The Future of Money: DIY Currencies

Futurist Douglas Rushkoff, famous for correctly predicting the rise of social media, is trying to convince Craigslist’s Craig Newmark to create “craigbucks.” He thinks it’s the obvious next step in the evolution of money. “People could buy and sell things exclusively on Craigslist using craigbucks,” Rushkoff enthuses. “Sure they’ll want to keep their Visas and their MasterCards, but they’ll want a specialized, alternative form of cash too.”

The idea is not as far-fetched as it may seem. Economists already have a term for this kind of community-specific money; they’re called “complimentary currencies” and they naturally take root when conditions are right. For example, in 2006, a Chinese online social network called QQ produced “QQ coins” that became widely traded, used for almost a billion dollars a year in transactions. Even though the currency was designed just to buy things on the QQ network, other websites started accepting QQ coins for payment of even non-virtual goods, and a black market sprung up to convert QQ coins directly to Yuan. The Chinese government cracked down: They feared that QQ could trigger inflation of the Yuan by increasing the total money supply in China.

An even more popular form of complimentary currency has grown up around cell-phone minutes. Today Kenyans use a service called M-PESA that helps people swap mobile-phone minutes as cash— you can literally pay for something at the store by transferring mobile minutes to the clerk’s phone. Today the M-PESA is used for $10 million worth of trades a day, a figure that translates out to $3.6 billion a year, or about 10 percent of the Kenyan GDP.

Underground currencies thrive in nations whose governments are unstable or restrictive. According to Transparency International, a good-government NGO, Kenya’s government is among the most corrupt in the world. And in China, it’s illegal for people to gamble and view pornography, and yet the demand for them remains strong—hence, the rise of the QQ coin, which is perfect for buying both. When the banks or nations that issue currencies are unstable or unusable, people naturally seek out alternatives. The novelty of QQ coins and minutes is that they are a form of cash designed to be stored in cell phones instead of wallets.

Cash has an enduring appeal, and not just in uncertain times or economies. The amount of U.S. bills in circulation has actually increased over the last decade. Dave Birch, one of the U.K.’s leading financial pundits and the director of Consult Hyperion, a high-tech advisory group, points out that the essential character of cash is trust. Cash is simply a money system we are certain has worth,whether it’s backed by a government or some other guarantor of value.