Guillaume's blog | Thoughts on the future of money

My panel submission for SXSW10: “not-so-random acts of kindness”

I submitted the following panel to SXSW10. Please vote for it if you would like to see it happening.

Mobile technology makes the real world a massive real-time multi-player play ground. This is a unique opportunity to move away from “work and no play” or from the “this for that” of traditional money, towards motivating people to spontaneously provide good experiences, and collectively evolve towards more indirect forms of reciprocity.

Questions Answered:

1. Do achievement badges influence behavior more than monetary rewards?
2. Do people donate more when their donations are publicized to their social networks?
3. Will gifts be taxable?
4. Is scarcity a myth?
5. Can supply and demand be matched in better ways than through the market?
6. What motivates people to do good?
7. How does traditional money play along with new forms of social recognition?
8. How do we avoid social capital bankruptcy?
9. Are reputation based systems necessarily following a power law distribution?
10. Can we avoid the tragedy of the commons by relying less on money?

Funding public art with community currency?

Last week, Interactive Architecture ran an article about the Singing-Ringing Tree sculpture in Burnley, Lancashire, UK. The video resonated very much with some of my recent thinking on how public art that is part of the commons can be at the heart of community economic development.

First of all, it reminded me of an interview of Douglas Rushkoff about his latest book Life Inc where he tells the story of how Middle Age cathedrals were built:

The Vatican and central Rome did NOT build the cathedrals. The funds came from local currency. They were what we would now call “demurrage” currencies that were earned into existence. Towns ended up creating more value than they knew what to do with! They started investing in their infrastructure and their windmills and their water wheels; and also in their future in the form of cathedrals and other tourist attractions.

The second thought I have had recently is that a currency is a unit of contribution to a common goal, and it is this common goal that gives the value to the currency, because the common goal provides a social incentive for everyone to participate in their own way, some by contributing directly to the common goal and being issued currency, others by contributing indirectly to the goal by accepting it for goods/services. In my view, individuals’ common goals or common individual goals are what initially create community, more than anything else.

A public art piece like the Singin-Ringing Tree is such a common goal. It creates long-term value for local businesses like the cathedrals of the middle-age. It creates identity and pride for the local population. It also create jobs.

One approach to funding art is to seek grants from tax-funded government development agencies, but this approach can be viewed as quite inefficient since it requires tax collection, projects competing for funding with other projects, and a hierarchical and highly centralized decision making process.

Another approach could be to use a community currency dedicated to the particular art project. It would work like this:

The art project would issue acknowledgments for in-kind or monetary donations made to the project. Issuance would be made public.
Businesses could show their support by accepting some of these acknowledgments for partial payment of goods/services they provide.
The notes, if printed in paper, could bear an artist rendering of the public art piece to be built.
After it is built, the public art piece would likely attract tourists to whom the notes could be sold as a “piece” of the art piece, likely for many times the face value in dollar, since originals would be in limited supplies. This would provide a natural way for the currency to disappear from circulation, and be replaced by new ones for new projects.

Beyond Money SF event quick notes

The event took place last Wednesday. I was invited to speak on “beyond money” together with Mathew Edwards from The Village Network. Regina Gelfo who organized the event did an amazing job at moderating the event. We where about 20-25 people. After Mathew’s and myself respective 10-15 minutes talk, we split in smaller groups of 4-5 people to discuss specific topics and then regrouped to share our conclusions.

My personal talk was centered on the inefficiencies of the market processes at creating sustainable abundance and happiness for all, and how mobile Internet technology ability to track our day to day accomplishments and advertise them in our social networks will provide new currencies that will allow those who give a lot to find their needs supported (and more), thus encouraging more people to focus on what they do best and give it away, rather than working for money at an alienating job that they might lose at any time.

