Latest News in the World of Complementary Currencies

Terrible tokenomics: Yellowcoin

Selling tokens is now an accepted way to raise investment capital for IT projects, at least for speculative blockchain ventures. Tokens are not like shares an a company; they do not pay dividends or confer voting rights. Sometimes they can be used to buy the product or service, on the off-chance the company ever gets it to market. But sometimes it is neither of those, and issuers come up with creative ways to assure investors that success of the venture will somehow translate to demand for the tokens. Welcome to tokenomics!

AI yellow is a global business directory which has enough eyes on it that 1.4 businesses pay to be in it. It uses multi-level marketing (MLM) to get existing members to recruit new members and earn commissions which can add up handsomely. Though many people may feel that MLM is tainted or tacky, AI Yellow seems like a respectable and successful business. I’ve always thought that a business directory is a great context for a complementary currency discount system so I was keen to find out about this one.

Last week they launched an ICO (the process of issuing tokens and selling them into circulation). I read the white paper which is supposed to explain what the tokens do and why it is a good investment.

The paper had the tone of a once-in-lifetime offer, and contained much vague wording and misleading information, such as a chart showing the exponential growth of the cryptocurrency market capitalization 2017-2025; and several assertions like this:

As a result of the massive AiYellow eco-System, YTC has a truly unique expectation of appreciation…Bitcoin started in 2009 at $.003 USD. Today it is between $6,000 / $8,000 USD.

This kind of shilling is so irresponsible that it must have been deemed necessary to include the following paragraph on the final page:

Certain statements, estimates and financial information contained in this white paper constitute forward-looking statements or information. Such forward-looking statements or information involve known and unknown risks and uncertainties, which may cause actual events or results to differ materially from the estimates or the results implied or expressed in such forward-looking statements.

Too much time is spent extolling the virtues of Bitcoin which is irrelevant, and Ethereum, which is merely the accounting engine. A large part of the paper is devoted to explaining the game mechanics they designed to try to maximise the sales revenue. Even that seems tacky and over-complicated, basically there are about ten rounds of sales getting progressively more expensive.

But I want to focus on the tokenomics. On the first 2 readings I couldn’t work out what the token was actually for apart from raising capital of course. Several use cases are given from making private transfers to banking the un-banked which any crypto could be used for, but the key was in these bulletpoints, which seemed to repeat each other despite being in the same set.

  1. Merchants in the eco-System will accept the YTC-Token for $1.00 USD
  2. All merchants in the AiYellow eco-System will accept the YTC Tokens as a form of barter. There is a minimum value ($1 USD) agreed to by contract, with the merchants. This ($1 USD) value places a true floor on the fluctuation of the YTC Token value.

This makes purchasing tokens at between $0.02 and $0.15 a very good deal. Merchants will probably accept the token at $1 without coercion because AI Yellow is promising to buy them back (effectively backing them) for $1. This strikes me as a huge gamble on their part. If tokens fall below $1 on the free market, nobody must be allowed to buy them up and redeem them immediately from AI Yellow. That arbitrage would be parasitic, taking the tokens out of circulation and draining the cash reserve.

If the tokens aren’t continuously used as a medium of exchange or held by speculators but redeemed by merchants, it could mean serious cash outflow from company coffers.

So why would anyone pass these tokens around instead of money? Once the person who purchased the token at a discount has spent it, all the speculative gains have been realised. So there is an incentive system which seems to build in discounts, though its not clear if AI Yellow of the merchants end up funding that.

Merchant incentives for making purchases with YTC tokens also appear.

and there’s no way of knowing if that incentive will be strong enough: $1 cash will always be more useful to a company than $1 in discount vouchers.

There’s no reason for speculators to hold on to these tokens either. If they are backed by $1, then they are unlikely ever to have more than $1 purchasing power.

What the whole tokenomics seems to be ignorant of, is that the best way to make a medium of exchange circulate is to issue it as credit. Then the units are always in demand by the people who spent them into circulation, and no centralised backing is needed.

The AI Yellow token sale looks like a great offer to me, if you are prepared to spend the tokens in participating shops. But in my opinion the tokens will stop circulating fairly quickly, they will not have a lasting impact or create a new economy. And I worry that AI Yellow cannot redeem all the tokens for dollars. At that point the token holders will be left high and dry.

