Open Source Currency - Will mobile phones enable ubiquitous LETS?
What if we could use our cell phones to confirm transactions with one another as simply as pressing a button? We don't even need to shake hands with each other, only with the central server, which can confirm that both parties have agreed. As Paul put it in an email, "enabling the back-end for a truly decentralized marketplace with buyers, sellers, traders, and sharers is the open-source 'killer app' of the next century."
http://www.thefeaturearchives.com/101119.html
Open Source Currency
By Douglas Rushkoff, Wed Oct 13 11:45:00 EEST 2004
Or, how mobile phones can break the money monopoly.
In the midst of discussing wireless data business plans, cell phone technology developments, and the moment-to-moment success of the mobile media industry, it's sometimes easy to forget the bigger picture. Just as early Internet enthusiasts seemed to focus on ad banners and animated GIFs instead of what turned out to be the much more momentous power of blogs to influence the direction of culture, those of us covering mobile data may have also taken our eyes off the bigger prizes in store for this new medium.
It's easy to talk about how handheld, networked computers (that's what our cell phones are, after all) promote the decentralization of content creation, file exchange and even culture -- but what about the stuff that's so centralized we stop thinking about it as even up for discussion? That's right: I'm talking about money.
Handheld wireless technology stands ready to enable what's known as the "complementary currency" movement in ways so powerful that the dominance of national currencies such as the dollar and the euro may soon be called into question.
This is not as preposterous a scenario as it sounds. After all, it's only been since the Renaissance that nation-states have been powerful enough to corner the money market. Before then, most municipalities developed their own currencies, often basing them on very different principles than the ones we use to justify our currencies today.
For example, many earlier currencies were based on commodities. A person would bring grain to the store (not the shop, but the grain storage facility), and receive a note in exchange listing how much grain it represented. This note was a tender, and could be traded for other goods and services, whether or not the person accepting that note really needed grain or not.
Unlike most currencies today, these commodity-based currencies usually devalued over time. After all, the storage guy needed to be paid, and there was always some grain lost to rats and rain. This cost was passed on to whoever was holding the money, making money something you didn’t hold on to. Uninvested money was money lost. That's why so much capital went into preventative maintenance on windmills, and the construction of all those giant cathedrals.
Money today, on the other hand, is issued by what's known as "fiat." This means it is literally created out of nothing. Our money is all borrowed from the central bank, and must be paid back, with interest. If you get, say, a $100,000 loan, you must pay back $200,000 or more, over time. Where do you get that extra money? By competing for it. The ground rules for a certain kind of competitive marketplace are dictated by this relationship to currency.
Over time, many communities have seen fit to challenge the monopoly of single currency systems by developing their own. This works particularly well during periods of recession or depression, when centralized currency is hard to come by but people are still ready to do work and anxious to get the food and services they need. Complementary currencies, such as Ithaca Hours, allow communities to set a value on the goods and services they supply one another, and then exchange an agreed upon number of local currency units. Such systems have allowed, for example, people in cash-poor Japan to provide health care for their relatives in distant cities by doing chores for people in their own.
Who gets left out of this system? Why, the central bank, of course, as well as the tax man. But it does allow communities to provide for themselves, even over great distances, as long as the credits and debits can be properly recorded and managed -- and trusted.
Instead of printing money, most local currencies of today rely on centralized bookkeeping. While a physical accounting book might work for a small town - it still requires everyone to come in to the accounting office and register what they've bought or sold. The Internet has served a number of other communities as a more modern way to enter and verify transactions, and then tally everyone's accounts. The LETSystem is a free system for doing just that.
But going home to the computer to record transactions online is still something of a burden, and requires a bit of trust.
That’s where cell phones -- as well as a conversation that began in a forum here on TheFeature between me and futurist Paul Hartzog -- come in. What if we could use our cell phones to confirm transactions with one another as simply as pressing a button? We don't even need to shake hands with each other, only with the central server, which can confirm that both parties have agreed. As Paul put it in an email, "enabling the back-end for a truly decentralized marketplace with buyers, sellers, traders, and sharers is the open-source 'killer app' of the next century."
Killer app of the century? He may not be overstating the case. After all, if people can conduct transactions efficiently with alternative currencies, then they may look for those that have lower premiums than the US dollar. Cheaper money, anyone? The race is on, as Paul explains, "PayCircle is a non-profit organization that is working towards open APIs for payment systems based on XML, SOAP, Java, etc...There's even a Yahoo Group for the discussion of the 'emerging array of community currencies.'"
