The emergence of cloud banking in developing economies from billions of cell phones transacting both legal tender and informal units of accounts has created a need to reconsider habits of thinking about the nature of money and banking in advanced societies. The dysfunctional nature of modern money and banking is revealed by considering cell phone units of account based on four historical forms of money: (i) the current form of synthetic or “fiat” legal tender that can earn interest (ii) fiat money that does not earn interest but has a usage fee (iii) “Free-money” issued privately with a usage fee and (iv) “natural” money redeemable into specified goods and/or services with a usage fee. The value of a “green” form of natural money, redeemable into units of renewable electricity, becomes fixed by the investment cost of generators to create an inflation resistant unit of account. The paper identifies green dollars as offering a competitive medium of exchange for the “invisible hands” of (i) investors, (ii) Islamic economies and businesses, (iii) green voters, (iv) governments seeking to reduce the need for carbon taxing or trading and (v) those seeking a reserve currency in case the financial system fails.
@rstevens - checks are the floppy disks of money
Since terrorists and drug lords take advantage of anonymity of cash, Jonathan Lipow argues for a transition from cash to smart cards or other digital solutions:
Jonathan Lipow, Turn In Your Bin Ladens
From a technical point of view, such an initiative is entirely feasible. The trick is to lower the cost of making transactions to the point where even the smallest payments can be executed efficiently. For example, a Twitter application known as TwitPay allows you to use your cellphone and a PayPal account to transfer money. In Kenya, a mobile banking system known as M-Pesa allows six million people to execute small payments using SMS messages.
Unfortunately, cellular-based systems are unsuitable as a complete replacement for physical money, particularly in the developing world. Cellphone coverage doesn’t yet extend to many rural regions or small urban centers; in addition, such systems remain too vulnerable to cybercrime and power grid or mobile service disruptions.
A better approach would be to use smart cards with biometric security features, like the Universal Electronic Payments System. In South Africa, the technology company Net1 now distributes social welfare grants to almost four million people. It’s simple: with a battery-operated, point-of-sale device akin to a credit-card terminal, money is transferred from one person’s card to another; during the process, the cards download and record each other’s transaction records.
Every few days, employees from the payments system head out to the villages and make their own money transfers, downloading the transaction histories of the cards they come into contact with, which contain the histories of the cards they interacted with, and so on. That data is then downloaded into the company’s mainframe, as a way of monitoring the flow of funds across the cards.
Best of all, the system can function offline and off the power grid, providing a secure means of payment under all conditions and without any geographic limitations. And the incremental cost of executing a transaction via this system is essentially zero. It is a promising model for the global economy.
In a cashless economy, insurgents’ and terrorists’ electronic payments would generate audit trails that could be screened by data mining software; every payment and transfer would yield a treasure trove of information about their agents, their locations and their intentions. This would pose similar challenges for criminals.
And Big Brother would know how much you are spending on cigarettes, booze, dirty magazines, and betting with your bowling team.
I will leave aside the obvious — the ubiquity, convenience and flexibility of paper money — and the more philosophical questions of the benefits to society that anonymous money brings, for a moment, although I think these are the right points to discuss.
What about the costs of transitioning to a smartcard-system system of this sort? At least with cell phone-based approaches people generally have pay phones already. But if billions of people are coaxed to switch to smartcards to buy their daily bread, won’t it cost a fair bit to get up and running? Like hundreds of billions of dollars?
And who does such a system benefit? Not the part-time sex worker, trying to make ends meet in a down economy. Not the bellman at the airport, whose tips might disappear after the transition to cards. Not the homeless guy I gave $2 to the other day, or the busker playing guitar in the train station. Or the Green Peace folks collecting coins at the park.
The ones that benefit are the those selling the cards and the readers. And the policy-makers who want to see the flow of cash to find — supposedly — drug lords and terrorists, but secretly want to know everything about everybody.
But this is the argument for pervasive surveillance again. In the name of security and safety, they say we should all accept the intrusion of the government into our private lives so that the state can be protected from its enemies. After all, they say, if we aren’t doing anything illegal, why should we care? What have we got to hide?
But we have the right to privacy in our doings. We don’t have to say why we want privacy: it is our right.