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PDF icon Yellowcoin_white_paper.pdf 6.72 MB
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Catering with less waste and more delicious

You can now hire the Brixton Pound for catering events: snacks for talks and workshops, hot meals for community meetings, buffets at art exhibitions, one-pots for corporate events. Whatever your budget, let us feed your guests using some of the finest ingredients saved from landfill. Our inventive veggie and vegan menu is inspired by the donated […]

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[Conference] 11th International Social Innovation Research Conference – Call for papers

11th International Social Innovation Research Conference – ISIRC 2019 Please find below the call for papers for ‘11th International Social Innovation Research Conference.’ One of the streams (‘Alternative economic organising for social innovation: Ecologies of context and relations‘) mentions specifically community currencies. This stream draws on the “diverse economies” approach. Read the full description of […]

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Last chance to buy first edition Brixton Pound notes

We are definitely not bringing Christmas into October but we’ve just released these beautiful collectors’ packs of first editions which will make ace presents (any time of the year). They are uncirculated, in mint condition and therefore extremely rare. When they’ve gone, well, yes, they’ve gone. The pack contains an Olive Morris note, a James […]

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Latest News

By now more than 10 years have passed since the outbreak of the great financial crisis. Many alarming developments have taken place since and the global financial system is as dangerous as before and banking regulation has generally been terribly weak wherever you look. More than ever, we need a monetary system that serves society […]

The post Latest News appeared first on International Movement for Money Reform.

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Free film night explores future of food production

Come along to our free film night at the Brixton Pound Cafe. The event is free but please consider giving us a donation to cover our costs. In Our Hands In Our Hands explores a quiet revolution that is transforming the way our food is produced and distributed. Our current industrial food system is a […]

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Massively multiplayer tokenomics

Earlier this year I wrote about how financial markets using Bancor Foundation might behave unpredictably in a crisis. I also opined on the protocol’s suitability for complementary currencies. But the ambition of those guys goes beyond merely supplanting Bloomberg, and beyond everyone having a Bancor enabled wallet on their phone, they imagine a world in which everyone will issue and trade their own tokens instead of using a common money – what I call massively multiplayer tokenomics.

In the Ripple multi-currency system, anyone can issue credit denominated in a national currency, and the system will provide an automated market between any two currency pairs, so any person’s credit can be made liquid for a discount by market-makers according to their confidence in the issuer. But without market makers for the vast majority of currency pairs the system would never take off as intended; no buyers and no sellers means a random person’s credit has no price.

The Bancor Protocol solves all that by allowing issuers to join into groups, issue reserve tokens, and by providing a bot market-maker which uses the reserve tokens to be a counterparty to all trades and to ensure there is enough of each currency to do the next trade. They haven’t made a good name for that whole arrangement yet, so I’ll call it – the token pool including the reserves and the trading bot, a bExchange.

If you just issue a token by yourself, nobody will know what it is worth, maybe not even how many you issued. So Bancor allows you to give value to your token by making it exchangeable for another token, perhaps your neighbourhood token. You agree and the other token issuer(s) agree how many of each others tokens you are prepared to hold, bearing in mind the risk of default, and together you create a new bExchange with reserve tokens allocated to each. Now your personal token has a ‘value’ in terms of your neighbourhood. The process is recursive, so your neighbourhood token might have a value in your bioregion, and your bioregion in your country, and your country in the world. In this way, your and everyone’s tokens, are convertible to anything, meaning everyone can buy and sell with anyone else in the world in the system. Your token is probably even convertible to dollars.

Yes, you can create tokens and convert them to dollars, when your neighbours agree effectively to back your tokens. So how many dollars? That depends on the virtual market maker, and how much it is paying for your tokens at any moment, which depends in turn on your balance of trade. As you spend your tokens, you’ll find that their value decreases. The reason is that your reserve tokens allocated to you are going into the exchange you share with your neighbours, and as your reserves go down, the market maker buys your currency for less. Now according to the theory of the price-specie flow mechanism, which neoliberals take as given, your weakening currency will dissuade you from buying and encourage you to sell, while encouraging others to buy from you, and thus the exchange rates will stay in balance in the long run. There are some serious criticisms of that theory, including that it seems not apply in the real world, but for the sake of my argument here, we’ll assume this mechanism works.