My notes:

Mathew presented a model of trust as concentric networks, with the core circle as most trust-worthy in which a gift economy operates, and outside of this circle the rest of the world, the global economy with global currencies. For Mathew, there is little in between and this is where an intermediate concentric network must emerge with a mix of gift economy with a bit of accounting/reputation and local currencies with less influence of global market forces. He gave as an example the Village Network currency systems, which operate both as a gift-economy and mutual credit currency. He explained that in this system, everything starts with the expression of a need by a member, that others are offering to satisfy (ex. need a ride to the airport), rather than by a marketplaces of products/services offered that can be shopped for.
We discussed how deeply unsatisfactory exchanges can be, compared to authentic gifts: “billing for necessities makes me feel really bad”, earning $1500 in a WE for a wedding you don’t want to be at, having to asks patients or students for money knowing they don’t have it. Binal Shah of Karma Clinic shared with us in a small group how she provides healthcare to patients on a gift economy basis. Here is what she says to her patients: “What I provided you is worth way more than you can possibly pay for it so I’m going to give it to you”. She simply trusts that the ripple effects of her gifts will come back to her and satisfy her needs. Another attendee, who is an educator, as well as Mathew mentioned how he provides a service on a sliding scale basis, but with a commitment to always says “Yes” even if the patient cannot pay the full price, sustaining their activity by the generous contributions of some clients that allow them to provide service for free to others.
Someone mentioned how existing platforms such as CouchSurfing could be extended to provide housing and foor for people volunteering (not just for CS, but any volunteering). This is in line with some ideas I introduced in my talk.
Anthony Di Franco summarized a discussion by saying that our perception of scarcity is a self-realizing phenomena and that we must find ways to change this perception to a perception of abundance, which in turn will entice people to give more.

Other names mentioned I heard for the first time:

The Green Society and their complementary currency.
Damanhur

Keith Hart on sectarianism in the community currency movement

This 4 year old video from Keith Hart is “on the money”.

Many people in the community currency business are very keen to put more distance between the forms of money that they devise, the forms of association they are inventing, and the ones with which we are the most familiar and that leads often to quite sectarian struggles over the definition of the relation between the currency and the national currency, whether it should be multiple issuer/member/subscription supplied or supplied from a central fund, whether it should take the form of hours or some kind of currency, whether it should take a scrip form or be entire virtual, and so on, and these things often become a matter of intense debate leading to a kind of sectarian struggle in the movement, which is comparable only in my experience, with that of Trotskyist movement, or the early christians, or the puritans, people who are willing to break up an organization on a matter of principle. And as we learnt in the last session, the problem is less how can new community currency organizations generate themselves on a standalone basis, but how can they be coordinated as part of a wide movement and integrated more effectively into commerce more generally.

Alt.transport currency and carbon offsets

I have been researching a bit more the idea of a SF Bay Area rideshare currency, and realized it should be expanded to any alternative transportation method.

Here’s how it would work:

Alt-transportation users would log their shared rides/bicycle rides/walks using a service like RideSpring, which may provide rideshare matching service. From these logs as well as the type of car that would be used otherwise, carbon emission savings would be computed. Certification might involve a mutual process or a device such as the Freiker or the Zap tracking devices for walkers/bicyclists. Users with would be able to withdraw these carbon offset certificates as printed stickers with a barcode.
Non-alt transportation users buy carbon offsets certificates issued in proportion to the carbon emissions saved by the tracked usage of alternative transportation. This certificates would be valid for a year and issued as bumper stickers that buyers can proudly stick on their car.
Businesses would accept payment of their products/services in part with the carbon offset certificate stickers.
In addition, thanks to the recent Commuter Bicycle Benefit bill, bicycling commuters riding at least 3 times a week would be able to get $20 pre-tax income every month from their employers in the form of additional carbon offset dollars (that could only be spent at bicyclist shops).
The overall system would be operating by a non-profit charity with a specific additional mission of lobbying for additional tax breaks, in particular for ride sharers not using vanpools.

I need to do the maths, but in the meantime, would love to hear what you think.