And the shadowy doings at the margins of people’s lives are exactly the point of privacy. The man funneling money to a child born to his mistress without his wife’s knowledge, or a woman loaning money to her brother without her husband knowing: they want anonymous cash. The rich golfer that takes a woman not his wife out on the town has a right to privacy, even if a narrow-minded and moralistic society doesn’t think so.
We have known for years — decades — that pot is no more (and perhaps less) dangerous than alcohol, but the laws are slow to change. And in the meantime, millions of people are buying pot. At some point in the near future, the prohibition will end, and it will then become a regulated and taxed commodity, like alcohol. In the meantime, people slip into the shadow world to buy a bag. And they are justified, since laws that are enacted without regard to science and health — that are ideological and repressive — are illegitimate, and the people have the right to run around them.
Historically, tyrannical governments have attempted to raise taxes to unsupportable levels, and cash money could change hands without the government being aware: the gray economy. While today’s government may not be engaged in this sort of economic control, the use of traceable digital money would certainly be the sort of economic foundation a tyranny would want.
The advocates of total intelligence as a way to catch the bad guys are going down the wrong path. To counter the drug lords, we simply have to make pot legal. And if we contort our free and open societies to counter terrorists’ use of cash, they have won.
This is similar to the ‘security theater’ that goes on in our airports: where techniques that do not work are employed to convey a sense of security, and unobtrusive techniques that do work — like the Israelis’ airport security — are not used because of the politics around ‘profiling’. In order to meet some hypothetical threat from terrorists, our personal privacy and free movement are held hostage. At what cost? Who benefits from all the back scatter scanners being bought?
I maintain that cash is a prerequisite of a free society. If the authorities start rounding up all the money, and begin distributing smartcards, it’s time to rally in the streets.
Cash is not a metaphor for freedom, it is a requirement of freedom. A strong society that accepts human nature without moralizing will always have anonymous cash. Only totalitarian governments — where everything not expressly required is illegal — would want to monitor the flow of every cent.
Technically, it would be possible to design and deploy anonymous digital money, just like we could be encrypting all telephone calls. But governments always want to reserve the right to listen in on our conversations secretly, so the phone systems are inherently insecure. But cash predates the notion of modern nation states, and even our modern currencies are unbugged.
We shouldn’t let the government be a party to every transaction, gift, or exchange we engage in. And if we let them, they will want to, and once they get that ability, we might never be able to go back.
Looks like I will be attending a Tech@State event on 2 August 2010, called Mobile Money. Very interesting stuff.
[It’s annoying that the announcement doesn’t have an address: I guess we are all supposed to know where the State Department is located?]
Jamais Cascio is one of the world’s leading futurists, and spared me some time a few weeks ago to talk about money, especially alternative cash.
A far-ranging and engaging discussion with one of the most thoughtful thinkers of our time.
The Future Of Money series is sponsored in part by Neo.org
After a month off the project, because of the press of other work, I am back to The Future Of Money. In this episode, I speak with Joe Edelman about his Groundcrew project, intended to help the coordination of community activities, including ‘an economy of gifts, sharing and neighborly aid.’
From the website:
Short Project Description
Groundcrew is web/mobile software that gathers people instantaneously in real life to work on projects, and allows for complex mobile-coordination of real-life communities and tasks. Community members can see who’s available to pitch in at any moment and can rapidly communicate assignments—either mass assignments or systems of individual assignments—to help people work together for a greater good.
Detailed Project Overview
Until now, only large organizations with multi-million dollar budgets — from airports and taxi companies to delivery services and construction fleets — have had access to real-time planning, coordination, and mobilization software.
The consequences of making this software available to ordinary people and to local communities will be profound:
IN THE SHORT TERM
* Our software will be used to facilitate beautiful, desired events in our communities: playground builds
green retrofits, art projects, you name it.
* Communities of neighbors available in real-time can provide families and whole municipalities with extra help during this economic crisis.
* We can promote civic engagement by giving citizens an easier way to get involved—they mark themselves available just by sending a text message or pressing a button on their phone—wherever they happen to be.
* By providing such a low barrier to be physically and personally involved in a community, we will get many people out of their homes and entertainment centers, onto the streets and public spaces, and under the sun.
