Guillaume’s blog

This is the basic question that came up on a Flash Meeting titled “Open Money for Beginners” organized by Christophe Ducamp last Sunday. This is also a question that Eric Harris-Braun, Art Brock and I ended up discussing on a conference call last Friday night. So, I decided to take a shot at it, knowing that not everyone will agree at first, but hoping I can start a constructive debate and that we can agree on a definition at some point.

Etymology

One angle to start with, is etymology:

• In English, “currency” comes from L. currentum, pp. of currere “to run”.
• In French, the translated word is “devise”, which is essentially a motto, something you stand for, a rule you live by. In French, we have two words that are closer to the English word: “monnaie courante”, which means the money that is widely accepted.
• In German, the translated word is “Währung”, which according to the wikipedia page comes from a word that means “warranty”, but may also be from the verb “währen” which means “to last”.
• In Spanish, the translated word is “moneda”, which according to the etymology, means a coin minted with the mark of the issuing authority, which gives credit to its value.

So, three languages focus on the currency as something whose value is ensured by the reputation of its issuer. Only the English word derives from the consequence of this quality, which is that it flows easily between people.

Attempted definition

A currency is a means of payment denominated in a unit of value, issued, marked and ultimately redeemed by an issuer who guarantees (“backs”) its value. This guarantee is a function of the issuer’s reputation. The stronger the reputation the more the currency will be accepted and flow.

Why a currency is not a unit of value – See discussion between Chris Cook and Thomas Greco on P2P Foundation wiki.

Examples

Airmiles are backed by the airline company’s ability to redeem them for flights.

Twollars backed by EisoMac Ltd and sponsors’ commitment to donate one US$ for each donated Twollar.

Hours at time banks backed by the commitment of participants to deliver on one hours of their time.

Can we go beyond this definition?

There are many people that are streching this definition.

Supporters of the meta currency project, according to my understanding, view the above definition as restrictive and unable to correctly address forms of wealth that are not tradeable such as health. On this topic, I think that although I can’t trade my health, my heath or health-related activities can be tracked, and these have values to the welfare system I participate in. For instance, if I don’t smoke and I can back it up via a reputable issuer (either a doctor or a trusted device), that fact has value to the welfare system (less cost to them down the road) and could be the basis of a health currency.

Other examples given by the meta currency project are: right to vote. Voting can be viewed as something issued to each voter for a particular ballot and that they redeem to the issuer when voting. There is indeed some flow of wealth here, backed by the ability of the issuer to implement the voted proposition, but voting rights cannot be transfered. School grades are another example. I see these processes as reputation-building processes that in turn can back a currency, but not as currency themselves.

I have also heard people like IdentityWoman talking about identity infocards or as a currency. This is a topic I have addressed in a recent blog post. I don’t think that my “date of birth” or “email” is a currency b/c if I issue 10 tokens that can be redeemed for it, without accountable privacy policies, one party redeeming it devalues it for the 9 other token holders. Plus having more than 1 token is useless. Plus I only want the person I share it with to redeem it. On the other hand, I can see possibly how a blogger could issue tokens denominated in blog posts or tweets that could be redeemed by the holder to access restricted content on the blog.

In online multiplayer games, there are currencies that are not use to trade goods with other players, but that can be only exchanged with the game itself. An example is influence, which some games dispense quite generously and are a parameter to the success of some operations in the game. But obviously, these games operate in a virtual context that do not have the limited resources of our real world, so that may be not such a problem.

What is your opinion? should the world currency be kept to something that can be used as a form of payment in a trade, or should it be used in a wider variety of social contracts/games/processes? more importantly, will it help people understand and adopt new currencies or will it make things more complicated and backfire?

I spotted an ad for some photographic equipment for sale on Craigslist this morning that had the following post-scriptum:

I have to make rent and times are tough. So make an offer.

And this morning in my taxi, next to the “No Check” sticker, a yellow sticker woud read:

I am Self Employed Independent Contractor. I’d appreciate your repeat business.

One way to look at this is that it is a form of “Authentic Marketing” but I prefer to describe it simply as adding meaning to transactions, in the above cases: helping someone possibly unemployed, or rewarding someone who is contributing via its small business to a wider diversity.

These are examples that while exchanges are fundamental for mutual wealth, exchanges aren’t just about money. Exchanges preceded money, and even when first monies appeared, it was not uncommon for multiple of them to exist concurrently, each with its distinct role, or meaning. Money as we know it today (standardized, government issued) has had a huge objectifying influence on our subjective values, an effect that authors like Georg Simmel have described as completely objectifying and alienating. Others, more recent, authors like Viviana Zelizer in her book The Social Meaning of Money argue that subjective values have had a largely underestimated influence on our money as well, with people relying on a variety of techniques to give back social meaning to the colorless government-issued money, such as using different jars in their household for different uses. To Zelizer, under the surface of a single fungible government-issued currency, people use what amounts to a myriad of different currencies: they all flow differently even though they are all denominated in dollars.

