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Abstract

ng alternative to national currencies.</p><p id="7be2">The large amounts of energy that are used for the mining of currencies has been criticised. The resources needed for mining is a way of building scarcity of the cryptocurrencies and increasing their value. It has been estimated that the mining of Bitcoin currently consumes 150 TWh of electricity, the amount used in Argentina on an annual basis.</p><h1 id="1b48">Are Cryptocurrencies the Future?</h1><p id="4cf2">Cryptocurrencies form an alternative and many people see weaknesses in national currencies, focusing on how national currencies are created by banks through their lending of money to customers. Many welcome the opportunity to use currencies that are used outside of the global banking system.</p><p id="88dd">So far, cryptocurrencies are used more for investments than for payments. One problem is that very few shops or Internet businesses accept Bitcoin or other cryptocurrencies for payments. The rapidly fluctuating values of cryptocurrencies is one aspect that makes it difficult to use them for payments. Users need to be certain that they will be able to buy the same amount of goods or services for a certain amount tomorrow as they can today, otherwise they are not likely to accept payments in cryptocurrencies.</p><h1 id="b9f6">Complementary Currencies Through History — Retrospective Glance</h1><p id="8863">In the past alternative or complementary currency systems have been successfully used in many different situations and complementary currencies have become widely accepted for payments. During the depression of the 1930’s some local communities started currency systems that rapidly increased economic activity and reduced unemployment.</p><p id="b5f2">One shortcoming of national currencies as well as cryptocurrencies is that people cannot buy products or services unless they have first earned enough money to pay for it. In a complementary currency system, it is possible to hand out money to people that they can use and the holders of these currencies, often called “scrip,” can use it to buy products or services.</p><p id="385c">One local system was implemented by the mayor Unterguggenberger of the Austrian town Wörgl from 1932 to 2933. The mayor had a long list of public works projects that needed to be completed, unemployment was high so there was no shortage of hands willing to help, but the town had no money to pay for the labour. The town administration introduced local scrip that was used as payment. The scrip could then be used by workers to buy goods and services in shops and from craftspeople in the community.</p><p id="4717">The researcher Bernard Lietaer, in his book “The Future of Money” describes the experiment. Before the system started, there were 500 jobless workers in Wörgl and another 1000 in the surrounding area. The total population of the townstood at 4500.</p><p id="7364">The citizens of Wörgl re-paved the streets, expanded the water distribution system to serve the entire town, built new houses, a ski jump, and a bridge. Six villages in the area copied the system, one of which built a swimming pool.</p><p id="f185">To enc

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ourage circulation, the scrip was devalued by 1 percent each month by putting a stamp on each note. This was called a “demurrage” fee. This made sure that people spent their money and kept the scrip in circulation. Overall, there were only 5,500 shillings worth of scrip in circulation, but the money was during the 14 months when the system was in use, circulated 416 times, generating economic activity amounting to more than 2.5 million shillings. This amount is equal to about 10 million dollars in today’s currency.</p><p id="029e">The demurrage fee was used to pay for a soup kitchen that fed 220 households.</p><p id="0a38">Through the system Mayor Unterguggenberger effectively eradicated unemployment.</p><h1 id="f182">Putting A Stop to Local Currencies</h1><p id="4692">The system in Wörgl became too successful. It was copied by a number of villages and towns and many more planned to implement a similar system when they learned about the success in Wörgl. The central bank saw the local currencies as a source of competition of the Austria’s national currency, the shilling.</p><p id="3b71">One of the aspects that made the success of the system in Wörgl was the fact that it was started and operated by the local authorities. They could use it to pay for public works projects and also make sure that the currency could be used extensively in local shops and to buy services.</p><h1 id="7874">The Traits of Successful Currency Systems</h1><p id="4463">Local currencies have the advantage that some trusted local organization operates the system and sets the rules. They issue the scrip and decide about demurrage fees and other mechanisms that create incentives to use the money. The use of the scrip increases if the currency can be used for a multitude of purposes.</p><p id="6f3d">A present disadvantage of cryptocurrencies is that they can seldom be used for very many purposes. Users also stand the risk of losing their money if they lose their computer or their smart phone, or if they forget the password to their electronic wallet. In the case of Bitcoin there is no way to retrieve many if the wallet or its password has been lost.</p><p id="fd66">No currency system is perfect, but it seems to be an advantage if users are encouraged to spend their scrip or their money, for example through the principle of devaluation of the currency. It may also be more successful if it targets people who have limited access to national currencies, for example through unemployment or exclusion for other reasons. The stability of national currencies and complementary currency systems creates an advantage compared to the strong fluctuations of cryptocurrencies.</p><p id="ac85">I am the author of seven internationally published books on innovation and business development, focusing on the large-scale change to electromobility, the circular economy, and the development and implementation of other new technologies. In “The Transparent Market” from 1998 David Lundberg and I discussed the development of e-business. My latest book is “The Blind Guardians of Ignorance — Covid -19, Sustainability, and Our Vulnerable Future.”</p></article></body>

Are Cryptocurrencies the Future? — A Comparison with Past Experiments

Cryptocurrencies Have Many Advantages

Cryptocurrencies are electronic currencies that are launched as an alternative to national currencies. The first and the best-known cryptocurrency is Bitcoin, which was developed by an anonymous person using the name Satoshi Nakamoto.

Nakamoto created very specific rules for the mining and use of Bitcoin that have contributed both to building the value of the currency and to the interest it has generated as an investment opportunity and as a currency that can be used for payments.

The fact that Bitcoin is an exclusively electronic currency that is not issued by any national bank means that it can function outside of the traditional banking system. To receive Bitcoin and use it for payments users need to have electronic wallets. Bitcoin can then be used for international payments as well as for local purchases.

