The Internet might be more than a new kind of marketplace and a new medium for exchanging money as we know it.

Money, according to Lietaer, can be defined in several ways: "Money is information about the way we exchange energy," he says. "Money is an agreement within a community to use something as a medium of exchange. The agreement can be conscious or unconscious, coerced or free. Most of us donŐt consciously choose our money. We have an opportunity to change that. The Internet is a space where that is possible to do. I expect a flourishing of money systems in the coming years. 95% of these experiments will fail. But the 5% that succeed will change the world."

"Some implicit built-in mechanisms in money systems have social implications," Lietaer claimed in a recent interview. "First, currencies are national, an assumption based on 19th century emergence of nation-states. All the money we have is debt-generated -- someone goes to a bank and makes a loan. This pits people against each other, collectively. Competition is built into the money system. Greed and the breakdown of community that everybody is complaining about correlate with the use of competitive money systems. But there were no money exchanges in monastic communities. The word 'community' comes from latin, meaning 'exchanging gifts among each other.'

Some money systems can preserve this gift mechanism." Example of money systems that preserves the gift aspect of communal energy exchange are formal systems for keeping track of the value of goods or services exchanged between members of a defined group. These differ from national currency because they are valid only within the group. For example, a local currency in your town could be an exchange arrangement that a number of people would agree to. Unlike barter, where you would mow someone's lawn in exchange for a quart of milk, you could agree to contribute a certain number of hours of lawn-mowing to your "account." Someone who had a dairy farm could contribute a certain number of gallons of milk. Instead of forcing lawnmowers (or anyone with a skill or commodity) to seek out dairy farmers, the farmer could go to the local exchange bank and turn in a number of milk credits in exchange for a number of lawn mowing credits. Everyone who contributes a number of credits to the local currency bank can exchange those credits for goods or services from other members of the community, and must work off those goods and services by contributing to those who have need of whatever they have to offer.

"Local Exchange Trading System"(or LETS) is the name for a system for recording transactions between members of a group who agree to provide goods and services to each other. This group produces a directory which lists their skills, services and goods, together with requests for anything they wish to obtain in trade. Such systems predate Internet-based transaction systems, but are adaptable to online communication and accounting systems.

The Internet might lead to a radical change in the nature of money if the Internet's technical mechanisms are used to support the creation and maintenance of local currencies. The two key mechanisms for maintaining a LETS system are an accounting system for keeping track of people's contributions and withdrawals, and a registry or directory that enables people to find the goods and services they seek. Although these systems were created in the early 1980s, without reference to Internet-based tools, the recent emergence of digital signature, digital money, and other Internet-based economic instruments makes it possible to envision LETS systems that extend beyond local geographic communities. LETS credits are units that communities use to measure the value of exchanges. In Manchester, England, they call them BOBBINs. In San Francisco, they are called FOGs. One group on the Internet calls their unit of currency VIRTs. One of the most famous is the Ithaca, New York, HOUR.

The idea of LETS was first developed by Michael Linton, and started in Canada in the early 1980s. LETS systems have spread around the USA,, Australia,, New Zealand and the UK, where there are now around 300 active systems. The security of these systems depends on good communications -- the communities are self-policing to the degree that members can see the transaction records of other members, and people who take from the system without contributing to it are soon weeded out. People who have a good record, over a period of time, of paying their goods and services back into the system, are likely to be able to be granted credit for others -- buying goods or services in excess of their account balance, then paying back into the balance by providing goods and services as they are requested by others.

Paul Glover, who created the Ithaca, New York, HOUR system, describes it this way: "...the Ithaca HOUR is Ithaca's $10.00 bill, because ten dollars per hour is the average of wages/salaries in Tompkins County. These HOUR notes, in four denominations, buy plumbing, carpentry, electrical work, roofing, nursing, chiropractic, child care, car and bike repair, food, eyeglasses, firewood, gifts, and thousands of other goods and services. Our credit union accepts them for mortgage and loan fees. People pay rent with HOURS. The best restaurants in town take them, as do movie theaters, bowling alleys, two large locally-owned grocery stores, and thirty farmer's market vendors."

The Internet offers several powerful means of amplifying the ability of a group of individuals to create a community currency. First, because the Net facilitates global communications, the group does not have to be limited to a geographic areay. Second, because the Net and the computers connected to it make it possible to keep track of a large number of transactions and communicate their results rapidly, it is possible for a community to keep track of the activities of members and self-police. Third, because methods involving encryption make it possible to exchange national currencies as well as local currencies ("digital cash"), it makes it possible for different local currency systems to honor each other's transations. And finally, encryption-based "digital signature" technology makes it possible to protect against online counterfeiting or impersonation. National currencies are based on debt and competition and are backed by gold and government promises. Local currencies are based on contribution and cooperation and are backed by the talents and promises of humans.

Transaction Net maintains resources and links related to community currencies. The alt.community.local-money newsgroup maintains a list of frequently asked questions and answers. . Both sites include links to others.

return to rheingold's brainstorms
more rheingoldian writing