Thursday, November 17, 2011

wikipedia - Complementary currency (CC) is a currency meant to be used as a complement to another currency, typically a national currency.[1] Complementary currency is sometimes referred to as complementary community currency (CCC) or as community currency. The term local currency, describing a complementary currency which is limited to a single locality, is sometimes used interchangeably with complementary currency. There are, however, some complementary currencies which are regional or global, such as the Community Exchange System, WIR and Friendly Favors, or the proposed global currency terra.[2]

1 Types of complementary currencies
2 Purposes
3 Complementary currencies
4 Example of a fully funded complementary currency
5 Major activists
6 See also
7 References
8 External links

[edit] Types of complementary currencies

Complementary currencies describe a wide group of exchange systems, currencies or scrips designed to be used in combination with standard currencies or other complementary currencies. They can be valued and exchanged in relationship to national currencies but also function as media of exchange on their own. Complementary currencies lie outside the nationally defined legal realm of Legal tender and are not used as such. Rate of exchange, scope of circulation and use in combination with other currencies differs greatly between complementary currency systems, as is the case with national currency systems.

Some complementary currencies incorporate value scales based on time or the backing of real resources (gold, oil, services, etc.). A time-based currency is valued by the time required to perform a service in hours, notwithstanding the potential market value of the service.

Some complementary currencies take advantage of demurrage fees, an intentional devaluation of the currency over time, like negative interest. This stimulates market exchanges in the devaluating currency, propagates new participation in the currency system and forces the storage of wealth (hoarding) ability usually reserved for currency into more permanent and better value holding tools like (property, improvement, education, technology, health, equity securities, etc.) all of which are sheltered from the currency based demurrage fees.

Other experimental complementary currencies use high interest fees to promote heavy competition between participants, and the removal of wealth from long term wealth holding structures (natural/material wealth, property, etc.) to aid in the process of rapid industriaization, mass production, automation and competitive innovation.[citation needed]

Monetary speculation and gambling are usually outside the design parameters of complementary currencies. Complementary currencies are often intentionally restricted in their regional spread, time of validity or sector of use and may require a membership of participating individuals or points of acceptance.
[edit] Purposes

Complementary currencies are often designed intentionally to address specific issues or problems.[3] Most complementary currencies have multiple purposes and/or are intended to address multiple issues. They are very useful for communities that do not have access to financial capital, and can be useful for adjusting peoples' spending behavior.[4] The 2006 Annual Report of the Worldwide Database of Complementary Currency Systems presented a survey of 150 complementary currency systems in which 94 respondents said that "all reasons" were selected, among cooperation, micro/small/medium enterprise development, activating the local market, reducing the need for national currency, and community development.[5]

In the current economic climate, some local money projects can also be promoted as

low carbon, by encouraging localisation of trade and relationships
lifeboat currencies
encouraging use of under-used resources
recognising the informal economy

[edit] Complementary currencies

Beginning in the 1960s, the first advocates of complementary currencies, especially in Canada, did not think of CC as working contra to our national currencies.[citation needed] This is why certain leaders of this movement were careful to use the term 'complementary'. They used it to emphasize the importance of working in cooperation with governments and the tax system, businesses, unions, associations, charities, the banks and all forms of democratic capitalism—as partners in the above-ground economy.
[edit] Example of a fully funded complementary currency

The Toronto dollar system is fully funded by (i.e. backed by) Canadian dollars. Participating merchants are free to exchange the Toronto dollars for Canadian dollars.

In addition to being supported by any number of social activists, including philosophers, clergy, artists, etc., it is fully supported by a growing number of political leaders, past and present, including, over the years, several mayors of Toronto.[citation needed]
[edit] Major activists

Some major complementary currency activists are Bernard Lietaer and British economist Hazel Henderson. Lietaer has argued that the world's national currencies are inadequate for the world's business needs, citing how 87 countries have experienced major currency crashes over a 20 year period, and arguing for complementary currencies as a way to protect against these problems.[6] Lietaer has also spoken at an International Reciprocal Trade Association (IRTA) conference about barter.[7]
[edit] See also

Calgary Dollar
Digital gold currency
Ithaca Hours
Lewes Pound
Margrit Kennedy
Sectoral currency
Silvio Gesell
Stroud pound
Time Banking
WIR Bank
Ven (currency)

Lewis Solomon is the best known expert on private currencies.

How to Start Your Own Private Currency
By Derek Thompson

Apr 5 2011, 8:40 AM ET 18

It's not as complicated as it sounds. All you need is a system other people can understand and, most importantly, trust.

590 gold standard certificate.png
Here's a nightmare scenario shared by some mainstream investors, goldbugs and Ron Paul devotees: The year is 2013. Inflation has the U.S. economy in a stranglehold. International investors are fleeing to the far corners of the globe. The dollar is in a free fall, and Americans are scurrying to protect their wealth. What do you do?

Start your own currency.

