Translator: Patrizia C Romeo Tomasini
Reviewer: Denise RQ
Good morning everyone,
my name is Sebastiano Scròfina.
I deal with new alternative currencies,
an unusual, weird topic.
The path that leads me here
actually started long ago,
as a little kid.
I was inquiring adults
about everything, and I asked,
“What is money,
and why do you struggle chasing it?”
As an Italian, when I found out
I said, “Let’s just print more of them
and we solve the problem.”
That was my first encounter with money.
But what is money, really?
I did not get
any really satisfying answer then,
nor did I get one
in the following decades.
Not even university economics textbooks
carry satisfying answers
on what money really is,
they just explain what money does,
the functions of money.
But money defines so much of our lives,
we live for money, at least we need it,
some people die for money;
but still, we can’t define what it is.
Before trying to answer,
I’d like to start
with a handy example to show
what we can achieve with
these new systems of alternative currency.
Is there any banker here?
Oh no, he ruined my script.
I wanted to show you
how we can pay back the hardships
imposed upon us by bankers like him.
we can do the equivalent
of filling out forms,
wasting time and money
to open a bank account.
With this code, using Bitcore,
a library based on Bitcoin
– a new currency you all have heard of –
we can open an account that allows us
to get money, store it,
and send it anywhere in the world.
This is an alternative
to opening a bank account.
Of course, it’s an innovative,
but just to give you a taste
of what one can achieve
with alternative currencies.
They’re not payments systems
like Paypal or credit cards,
but brand new currencies
that differ from central banks’ money.
This graph shows the evolution
of these systems in the recent decades.
Today we only hear about Bitcoin:
but let’s put this phenomenon
It started few decades ago:
we show from the 80s to the 2000s
alternative currencies worldwide,
experiments with alternative currencies
have grown until a certain point
at an exponential rate.
This shows that there is a trend,
there are cracks
in the traditional currency system.
Cracks that are being filled
by people around the world
who try to solve problems.
How do they do it?
In this map I classified some
of those alternative exchange systems.
On the y axis we have
the geographical scope of the system,
some are very local currencies,
that serve local communities,
others are accepted globally,
like “fiat” money,
as it’s called here,
that is what we usually call “money”:
Euros, dollars – central banks’ money.
But on the x axis we have
the fiduciary nature of the system.
Again: what is money?
Is it a commodity? Or just a credit?
For millennia we’ve been used
to think that money is a tangible good.
Or a digital one,
bitcoin and criptocurrencies,
the family of bitcon-like money,
are basically digital goods.
Bitcoin is sometimes called
it’s digital, but it’s scarce,
you can’t duplicate it.
Other systems, on the other hand,
are based on the different idea
that money is credit,
like the system called “mutual trade”.
Now, TED is about ideas worth sharing,
so let me share three ideas,
found during years of study
and work in this field,
that carry a big disruptive potential
I want to share with you.
The first one is the “mutual trade”
we just talked about.
In this paper, US economist James Todder
analyzes the macroeconomic consequences
of reciprocal trade systems.
Indeed, a totally esoteric title,
but with a true
and fascinating story behind.
Starting in the 1930s,
a group of Swiss entrepreneurs
faced the economic crisis,
lack of liquidity and recession,
something akin to what we live today.
Following theories of an anarchic
called Silvio Gesell,
they decided to create
a “virtual” currency network
so that entrepreneurs
could trade without money.
The idea was: when you have
untapped productive potential
and consumption needs,
why must you suffer a crisis?
They created a kind of a mutual
trade network: how did it work?
The problem with barter
is also called by the economists
the “double coincidence of wants” problem.
It is hard to find
a counterpart to swap with,
so with “triangular barter”
you get from a company,
and then you give to a different company,
thus clearing your position.
So this kind of triangular barter
happens via a clearing house
the so-called “mutual credit”.
Does this have consequences?
There are huge ones.
First, this system gives people credit
without the need for savings.
This is really big,
and actually this credit
usually comes at 0% interest rate.
These aren’t just fancy theories:
more than a million businesses, worldwide,
already do this kind of trade
with a virtual currency as unit of account
– so this is very practical.
Maybe the most interesting consequence
is that credits, in these systems,
tend to be spent as fast as possible:
you don’t want to accumulate
this kind of virtual currency
with such a limited scope of acceptance.
But this, paradoxically, helps the economy
by helping those in debt
to come back into balance.
