Saturday, October 31, 2009

Membrane Currencies

In the previous post, Arthur talked about expanding the range of how we think about currencies. We are all familiar with trade currencies, and more and more people are becoming comfortable with the term "reputation currency" (a Google search for "reputation currency" reveals almost 4000 hits, many of which point the Whuffie), as well as "loyalty currencies," which are token systems like airline miles, and buy-10-get-1-free cards. Other types of currencies we've talked about include "voting currencies" and "performance metric currencies" like grades/credits/degrees and nobel prizes which incentivize and guide participation.

But today I want to share about one of the hot topics in the meta-currency lab: the membrane currency.

As you probably know if you've been following this blog, we think of a currency around here more as a "current see," i.e. something that lets the social organism see and interact with a current, a flow. When looking at natural systems and the flows that course through them (that in fact are their very essence) there is a completely ubiquitous phenomenon that is often hidden in plain sight: the membrane. Membranes are somewhat tricky to define and understand, because in the end, where the membrane of any particular system starts and where it ends, is a matter of how you choose to look at it. This fact, that the boundaries of a membrane are somewhat fuzzy, is particularly interesting because that's exactly what membranes themselves are: boundaries. They are the component of a system that makes it appear to be a separate, complete, and integral system in the context of some environment. Membranes can be seen as that which creates a context, or environment, in which subsystems can be coordinated to into being an integral whole. This is not-withstanding the fact that all membraned systems are themselves embedded in an context or environment which is itself bounded by a membrane.

Membranes are permeable. One of the most important features of any membrane, is exactly the form and shape that it gives to permeability. This permeability, is clearly a mechanism for regulating flows in and out of a system, of coordinating how the inside of the system will see the outside, of limiting/enhancing/controlling/shaping/transforming what gets in and out. Sound familiar? By our definition of currencies, a membrane certainly is one. In fact, I now suspect that membranes are one of the foundational currency types.

In some living systems it's very easy to see the membranes as they map one-for-one with the very things we see. This is simply because they are the physical boundary that makes those systems "things" to our eyes. Animals have a skin. Cells have a "cell membrane." Without them, they would cease to be integral living things. It's harder for us to see the membrane in other living systems. What's the membrane of a bee-hive or an ant colony? The examples of social insects are an important step to understanding membrane currencies. Social insect colonies build both physical structures, but also have functional/behavioral structures that create the integrity of the colony as whole. Wasps build paper shells around their nests, but also guard them from intruders. Bees and ants, not only have specialized casts to ward off invaders, but also have complex identification systems to recognize bees and ants from other colonies. All of these aspects are part of what make the membrane of the colony.

So what does this have to do with currency? As with many things about currency, I credit Michael Linton with being first into deep insight about this. When I first met Michael in 2004 at the E.F Schumacher Society Local Currencies conference he was describing his vision of a multi-currency open money system that included a concept he was calling "domains." Here's one of the images he showed: What Michael was describing in that picture was a network of currency systems. The circles are people, and the colored networks are the different currency system used by the people. But the key thing in the picture is that people are grouped in those gray areas: domains. Michael realized that for a self-organizing resilient currency network to form, there had to be a self-declared boundary system by which currencies and accounts in those systems could be declared and named, such that they would be visible and known to the entire network, but also such that any such group had it's own autonomy and control within that domain. This is a profound insight: naming is one of the key elements that creates the membrane of the social organism. Names are part of what creates the boundary that make a social organism distinguishable as an independent whole. And it's related to the identification mechanisms of ants and bees to know if any particular ant or bee they come across is part of "self" or not.

I went on with Michael to build two functional implementations of the open money system one at and another at, both of which include a naming system to create contexts for currency accounts. The second implementation is described at: and you can see there how namespaces (which is what I started calling them instead of domains) were even conceived of as one of the fundamental entity types in the "Mesh".

That work has evolved into the meta-currency platform where again we continue grappling with the naming questions for the network. How will entities be made visible to other entities on the network, i.e. what will currency account addresses be? How do you name a currency? How will that namings be delegated? You can see the design document for our early ideas. But this all came to a head in working on the flowplace. The flowplace design included the notion of a "circle," which was a way to group users and currencies. The circles were completely separate from the currency network addresses (which we were now calling wallets). We conceived of circles as providing a context for action. So any group that wanted to use free currencies to build wealth together, could come to the flowplace, and start by creating a circle, and a bunch of currencies that it would use to measure it's wealth. When you have such circles, immediately you need to address the "security" questions of who gets to add new members into the circle. And then also the question of who gets to create currencies in a given circle, and so on. So I sat down to code these "administration" features into the flowplace, when it hit me that the meta-currency infrastructure we were using to create the currencies in the flowplace, was exactly what I needed to implement these permissions structures for the circles.