IN THE MID TERM
* Use of our software will increase levels of gratitude and trust in our communities by providing an economy of gifts, sharing, and neighborly aid where in the past money transactions or isolation were dominant.
* As pools of available volunteers and physical resources— tools, cars, land, and people—increase in size, these assets will be available to good causes en masse.
IN THE LONG TERM
* Our software will be a key part of building a sustainable economy by coordinating reuse and enabling urban lifestyle redesign. While most talk of green cities focuses on architecture, scheduling and lifestyle changes will be just as important to realize visions of rooftop gardens, local food distribution, etc. Groundcrew community organizers will be in the best position to help people redesign their lifestyles, on the ground, and direct people towards new paths of getting what they need.
* Through “ambient organizing”, socially beneficial ideas will be instantly realizable. Social entrepreneurship will be something everyone can do.
* Simultaneous events and projects in different cities around the globe will promote global solidarity and peace between nations.
Groundcrew leverages the power of GPS in ordinary cell phones to enable today’s 3.2 million mobile users to:
* Rally individuals or a community around a particular issue or task
* Gather individuals or a community in real life
* Mobilize and address individuals or a community in real-time
* Coordinate geographically in real-time
* Manage and share resources efficiently
The third phase that Joe talks about is the most speculative, and is as yet unimplemented, having to do with a new economy. In this stage, reputation as an organizer increases as a result of their effectiveness, and then those that are volunteering can stipulate that they will participate in new activities based on the likelihood that the project will gain many other participants, and therefore will have a real impact.
I am particularly impressed by the self-organizing qualities of Groundcrew, around ‘participation design’, where the volunteers are handed more control about how their involvement should be applied in some project or activity, instead of just being told what to do.
Groundcrew can also keep track of people’s contributions and then award reputation (what I call “swarmth” and they call “PosX”) without cash, without currency, simply by keeping track of results. Very interesting.
The Future Of Money series is sponsored in part by Neo.org
I followed a mention in some online journal, back at the end of June, to an online whatzis called The Dollar ReDe$ign Project. The man behind it is Richard Smith, a brand strategy consultant, whose work is showcased at ThinkCreateBelieve.com, whose company is The Extent Or Measure Of A Surface, and whose main blog is The Daily Blend.
He’s been interviewed all over, most recently on Fox, who pronounced it “the neweset internet craze.”
Richard’s deep motivation was to help restart the economy, and the means? Redesigning our money, and rebranding it, to shift our thinking and to help the little bits of paper in our pockets act as a sort of social catalyst for change. He set up the project in the form of a contest, and received dozens of truly wonderful designs.
Kyle Thompson won the contest with this design, who wrote ““I sought inspiration in numerous areas of American culture and history, and eventually decided to focus on the philosophers and political thinkers (i.e. Thomas Hobbes, John Locke, Charles de Montesquieu, among others) who inspired the Founding Fathers. I chose this for several reasons, the most important being that I feel that a new system of US currency should be hopeful and positive, while simultaneously reminding citizens and the world at large of the ideals on which the United States was originally founded.”
Runners-up included these:
I had a chance to interview Richard last week, just after he had announced the winning five designs in the contest.
I hope that all those coming here and reading this will sign the petition, and support this project. To date, Obama’s administration has not paid much attention, but if enough of us keep howling about this, maybe they’ll think about it.
The Future Of Money series is sponsored in part by Neo.org
I am launching a new interview series examining the future of money. I plan to be talking with all sorts of people: artists (like today’s Christian Nold), futurists (like Jamais Cascio), writers (Bruce Sterling interview later this week, and Steven Berlin Johnson in the near future), economists, philanthropists, and all sorts of other people interested in where this is headed.
This series is sponsored in part by Neo.org, a non-profit I am working with. Bill Liao, one of the founders of Neo, characterizes the organization this way:
Neo is a movement that includes a powerful combination of elements: a currency, a legal structure, a constitution, a web presence and a unique global network of people declaring themselves and their optimism for a better world future.
Because of Neo’s efforts toward defining and implementing a new digital currency, I thought that a series on the future of money might line up well, and draw some attention to Neo’s efforts.