The Money ReportIt sounds complicated, but really it's as simple as three steps. First, amass a bank of stuff. Let's say gold. Second, decide on a sensible unit for your new currency. Let's say one "Derek Dollar" token is worth a gram of gold. Third, convince a critical mass of people to use it so that "Derek Dollars" are redeemable not just within my group of friends, but among shops and merchants around the world. Voila, we've got our own private currency.

No gold? No problem. The easiest way to start a currency is to draw up an I.O.U. system that allows your friends to trade hours of work. Hundreds of shops in Ithaca, NY, accept "Ithaca HOURs," a local currency backed, not by gold, but by man-hours. I spend an hour mowing an Ithaca lawn and receive a paper note for one HOUR. I walk to the barber's, hand him the piece of paper, and he cuts my hair. Now my neighbor's grass is shorter, my hair is kempt, and my barber is one HOUR richer. And it's all thanks to transactions that might not have happened were it not for a private currency.

japan sidebar.pngThe success of Ithaca HOURS shows you don't need to be a conspiracy theorist to see the virtue of private currencies. Maybe you want to create a new revenue stream that stays within your community (see right). Maybe you see a currency shortage and want a new way to grease exchanges. Maybe you want to buy goods in a virtual world like Second Life. Or maybe you want a fast, frictionless currency and you've found thousands of consumers who want the same thing.


U.S. dollars, like most modern money, are backed by a promise, not a metal. Rather than support the currency with towers of gold bricks, Washington issues the currency by "fiat," or by decree. The good news about fiat is it allows us to create more money -- trillions more --when the economy tanks. The bad news is that, like any promise, fiat currency relies on the faith of its users and investors. The history of fiat currencies is a mixed bag of century-long successes and infamous failures, from ancient China to modern Zimbabwe where inflation hit 90 sextillion percent in 2008. (Yes, that's sextillion. With 21 zeros.)

But how can a government-backed Zimbabwe currency be utterly worthless, while a pixelated pile of gold on the game World of Warcraft can be worth more than the computer screen that creates the pixels?

One clue to the answer lives in one of the most common words for money: credit. It comes from "credo," the Latin for "I believe." Money is all about trust. It's doesn't particularly matter whether your currency is backed by something concrete (like gold), something specific (like hours of labor) or something invisible (like a government's promise to accept that money as payment for taxes). What matters is that people agree to accept it in exchange for goods and services.

"Imagine that we are on a gold standard and a severe drought hits," economist Nick Blanchard explained to me in a useful example. "Suddenly water is in extremely high demand relative to gold, and everyone would be happy to rid themselves of bullion for water. Would you say that the dollar derives its value from gold, or the fact that people will accept it to buy water? The gold price of water is a floating exchange rate as much as is the dollar price of yen."

"The real value of any currency comes from the reasonable assumption that when you demand goods and services, the paper/metal/lint/whatever in your pocket will be accepted in exchange for that thing," he continued. "Currency loses all its value when people no longer want it in exchange for what you want."


Architects of private currencies face a chicken-egg challenge. To make a new currency popular among users, you have to sign up retailers. To make it popular among retailers, you have to sign up users.

The most interesting currency facing this existential crisis is BitCoin, a computer-generated currency that is famously traded among a couple hundred computer geeks and merchants. "The only thing valuable about BitCoin is that there are other nerdy internet denizens that will accept it for payment for things," Blanchard said.

BitCoin is backed by neither metals nor man-hours, yet each coin is worth nearly a dollar due to demand for the scarce BitCoins that have been released among the network of users. BitCoin is currently legal and active. But some worry it could face a fate like E-Gold, the bullion-backed online currency that quickly became a favorite of global crooks and money launderers. Its founder was sentenced to house arrest.

"Anything can serve as a currency and ultimately the winners will possess the characteristics that people demand: portable, fungible, easily divisible, and reasonably scarce," said John Matonis, editor of The Monetary Future blog and an outspoken advocate for private currencies. "Coins did serve that function, but a coin cannot be jammed through a broadband connection and molecularly transported. We must evolve now."

The excitement over private currencies -- whether from the goldbug fringe, the software geeks, or the econoblogger nerds -- boils down to an old-fashioned belief in competition. Currencies are like any other good or service. Monopolies can hurt the market. Government control can breed inefficiency. Maybe we should stop worrying and learn to love the BitCoin.

I don't mean to be rude, but it's pretty clear that you don't understand how bitcoins work. The "bitcoin company" cannot be hacked because there is no bitcoin company. Everything is maintained inside a decentralized network with no single point of failure. Also, bitcoins cannot be counterfeited. This is cryptographically guaranteed. Now, there are attacks that can be launched against the network if more than 50% of the network is owned by a malicious party, but this isn't a problem unique to bitcoins. For example, if 50% of the population decided they wanted to wreak havoc on our fiat currency, then I'm sure quite a bit of damage could be done.

Here's a short video that gives a very brief intro to bitcoins: Unfortunately, the technical explanation is a little hand-wavy, but that's because there's not really a simple explanation as to how it works. You'll have to know a bit about public key cryptography to understand it, but there's a more in depth explanation here: And, if you're interested, here's a list of the known attacks that can be launched against the network:
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