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Complementary social and cryptocurrencies

Recently I have had the opportunity to meet with several people from the complementary currency and the cryptocurrency movements. I learnt an awful lot of things. Most of the people I met agreed that the learning experience is maybe the most important one: learn what's wrong with fiat currencies, understand the fact that any currency is a social agreement or convention and without it would have almost no value at all, and above all find out about the thousands of complementary currency systems out there that help us redesign the economy. Cryptocurrencies are certainly a particular form of that, most notably since the start of BitCoin.

In this post I will try to point out some of the things I learnt, and sketch some of the main elements I myself and possibly also others would like to find out and accomplish. If you're interested in these topics, let me know, we could think of starting a working group on this and possibly organise some courses.

My personal starting point was at the end of 2011, when I acquired my first BitCoins, at a rather low exchange rate. This year I restarted my interest in the topic, especially critical of the huge rise of the BTC value, which triggered me to discuss this with Michel Bauwens and post my reflections in "An accidental millionaire by Bitcoin".

For the Economy of the Commons Conference (ECC) in berlin I reposted it on the conference website as "From BitCoin, FreiCoin and Riplle to a Commons powering complementary currency". We organised a break out session ijn the Money&Markets stream on Commons supporting Complementary Currencies. We discussed the combination of local currencies with global currencies. the importance of communities being in charge of their own currency, and depending on how well they are considered by others (based on much broader commons-oriented metrics than just the GNP), their currency could rise or lower in value (if free floating). The issuing of credit is an important aspect that in the official currencies is controlled mainly by private banks. Matt Slater, developer of Community Forge for Local Exchange and Trading Systems (LETS) and timebanks made a very strong point for this: credit should be back in the hands of the community - and this is what mutual credit systems do. The WIR in Switzerland has shown proven success since the 1930s for this. Other participants in this session were Jaromil - founder of Dyndy and Freecoin, a suite to help people set up their own cryptocurrencies (derived from BitCoin)-, Ruby van der Wekken - engaged in the Finnish timebank movement -, Enric Senabre - member of the core team behind the Goteo Crowdfunding the Commons platform-, Martin Auer, who funded part of the development of FreiCoin, Smari McCarthy - director of the Islandic Modern Media Initiative -, Jan Inglis from the Global Commons Trust, Nikolay Georgiev - from open Source Ecology Germany and Europe-, Christophe Vaillant from the Berlin open bike workshop and myself.

A summary of the Money&Markets stream during the ECC conference can be found in this PDF. The stream was opened by Jem Bendall and moderated by Ludwig Schuster. Stefan Meretz led the discussion on demonetisation - to replace transactions by social relations. "The core element of the monetary logic is equivalent exchange and a codified social power relation saying »you only get something if you give something back«. This underlying logic creates relationships of guilt, which David Graeber has convincingly analyzed for human history."

In Juli 2013 I organised a session in the Escuela de los Commons (E2C) in Barcelona where I invited Jorge Timón, co-founder of FreiCoin to discuss this currency in the context of the commons. FreiCoin is a fork of BitCoin and distinguishes itself mainly in two ways: first, it applies the concept of "demurrage", which means that keeping the currency in your wallet has a small cost to incentivise circulation (in Spanish it is called "oxidación" which maybe a more intelligible term); second, only 20% of the mined FRC's (that's how the currency is abreviated) go to the miner, the remaining 80% goes to the FreiCoin Foundation, which distributes these funds over social projects. The FreiCoin Foundation is desgning a participatory process to leave the decision to who these funds go to the community. For example they could set up a crowdfunding matching programming with Goteo.org (the commons oriented crowdfunding platform).

The session was interesting in particular because of the participation of people actively involved in local currency initiatives in Catalonia. There were people from the Solidarity Economy Network (XES for its abreviation in Catalan) who have their complementary currency called the EcoSol; people from the Cooperativa Integral Catalana (CIC) which runs the ECO currency and from the Dropis network.