For my first interview, I contacted Christin Nold, an artist I met a few weeks ago at the FutureSonic conference in Manchester, England. He is perhaps best known for his Emotional Cartography work, which has recently been published as a downloadable pdf. As he describes it,
Emotional Cartography is a collection of essays from artists,
designers, psychogeographers, cultural researchers, futurologists and neuroscientists, brought together by Christian Nold, to explore the political, social and cultural implications of visulising intimate biometric data and emotional experiences
His work in this area has been widely reviewed, and I had in fact read about it, but I didn’t connect it with Nold until he referred to it in his talk in Manchester.
His bio sheds some light on his orientation:
Christian Nold is an artist, designer and educator working to develop new participatory models for communal representation. In 2001 he wrote the well received book ‘Mobile Vulgus’, which examined the history of the political crowd and which set the tone for his research into participatory mapping. Since graduating from the Royal College of Art in 2004, Christian has led a number of large scale participatory projects and worked with a team on diverse academic research projects. In particular his ‘Bio Mapping’ project has received large amounts of international publicity and been staged in 16 different countries and over 1500 people have taken part in workshops and exhibitions. These participatory projects have a strong pedagogical basis and grew out of Christian’s formal university teaching. He is currently based at the Bartlett, University College London.
Christian appears in the Art programme with Biotagging Manchester link and the Environment Open Lab on Saturday link
His talk in Manchester went off in a slightly different direction. It was about the Bijmer Euro: “The Bijlmer Bank is a project by Christian Nold commissioned by Imagine IC that examines how trust networks function in the Bijlmer area in South East Amsterdam. The aim is to develop a prototype system for an alternative local currency that could support local development and work in conjunction with the Euro.”
The project explores many angles — sociological, political, and economic — but I was fascinated by the idea of ‘parasitical money’. Nold stripped the RFID tag out of Amsterdam travel tickets, and stuck it on Euros, so their physical movement — from store to store — can be traced, and mapped.
I am looking forward to following Nold’s future endeavors at his website. I have a feeling that this notion of parasitic money, riding on top of fiat currencies, is a massive idea. Consider that any interest group or locality could adopt this model, even going across borders. A group could use RFID tags on different currencies — dollars, and euros for example — in a global fashion, and sidestepping the question of deep trust in the organization, since the underlying money has independent value.
Although Nold is fixated on the specific, I believe that we can find common patterns across people’s use of money, universals, as well.
Update: I found this comment today in my email, one that I had never posted:
Very interesting post, ‘parasitical money’. We are watching the rise of Community Currency in the US and UK as the economy slows. http://ccmag.net
Also privately issued digital currency such as Loom and Trubanc are ideal new innovations as they permit anyone to create their own private label digital currency. Some backed by gold and some backed by nothing, the unique feature of these currencies is the users must trust the individual private issuer.
Skype IM ‘digitalcurrency’
When you are interested in magic, you might want to talk to a witch doctor, so when I started to think about the future of money, I thought I should talk to a science fiction author. Who better? As it so happens, I know one.
Bruce Sterling is a well-known science fiction author, perhaps best known for his contributions to what is now known as “cyberpunk”: near future, post industrial, dystopic settings with alienated loners struggling against megacorporations and artificially intelligent machines. He won Hugo Awards for “Bicycle Repainrman” and “Taklamakan”.
Sterling is responsible for a lot of neologisms, like “Spime” which he coined in 1994:
[via Word Spy]
The next stage is an object that does not exist yet. It needs a noun, so that we can think about it. We can call it a “Spime,” which is a neologism for an imaginary object that is still speculative. A Spime also has a kind of person who makes it and uses it, and that kind of person is somebody called a “Wrangler.” At the moment, you are end-using Gizmos. My thesis here, my prophesy to you, is that, pretty soon, you will be wrangling Spimes.
The most important thing to know about Spimes is that they are precisely located in space and time. They have histories. They are recorded, tracked, inventoried, and always associated with a story.
Spimes have identities, they are protagonists of a documented process.
They are searchable, like Google. You can think of Spimes as being auto-Googling objects.
