What is a currency?

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.


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.


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?

11 thoughts on “What is a currency?”

  1. Guillaume,
    I don't think the issue is whether or not thinking of currency in a broader context will affect the ability of folks to adopt it. I think the issue is how we in the currency design world understand what a currency is to begin with. If we are confined to thinking of currency as money (i.e. “something that can be used as a form of payment in a trade”), we miss almost all of what is actually going on in an economy. That level of understanding may be okay for some applications, but as you point out, questions of reputation, group decision making, etc, are closely interdependent anyway.

    I don't think the key factor in determining how we define currency should be whether the general public are likely to “understand” these ideas or not. The fact is that understanding is not a key factor in adoption. Almost no one understands the dollar, yet it has universal adoption. Almost no one understands an internal combustion engine, yet almost everyone drives a car. Even scientists barely understand why microchips works the way they do, yet we are all dependent on computers. Knowledge about currency should, of course, be open and accessible to all who wish to engage with it, but that does not mean that popular understanding is a prerequisite for popular adoption.

    My concern is that if we isolate monetary currencies from other types of social flow, we will never have the tools we need to adequately describe functional currency designs or enable them with the appropriate information systems.


  2. then let's create a new word that will facilitate the exploration of ideas and experimentations around new forms of money & currency.
    This (those) word(s) should reflect what we would like it to become : a mean of exchange that enable the flows of wealth, energies & ideas between people.
    See the VitaMoney concept ” FREE ” ( FR ee E nergy E xchange) here : http://p2pfoundation.net/?title=Joytopia&diff=2

  3. Hi Alan, thank for for the feedback. Indeed we are in a political monetary economy, not just an economy so there are indeed many other important social interactions other than exchange. I agree with you that the tools to model, automate and analyze these processes are not yet available. That said, there is a lot of work on formal languages for contracts (ex. http://szabo.best.vwh.net/contractlanguage.html).

    Re: understanding. I agree users shouldn't have to understand how a currency is designed to get value from it, but because we are re-using the word “currency”, we need to make sure that whatever the popular understanding of the value is, we don't stretch it too far, at least not too quickly.

  4. Thanks for this exploration of the language. In English, I try to keep “money” for the tradable kind, the more restrictive version you are looking at, and use “currency” in the broader sense, and that fits with common usage of these words.

    It is critical that we be able to represent all of these forms of currency, transferable, measurable, or not in the system lest we forget about and devalue the most important qualities, the values that we hold closest to the center of our being.

  5. Great link to the contract language stuff! I will definitely look into that more.
    What really excites me about including more types of social tools under the umbrella term “currency” is that the language we use for describing one, may be applicable to all. Whatever the word, there is clearly a deep structure that money, reputations, voting, grades, etc. all share. All of these systems are so closely interrelated that if we want to get meaningful information about what patterns are occurring an economy or design systems that help manifest the patterns we want, having a common matrix of understanding for all might be very useful.

  6. Bernard Lietaer says “The word money is itself related the the Great Mother and derives from the Latin moneta. The first Roman mint operated out of the basement of the temple of the goddess Juno Moneta – – that is, her womb.”

    I like the kind-of pun or entendre in use of the term “currency” as the binding of request and resource, into mutual presence or coming together. Something – the transaction – happens, resource meets need, currency is exchanged/recorded, and the currency remains available as a potency for further use. As many kinds of needs/resources relations there are, that many currencies there could be.

  7. “The stronger the reputation the more the currency will be accepted and flow” especially in mutual credit currencies where my money is my word.

  8. “The stronger the reputation the more the currency will be accepted and flow” especially in mutual credit currencies where my money is my word.

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