Read just about any blog about Bitcoin, or listen to any expert, or even just read the Wikipedia entry and they will list the digital currencies that came before and led to Bitcoin:
The reasons these systems failed, almost invariably point solely to centralization in the system, as though decentralization of currency would be the necessary key to success that was missing until Bitcoin came along.
Well, obviously I need to shed some more light on the history, because there are thousands of complementary currency systems, centralized at the local level but with an open public transaction ledger that have been in use since the 1930s.
One of the early models from the early 1930s which is still thriving today is the WIR in Switzerland. Wir’s Cooperative Currency / Mutual Credit model is at the foundation of many complementary currency systems in the world today. There is an estimated 4,500 mutual credit systems worldwide.
Since the 1980s, the Local Exchange Trading System (LETS) has been using software to record transactions since the IBM XT and dBase were made available to the public.
In my Pictorial History of Complementary Currency Systems, which I wrote in 2000, I list many more complementary currency systems that have been implemented throughout history as a response to social and economic crises.
In 2004, I was contacted by a young programmer from a neighbouring city in Canada who wanted to take the mutual credit concept and modify it into a purely digital currency platform. His name was Ryan Fugger, and his platform was called Ripple, now known as Ripple Classic which is still live. The Ripple which is now owned by Ripple Labs names Ryan as the person who conceived Ripple.
In fact, here’s an email from 2006 where he discusses his concept with me and the Cyclos payments platform users group:
A few weeks ago, I was going through my folders and came across several others, most of which were abandoned, but which I have uploaded to my Github Repository. These are all precursors to Bitcoin as well, and their theories have been studied by at least one Bitcoin core developer, Jorge Timon who is now a developer with Blockstream who co-created Freicoin which implemented the concept of Demurrage within a digital currency, and contributed to the early theory of sidechains.
The other currencies I uploaded to Github are:
UNILETIM – written in php
Qlets – written in C++
LETS Webtool – written in perl/cgi
Mutual Credit LETS – written in cgi
WebLETS – written in php
In addition to these, we can add:
Geek Credit, 2004, also a P2P Digital Currency
GVB – Global Village Bank – Snapshot from the Internet Archive
Mlets – written for DOS in dBaseIII. Under Copyright.
Cyclos – Initiated in 2005, Currently the most widely-used Complementary Currency Software.
Ven – launched around 2007 (I’m one of the early members)
Webfunds – by Ian Grigg
Global Exchange Trading System (GETS) – by Richard Logie
The real revolution with Digital Currencies is not necessarily that they are decentralized, but that they are competitive with and complementary to existing monetary systems. By offering features of money that do not exist or do not function properly with national currencies, complementary currencies can create niches of monetary and thus economic, efficiency.
And why didn’t you hear of any of these systems before Bitcoin? I think of two main reasons, 1) Because Bitcoin is purchased with Fiat Currency and not issued as Mutual Credit and therefore more immediately valuable to people in fiat monetary terms rather than in “alternative” currency terms and secondly because before Bitcoin there were really not many people actively involved in the effort. Bitcoin, with deep appreciation, changed all that.