A qualified ReTweet microsyntax idea

I have written a couple times in the past about the ReTweet as the Twitter currency. My conclusion was that you should lose credits when you RT and earn credits when you are RTed. I also suggested that the number of credits earned/lost would be fixed.

There is an interesting parallel here with the Twollars RT syntax: RT 2 twollars @giyom for …

I don’t know exactly how Twollars accounts for ReTweeter being ReTweted (Eiso?), but I like the idea of qualifying a ReTweet.

I see two ways to qualify it:

a number, positive or negative, indicating how much I like something or not (although the negative number may not be practical)
a hashtag or something similar, further qualifying my number. (BTW, I noticed that people like to add tags to the things they RT, but it’s not clear to receivers whether these were tags in the original tweet, or the RT only)

Examples:

Liking the Tweet: RT 2 @giyom … same as RT +2 @giyom same as RT ++ @giyom
Not liking the Tweet: RT -1 @giyom … same as RT – @giyom
Liking the Tweet for a specific aspect: RT 2 #fun @giyom …
In addition, a regular RT like RT @giyom would be accounted as +1

Note in the last example that the hastag is before the RTed username, which allows the receiver to see that the hastag was added by the RTer.

A tracker may keep track of balances for each Twitter user, like Twollars or Twitbank does.

A look at the Opensocial Virtual Currency API proposal

The Opensocial virtual currency API proposal is at revision #3. There has been growing interest in the money geek community as to what it might entail, so I thought I’d take a stab at it.

First of all, we are talking about virtual currency, that is governement-currency converted to a separate denomination to provide the following benefits:

Allow those without a bank account, particularly kids to be able to convert cash into virtual currency by way of gift cards.
Higher relative denominations (ex. $1USD = 10 virtual currency unit) for psychological impact: to increase the perceived value of virtual goods sold and of monetary gifts received.
Usually, non-convertibility or limited convertibility back into government-issued currency, which limits liquidity risk on the issuer side while allowing the issuer to use the currency as a way for users to earn by participating, checking-in, accomplishing tasks, volunteering personal information, etc.
Typically shouted transactions in the social graph as a way to seek mimetism of donations by social graph members or to increase social capital and seek indirect reciprocal benevolent behaviors.

Motivation

The first paragraph of the design explains the primary motivation for the API. The API provides essentially a way to workaround the fact that the application requesting the payment does not hold user’s credentials required to authorize the payment, so it has to communicate first with the container of the application, get the user’s authorization at that level, before the request can be passed to the authorization system.

A bias towards single currency per app

Looking at the details of the API, what is interesting is that there is no currency passed as part of the Payment object, only an amount and a reason. In fact, the currency is implicitly specified via the a opt_paymentHandlerUrl parameter (the URL of the payment handler) or via a pre-registered payment service URL.

In other words, it is designed primarily for applications who only deal with their own single currency, although it does not prevent an application to support multiple payment URLs. In all cases, each currency is tied to a currency service. It should also work very well for applications, which want to use a third-party currency and currency transaction service.

A bias towards purchases/rewards

Looking at the required versus parameters, the API seems really biased towards transactions between the application and the user such as virtual goods purchases.

The API supports both debiting the user’s account and crediting it, which means the API can be used to authorize both purchases and rewards for the user.

Extensibility

Despite the above mentioned biases, flexible “parameter” parameter can contain any application-specific data that the application may want to transmit. This opens the door to referencing invoice #, destination accounts, currencies, etc

Reputation badges as a driver for benevolent behavior

I’ve had a couple travel hours today to continue my reading of Richard Alexander’s The Biology of Moral Systems. The essential thesis of the book is that our moral, benevolent behaviors are motivated by our desire to receive indirectly reciprocal benevolent behaviors from others in a way that maximize the reproduction of our genetic capital. “Indirect” means that we may not get the reciprocal behavior from the same individual as the one we originally were benevolent to. There is another indirection since we may not even ourselves get the reciprocal behavior, but it might be given to our descendants or relatives. As Jean told me a few months ago, we might want to call this “slow reciprocity”.