—Bruce Sterling, “When Blobjects Rule the Earth,” SIGGRAPH, August 1, 2004
There are a lot of spimes in the world today: soda machines that dispatch trucks to refill them, xerox machines that diagnose paper jams and text message people to unjam them, and the Challenger space shuttle that twitters its position in space. Bruce saw all that coming.
Among a long history of projects and writing, he is now author of a blog at Wired Magazine, called Beyond The Beyond, where you can see the video of his talk from the recent Reboot conference in Copenhagen, which comes across as something like a graduation day speech. (I thought i was hilarious, but it incensed quite a few of my more serious techie friends.)
We chatted in Copenhagen over breakfast, and then we caught up a few days later, when I was back the States and he was in Torino, Italy.
The first is Gothic Hightech, and he uses the example of Bernie Madoff, who wormed his way into the convention world of investment and banking, and boiled off $50B, leaving thousands wrecked. He seems to imply that this endlessly possible, and that an episode could be much more devastating. Or perhaps he’s suggesting the current Econolypse is no different? That handing over our money to the system is inherently dumb, a form of institutionalized and voluntary slavery?
The second term is Favela Chic, decidedly low tech approaches taken by the dispossessed, outside the orbit of bourgeois society. These folks don’t line up with the world of banks, so they opt for paracurrencies, like cell minutes. He points out that the transfer of this sort of currency does not necessitate handing something over physically, like paper money. Like electronic fund transfers, you can give cell minutes to someone by just telling them a code to use. So it is an anonymous transfer. “No tax. Crosses international borders.”
Bruce suggests that a return to a feudal honor society could come about. I asked about a world of the near future with less governance, more rogue cities and regions. Will fiat currencies fall in use, and be replaced by commodities, like cell minutes, energy credits, or the like? Bruce argues that these regoins are parasitic on the more well-off, better managed areas that surround them or abut them. Bazaars emerge, he says. “I look to the Chinese model, by which I mean the offshore Chinese, not the communists.” He argues that they set up clan-based banking or production businesses, based on petty bourgeois activities. “There’s a certain rough justice in it [transactions in the bazaar sealed with a handshake], because you see the guy every week when your wife is there buying rutabagas.”
A truly enjoyable experience, and thought provoking in unexpected ways, which is pretty much what I expected from Bruce Sterling, I guess.
The Future Of Money series is sponsored in part by Neo.org
A recent piece by Ben Block at Worldchanging suggests that alternative currencies seem to pop up in bad times, but may not have a real impact on local communities, even in the worst of times:
[from Worldchanging: Bright Green: Local Currencies Grow During Economic Recession by Ben Bolt]
At least 4,000 complementary currencies are now estimated to be in circulation worldwide, compared with fewer than 100 in 1990, according to Bernard Lietaer, a co-founder of the Euro and now a local currency proponent.
The currencies take on various forms. Many function similar to the traditional currency but are distributed at a discounted rate to encourage participation, such as the Berkshares or the cimarrón in Venezuela. Others are designed so that each paper note reflects the per hour labor required to create the product, such as Ithaca Hours in New York or Community Oriented Mutual Economy in Hong Kong.
In Switzerland, the WIR (the German word for “we”) functions as a mutual credit system. When a buyer makes a purchase from a WIR participant, the seller receives credit in a WIR account. The credit can then be spent by purchasing something from another participant.
Economists have monitored the WIR since it began in 1934. “Whenever the economy goes up, the turnover in WIR decreases…. When business people cannot sell goods in Swiss Francs, then they go onto the WIR,” said Margrit Kennedy, a German-based consultant on complementary currencies. “At the present moment, people are much more open to these types of ideas.”
Pilot projects similar to the WIR are now under way in Belgium, France, and Germany, Kennedy said.
In order for alternative currencies to succeed, organizations, institutes, or individuals need to be committed to the currencies’ additional demands. Not only must the currency be counted separately, but businesses must be convinced to accept the currency and know where they can, in turn, spend it.
In Canada, the Toronto Dollar circulated about $90,000 worth of paper currency last year, less than in years past. Organizers are now attempting to shift to an electronic version to simplify its management. “The labor involved in tracking notes and doing all the accounting involved is too onerous for a volunteer community organization,” said David Walsh, the Dollar’s co-founder.