So watch out, Alan Greenspan, the wireless bubble may be coming -- but it could be the dollar that gets popped.
http://www.thefeaturearchives.com/101119.html
Open Source Currency
By Douglas Rushkoff, Wed Oct 13 11:45:00 EEST 2004
Or, how mobile phones can break the money monopoly.
In the midst of discussing wireless data business plans, cell phone technology developments, and the moment-to-moment success of the mobile media industry, it's sometimes easy to forget the bigger picture. Just as early Internet enthusiasts seemed to focus on ad banners and animated GIFs instead of what turned out to be the much more momentous power of blogs to influence the direction of culture, those of us covering mobile data may have also taken our eyes off the bigger prizes in store for this new medium.
It's easy to talk about how handheld, networked computers (that's what our cell phones are, after all) promote the decentralization of content creation, file exchange and even culture -- but what about the stuff that's so centralized we stop thinking about it as even up for discussion? That's right: I'm talking about money.
Handheld wireless technology stands ready to enable what's known as the "complementary currency" movement in ways so powerful that the dominance of national currencies such as the dollar and the euro may soon be called into question.
This is not as preposterous a scenario as it sounds. After all, it's only been since the Renaissance that nation-states have been powerful enough to corner the money market. Before then, most municipalities developed their own currencies, often basing them on very different principles than the ones we use to justify our currencies today.
For example, many earlier currencies were based on commodities. A person would bring grain to the store (not the shop, but the grain storage facility), and receive a note in exchange listing how much grain it represented. This note was a tender, and could be traded for other goods and services, whether or not the person accepting that note really needed grain or not.
Unlike most currencies today, these commodity-based currencies usually devalued over time. After all, the storage guy needed to be paid, and there was always some grain lost to rats and rain. This cost was passed on to whoever was holding the money, making money something you didn’t hold on to. Uninvested money was money lost. That's why so much capital went into preventative maintenance on windmills, and the construction of all those giant cathedrals.
Money today, on the other hand, is issued by what's known as "fiat." This means it is literally created out of nothing. Our money is all borrowed from the central bank, and must be paid back, with interest. If you get, say, a $100,000 loan, you must pay back $200,000 or more, over time. Where do you get that extra money? By competing for it. The ground rules for a certain kind of competitive marketplace are dictated by this relationship to currency.
Over time, many communities have seen fit to challenge the monopoly of single currency systems by developing their own. This works particularly well during periods of recession or depression, when centralized currency is hard to come by but people are still ready to do work and anxious to get the food and services they need. Complementary currencies, such as Ithaca Hours, allow communities to set a value on the goods and services they supply one another, and then exchange an agreed upon number of local currency units. Such systems have allowed, for example, people in cash-poor Japan to provide health care for their relatives in distant cities by doing chores for people in their own.
Who gets left out of this system? Why, the central bank, of course, as well as the tax man. But it does allow communities to provide for themselves, even over great distances, as long as the credits and debits can be properly recorded and managed -- and trusted.
Instead of printing money, most local currencies of today rely on centralized bookkeeping. While a physical accounting book might work for a small town - it still requires everyone to come in to the accounting office and register what they've bought or sold. The Internet has served a number of other communities as a more modern way to enter and verify transactions, and then tally everyone's accounts. The LETSystem is a free system for doing just that.
But going home to the computer to record transactions online is still something of a burden, and requires a bit of trust.
That’s where cell phones -- as well as a conversation that began in a forum here on TheFeature between me and futurist Paul Hartzog -- come in. What if we could use our cell phones to confirm transactions with one another as simply as pressing a button? We don't even need to shake hands with each other, only with the central server, which can confirm that both parties have agreed. As Paul put it in an email, "enabling the back-end for a truly decentralized marketplace with buyers, sellers, traders, and sharers is the open-source 'killer app' of the next century."
Killer app of the century? He may not be overstating the case. After all, if people can conduct transactions efficiently with alternative currencies, then they may look for those that have lower premiums than the US dollar. Cheaper money, anyone? The race is on, as Paul explains, "PayCircle is a non-profit organization that is working towards open APIs for payment systems based on XML, SOAP, Java, etc...There's even a Yahoo Group for the discussion of the 'emerging array of community currencies.'"
So watch out, Alan Greenspan, the wireless bubble may be coming -- but it could be the dollar that gets popped.
Tags: cellphone, currencies, wireless
Replies to This Discussion
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Permalink Reply by Sepp on -
I found the link to this story on the ripple discussion list ...
Bill Gates helps bring mobile banking to the poor
February 18, 2009
Microsoft founder Bill Gates has agreed to help fund a massive rollout of projects enabling poor mobile phone users to transfer money using their handsets, an industry body announced on Tuesday.