In other words, we are acting morally and being benevolent to others, sometimes making this moral behaviors into law because it will serve the reproduction of our genes. For instance, monogamy rule limits competition between males, which maximizes every male’s chance to reproduce.

Another example are empirical evidences that social recognition of donations is an important incentive in pro-social activities, as if we cared about talking about our donations/moral behaviors in return for reputability and ultimately obtain an indirect return even if it won’t be ourselves but our children or great grand children who will enjoy it.

For instance, this paper documents an experiment that shows that when people know that their donations are being watched, they tend to donate more.

Another example is a study on blood donors in Italy that has shown that “that donors significantly increase the frequency of their donations immediately before reaching the thresholds for which the rewards are given, but only if the prizes are publicly announced in the local newspaper and awarded in a public ceremony”.

In a Web 2.0 world, this public announcement would translate to the blood bank issuing a virtual badge certificate, that the donor would be able to shout out to their friends on Facebook or publish on their Web sites.

There are many blood donors Facebook groups, but I don’t believe anyone requires a certified blood donation to become a member. The closest think to a blood donor reputation badge is the I give blood application, allows your blood center to automagically upload your donation and cholesterol history and your blood type to your profile page.

Badges are also used in the Foursquare social game application, but are less serious. “They are little rewards you earn for doing interesting things – e.g. staying out late on a school night or visiting places far outside your neighborhood”.

Despite the positive potential that these reputation badges could unleash, I am not aware of any standard mechanism in social networks that support this. You can advertise a donation you’re making via TipJoy, but you can’t get a certified donor/benefactor/donator for all the good things you’ve done.

As Jody Reale mentioned this morning: “Why nothing positive is ever recorded in one’s “permanent record.”

One simple way to achieve this would be for non-profits receiving donations to publish on their Web site the name of the donors. This is something Wikipedia does. It wouldn’t take much for donation receivers to microformat these pages with hReview (the URI pointing to the Web identity of the donor), in a way that it can be easily extracted, aggregated and re-published on social networks.

Microformats and decentralized online currencies

Most people are probably aware of the announcement by Google (following Yahoo’s announcement) that they would be supporting microformats.

What is really interesting to me is what this means for online currencies.

If you look at an hReview, what it is fundamentally is a declaration of positive (or negative) experience measured as a number betwen 1.0 and 5.0 about an item, which someone publishes on the Web anywhere he/she wants. An aggregator like Google in turns aggregates it and computes an average of the rating. The reviewer does not need the authorization of the reviewed item to publish the review.

That name typically includes a link (URL), which can be viewed as one of the identifiers of the reviewed items on the Web. It might be their own homepage for a restaurant, or it might be a description of the item on a review Web site such as Yelp (here the Yelp URI of a thai restaurant where I live).

In the payment world, there is already a payment application that allows you to donate/pay money without the other person having registered, it’s Tipjoy. The way it works is that you donate to URLs on the Web. Just like an hReview, the recipient does not have to be registered with TipJoy for others to tip them. If and when they eventually register they can claim their money by inserting a tipjoy tag with their username in the HTML of their Web page. Twollars followed a similar process but with Twitter names instead of Web URLs, but Twitter names are also URLs…

So the general pattern of Twollars, TipJoy and hReview is that you give or review a URL.

This could work for a really open monetary architecture:

People would write somewhere on the Web (typically a Web space they own) an hReview-like statement that they give a number of units of currency to someone else. For instance: Given 20 BH$ to <a class=”to fn url” href=”http://www.yelp.com/biz/blue-elephant-thai-san-francisco”>Blue Elephant restaurant</a> (Note that they could write it manually, but most likely, they will use a form that will generate it for them).
An aggregator would find this statement, either by crawling the Web, or if they are blogged via a RSS ping. The aggregator will typically compute balances (positive and negative). In a mutual credit model, people’s balances would be allowed to be negative, but in a traditional government-issued currency, they would not, they’d have to borrow it at interest.
Receivers may claim some of the URLs through a similar process than the one used by TipJoy.
Users may publish back their balances via a widget on their Web site.

