this phenomenon around the United States: in Urbana-Champaign, where the University of Illinois is located, a currency called C-U Smiles is accepted by many merchants and treated as cash. Other communities around the US also have their own currency: Ithacash can be used in Ithaca, New York, and Mile High Hours can be found in Denver, Colorado. In Switzerland, you can find the farinet tied 1:1 to the Swiss Franc in the Canton Valais. In Canton Zug, the Chriesi is accepted by local merchants.
These communities have created alternatives to their national currency, because they want to support and encourage business activity in their communities. By having a “private” currency that is difficult or impossible to exchange or spend elsewhere in the world, they are able to encourage local spending. There are some positive effects, although most are hard to measure quantitatively: locally produced food is healthier and reduces pollution, and there might be an uptick in local entrepreneurship. Local infrastructure might have a chance to improve.
The internet makes it possible for communities to form, not by geographic co-location, but by shared interest. As we have seen for the past three decades, the internet makes it possible for like-minded people to form communities and interact with each other, regardless of where their physical bodies are located. Until now, these communities have been able to communicate information, but not value. We have technology now, however, which enables these virtual communities to create their own currencies. We might call these new community currencies digital assets. These digital assets are just like any other community currency, and just as valid. Bitcoin is an example of one of these community currencies, and it has been successfully used by like-minded people around the world since 2010. Other examples include Ethereum, Dogecoin, and Monero.
The interesting thing about these new digital community currencies is that they can be easily accessed and exchanged anytime and from any computing device. This means that outside communities are willing to trade other currencies for them, and that creates a market value. Some of these currencies are already very valuable, when we judge them through the lens of the national currency we are used to looking through. The technology behind these new digital assets is still very new, but they have already started changing how the world of business works.
See also: Complimentary Currency (Wikipedia)