The GSM Association, which represents 750 mobile phone networks in the world, said a grant of $US12.5 million from the Bill and Melinda Gates Foundation would help fund 20 initiatives in Asia, Africa and South America.
Money transfer via mobile phone is seen as a potential area of growth for network operators in developing countries, where millions are without access to the banking system.
"There's 1.7 billion people in the emerging markets who don't have a bank account but do have a mobile phone, so they could use their mobile phone to conduct financial transactions," explained Michael O'Hara, marketing director or the GSMA.
"The target is to reach 20 million additionnal unbanked people with the service by 2012," he added.
About 12 mobile phone banking programs have been launched worldwide in the last few years, with about 10 million users benefiting so far.
The Gates Foundation said the grant was part of its program to extend financial services to the poor who are often without access to a simple savings account.
"The foundation believes that setting aside small sums in a safe place allows people to guard against risks and build financial security," said spokeswoman Susan Byrnes in a statement received by AFP in Washington.
The GSMA estimates that the money transfer market on mobile phones could represent $US5.0 billion by 2012.
from http://www.smh.com.au/
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Permalink Reply by ernie yacub on -
See @mwl presentation Money 2.0 at Everyday Digital Money last year.
"Money 2.0 is information, not mass or commodity. It measures, it moves and it is a social agreement...Money cultures and technologies will co-evolve more rapidly beside and beyond the established structures than within them. Mobile technologies for money - MPESA, OBOPAY for instance - are establishing in the developing world where landlines and conventional banking are unrealistic. Before any such systems were released for "real" money between "real" users and "real" bank accounts, you can be sure they were tested on virtual users and virtual banks, and moved virtual money. Systems that can support "real" money can readily support other currencies in parallel - how long before we have chips with everything?"
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Permalink Reply by ernie yacub on
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see also David Birch on Digital Money Forum Can contactless save content?
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Permalink Reply by Martien van Steenbergen on -
From How Mobile Phones are Changing Banking and Finance. Money Next?: This system, known as “branchless banking”, lets people set up remote bank accounts that are accessed through their mobile phone or other technology.
It’s a financial revolution that has taken Kenya by storm and will probably do the same across the rest of the continent by giving Africa’s poor access to financial services for the first time. Africa has seen phenomenal growth in mobile phone subscribers - with 278 million users by the end of 2007, according to Britain’s Department for International Development (DFID).
M-PESA, which was set up by Vodaphone and funded through DFID, now has 5 million users in Kenya, more than all the bank accounts. It is being expanded to support salary payments, bill payments and social benefit payments. Poverty experts say a lack of access to banking hampers people’s ability to improve their incomes and pay for healthcare and education, whilst holding back countries’ economic growth.
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Permalink Reply by ernie yacub on
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what they haven't yet done is made the leap to thinking about another form of money, community currencies being created and managed by fone/chip/internet, which is what sepp astutely observes in the title of this thread but not yet seen by rushkoff and elkington in the two articles cited.
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Permalink Reply by Martien van Steenbergen on
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you're absolotely right. but it means that we're getting closer to an infrastructure that support, or enables any kind of money system.
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Permalink Reply by Dean Procter on -
Have you been reading our website?
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Permalink Reply by Tero Heiskanen on
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Permalink Reply by Sepp on
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Very interesting, Tero. I didn't realize at first that you had linked the title of Nokia's release.
"Nokia Money has been designed to be as simple and convenient as making a voice call or sending an SMS. It will enable consumers to send money to another person just by using the person's mobile phone number, as well as to pay merchants for goods and services, pay their utility bills, or recharge their prepaid SIM cards (SIM top-up). The services can be accessed 24 hours a day from anywhere, meaning savings in travel costs and time. Nokia is building a wide network of Nokia Money agents, where consumers can deposit money in or withdraw cash from their accounts."
Although the Nokia system will be using current "normal" money, it is definitely a step forward to have an infrastructure for quick and easy mobile payments independent of banks. In the future, such a system could be used with any kind of different (new) currency.
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Permalink Reply by Sepp on
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Getting closer to the release of Nokia Money...
http://www.intomobile.com/2009/08/26/nokia-just-became-paypal-with-...
"Nokia [Money] is going to be built on top of Obopay’s mobile payment platform. More details will be revealed next week and it can not be stated enough how important this is at helping Nokia remain relevant going forward. In my open letter to Nokia earlier this month, I told them to become a bank. I hope this is the first of many steps in achieving that transformation.
Note: Obopay only works in the United States and India at the moment. Nokia also invested roughly $70 million into Obopay in March of this year. Current Obopay users pay $0.25 to send any amount of money, up to $1000. Receiving a payment is free."
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