What’s great with this model is that anyone can start playing, even create their own currency, very easily.

More importantly, you can have several accounting services tracking hPay statements and computing balances. You don’t need an account at a bank, your Web site is your bank account. What the accounting service does is simply authenticating that you own the space where you published transactions, and keeping tabs.

There are several issues:

Currency creation: Where do we register new currencies so that accounting services can distinguish different currencies? The ISO 4217 code is too limited to support millions of currencies. We need something like I used above: “us.ca.sf.bh”, which would allow new currencies to be easily created out of existing ones simply through forking.
Currency rules: different currencies have different rules. Some will allow negative balances of any amount, some won’t allow anything below zero, some will allow some negative balances or positive balances with limits (ex. 5,000). These rules must be encoded in a formal language, published to accounting services and participants and associated with the name of the currency. Eric Harris-Braun and Arthur Brock have already explored this topic extensively.
Refusal: how does a recipient refuses a given currency amount? (another currency rule BTW) this assumes that the recipient can be notified that their URL was mentioned. This is essentially a linkback.
Security, in particular:
- Authentication: how do we make sure that statements posted indeed come from the person owning the resource.
- Authorization/Privacy: how to we ensure that not all transactions I make are public, but available only those I transact with and possibly as few as possible trusted reputable intermediaries. OAuth could be useful here if the resources can be easily segmented and tokens can be issued to groups at once.
- Non-repudiation/Tracability: how do we prevent the effect of people deleting hPay statements.
- etc.

Quite a lot to think about. Some of these items will be the topic of future posts.

When will payment networks open up to non-government issued currencies?

Probably sooner than later, not only because these new kind of currencies are currently popping up all over the place and represent a lost opportunity for payment networks, but especially because there are very valid business use cases.

First of all, what are we talking about?

A payment network opening up to non-government issued currency would essentially allow payments to be done non just in US dollars or any other legal tender, but in privately-issued currencies, whether it’s World of Warcraft gold coins, Facebook currency or others. In particular, multi-currency payments would be possible: say 20% of the amount in a currency and 80% in another, which isn’t possible right now.

Furthermore, non-government issued community or virtual currencies are by nature circulating within a specific group of people, with limited conversion from/to real US dollars, which reduces revenue for payment networks exclusively focused on US dollar. It would be much better for payment networks to provide their operational expertise to communities and charge for it.

What would be the business case?

Think about the following scenario: you log in to Amazon and have registered your World of Warcraft username, so Amazon knows that you are a player. You have authorized Amazon.com to access your WoW balance and submit transactions on your behalf (say via OAuth). You now browse to a produce page, and instead of the regular price of $100 (USD), you see $80 (USD) and 20 WoW gold coins. You press the buy button, and $80 are taken out of your credit or debit car or bank account, while 20 WoW gold coins are transferred to Amazon.com WoW account.

Why would Amazon.com do that?

It’s a very cheap way to target and attract a particular community of customers that they can further target with specific offers knowing what they like.
It’s a perfect way to build their brand using the accumulated game currency on the virtual world
They can use the acquired game currency to target specific players with incentives to purchase at Amazon.com
As long as they see value in using these acquired game currency to build their brand (i.e. they recirculate them), it’s really not a rebate, simply a different use of their marketing dollars.

Beyond game currencies

Beyond game currencies, the above use case would be valid for any community currency, say of a particular city or neighborhood. It may not work very well for Amazon in the case of a neighborhood since Amazon.com may not be willing to spend too many dollars on a particular local community, but that’s the point: if they don’t, why would the local community shop at Amazon.com? there are probably other retailers that would be happy to collect currency that they can redeem for advertisment in a local newspaper or local Web site.