In other words, old habits die hard and humans strive for meaning in everything they do, something the game designers try to satisfy as much as possible in their alternative worlds. As people look to compensate for less transactions with more meaning per transaction, we ought to see a wide range of solutions that will help them do just that.

Without going to a different currency, one example based on the above could simply be for users to expose part of their identity (unemployed) to a trusted party in a way that guarantees buyers on Craigslist that their money indeed goes to a person who is unemployed, and not someone deceiving to get an unfair advantage. That trusted party does not need to be an institution, but simply a social network.

If we think in terms of a new currency, one thing to keep in mind is that while money is a very powerful leverage tool, it is not what will drive people to exchange. A currency does not enable exchanges, it facilitates them, and one way it can facilitate them is by having built-in meaning.

We just released the PR for BarCampBankSF2. Please re-blog, re-twit, re-send, …

Dear Innovators,

It’s been a year since we had the first BarCampBankSF at the UC Berkeley campus — and given the current state of the economy, the collapse of the stock markets, the credit crunch hitting the global markets and the issuing severe slowdown of activity — the timing couldn’t be better for a second BarCampBankSF.

BarCampBank aims at bringing together the Bay Area’s smartest technologists and industry insiders from all over the world for a great day of networking to discuss the impact of emerging technologies in the Banking and Financial Services space. BarCampBankers will present projects, confront ideas and participate in lively conversations around the innovations in the Banking and Finance world. If you are an innovator, a technology disruptor or a professional in the banking and finance industry we’d love to have you join the debate and share in the experience.

We believe that innovation happens in any economy. We’d love to hear your ideas and share how your organization or institution is doing to ease the financial mess we are in right now.

Regards,

The BarCampBankSF Team.

More info and the wiki for the event can be found at http://barcamp.org/BarCampBankSF2
Registration takes place on eventbrite: http://bcbsf2.eventbrite.com/

The Open Money Foundation is gathering interest.

I’ve discussed the idea to a variety of people in the last few weeks, ranging from virtual world developers to Web developers, community currency activists and gold currency advocates, and there is a strong agreement towards a very focused and simple goal of currency services interoperability.

This simple goal has to be viewed as a first and necessary step to realize the larger vision of Open Money or free currencies. In particular for community currencies, another cornerstone are economically-driven adoption models such as Community Way.

Open Money Foundation mission

In a nutshell, Open Money Foundation should define the OpenID of currency services:

Open Money = a set of open interface specifications designed for adoption that governs the interoperability between independent currency services and client applications.

Note that this is not restricted to community currencies currencies. We think World of Warcraft virtual gold coins, phone airtime minutes, digital gold currencies, Linden dollars or any virtual currency can benefit from this interoperability. Conversely, we think that community currencies will benefit from the participation of virtual/game/alternate currency providers.

A currency service that complies with Open Money Foundation specifications will enable the following benefits for end-users:

• automatic discovery of currency services on the Internet.
• one click currency registration request: users will be able to very easily request to join a currency service from their favorite currency application (“wallet”?).
• single view of all currency balances: users will be able to view all their balances at various currency service from their favorite Open Money-compliant currency app.
• transacting on any currency service from any Open Money compliant app.
• starting a new currency on an existing currency service will be as easy as starting a group on Facebook (this is specific to credit currencies such as community currencies)
• and more.

The goal of these specifications isn’t to re-invent the wheel. There are many open specifications to leverage to address some of the problems above (OpenID, OpenSocial, OAuth, OFX) and some currency systems already leverage these.

An important aspect of the suggested focus is to not focus on implementation but only on interfaces. In the case of a currency service, implementation is for instance how creditworthiness and credit limits are determined, or whether interest or fees are charged. An interface is simply: how do I request to the currency service a demand for credit. There are many advantages to focus on interfaces not implementation:

• We don’t get into the philosophical discussions of what is a currency, what are its characteristics, etc.
• We can each focus on our area of expertise: some on client applications that make it easy for users to use the currency, some on server scalability, some on currency design, etc.
• We leave an opportunity for implementers to differentiate themselves and address various community requirements, either as a generic platform with a currency definition language or as an ad-hoc currency service for a specific community, either as a not-for-profit, or for profit.

Besides offering a forum for the development of these specifications, the Open Money Foundation will channel funding for the development of an open source reference implementation that everyone can at least use to test their own implementation, or build upon.

I’m looking forward for feedback on this topic. If you like these goals and are interested to participate in a way or another, please comment.

Open Money Foundation logo

Here’s a possible logo I’ve been working on several WEs ago.

Today, Eiso Kant, the co-founder of Twollars announced that he had been working lately on a multi-currency version of Twollars, and that “soon everyone can start their own currency on Twitter”. This could be an interesting development for Twollars, which have so far acted as a multiplier and allocator of the generosity of the sponsors US dollars donations: Twollars are backed by commitment of sponsors to donate real US dollars to the charity of the donator’s choice (the first $1,000 was sponsored by Eisomac Ltd, the creator of Twollars themselves, and it seems they are now looking for a new sponsor for the next $10,000).