So everyone has a currency, there is perfect liquidity between the currencies, and the more of your own currency you hold, the stronger your currency is, and the cheaper everything appears to you. No-one else will hold your currency unless they can help it, because they want to hold their own currency. That means the traders in deficit will convert all their sales into their own currency until their reserves are 100%. Then the traders in surplus will hold all their own currency and and their surplus will of a currency whose issuer is in deficit. I can see a lot of parallels with the fiat money system:

  • the medium of exchange will consist entirely of the credit of the deficit traders, and currencies belonging to surplus traders will be not be needed.
  • surplus traders have more spending power than deficit traders, equivalent to interest earned on fiat savings
  • deficit traders have less spending power than par, equivalent to interest paid on fiat debt
  • a trader who spends all his tokens without earning them back, effectively defaults on his debt, to his guarantors – in this case his neighbours

But unlike the fiat money system

  • We now have many currencies in our wallets
  • Currencies purchasing power is constantly changing – we need to consult and app every time we want to know the price of something
  • Our credit is determined by agreement with our neighbours not by the bank

Adding these few thoughts up, it seems to me that the economy produced is quite like fiat money, except much less user friendly. The only advantage is that credit now comes from trusted friends – as in ripple by the way, and mutual credit. But unlike mutual credit, the system does nothing to prevent the accumulation of reserves and encourage the spending of them, so it will still end up with surplus traders hoarding tokens out of circulation, because hoarding is rewarded not with interest, but with better exchange rates.

The neoliberals at the Bancor foundation doubtless imagine that the protocol is an implementation of Hayek’s proposal for competing currencies. Hayek believed that the most trusted currency provider would beat the competition and the least trustworthy would go out of business, and thus that the free market would give the users of money the highest quality money. But what concerns me is that this isn’t the intention at all for most complementary currencies. Those projects are mostly about building community and local economy, not building a local economy until it subsumes all other localities.

Tokenomics doesn’t have a proper approach to debt default and so when the market loses confidence in a trader, the value of the tokens drops to, say, zero and whoever happens to be holding them loses out; tokens are never cancelled or recalled, they just leave a mess in people’s wallets, and there’s no compensation because hey, their intrinsic value was zero.

Furthermore there’s no need to do economics on the basis of creating tokens out of nothing. You can do the same economics but much more intuitively once you realise that everything is actually credit – if you spend more than you earn, it is a mathematical truth that somebody else will pay for it.

My concern is that this massively multiplayer flexible exchange rate monetary system is far more complex than it needs to be. That complexity means ordinary people will struggle to understand it even more than the current system, struggle to use it, and be more vulnerable to manipulation and scams.

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Personal currencies

Over the years I’ve come across a few proposals that any person or entity should able to issue their own currency, and I’ve always struggled about what that would mean and how it would work. For a start, there would need to be an exchange rate between each currency and each other currency, which means either they are literally convertible into a different unit as miles are convertible to kilometers, or that there is a market enabling all currencies to be bought and sold for each other.

It always seemed to me that the whole point of a currency was that it was a shared reference point with a stable value in relation to goods and services, and that a personal currencies would be neither shared nor stable. Furthermore it would be very hard for the market to assess the value of each person’s promises.

There is plenty of monetary theory and historical experience around having multiple issuers of say, dollars. Many cryptocurrency advocates see themselves as implementing Hayek’s proposal for competing currencies. He believed that the most trusted currency provider would beat the competition and the least trustworthy would go out of business, and thus that the free market would give the users of money the highest quality money. I think a regime of personal currencies is an order of magnitude more complex than each bank issuing its own notes.

The Distributed ledger version of Ripple a href=”https://ripple.com/“>Ripple indicated how this might be done by granting every user the possibility to guarantee their friends’ IOUs. Everyone member’s promise was its own asset class or currency, and it provided an automated market for every possible pair of currencies. But the system would never work because any liquidity there might be for my promises of dollars would be spread thinly across many markets.

This was the problem the Bancor Protocol solved albeit with a token-based approach rather than using IOUs. Any user could issue any number of tokens and ‘connect’ them to other tokens in a pool with a common reserve token. The first currency could then be traded with, meaning exchanged for and priced against, the other tokens in the same pool, and therefore for tokens in other pools connected to that pool. Pools would be recursively connected until every token could be traded with every other across a tree structure just as I described in the credit commons white paper. The total number of markets was only the number of pools rather than one for each possible currency pair. Each pool could use its reserve to buy or sell tokens instead of needing a counterparty, meaning all the tokens could be liquid. This was an engineering achievement, and it forces us back to the question of why we thought everyone should issue their own token. It seems to work as a medium of exchange if you have an app connected to a blockchain, but what about other monetary functions? Its not standard of value because all token values are shifting with supply and demand, and its poor a store of value, having no intrinsic worth and only one guarantor.

So beyond those I have three major criticisms of massively multiplayer tokenomics.

