Community issuance of money

I’ve been reading The Role of Money by Frederick Soddy, after Michael Linton inspired me by forwarding me this great Soddy quote:

Money is the nothing we take for something before we can get anything.

I hugely recommend this book and will try to condense some of his thoughts on this blog. Here’s a first thought this book inspired me:

Money must be issued as receipt for a voluntary gift of goods/services to the community, not as privately-printed counterfeit community gift receipts in exchange for forced, future larger real gifts to the private issuer. Following the latter model puts you on a course where the community’s debt has to always increase – sometimes to bail out the private money issuers – and inevitably concentrate in fewer hands, while forcing the endless privatization of formerly abundantly available resources.

The key challenge in such a model of community-based issuance of money is determining:

  1. what constitute a “gift of goods/services to the community”, and
  2. how to measure it.

2. is not big challenge. Even though gifts are made to the community, the largest part of the economy would still be free exchange based, providing a market-based valuation of gifts made.

1. is the key challenge. Certainly a gift of one’s time to clean up a nearby public park serves better the community next to this park, than the community miles away. This is where democracy – the online real-time one – and multiple currencies can really help: identifying unmet needs that the community cares most about, and validating them as worthy of community receipts when voluntarily providing gifts in the form of goods/services. Furthermore, separation of commons can be achieved by having an issuer i.e. a distinct currency in each community.

This can work at any level, neighborhood, city, county, state, federal, world, essentially allowing to pay over time the interest-bearing public debt with non-interest bearing gift receipts. Governance can be truly decentralized.

There should be currencies for those who don’t want to use the community-issued currency as medium of exchange, for instance asset-based, like e-gold.

Fractional reserve banking can be made illegal.

Many taxes could be ditched as well in generous communities. Some communities may require to have taxes paid, but would require them to be paid in their own currency, so as to ensure that not too much is issued and it gets recycled to fund new projects. Paying taxes would be done by either giving your time/goods in exchange of issued currency, or paying the taxes with local currency collected via exchanges with other local currency holders.

Banks can focus on narrow banking i.e. accounting, identity, security.

P2P lending in any currency, community or asset-based, can thrive. No problem in lending money as long as lending more than you have is illegal.

As a practical example, imagine a school in need of a bus+driver to go on a field trip. The community would vote this project as worthy of a receipt. A bus company would accept to provide the service in exchange for these receipts. They could use the receipts at accepting merchants. Merchants would be interested to collect the receipts since that’s what they could pay their local taxes with.


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.

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: <span class=”hPay”><span class=”give”>Given</span><span class=”amount”> <span class=”value”>20</span> <span class=”currency” title=””>BH$</span> to <a class=”to fn url” href=””>Blue Elephant restaurant</a></span class=”hPay”> (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: “”, 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.