Internet Currencies

Characteristics

Bernard Lietaer on the Desirable Characteristics of Internet Currencies at http://www.transaction.net/money/internet/:

I propose that the following five characteristics would be desirable for Internet currencies:

efficient and secure in an electronic payment system

convertible into local expenses

(i.e. answering the key question: how can I use credits earned on the Net to pay for my food and daily needs?);

non-national

One key characteristic of the Net is its lack of national boundaries; while national currencies are specifically designed to foster national consciousness. Why should a German buying a product offered by an Indian company on the Net have to pay in Deutsche Mark, Dollars or Rupees? The precedent of the expansion of 'frequent flyer miles" as a means of payment not only for air travel but also long-distance phones, hotels, taxis, etc. show how less traditional currencies - in this case privately issued corporate scripts - can establish themselves to fulfill specific purposes.)

self-regulating on the Net itself

The current national currencies are *not* self-regulating: they require a Central Bank to operate, and credit approval by banks to be created. This feature is important because the Net itself is a self-organizing system, and it would run against its entire established spirit and dynamic to require a central authority to operate its money system;

supporting the creation of community

Again, the opposite of what our 'normal' national currencies do." (http://www.transaction.net/money/internet/)

Requirements for Success

Bernard Lietaer [1]:

"There is one type of currency which could be made to meet all five characteristics if at least some of the virtual communities would choose to agree on it. Currency systems modeled after Michael Linton's: LETSystem (Local Exchange Trading System) and Edgar Cahn's Time Dollars hint at an answer. They are Mutual Credit Systems where two participants agreeing on a transaction create the necessary currency respectively as a debit and credit. They are therefore self-regulating, needing no Central Bank to monitor money supply. Most are already completely computerized. Finally, most important for our purposes here, there is ample pragmatic evidence that using such currencies actively promotes cooperation rather than competition among participants.

The only additional step needed to create the Internet currency meeting our specifications is to have an automatic electronic clearing house for such local currency systems, clearing house which could operate on the Net itself. The Multiple-Registry software needed to enable such automatic clearing among different community currency systems operating in distant geographical locations are already available. What they would enable in practice is that someone in Manchester, UK, for instance, could 'earn' credits by providing a service on the Internet, and automatically exchange them for use in her local LETS system. Conversely, the credits earned in Manchester's local economy would be more valuable by becoming exchangeable for goods and services on the Internet. "Think globally, act locally" would gain some added pragmatic reality in this approach.

Note that I do *not* claim that no national currencies should be used on the Net, or that community currencies of the type described above could or should replace the national currencies. For instance, national currencies are the obligatory means for tax payments, and they will remain an effective tool to foster competitive behavior wherever that is appropriate and useful. In any case, the billions of dollars already invested in creating national currency payment systems will ensure that such systems will remain a dominant force on the Net and elsewhere. But I do claim that time is ripe to encourage in our societies some cooperation as well; and that both types of money systems could become complementary to each other on the Net." (http://www.transaction.net/money/internet/)