Currency Multiplicity: Social Economic Networks

Cryptocoin multiplicity is just one kind of currency multiplicity in the modern world. More broadly, we are living in an increasingly multi-currency society with all kinds of monetary and non-monetary currencies. First, there is currency multiplicity in the sense of monetary currency in that there are many different fiat currencies (USD, CNY, EUR, GBP, etc.). Second, there are many other non-fiat, non-cryptocurrencies like loyalty points and airline miles; one estimate is that there are 4,000 such altcurrencies [1]. Now there is also a multiplicity of blockchain-based cryptocurrencies like Bitcoin, Litecoin, and Dogecoin. Fourth, beyond monetary currencies, there is currency multiplicity in non-monetary currencies too like reputation, intention, and attention as discussed above.

Market principles have been employed to develop metrics for measuring non-monetary currencies such as influence, reach, awareness, authenticity, engagement, action-taking, impact, spread, connectedness, velocity, participation, shared values, and presence [2]. Now blockchain technology could make these non-monetary social currencies more trackable, transmissible, transactable, and monetizable. Social networks could become social economic networks. For example, reputation as one of the most recognizable non-monetary currencies has always been an important intangible asset, however was not readily monetizable other than indirectly as an attribute of labor capital.

However social network currencies can now become transactable with web-based cryptocurrency tip jars (like Reddcoin) and other micropayment mechanisms that were not previously feasible or transnationally-scalable with traditional fiat currency. Just as collaborative work projects like open-source software development can become more acknowledgeable and remunerable with github commits and line-item contribution-tracking, cryptocurrency tip jars can provide a measurable record and financial incentive for contribution-oriented online activities. One potential effect of this could be that if market principles were to become the norm for intangible resource allocation and exchange, all market agents might start to have a more intuitive and pervasive concept and demonstration of exchange and reciprocity. Thus social benefits like a more collaborative society could be a result of what might initially seem to be only a deployment of economic principles [3].

References
[1] Lietaerm B. nad Dunne, J. (2013). Rethinking money: how new currencies turn scarcity into prosperity. London, UK: Berrett-Koehler Publishers.
[2] Swan, M. (2010). “Social economic networks and the new intangibles.” Online text from the Broader Perspective blog. 
[3] Swan. M. (2009). “New Banks, New Currencies and New Markets in a Multicurrency World: Roadmap for a Post-Scarcity Economy by 2050.” Create Futures IberoAmérica, Enthusiasmo Cultural, São Paolo Brazil, October 14, 2009.

Bitcoin Cryptocurrency Mania!

With bitcoin nearly doubling in value in the last few weeks (surpassing USD $400 on November 9, 2013 and reaching USD $937 on November 29, 2013) (see this chart in Figure 1 and the real-time exchange rate), the question is whether it is just another inflationary virtual currency bubble like WOW gold and Second Life Lindens, or a trend that will endure. At present volume is skyrocketing, with a daily turnover (as of November 25, 2013) of 50,000 bitcoin per day (USD $45 million) which translates to USD $17 billion per year. 

Figure 1. Daily Bitcoin-USD Price-Volume Chart: Oct 4 - Dec 1, 2013. (Source: BitcoinCharts, quotes also at Bitcoin Charts)

What is bitcoin? 
Bitcoin is an open-source protocol enabling the transmission of value across the Internet in the form of a digital asset, digital currency, or payment mechanism – it is essentially a peer-to-peer decentralized monetary system. Exchange across the network is pseudonymous (not anonymous) because there is a trace if you give someone your wallet address for a transaction. Transfers use a public key/private key system, and a record of transactions in kept in the blockchain. Bitcoin is just one of hundreds of virtual cryptocurrencies (e.g.; cryptography-based) as illustrated in Figure 2; yes, there is a BaconCoin, BBQCoin, [YourNameHere]Coin...

Figure 2. Cryptocurrency Hot List: Dec 1, 2013. (Source: CoinWarz)

Bitcoin Mining Ecosystem
In addition to exchanging physical-world currencies for bitcoin or other cryptocurrencies on exchanges (example: DealCoin), bitcoins can be earned by ‘mining.’ An extensive cryptocurrency mining ecosystem has arisen. Mining or hashing is using home-based GPU rigs (like SETI@home but for crytocoin mining) in resource pools with others (like Coinotron), or renting cloudhashing processing resources, to algorithmically make as many guesses as possible on the number of the next block of coin to be released, sort of like a lottery. There is a safeguard against money-printing and inflation as in the case of bitcoin, only 21 million total bitcoins can be created.