Robert Costanza, an ecological economics professor at the University of Vermont, said local currencies support “buy local” programs, but he has not found any currency that has had a significant impact on a region’s overall economy. “There are several examples of currencies that survive. They keep going,” Costanza said. “But the question is, at what scale?”
Obviously, if the goal is to, say, slowing the movement of money out of a community, you’d have to actually measure that to decide if the alternative currency was doing that. (For example, by RFID tracking of the money, if people would agree to that sort of surveillance).
But this begs two questions:
Regarding the first question — which I think of as “is small the new big” — we have to return to what we know about social systems. The overwhelming majority of alternative currencies are associated with some alternative organization: like the Berkshares, Inc organization behind Berkshares. Although these groups are formed to do something other than what national governments do, they in effect are setting themselves up as a simulicrum of a government, or at least the part of the government that circulates money. And I think this is an impediment to the socialization of alt cash.
I think that successful alt cash will have to take a strong stance on some issue, like putting a higher value on local economic resilience than maintaining a level playing field with national chains. In essence, I think successful alt cash will have to be almost subversive — will have to be involved in a fight against something, a fight against specific forces — and will have to drop any semblance of neutrality.
Alternatively, we could have personal money: social money. Imagine if there were an online (perhaps open source) mechanism to allow anyone to create money, backed by their own reserves, like that envisioned by the Open Money Development Group (to be reviewed in detail in a later post). I might create 1000 @stoweboyd bucks, and circulate them to those I know. Perhaps I have a personal cause, and the money is designed so that when someone takes it out of circulation by exchanging it for US dollars or Euros a small percentage is allocated to a fund, and then directed to the cause I care about. People that know me would be likely to accept this money from me — especially if this practice were commonplace — and could pass it along to others that know me. If this were taken up by celebrities, say Oprah or Al Gore, even retail chains would accept the money.
This money could be printed out, with appropriate bar codes and other information, so that people could check that money is authentic, what it stands for, and who stands behind it. Cell phone pictures could be directed to the currency platform website, and all the info would bounce back to the phone in real time.
Or the money could be purely digital, being passed via messages, or from cell to cell.
Such an open money platform would have to support all varieties of tinkering: for example, I might opt for ‘demurrage’ on my @stoweboyd bucks, meaning that the value of the bucks decreases a little bit each month, incenting people to spend it quickly, or to convert it back into dollars. Also, others could accept these @stoweboyd bucks, and turn them into their own personal money, through the platform.
I find it interesting that nothing like this has emerged, which is one of the reasons I am working on the Neo.org project.
The second question is a bit more complex. I doubt that any value-neutral alt cash can make it. Even something apparently benign — like support for a regional economy — is decidedly political, as shown by Bruce Sterling’s strong aversion to them in his recent interview on the future of money. Sterling stated baldly that these systems were anti-immigrant, suggesting that locally well-established families and businesses were in essence using the alt cash as a way to block other businesses from entering the economy. These new businesses could be corner stores run by Mexican immigrants or Walmart, but they are not ‘locals’.
I find his comments have merit, on reflection. And to generalize, I think that successful alt cash will have to take a strong stance on some issue, like putting a higher value on local economic resilience than maintaining a level playing field with national chains. In essence, I think successful alt cash will have to be almost subversive — will have to be involved in a fight against something, a fight against specific forces — and will have to drop any semblance of neutrality.
This means that successful alt cash is not going to be used by all members of some locality, because it will have to be partisan. Those who don’t agree with what the money stands for will not use it. Those that do use it will agree with the principles it stands for, and are opposed to the interests of those that the cash is designed to counter.
Future philanthropy might come in the form of alt cash. Imagine if the Google twins decided to create Google bucks, a purely digital money backed by a few of their countless billions, where a penny per dollar would be diverted from every tenth exchange of cash, and directed toward better battery research. Every bithead and dweeb on the planet would stand in line to get this money, and they would ostentatiously try to use it at every opportunity. But people outside the tech world wouldn’t care. Gates could create money that supported malaria prevention. Soros would mint his own cash, dedicated to the goals of the Open Society foundation. (Come to think of it, he should implement open money of the sort I suggest here.)
The Future Of Money series is sponsored in part by Neo.org