I asked our friend Sepp Hasslberger the following question: why the strong growth in local currencies, yet the almost total absence of internet-based currencies?
His response:
“I think I have a good idea of why internet based currencies are much slower to take off than local ones.
As long as you’re local, there is a much closer connection between all the participants in a monetary scheme. Closer connection means close-knit community, means backup between the members in case of trouble.
Potential trouble for any alternative currency comes from the institutions that detain the monopoly of currencies – banks, central banks, and ultimately governments. They will tolerate local currencies that have no potential to change the status quo. They will interfere when things get too successful, as they did in the historical Woergl experiment.
Jumping from local to internet-based there are two important changes. For one, the close connection (and willingness to stand up for each other) that is characteristic of local currencies is likely absent. But even more importantly, number two: Internet based currencies have game changing potential. As soon as they look like they are seriously gaining adherents and are being used as an alternative to official currencies, the heavy hand of “justice” comes down on them. Witness the recent closing down of some of the gold-backed internet currencies that were being used to trade in a more generalized way.
So the hurdles that an internet-based currency must take to successfully operate and stay in operation are much more serious than the ones that a local currency has to overcome. I think that is why we see a relatively slow adoption of such currencies.”
From Thomas Greco, via email:
Sepp,
I’m not sure what you’re looking at when you say that. What specifically are you comparing?
None of the currencies or credit clearing systems that have emerged from the grassroots has had significant economic impact, or has succeeded very well over the long run. I say that not to find fault but simply to point out that the movement up to now has been in the experimental stage that has resulted in significant learning.
The reasons so far have not been repression by the powers that be, although that will surely come when exchange alternatives achieve significant results.
Rather, the failure has stemmed from deficiencies in design, operation, and implementation. I have two entire chapters on this subject in my new book (Ch 13 &14).
There are two fundamental reasons why exchange alternatives fail to thrive.
These are:
1. failure of reciprocity and,
2. inadequate scale and scope of operation.
Failures of reciprocity can stem either from system design flaws or from management issues.
System design flaws include:
• Improper basis of issue of credits or currency
• Inadequate account limits, i.e., over-issuance of credits or currency in relation to an issuer’s productivity and the demand for their goods or services
• Lack of a clear agreement between issuers and users of credits or currency
Management issues include:
• Lack of accountability and transparency
• Inadequate management procedures and controls
• Over-reliance upon volunteer administrators
• Failure to respond to internal or external threats
There are several aspects to the problem of scale and scope, which can be
summarized as follows:
• Failure to achieve critical size of the participant base
• Too narrow an assortment of goods and services being offered
• Failure to attract participants from all levels of the supply chain (production/distribution circuit)
• Failure to gain wide acceptance among the mainstream business community
In the following chapter (Chapter 14) I discuss the principles that need to be applied to adequately address those issues.
What the current mega-crisis requires is the availability of effective exchange alternatives that are locally controlled yet globally useful. This requires the creation of an optimized local exchange that will serve as a model that can be widely and quickly replicated. These exchanges must then be networked together based on a standard set of procedures and protocols. It is also imperative that we employ an implementation strategy that enables the rapid proliferation of exchanges and expansion of patronage (membership). It needs to get big fast so as to withstand the inevitable assault that will come from the vested interests.
Tom
I’d say that the software you require is already in use, OS, it’s decentralized and it fits your requirements to work on a local scale or global. IVTS, value transfer systems such as Loom.cc or Trubanc.com are both already online and working. Skype me for info anytime. ‘digitalcurrency’
Mark
editor@dgcmagazine.com
Stan Rhodes, via email:
Re: Twollars, see commentary by Stan Schroder:
http://mashable.com/2009/05/26/twollars/
Alan Rosenblith: http://newcurrencyfrontiers.blogspot.com/search/label/twollars
I suspect twollars is little league to prepare for using Google Wave
to make Wavoleons or Wavebux or obs or whatever. They didn’t know
about Wave when they started, but I’d be surprised if they don’t have
their eye on it now.
So, if we look at possible next moves in the arms race:
1. money moves into the internet via projects that are building open
money systems
2. open money systems that are easiest to use and access by the
mainstream is adopted rapidly by the tech savvy for small transactions
3. diverse money systems are created, but only a few are used, moves
quickly toward one
4. they’re used for all sorts of legal and illegal activities
5. governments go after traders, like China did with QQ coins
6. organized crime increasingly tries to squeeze in as the buying
power increases
7. governments, particularly the United States, strikes at two points
in the infrastructure: businesses and ISPs
8. people route around businesses with virtual enterprises, and route
around ISPs via peer open telecom tech
9. the “rickroll” becomes the world’s first true global currency after
a scandal with “lollars”
“Internet based currencies have game changing potential. As soon as they look like they are seriously gaining adherents and are being used as an alternative to official currencies, the heavy hand of “justice” comes down on them. Witness the recent closing down of some of the gold-backed internet currencies that were being used to trade in a more generalized way.”
Jct: The Liberty Dollar people were asking for trouble when they made their currency look like the real thing, which is illegal. Ithara Hours, Toronto Dollars, LETS, have never had any trouble with the authorities.
Best of all, when the local currency is pegged to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See my banking systems engineering analysis at http://youtube.com/kingofthepaupers
dear John: thanks for this extra information.