Bitcoin has received large amounts of positive publicity as it has been used by the UN for payments to refugees and by companies as payment for contributions from people in developing countries that would have found it difficult to receive payments via traditional payment channels.

Payments in Bitcoin and other cryptocurrencies are more secure than payments via national currencies. All payments are verified through a ledger that is available to all users, called a blockchain and the blockchain can never be erased as it is stored on the computers of many users.

When looked at in more detail, there are also disadvantages. As all payments have to be verified a fee is added to transactions. This fee varies depending on the current number of transactions and it could at times be quite high, making transactions of small amounts uneconomic. The number of transactions that can be made in a certain time period is also limited, which seems to limit the ability of Bitcoin to gain volume as a currency.

Other Cryptocurrencies

More than one thousand cryptocurrencies that have been launched since the launch of Bitcoin. Each of these currencies is equipped with a particular set of rules for the mining and use.

Bitcoin is still the cryptocurrency that commands the highest market capitalization — more than 50 percent of the value of all cryptocurrencies taken together. The second biggest is Ethereum

The rules of the different cryptocurrencies represent efforts to create a system that could become the currency of the future to be widely used and that could eventually become a strong alternative to national currencies.

The large amounts of energy that are used for the mining of currencies has been criticised. The resources needed for mining is a way of building scarcity of the cryptocurrencies and increasing their value. It has been estimated that the mining of Bitcoin currently consumes 150 TWh of electricity, the amount used in Argentina on an annual basis.

Are Cryptocurrencies the Future?

Cryptocurrencies form an alternative and many people see weaknesses in national currencies, focusing on how national currencies are created by banks through their lending of money to customers. Many welcome the opportunity to use currencies that are used outside of the global banking system.

So far, cryptocurrencies are used more for investments than for payments. One problem is that very few shops or Internet businesses accept Bitcoin or other cryptocurrencies for payments. The rapidly fluctuating values of cryptocurrencies is one aspect that makes it difficult to use them for payments. Users need to be certain that they will be able to buy the same amount of goods or services for a certain amount tomorrow as they can today, otherwise they are not likely to accept payments in cryptocurrencies.

Complementary Currencies Through History — Retrospective Glance

In the past alternative or complementary currency systems have been successfully used in many different situations and complementary currencies have become widely accepted for payments. During the depression of the 1930’s some local communities started currency systems that rapidly increased economic activity and reduced unemployment.

One shortcoming of national currencies as well as cryptocurrencies is that people cannot buy products or services unless they have first earned enough money to pay for it. In a complementary currency system, it is possible to hand out money to people that they can use and the holders of these currencies, often called “scrip,” can use it to buy products or services.

One local system was implemented by the mayor Unterguggenberger of the Austrian town Wörgl from 1932 to 2933. The mayor had a long list of public works projects that needed to be completed, unemployment was high so there was no shortage of hands willing to help, but the town had no money to pay for the labour. The town administration introduced local scrip that was used as payment. The scrip could then be used by workers to buy goods and services in shops and from craftspeople in the community.

The researcher Bernard Lietaer, in his book “The Future of Money” describes the experiment. Before the system started, there were 500 jobless workers in Wörgl and another 1000 in the surrounding area. The total population of the townstood at 4500.

The citizens of Wörgl re-paved the streets, expanded the water distribution system to serve the entire town, built new houses, a ski jump, and a bridge. Six villages in the area copied the system, one of which built a swimming pool.

To encourage circulation, the scrip was devalued by 1 percent each month by putting a stamp on each note. This was called a “demurrage” fee. This made sure that people spent their money and kept the scrip in circulation. Overall, there were only 5,500 shillings worth of scrip in circulation, but the money was during the 14 months when the system was in use, circulated 416 times, generating economic activity amounting to more than 2.5 million shillings. This amount is equal to about 10 million dollars in today’s currency.

The demurrage fee was used to pay for a soup kitchen that fed 220 households.

Through the system Mayor Unterguggenberger effectively eradicated unemployment.

Putting A Stop to Local Currencies

The system in Wörgl became too successful. It was copied by a number of villages and towns and many more planned to implement a similar system when they learned about the success in Wörgl. The central bank saw the local currencies as a source of competition of the Austria’s national currency, the shilling.

One of the aspects that made the success of the system in Wörgl was the fact that it was started and operated by the local authorities. They could use it to pay for public works projects and also make sure that the currency could be used extensively in local shops and to buy services.

The Traits of Successful Currency Systems

Local currencies have the advantage that some trusted local organization operates the system and sets the rules. They issue the scrip and decide about demurrage fees and other mechanisms that create incentives to use the money. The use of the scrip increases if the currency can be used for a multitude of purposes.

A present disadvantage of cryptocurrencies is that they can seldom be used for very many purposes. Users also stand the risk of losing their money if they lose their computer or their smart phone, or if they forget the password to their electronic wallet. In the case of Bitcoin there is no way to retrieve many if the wallet or its password has been lost.

No currency system is perfect, but it seems to be an advantage if users are encouraged to spend their scrip or their money, for example through the principle of devaluation of the currency. It may also be more successful if it targets people who have limited access to national currencies, for example through unemployment or exclusion for other reasons. The stability of national currencies and complementary currency systems creates an advantage compared to the strong fluctuations of cryptocurrencies.

I am the author of seven internationally published books on innovation and business development, focusing on the large-scale change to electromobility, the circular economy, and the development and implementation of other new technologies. In “The Transparent Market” from 1998 David Lundberg and I discussed the development of e-business. My latest book is “The Blind Guardians of Ignorance — Covid -19, Sustainability, and Our Vulnerable Future.”