How is this possible? Lets go back to our definition of currencies: A formal system for shaping, enabling, and measuring currents (or flows). Well, the meta-currency infrastructure provides a language (XGFL) for creating those formal systems, and in the flowplace I'd already used it to create some trade, performance metric, and reputation currencies. I saw that I could use this same language to specify the permissions that participants of the circle have in regards to the currencies that the circle uses, and that that very specification could simultaneously serve as a naming, i.e. a mapping, between people, currencies and roles in the context of the given circle. After talking this through with fellow currency geeks, we realized that the membrane currency also has a broader naming function in that it is also responsible for creating names for all the currencies in use by the circle, be they currencies that are created by circle for internal use only, or be they currencies created externally. The membrane currency brings such currencies "inside" the circle, by virtue of giving them a local name. Arthur came up with the word "namescape" to describe the resulting naming that the membrane currency accomplishes. This reflects the idea that it's not just a static namespace, or direct mapping, that the the membrane currency accomplishes, but rather that for the social organism, the membrane uses a dynamic naming process to create the shape of the relationship between those currencies and processes that "inside" and "outside" of the social organism. Geeks can check out the progress of the developing membrane currency for the flowplace on github.

So let me try to sum this all up: I am engaged in this work because the social organisms that we are embedded in are destructive of us, the planet, and therefore themselves. Thus our social organisms must evolve, they must be radically transformed. I believe that for this to happen, we must come to see the social organism from the point of view of all the myriad flows that literally are what it is made of. But what gives any organism a level integrity, of self, wholeness, and difference from other organisms? It is a membrane, which is the systemic component that both separates and connects the organism from its environment. The membrane is not so much a static physical barrier, as it is an active process that mediates between "inside" and "outside." In the case of social organisms, the central process that accomplishes this is naming by assigning of roles. (Think of all initiatory ceremonies of social bodies where individuals get new names, or formal markings that assign them to roles). This "membranic" process is itself a currency as it a formal system for shaping, enabling, and measuring these flows of participation.

Perhaps we shouldn't call such currencies "membrane currencies" but rather "integrity currencies." The former is a name for the component in the system. The later is a name for what that component accomplishes.

Thursday, October 29, 2009

Critical to expand perception of Currencies

On the Complementary Currency Skype channel we've got going, there was brief but old standard debate going on about fiat vs. mutual credit currencies.

I chimed in with:

When you expand your perspective about currency beyond only medium of exchange / monetary currencies the need for fiat currencies becomes clear.

For example, debiting a University for granting a college degree as reputation currency starts sounding awfully silly. There are quite valid reasons for fiat currencies.

However, if your goal is to create sustained monetary value, that form of issuance tends to be "bad tech." I think we might be able to transcend some of the dogmatic Mac/PC or Fiat/Mutual-Credit posturing if we consider these broader applications they create sharper contrasts and clearer hues so that we can learn which adjustments effect what outcomes.

Imagine analyzing breeds of apples. There are a lot of differences between them, but mostly a lot of similarities when you compare them to all other fruits. It may be that if we want to nourish ourselves effectively, that we shouldn't rule out all other fruits. They each have their own value and there are things to learn from them that may even teach us a few things about apples.

(Yes... You might accuse me of making an apples to oranges comparison here.)

Later Ernie asked: “I would like to know what you mean by this: ...if we consider these broader applications they create sharper contrasts and clearer hues so that we can learn which adjustments affect what outcomes.”

After a few days I responded:

Sorry about my delayed response. Let me try using what I think is an apt metaphor. The design of any currency establishes a range of possible behaviors of the individuals participating in it as well as a trajectory for the user community as a whole (as a sort of collective entity or organism).

I think this is very similar to the role that DNA plays in living creatures.

A currency organizes connections and interactions between groups of people into a kind of collective behavior which creates a kind of living social organism. The design of that currency (the rules about issuance, transaction, conversion/co-function, retirement/expiration, participant classes, governance, etc.) are the DNA of this social organism.