We will have to wait until more details emerge, as there are many different ways a multi-currency platform could be implemented.

In the meantime, I’d like to share some thoughts on the concept of a Twitter Time Bank, something I’ve been thinking about in the last few days.

Overview

The goal of the Twitter Time Bank is to allow people to bring the reality to the idea that “time is money”, and allow anyone to issue their own time-based money they can use to pay others for products/services or to donate to others.

Here is an example of how it would work:

“(from @glebleu) give @receiver 1 hr for …” would give the receiver the right to schedule 1 hour of my time with him/her/them, through an operation called “redeeming”. Alternatively, they could transfer the time/money I gave him/her/them to someone else via the following Tweet: “(from @receiver1) give @receiver2 1 @glebleu hr for …” (receiver1 gives one hour of glebleu to receiver2).

Give syntax

Anyone is free to give their own time money to anyone else they want for whatever reason they want. They can give as much as they want (but there is an obvious limit, as each person’s time is limited). Anyone is also free to transfer other people’s time money they received to someone else. Here is the syntax:

Short syntax (@giver = @issuer) “give @receiver 5 hr ….”  or  “give @receiver 10 mn …”

Long syntax (@giver <> @ issuer) “give @receiver 5 @issuer hr” or “give @receiver 10 @issuer mn”

units supported: hr or mn

Accept syntax

Although you are free to give your time money to anyone for something, they are also free to acknowledge it or reject it. Acknowledgment would be done via the following Twitter syntax:

Short syntax: (@issuer = @giver) “accept 1 @giverissuer hr for …”

Long syntax: (@issuer <> @giver) “accept 1 @giver hr from @issuer for …”

Creating fungibility with community currencies

“Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution.”

Personal time money is hard to get accepted, obviously. With the above scheme, each time you are given some time money, you need to review the issuer for the value of his/her time to you and his/her creditworthiness.

To make personal time money useful, we need to make it fungible, but obviously all people’s time is not fungible. It is only within specific groups/communities that it may be.

To create mutual substitution, we need to allow people to spontaneously mutually agree to make their time money substitutable with one another. This agreement is a currency. In Twitter terms, @user1, @user2, etc. create a community whose currency is for instance called #bernal (say for the Bernal Heights neighborhood in San Francisco to support neighborhood “barn raising” events). In the community currency configuration, the community admin can decide:

• how people can be accepted in the community (ex. unanimous vote, cooptation from a minimum number of existing community members, verification of affiliation, etc.)
• the limit on each community members’ un-redeemed issued time.
• whether the currency can be sold for US$ to highest bidder (note that there is no way to prevent it from happening, so it’s better for the process of buying/selling currency for US$ to happen in a way that can be tracked and users protected from theft).

Once this is set up,  community members can issue community currency backed by their own personal time money. For instance, if I’m a member of #bernal, when I tweet “give @receiver 1 #bernal hr for…”, I automatically have an additional @glebleu hr that is accounted for in my un-redeemed issued time. If I exceed the personal issuing limit set for my community, the issuance is rejected (the received can’t accept it).

Web service

A Web service would provide a Web version of give and accept actions, as well as the following actions:

• reports:
  • un-redeemed issued time,
  • un-redeemed (but scheduled) issued time,
  • total redeemed issued time
• search profiles of people that you can redeem your personal money or community currency with
• request redemption (schedule time & location, or redeem for US$)
• confirm redemption
• bid in US$ for redeemable personal time money or community currency
• personal profile/preferences
  • auto-accept given money (default is no for personal time money, can be configured on a per community currency basis)
  • authorize personal time money issued to be sold for US$ to highest bidder (default is no, but there is no real way to prevent it to happen)
  • community currencies joined
  • schedule w/ booked time.
  • geo location, services/products provided for 1 hr, delivery (F2F, online), etc.

Business Model

The business model would quite simply to take a % of the time money sold for US$ (the system would allow users to prevent their issued time money to be put up for sale in US$ if they’d like to).

I just started to read Stabilizing an unstable economy by Hyman Minsky. In this book published in 1986, Minsky argues that the financial capitalist system is endogenously more prone to instability than stability and that we should reform to avoid “IT” (the Great Depression) to reproduce. In the 2008 preface, there is a summary of his agenda for reform that I found particularly relevant to the current financial situation.

• employment rather than welfare, with the government acting as employer-of-last-resort, because employment provides more opportunity and dignity than welfare and because welfare – paying people not to work – is inflationary
• universal child allowance
• payroll tax elimination
• policies encouraging greater equality of wages
• allow retirees to work without losing Social Security benefits
• tax policies encourage equity finance rather than debt finance
• policies encouraging small- to medium-sized banks, with less regulation the smaller a bank is.
• increase oversight of banks trough the use of the Fed’s discount window instead of FOMC
• zero reserve requirements with interest-earning positive reserve balances