That is very fascinating, it’s linked
with current issues like Greece.
These systems tend
to come back to equilibrium.
What about the macroeconomic consequences?
In this graph we see,
in the last 50 years,
correlation – which is not causation –
between a macro-economical parameter,
like unemployment in Switzerland, in blue,
and the growth of the Swiss
reciprocal trade network,
called “WIR”, in purple.
This study actually analyzes
much more data but the idea is simple:
during economic crises,
when currency flows slow down,
but not the productive potential,
these networks support local economies
and sometimes help SMEs to survive.
Another idea worth sharing was elaborated
by Canadian engineer Ryan Fugger in 2004.
in this paper with an esoteric title,
“Money as IOUs in social trust networks:
proposal for a decentralized currency
It sounds very complex,
but the idea is simple:
– and there is a common thread
with the previous idea –
“how can we have an economy
without relying on the banking system,
basically rendering banks obsolete?”
Truth is, most of the money
in our bank account
is just fiduciary,
it is a promise, a bank IOU.
It is bank money,
created through fractional reserve,
nothing else than a promise.
So Fugger asks:
why do we need a middleman
to exchange promises?
isn’t it cheaper to exchange promises
via those social trust networks
that already bind us?
You can see this here:
in the left we see Alice,
who wants to pay Charlie
via the traditional system.
She pays the bank, who intermediates
and therefore charges a price.
In Fugger’s idea, Alice pays Charlie,
who still receives a promise:
but not through a bank, instead from Bob,
who’s a trusted friend of Charlie
and Bob gets paid with Alice’s promise
because he trusts her.
Fugger’s point is,
since the current banking system
is already based on trust,
why not make it even more fiduciary,
with a more capillary network?
We need to develop a way to rout
this economic information we call “money”.
The third idea worth sharing is Bitcoin.
Starting from a question
that’s similar to Fugger’s one
– how do we transact without
relying on the banking system –
in October 2008, this white paper
is released by “Satoshi Nakamoto”.
The author addresses this,
and also other issues.
Another one is:
How do we develop a payment system
that’s independent of political authority
to freeze accounts, revert transactions,
gather the identity of who’s transacting.
And other more ambitious goals like:
how can we get rid of a central bank?
how can we go back to commodity money,
free from central banks’ power
to inflate the monetary base?
These are the founding ideas
that have been implemented
by Satoshi Nakamoto, who explains
in the white paper, and then implements
Bitcoin and the block chain,
its underlying technology.
It is basically a ledger,
where you can record information,
mainly information on this currency.
A currency with a capped amount,
21 million units maximum.
Transfers of the currency
are recorded on this ledger,
shared across a network
of machines around the globe.
First of all it is transparent:
you can see how this currency flows.
Secondly, it is resilient:
it is extremely hard
to manipulate the ledger.
For the first time
we have a digital currency
that’s not subject to the whim
of any single authority.
In truth you can do much more
than simply using the currency:
you could use the block chain to do more.
In this example we see how,
with a simple HTTP call,
we can do something
that today takes a notary.
Here, for instance, we’re issuing,
and tracking on the ledger, 500 shares:
these could be equity of a business,
recorded on the ledger
which cannot be altered
so anyone can check
the validity of those shares
and transcribe them on this ledger,
– we can basically do, almost for free,
what used to take a notary.
Well, I tried to give you hints
of what you can achieve
with this weird things
called alternative currencies.
A common thread links these ideas:
they weren’t created by economists;
they want to make the financial
and the banking system obsolete;
but most importantly, behind these efforts
there’s a strong ideal drive concerning
the possible economic world.
These ideals may differ a lot among them,
but nevertheless they’re strong.
This is why I fell in love with them
and then made me turn
this love into a job:
the idea that by creating currencies
we can implement different ideas
of the world, philosophies.
In J.M.Keynes words,
behind practical efforts we often found
the spirit of a philosopher.
Our economic future is up to us,
it’s not been written yet.
How is it going to look like?
The one Keynes wished for?
A mix of both visions,
or something we can’t imagine yet?
Currency is a language,
one that alters our perception
and renders real the worldview
of its designers.
It is a way to imagine
new possible worlds,
in a sense, creates worlds,
realized by those who use them:
a language no one speaks is worthless.
So what I find exciting is that
our future is a blank book,
yet to be written:
we’ll write it together
with the awareness with which we’ll choose
which of the possible monetary worlds
we want to create and nurture.