DNA doesn’t tell us exactly what each individual biological critter will do, but it does define a particular range of possibilities and tendencies. We know pigs don’t fly, bats don’t “see,” fish must live in water, and most humans develop language capacities. That doesn’t tell us what sentences a particular human will say, just like the design of a currency doesn’t determine exactly what transactions individuals will do.

Suppose you want to understand human DNA – map the human genome. Scientists have found it VERY useful to learn from non-human creatures for many reasons. Simpler combinations of variables (fewer chromosome pairs), easier experimentation (eugenics / experimental breeding of humans is frowned upon), greater variety (difference between different animals create contrasts which help identify patterns that might be harder to see between humans who are so similar), etc.

I’m suggesting that as currency designers (even if what you want most is to understand monetary currencies) that expanding our definition of currencies to include non-monetary configurations helps in the very same ways that considering non-human DNA helps in mapping human DNA.

  • There is greater variety. Contrasts stand out much more starkly. Postage stamps fill a very different niche than grades on tests or bus passes. There are patterns amidst that variety that are direct outcomes of the design of each currency.

  • People participate more freely. Consider how many hundreds of millions of people are freely participating in currencies like five-star product ratings, eBay reputation, user participation metrics, certifications, college degrees, performance reviews, stocks, stamps, movie tickets, etc. in contrast to how few are participating in general purpose money substitutes (LETS, Berks, local currencies, and even commercial barter).

  • Failures are less costly. The impact on people’s trust, ability to sustain themselves and willingness to participate in another “experimental” community venture are less severe when people don’t expect to make a living from the experiment. With non-monetary currencies, we can experiment without people losing their retirement funds.

  • Results can be evaluated faster. One of the things people often expect from a monetary currency is long-term stability as a store of value. But non-monetary alternatives can be used to solve specific problems or meet specific goals then be retired. Even the WIR has barely been running long enough for many to consider it in long-term analysis.

This is what I meant in prior statement you asked about. I think there are many more reasons to consider these non-monetary currencies (such as gift economies are fundamentally more efficient than market economies).

Getting out of the rut of thinking that new “money” is the only real answer yields many opportunities for us. And yes – these broader “currencies” solve real problems that real people are grappling with every day. Money isn’t the only solution to our problems. And as we all know, it is in fact the source of many of them.

Tuesday, October 13, 2009

Money Simply Facilitates Trade?

Recently I've had some discussions about our MetaCurrency work with folks trained in economics. For some reason it seems particularly hard for some of them to grok what we're up to. More than once I've been told that working on changing the money system "hooey" and is barking up the wrong tree because "money simply facilitates trades," and that's it. Well, here's another statement: "cars simply facilitate moving stuff." Like the idea that "money simply facilitates trades" it is true for a narrow range of inquiry. But for even a slightly broader range of inquiry both of these statements are false. What's so interesting to is how hard it is in the case of money, to see that that statement is being made in a narrow context at all!

In the case of the technology of cars we know that the details of the technology itself has huge systemic implications. The CO2 produced by the internal combustion engines they run on has large consequences to the health of the planet's ecosystems. The specific effects of cars as a facilitator of moving stuff around vs. for example trains & and various other communal methods, or horses and buggies for that matter, have large consequences to the health of human social ecosystems.

You can't ignore the details of the technology in the case of cars, nor can you in the case of money. Both are technologies who's specifics make huge difference. What's weird is that by and large people don't even seem to think that money HAS any specifics. But it does. The currency alphabet that we've talking about (or currency literacy) is about getting the semantic and conceptual tools in our heads to see those specifics re money, so we can actually create forms of them that don't have the pernicious side effects. On top of that we're claiming that the best way to use such an alphabet is in an open, distributed, and democratic context, not a centralized one.

I see this situation is as if we lived in a society where we had invented cars, but we still had absolutely no idea how the production of CO2 by internal combustion could be responsible for climate change. We have created money, but we don't realize that the form of issuance of that money (debt based issuance), has very large side-effects. We don't really know why there isn't money for health care and education, we don't know why fundamentally our financial systems crash all the time. But it turns out that there are lots of other ways of issuing money into circulation (as there are other types of engines for cars), that don't have the same side-effects. My claim is that many, many of the fundamental patterns of our society are largely driven by the systemics that spin out from that basic axiom of debt based central issuance. If you change that one thing, lots of other things change. But it goes further than that too, just like in the case of cars as "facilitators of moving stuff." You can change out the engines to all be fuel cell electrics and thus solve the CO2 problem, but if we keep cars in place as our main way of moving people around we still have a huge range of social problems created by traffic, commuting, segregation of life into bedroom-suburbs and business centers, etc. And it goes even further, we pave over thousands of acres of arable land for cars. There are safety issues in using cars. They kill people and animals in ways that other transportation systems don't. They consume a scarce fuel resources which sets up other dependency relationships. They are built of metals which are getting increasingly scarce. They change the way people not in cars behave while moving around the world, and the list goes on. Just as it does with money, when you start to dig in deeper.