The first is that doesn’t nothing to address the balance of trade problem which naturally occurs in any economy where different regions produce and consume different amounts. A money system needs to be explicit about how trade imbalances are handled. Receiving reserve tokens is like being given a interest-free credit which has to be repaid; it enables you to buy stuff from the wider markets, but you still have to sell stuff back to those markets. Economics has been contorting itself to get around the problem that some areas are more (economically) productive than others, and areas do not naturally import as much as they export. Rather what usually happens (see the Eurozone and the globalised dollar) is that the surplus countries start lending their surplus currency to the deficit countries at interest, and a trade imbalance eventually becomes an unmanageable debt leading to poverty and loss of sovereignty. If we are interested in social justice, we have to solve the problem of trade imbalances. There are basically 3 ways:

  1. Political arrangements, investment from surplus areas to increase production in deficit areas, also maybe curbing or diverting consumption in surplus areas.
  2. Debt forgiveness / grants from surplus areas to deficit areas
  3. Block all trade when the trade becomes too imbalanced.

A multicurrency economy may have benefits regarding the issuance of currency and choice of which currency to use, but it obscures this balance of trade problem, especially when money is represented as variable value tokens. The Bancor approach uses a solid theory called the price-specie flow mechanism. The theory says that surplus areas’ currencies become stronger and deficit areas’ weaker, and therefore as trade becomes imbalances, prices change and surplus areas are encouraged to import and deficit areas export – essentially that with a free market in currencies, prices will automatically adjust to affect supply and demand to balance the trade. Unfortunately while the theory is solid, many economists say that in the real world there are many other factors affecting trade and this mechanism has little effect. Also it was never supposed to work for tokens but for a gold standard. So massively multiplayer tokenomics will be no more socially just than other money systems on this score.

My second criticism is that the distribution of risk/reward is very unclear. From time to time token issuers will go bust and the value of their tokens fall to nothing. Others will increase in value. Instead of holding money the purpose of which is to retain a known amount spending power, each user would hold a portfolio of assets whose value would be constantly changing. Every transaction would involve a choice and a negotiation of which tokens to transfer. This can be done automatically, or the user can use their own knowledge of the token issuers and their own assessment of what each token is worth or will be worth. In Bancor where demand is artificial, token values might not reflect any reality. The risk and reward is essentially randomly distributed except insofar as people know each others’ business and take the time to acquire and dump tokens they know about.This table shows who takes the risk in different monetary systems.

description issuer risk
Fiat money Commercial banks, backed by deposit insurance and bailouts in emergencies risk to the taxpayer, reward to the bank in the form of interest
Self-issued currency / Free banking Prominent institution such as local producer, bank or government bearers of the invalidated notes/tokens
A mutual credit where everyone has credit and debit limits everyone with a deficit everyone via inflation and/or surplus accounts as liquidity drys up.
A Ripple like system but with one currency. everyone the individuals who backed the defaulter, to the extent that they backed them.
Bancor tokens everyone The other currencies in the group who backed the defaulter, in proportion to the number of reserve tokens they hold.

My third criticism is usability. I can’t imagine a massively multiplayer token system working with cash; an app would be needed to price everything. The total amount in your wallet would need to be re-calculated hour by hour, and if you wanted to decide for yourself which tokens to spend and which to save, you would either have to configure your wallet or fiddle a lot just as you would if your pocket was full of coins from different countries. What you gain in usability, you would lose in knowledge and control over what was really going on in your wallet.

I’m also concerned that massively multiplayer token systems might not behave as their designers suppose.

Imagine you issued some tokens, but the more you spend them, the lower their price/purchasing power. You would much rather hold other people’s tokens than spend your own. It is very like borrowing money at interest Without mortgage tax relief distorting the picture, anyone would spend their savings before borrowing money because it is cheaper.

That means the only currencies circulating will be those issued by players currently in deficit. Meaning half the players’ token issuances are unnecessary. I see a lot of parallels with the fiat money system:

  • the medium of exchange will consist entirely of the credit of the deficit traders, and currencies belonging to surplus traders will be not be needed.
  • surplus traders have more spending power than deficit traders, equivalent to interest earned on fiat savings
  • deficit traders have less spending power than par, equivalent to interest paid on fiat debt
  • a trader who spends all his tokens without earning them back, effectively defaults on his debt, to his guarantors – in this case his neighbours

But unlike the fiat money system

  • Our credit is determined by agreement with our neighbours not by the bank but
  • We now have many currencies in our wallets
  • Currencies purchasing power is constantly changing – we need to consult and app every time we want to know the price of something

My final concern is about competition between currencies. Hayek was keen that different institutions like banks should compete to provide exchange media and store-of-value services to the market. But most complementary currencies are designed by communities for their own use. If they were to compete against each other they might make a more ‘efficient’ economy, if anyone cares to unpack that assertion, but at the expense of exacerbating trade imbalances, and eroding each other’s sovereignty.