One of the main challenges posed to FreiCoin during our session was the fact that the monetary mass (amount of currency in circulation) is not adjusted to the needs of the users. In the first three years of existence the monetary mass grows to 100 million FRC, independently of how much people want them. Jorge Timón, answered that the FRC can be subdivided in tiny fractions of 10exp(-8) just like the BTC. But the value of one FRC depends on its use and there will be no way to adjust that in relation to its need. BitCoin in fact has a bigger problem in this sense as it doesn't use demurrage. This makes that the early adopters of these cryptocurrencies have an important advantage (that is, in case such currencies persist, of course). But mutual credit systems have a much more equal distribution of the currency, generally users get an initial credit limit, laid down in the design of the currency and possibly adjusted if so decided in a general assembly. Some of these credit systems allow the credit limits to rise depending on the activity (trade volume) of the user.

Another approach is the ripple platform. It implements IOUs together with a proprietary cryptocurrency - XRP - which allows users to set trust levels for credit and exchange any kind of currency (most notably BitCoin and official fiat currencies) over a pseudonomous network. On the edges of the network people have set up exchanges such as BitStamp, DividendRippler, or RippleUnion which allow you to send fiat currencies into the system or withdraw from it. Though conceptually Ripple seems very attractive, I'm worried about the fact that one company controls the emission of the internal ripple currency (XRP), and that they promised to publish the software as Open Source Software, but still didn't do that.

That said, FreiCoin is planning to implement the main IOU features of ripple into their FreiCoin Markets version. This could also include various value baskets like the Terra as proposed by Bernhard Lietaer, or the more democratic p2p version of that as proposed by Enric Duran.

Recently I spent a few days in Brussels, where Dante-Gabryell Monson put me in contact with a few people of interest. Dante himself finds the idea of using context as a currency appealing. The things we do and learn, relationships we build in so many places and contexts have value, and should be used in a currency design. Dropis is doing an interesting thing in the context of online communities that autonomously define the value in each community, but through the global Dropis platform becomes useable in other communities as well.

Thanks to Dante I spend a few days at Olivier Auber's place. Amongst many things he's active in the OpenUDC community. OpenUDC is a French initiative for a "Universal Dividend Currency", in other words a currency system that incorporates a universal basic income scheme. In the context of a declining middle class, ever reducing labour needed to produce the products and services to satisfy the needs of the population - i.e. the end of the idea of jobs for everyone -, the growing conscience that motivation to perform certain activities is only partially vested in monetary compensation, the installation of a universal basic income scheme is gaining more and more traction (see more trends). And while many ways are presented to fund such schemes, the decline of the State, and especially its taxbase, makes the implementation right inside the currency system a rather interesting idea.

OpenUDC is a technical implementation of the Théorie Relative de la Monnaie (PDF in English) by Stephane Laborde. Auber is working on a fork called HDC: Human Dividend Currencies. More can be found in the P2P-Foundation wiki on Money.

There is much to learn and find out in this interesting area. If we were to design a course, what should be in it? Some learning objectives that come to mind:

  • understand the origins of money (e.g. read Debt by David Graeber)
  • understand the current official fiat currencies like the Euro and USD
  • understand mutual and social credit systems and common schemes for complementary currencies
  • know the main systems to run LETS, timebanks and other currency systems (e.g. see Shareable overview)
  • understand cryptocurrencies like BitCoin, FreiCoin and Ripple; know how to use them
  • be able to design a complementary currency for a local community within a global network
  • be able to design a strategy to receive and pay with multiple currencies, deal with currency exchanges at much lower costs than via conventional online payment services like Paypal and Google Wallet;
  • be able to reflect about the macroeconomic effects of adoption of such currency projects (e.g. critique on Bitcoin 1; 2)

If you're interested in co-designing a course like this, or help us make a plan for the free knowledge - free technology community of how to use a variety of the above mentioned currencies, feel welcome to join. Here's a place to start contributing to the course design.