I was recently forwarded a question about the difference between LETS, time-banks, and Open Money. I struggled hard to find the right response and decided that the fundamental shift was from “currency designs” to “currency platforms.” What follows is my attempt to describe that shift.
LETS, time-banks, commercial barter exchanges, and HOURS (Ithaca or otherwise) are all currency designs. Open Money is a currency platform. Those in the currency design world have tended to focus on coming up with the best design to maximize the chances of success. There was good reason for this focus since roughly 90% of attempts at implementing currency systems quickly fail. The most successful designs have been built around the concept of “mutual-credit” as in LETS, time-banks, and commercial barter. While each of these employ different subtleties, the core design principle is the same.
Even when currencies employ the relatively successful core design of mutual-credit, the odds of success are still slim. More importantly, however, is that the cost of failure is high. Until recently, if you wanted to harness the power of currency creation for your community, you had to invest many long hours in organizing. Frequently, these hours were uncompensated and underappreciated. Given the odds of success, only the most zealous even bothered to try.
To date, currency designers have tended to try to find the design that will finally take the idea of community currency to its full potential. The goal has been to raise the success rate thereby making those long hours of organizing worth it. However, what if instead of success being more likely, failure was less costly? Enter the currency platform.
As Michael Linton has pointed out “we all belong to many tribes.” This means that there are countless communities we already belong to that might benefit from some kind of currency strategy. But who in these communities is likely to spend the hours of organizing needed to implement such a strategy? What if creating a currency was, as Linton says, “as simple and easy as starting an email group?” Then, there would be little to no cost of failure. If people used the currency, great. If not, no one sacrificed long hours to make it happen. By lowering the cost of failure, countless numbers of communities will gain access to the power of currency creation without the risk of anyone wasting their time on a wild goose chase.
Some of these currencies will be measured in hours (as in a time-bank); some will be measured in the national money (as in LETS). Some will involve complex formulas for calculating credit limits; others won’t have credit limits. Some will have open account balances; others will have private account balances. The specifics of the design will depend on the needs of the community in question, just as the specifics of how email groups are implemented depend on the needs of the group.
This evolution represents a PROFOUND shift in how currency designers will operate. For those wanting a taste of what this might be like, Twollars is about to release a multi-currency platform. While still in its infancy, Twollars will allow users to generate their own currencies by simply defining a hash-tag for them. Hopefully, other currency platforms such as Open Money will also soon be operational (and interoperable), so we can really get this party started.