The power of texting

By JEFF INGLIS  |  March 2, 2012

DW In talking about the war on cash or the onslaught on cash, part of cash's death is by a thousand cuts. This is being inflicted by new technologies — mobile money and trading in M-Pesa in Kenya and all of that. But there is this whole other front in the war being conducted in the alternative-virtual-community-currencies world. And that's what you are talking about, that does go far beyond Disney Dollars and airline miles. People kind of have a knee-jerk response to the idea, thinking it's kind of kooky, in a way . . . but they work and they do hold a lot of promise for people in the developing world who have an interest now in challenging government's monopoly on issuing currency. I don't think that means we should pooh-pooh national currencies to the extent that we deny the incredible prosperity they have helped societies to build over the last century or more. But if you look at the euro crisis right now . . . I think there are strong arguments to be made that our wallets, and more specifically our financial lives, might not be hurt if we had not just other payment options, but other currencies. The key is, can you keep the exchange rate smooth and fluid like you're saying, because all this alternative currency stuff sounds like a crazy hassle, far less convenient than cash on the surface. I think the mobile phone can help us skirt around that if it can be programmed to help us conduct these exchanges in real time on the fly, even out there in the slums of Delhi.

RN One of the questions I have for you, since I haven't researched alternative currencies, David, is: I read some stuff about the Swiss alternative currency that's used by small businesses, and most of the alternative currencies I have looked into are pegged in some way to the national currency. I am wondering whether that is the norm right now, or do you see people breaking away from that?

DW I think the peg adds an aura of authenticity; you don't necessarily have to have it, but it doesn't really hurt them to be exchangeable, Maybe the way some alternative-currency innovators will get around that is if they are trading for example units of electricity, because that has "real" value in the physicists' sense of it — not in the gold enthusiast's sense of real value. It's a constant. This is really hard and heady stuff, but if we could ever find a way to be trading in kilowatts, it's going to take the same amount of electricity to light up a light bulb next week as it is 30 years from now, so that's real value that we can understand and we can predict. In that sense, I don't think you really need the peg, but for some of these other ones, again, going back to this idea of a rainbow of currencies at your disposal. If you can balance between Linden dollars and Bitcoin and Facebook credits and Malawi kwacha, why not do so? They're all floating anyway, and this is a much more macro point but it's all about accepting the faith of how currency and how money works, and if you've decided to believe in the value of Bitcoin or you've decided to believe in the value of Linden dollars, then you're on board already, so why not accept the changeability?

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