Adding these few thoughts up, it seems to me that a system of personal currencies isn’t fundamentally different to what we have now, though it could be much worse since manipulation would be much easier and injustices would all be obscured by unreliable exchange rates. It would democratise credit but there are much simpler and more accountable ways to do this. A balance needs to be struck somewhere between one world currency a global monetary policy and near-zero risk, and personal currencies which require artificial liquidity and have no fixed value at all.

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Personal currencies: Hayek’s wet dream or Spaghettinomics?

Over the years I’ve come across a few proposals that any person or entity should able to issue their own currency, and I’ve always struggled about what that would mean and how it would work. This is relevant for recursive currency systems like the Credit Commons in which theoretically any member could create a currency as part of a larger monetary ecosystem. Recently I’ve been thinking these through and I think the benefits are outweighed by the drawbacks.

For many currencies to coexist there needs to be an exchange rate between each currency and each other currency, which means either they are literally convertible into a different unit as miles are convertible to kilometers, or that there is a market enabling all currencies to be bought and sold for each other.

It always seemed to me that the whole point of a currency was that it was a shared reference point with a stable value in relation to goods and services, and that a personal currencies would be neither shared nor stable. Furthermore it would be very hard for the market to assess the value of each person’s promises.

There is plenty of monetary theory and historical experience around having multiple issuers of say, dollars. Many cryptocurrency advocates see themselves as implementing Hayek’s proposal for competing currencies. He believed that the most trusted currency provider would beat the competition and the least trustworthy would go out of business, and thus that the free market would give the users of money the highest quality money. I think a regime of personal currencies is an order of magnitude more complex than each bank issuing its own notes.

The Distributed ledger version of Ripple indicated how this might be done by granting every user the possibility to guarantee their friends’ IOUs. Everyone member’s promise was its own asset class or currency, and it provided an automated market for every possible pair of currencies. But the system would never work because any liquidity there might be for my promises of dollars would be spread thinly across many markets.

This was the problem the Bancor Protocol solved albeit with a token-based approach rather than using IOUs. Any user could issue any number of tokens and ‘connect’ them to other tokens in a pool with a common reserve token. The first currency could then be traded with, meaning exchanged for and priced against, the other tokens in the same pool, and therefore for tokens in other pools connected to that pool. Pools would be recursively connected until every token could be traded with every other across a tree structure just as I described in the credit commons white paper. The total number of markets was only the number of pools rather than one for each possible currency pair. Each pool could use its reserve to buy or sell tokens instead of needing a counterparty, meaning all the tokens could be liquid. This was an engineering achievement, and it forces us back to the question of why we thought everyone should issue their own token. It seems to work as a medium of exchange if you have an app connected to a blockchain, but what about other monetary functions? Its not standard of value because all token values are shifting with supply and demand, and its poor a store of value, having no intrinsic worth and only one guarantor.

So beyond those I have three major criticisms of massively multiplayer tokenomics.

The first is that doesn’t nothing to address the balance of trade problem which naturally occurs in any economy where different regions produce and consume different amounts. A money system needs to be explicit about how trade imbalances are handled. Receiving reserve tokens is like being given a interest-free credit which has to be repaid; it enables you to buy stuff from the wider markets, but you still have to sell stuff back to those markets. Economics has been contorting itself to get around the problem that some areas are more (economically) productive than others, and areas do not naturally import as much as they export. Rather what usually happens (see the Eurozone and the globalised dollar) is that the surplus countries start lending their surplus currency to the deficit countries at interest, and a trade imbalance eventually becomes an unmanageable debt leading to poverty and loss of sovereignty. If we are interested in social justice, we have to solve the problem of trade imbalances. There are basically 3 ways:

  1. Political arrangements, investment from surplus areas to increase production in deficit areas, also maybe curbing or diverting consumption in surplus areas.
  2. Debt forgiveness / grants from surplus areas to deficit areas
  3. Block all trade when the trade becomes too imbalanced.