So I can see how all of this would seem to some economists as "hooey." If you are a traffic engineer, then any talk of switching out engines in cars as if it were meaningful is indeed hooey. It doesn't make a difference in that narrow context of getting cars to flow through intersections.

So although it may be true that money "simply facilitates trades," oversimplifying it in this way completely ignores other very real effects which emerge from money and our decisions about how we issue it, manage it and transact it. Different currencies change the rules about those things and although they may still facilitate trades, they can completely change all the ancillary "side-effects."

Intentional design of currencies is about waking up to the fact that these things are indeed not just "side-effects" but "actual systemic effects" and we should be responsible for them in similar ways that we need to be responsible for all those "side-effects" of using cars to move stuff.
We can't ignore those these "side-effects" and have a livable planet, livable economies or livable communities.
Yet looking at money in this way is completely (and possibly intentionally) outside the scope of traditional economics. Traditional economics seems to look at things like this in terms of "externalities," and certainly there is a loud cry from within traditional economics for accounting for externalities and moving them into the system. And some economist seem to get the deeper issue. Here is a great answer by environmental economist Neva Goodwin to a question about externalities in an article in grist:

The problem I have with classical microeconomics is the failure to account for "externalities" that relate to fundamental human and environmental values. What do you propose to do to incorporate the breadth of human activity and resource use into the economist's paradigm and avoid us living out the "tragedy of the commons"? -- David Hohmann, Bexley, Ohio

Many people who are critical of economics say that the problem is that economists don't take account of externalities. In fact, this is one of the most hopeful areas of agreement between economists and environmentalists. Externalities are costs or benefits that are "external" to the market system -- that is, they don't come back to affect the economic actor that caused them. This is very distressing to economists, because the presence of an externality means that the market is not working as theory says it should. Economists used to mostly ignore the prevalence of externalities -- they can justly be criticized for that -- but since environmentalists discovered the word and began to bring examples to the attention of economists, they have been working hard to figure out ways to "internalize the externalities." If this effort could fully succeed, we would have a world in which any polluting firm would bear the full cost of its pollution, rather than leaving individuals to bear the cost in terms of ill health, etc., and every family whose children grow up to be constructive members of society would be fully compensated for the foregone earnings and other costs involved in devoting time and resources to raising children.

That's the positive part. The negative is that, even while mainstream economists are actively (and sometimes successfully) wrestling with efforts to internalize (into the system of market signals) the costs of economic activity that have been externalized to the natural world or onto societies, there's something bigger going on -- which I suspect is behind your question. There are "meta-externalities" -- unwanted side-effects of the whole economic system on its physical and social contexts -- which continue to be invisible to the theory. Critical meta-externalities show up in the impact of the economic system on the social context. Productive enterprises need a workforce that has been socialized to be able to defer gratification, to think independently and sometimes creatively, and to be honest and responsible. Citizens and politicians need to care about the long run, and to be able and willing to address intelligently the myriad highly complex issues that face modern societies. But the sales efforts within modern enterprises are focused on a different set of requirements. From the sales point of view, the self-interest of business is served by a culture of instant gratification and simplified thinking that urges material purchase as the answer to any discomfort. A serious, as yet insufficiently recognized, set of meta-externalities are the selfishness, short-term thinking, cynicism, and impatience with complexity that are cultivated in the populace at large -- even though these are not characteristics that will best contribute to a healthy society or a healthy economy.

The heart of the difficulty in seeing this issue, I think lies is in the fact that traditional economics rests exactly on that "system of market signals" as the central feedback loop necessary for governing flows of goods and services. It's fairly easy to see how pollution is an externality, and how by pricing mechanisms like cap & trade, it can be brought into the market signal system. But as Neva Goodwin says, what about the meta-externalities of the very information signaling system you use to bring those externalities into the system? They will necessarily remain invisible without a level jump.

That's the idea behind the MetaCurrency project. It's a level jump that allows the side-effects of the signaling system itself to be taken into account, by putting the signal system itself into play.