History textbooks have spoken of the Barter system as our first medium for exchange of goods but paper money has been our medium of exchange for goods for over three to four centuries. While each country issues its own paper money, the US dollar has been globally accepted as a genuine currency and even countries have a demand for the US Dollar for their day-to-day transactions. But a series of events that have occurred in the recent past might have just started shaping our new future. A future independent of US dollars, a future independent of national bank notes, a future that involves the use of alternate money.
Alternate money has been in use for a long time, mostly complementing regular money in the markets. Everyday, we collect units of alternate currencies in the form of loyalty points at fuel-stations, supermarkets and frequent flier miles on our air-tickets. We are quick to use this alternate currency to buy more fuel, more groceries or get a free-trip, without much realizing that we have, at-least for the moment, functioned without the need of regular money. There are quite a few alternate forms of currency in vogue today, each serving a specific purpose. Here are a few that I found interesting.
- Local Exchange Trading System (LETS)
LETS allows people to trade in work and earn credits (in terms of work hours) and use them in exchange for goods and services in the community. Initiated in 1983, LETS maintains an account of credits earned by an individual in a local log book and the recent forms of this system also feature printed notes for the credits. LETS is active in multiple communities across all continents of the world and provides the greatest advantage of generating business within the community.
- Time banking
Similar to LETS, Time banking works on the currency of man-hours and is active in over 20 countries across the globe. One is rewarded for one’s work in ‘time dollars’ or ‘time credit’ which is banked with local Time Banks and can be used as necessary for receiving services. Time banking is aimed at developing social capital in the community where young and old trade services they need. Introduced in 1980s, this system is quite popular in US and UK and also gained popularity in Russia and Europe during the recent economic slowdown. Launched in 2013, TimeRepublik has taken Time banking to a global level and you can now trade your expertise with anyone in the world.
- Bristol Pound
The Bristol Pound is the most recent of alternate currencies that is in circulation UK. Aimed at boosting businesses within Bristol, the value of each Bristol Pound is equivalent to that of the British Pound and can be exchanged at any of the banks within Bristol. A large number of businesses in Bristol have signed up and readily accept notes of the Bristol Pound that are being printed Bristol Credit Union as well as accept online transfers of the Bristol Pound.
The BitCoin is an electronic currency which is created and transferrred using a cryptic protocol and although was developed only in 2008, has been the fastest growing alternate currency in the world. Bitcoin transactions are recorded by dedicated servers called ‘miners’ and all miners coomunicate with each other using the peer-to-peer file sharing technology, the same technology that allows you to download content using torrent files or let you download songs using Napster until a few years ago. Bitcoin gained huge popularity when WikiLeaks started accepting them for donations. Unlike other alternate currencies, you exchange the BitCoin for the US dollar and this created an even greater demand for the BitCoin in the wake of the Cyprus Financial Crisis, where people preferred to park their funds in BitCoins rather than their bank accounts. A single BitCoin has traded for as high as $266 and is accepted by many websites around the world as the mode of payment.
With adoption of newer technology, usage of paper money is on the decline. Thanks to the volatile nature of economies today and the internet revolution, a simple computer program has the potential to replace currency as we know it.