A multicurrency economy may have benefits regarding the issuance of currency and choice of which currency to use, but it obscures this balance of trade problem, especially when money is represented as variable value tokens. The Bancor approach uses a solid theory called the price-specie flow mechanism. The theory says that surplus areas’ currencies become stronger and deficit areas’ weaker, and therefore as trade becomes imbalances, prices change and surplus areas are encouraged to import and deficit areas export – essentially that with a free market in currencies, prices will automatically adjust to affect supply and demand to balance the trade. Unfortunately while the theory is solid, many economists say that in the real world there are many other factors affecting trade and this mechanism has little effect. Also it was never supposed to work for tokens but for a gold standard. So massively multiplayer tokenomics will be no more socially just than other money systems on this score.

My second criticism is that the distribution of risk/reward is very unclear. From time to time token issuers will go bust and the value of their tokens fall to nothing. Others will increase in value. Instead of holding money the purpose of which is to retain a known amount spending power, each user would hold a portfolio of assets whose value would be constantly changing. Every transaction would involve a choice and a negotiation of which tokens to transfer. This can be done automatically, or the user can use their own knowledge of the token issuers and their own assessment of what each token is worth or will be worth. In Bancor where demand is artificial, token values might not reflect any reality. The risk and reward is essentially randomly distributed except insofar as people know each others’ business and take the time to acquire and dump tokens they know about.This table shows who takes the risk in different monetary systems.

description issuer risk
Fiat money Commercial banks, backed by deposit insurance and bailouts in emergencies risk to the taxpayer, reward to the bank in the form of interest
Self-issued currency / Free banking Prominent institution such as local producer, bank or government bearers of the invalidated notes/tokens
A mutual credit where everyone has credit and debit limits everyone with a deficit everyone via inflation and/or surplus accounts as liquidity drys up.
A Ripple like system but with one currency. everyone the individuals who backed the defaulter, to the extent that they backed them.
Bancor tokens everyone The other currencies in the group who backed the defaulter, in proportion to the number of reserve tokens they hold.

My third criticism is usability. I can’t imagine a massively multiplayer token system working with cash; an app would be needed to price everything. The total amount in your wallet would need to be re-calculated hour by hour, and if you wanted to decide for yourself which tokens to spend and which to save, you would either have to configure your wallet or fiddle a lot just as you would if your pocket was full of coins from different countries. What you gain in usability, you would lose in knowledge and control over what was really going on in your wallet.

I’m also concerned that massively multiplayer token systems might not behave as their designers suppose.

Imagine you issued some tokens, but the more you spend them, the lower their price/purchasing power. You would much rather hold other people’s tokens than spend your own. It is very like borrowing money at interest Without mortgage tax relief distorting the picture, anyone would spend their savings before borrowing money because it is cheaper.

That means the only currencies circulating will be those issued by players currently in deficit. Meaning half the players’ token issuances are unnecessary. I see a lot of parallels with the fiat money system:

  • the medium of exchange will consist entirely of the credit of the deficit traders, and currencies belonging to surplus traders will be not be needed.
  • surplus traders have more spending power than deficit traders, equivalent to interest earned on fiat savings
  • deficit traders have less spending power than par, equivalent to interest paid on fiat debt
  • a trader who spends all his tokens without earning them back, effectively defaults on his debt, to his guarantors – in this case his neighbours

But unlike the fiat money system

  • Our credit is determined by agreement with our neighbours not by the bank but
  • We now have many currencies in our wallets
  • Currencies purchasing power is constantly changing – we need to consult and app every time we want to know the price of something

My final concern is about competition between currencies. Hayek was keen that different institutions like banks should compete to provide exchange media and store-of-value services to the market. But most complementary currencies are designed by communities for their own use. If they were to compete against each other they might make a more ‘efficient’ economy, if anyone cares to unpack that assertion, but at the expense of exacerbating trade imbalances, and eroding each other’s sovereignty.

Adding these few thoughts up, it seems to me that a system of personal currencies isn’t fundamentally different to what we have now, though it could be much worse since manipulation would be much easier and injustices would all be obscured by unreliable exchange rates. It would democratise credit but there are much simpler and more accountable ways to do this.

A balance needs to be struck somewhere between one world currency a global monetary policy and near-zero risk, and personal currencies which require artificial liquidity and have no fixed value at all. It is as if anyone had the right to crown themselves king, and be sovereign over themselves. Great but somebody still has to clean the toilet every week. More currencies doesn’t mean more sovereignty, more credit, or more wealth, but it does mean more complexity and less liquidity.

After all, isn’t the whole point of a medium of exchange, like a sovereign realm, that it is something shared and agreed and standardised by a community?

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