Sophisticated mining operations have driven the profit in bitcoin mining below zero so erstwhile traders mine more volatile currencies that may be up-and-coming like ScryptCoin (USD $27/week profit), MicroCoin (USD $20/week profit) and other riskier alt.currencies that may yield USD $16-$20/day.

Prospects for Long-term Success
The reason why a few top cryptocurrencies like bitcoin could succeed are the huge worldwide liquidity of the Internet, the demand for flexible, digital, cross-border, pseudonymous payment systems, and the practical and social political support for peer-to-peer payment systems, financial empowerment, and self-sufficiency as part of the ongoing Occupy response to the 2008 banking crisis, global capitalism, and corporate hegemony. Transfers within the crytpocurrency network are pseudonymous and not directly trackable by authorities, but network ingress and egress exchange to physical-world currencies can be monitored. Regarding regulation and taxation, bitcoin is already being classified as falling under regulatory jurisdiction as a ‘payment system’ or ‘taxable voucher’ and being enfolded into the traditional financial world, with VAT now levied in Germany, Sweden, and Finland, and discussions ensuing in other countries.

Esprit of Financial Empowerment
Bitcoin and the cryptocurrency movement asks ‘who should be in charge of printing money?’ and suggests individuals not governments. Alt.currencies are just another step in the long tradition of decentralization, access, and self-empowerment in the financial industry that includes web-based stock trading and portfolio management, real estate and mortgage transactions, and peer-to-peer lending, and that is also emerging in other sectors like education with MOOCs, and health and biology with citizen science, biohacking labs, and synthetic biology liberating research from institutions.

Update: Dec 18, 2013 - With market-crashing volatility and regulatory oversight, bitcoin is already seeming short-lived: "Bitcoin value drops 40% after more bad news from China"

Automatic Markets

At Singularity University, one of the most pervasive memes was the “routing packets” metaphor; that many current activities are just like routing packets on the Internet. This includes areas such as people in driverless cars, electrons in electric vehicle charging and power entry, load-balancing, routing and delivery on smartgrid electricity networks.

Fungible resources and quantized packet-routing
The packet-routing concept could be extended to neurons (routed in humans or AIs), clean water, clean air, food, disease management, health care system access and navigation, and in the farther future, information (neurally-summoned) and emotional support (automatically-summoned per human dopamine levels from nearby people or robots). It is all routing…directing quantized fungible resources to where they are needed and requested.

Automatic Markets
Since these various resources are not uniformly demanded, the idea of markets as a resource allocation mechanism is immediately obvious.

Further that automated, or automatic markets with pre-specified user preferences, analogous to limit orders, could be optimum. Markets could meet in equilibrium and transact, buying, selling, and adjusting automatically per evolving conditions and pre-programmed user profiles, permissions, and bidding functions.

Truly smart grids would have automatic bidding functions (as a precursor to more intelligence-like utility functions) that would indicate preferences and bid and equalize resource allocation, the truly invisible digital hand.

The key parameters of a working market, liquidity, price discovery and ease of exchange would seem to be present in these cases with large numbers of participants and market monitoring and bidding via web or SMS interfaces. The next layer, secondary markets and futures and options could also evolve as an improvement to market efficiency, if designed with appropriate incentives.

Automatic markets are not without flaw, they exist now in traditional financial markets, causing occasional but volatile disruptions in the form of quantitative program-trading (blamed for exacerbating the 1987 Black Monday stock market crash) and flash-trading. Speculative aspects are not trivial and would be a critical area for market designers to watch, particularly managing for high liquidity and equal access (e.g.; faster Internet connections do not matter).

Markets to grow as a digitized resource allocation tool
At present, markets are not pervasive in life. The most notable examples are traditional financial markets, eBay, peer-to-peer finance websites and prediction markets. Being in a global digital era with the ability to use resources in a more fungible and transferable way could further promulgate the use of markets as a resource allocation tool.

A focus on preference rather than monetary value, and other currencies such as attention, authority, trust, etc. could vastly extend the range of implementation of market principles.