Here’s the draft of an article I was writing on the state of Digital Currency Payment Systems in 2000, some 5 years before Ripple was conceived, and 8 years before Bitcoin was released.

Since around 1995 I had been working on a few Mutual Credit type electronic accounting systems and we were paying close attention to emerging technologies like Mondex’ Smart Card and others. 

Here you can see that I have also stated that these systems will be purely Peer-to-Peer, and not mediated by any Third Party.

Internal Currency Networks and the New Electronic Economy

by Stephen DeMeulenaere, 2000


The world’s monetary and financial services industries are today undergoing a revolution unlike any before seen. Rapid technological advances combined with new economic models are presenting new challenges and opening new possibilities for improving the redistribution of goods and services to those who need them. As economic institutions become more global in scope, space is increasing for regional and municipal governments to begin taking a role determining regional and local economic policies.

The internet, ubiquitous as it is, is really a network of communities. From this perspective, it is possible to build an international economic system from the community up, and that includes issuing currencies that are valuable only within particular communities.

Key Points:

-How recent developments in the design and application of local currency systems and alternative methods of financing reveal the breadth of economic possibilities.

-How recent technological developments with the internet will allow accounting between people to be conducted between each other on-line, and not mediated by a financial institution.

-How citizens are becoming more than producers, and more than consumers—becoming both the producers and consumers (“prosumers”) of the goods and services they use, exchanged within closed networks of family, friends, community and locality.

-How a wide-range of monetary and financing options will be provided to enhance reciprocation, redistribution and the meeting of basic needs.

-How these emerging mechanisms will reduce market instability, reduce boom/bust economic cycles and ‘unrealistic’ fluctuations in the value of currencies as they relate to each other and to markets local to those using the currency.


Local, municipal and regional governments as well as businesses will see the advantages of issuing their own bounded currencies for use on the internet. Internet websites will offer ‘internal currencies’ to facilitate exchange between the members of each community of users. Citizen ‘prosumers’ will join their local governments in supporting regional currencies as they directly correspond to participatory democratic control over their economies, and what happens in their local areas.


Conventional economists see the economy as an unbounded system, where money and goods flow between points without concerning themselves with whether these points are located within a local area, or at opposite ends of the globe. They see the economy as pre-eminent—and within a narrow scope of vision this is true. They fail to see the economy as subsystem of a much larger system, that of our natural world. Thus economic decisions are made without regard for the natural world, seeing the environment as a source for raw materials and as a sink for waste outputs.

To see the economy as a subsystem of the natural environment is to see many economic subsystems, each bounded by local, regional, bio-regional and trans-bioregional geographic areas. Economies are needed which respect these geographical boundaries, so that the exchange that takes place between them respects the greater ecological systems.

To bound an economy to its locality is to give democratic control to those who live, work and produce in that area. At a time when conventional economies are becoming supra-national, local economies are needed to insulate and protect environments and societies from the instability that supra-national economic activities cause. Economies are best managed by those who live in that area, and certainly not by those who do not live there.

Thus we are seeing the development of local, municipal, regional and bio-regional economic networks that are bounded by geographic areas and social communities which give the greatest control over economic activities to those who participate in these economies and live in the particular area.

In Europe and in Argentina, these local networks are the most advanced.

Parallel Currency Systems

Parallel currencies are a form of money that operates in parallel to the conventional national currency of a country. Aside from a few experiences of three Argentine states that issued regional government bonds in the form of currency, parallel currency systems are limited by a geographic locality of circulate within a particular social community.

In the conventional economy, currencies are valued relative to their scarcity, the more scarce they are, the more needed they are for making payments, and thus the more valuable they become. The less scarce, the less valuable they become, causing deflation in their value.

In the emerging network economy, currencies are valued relative to the willingness of an individual to use them to mediate transactions. Their value is social, and not mathematical.

In the conventional economy, the money supply is always increasing. This is because money comes into existence as interest-bearing debt. When someone or some government borrows money from a bank, a larger amount of money is created and issued into the economy to allow others to repay loans. If the money supply did not constantly expand, in mean average terms over time, it would not be possible to repay all the loans made in full. We already know this to be a true and completely contradictory fact of the conventional economy. Yet few people see this as the root of a perpetual growth economy.

Money is not the root of all evil. It is the way money is used, as part of a greater monetary system that determines its social and ecological impact. To change the way that money is valued and used is to change the way it affects society and the environment.

Currency systems in which the currency is issued by a central authority to an individual upon joining the system or borrowing from it does not accurately reflect social, ecological nor economic reality. Instead, it reflects mathematical reality, and it can only be controlled mathematically, by experts who know how to do the math.

Mutual credit parallel currency systems are the most common form of parallel currency system in use in the world. This is the model of currency issuance used by the Local Exchange Trading System, a bounded community currency system designed by Michael Linton of Canada. LETS is a system of accounts that in which members of the network issue themselves their own currency for trading within the network. Although LETS does not use a printed currency, it is possible to issue printed currencies using this model. The Tianguis Tlaloc local currency system in Mexico issues its currency in this way.

Fiat parallel currency systems, such as the HOURS system in use in America and the RGT system in Argentina issue an amount currency to their members when they join. It is a simple form of parallel currency, however the method of issuance can cause the same money management problems found in the conventional economy.

A third model is to issue the currency relative to the conventional currency by means of exchange rates. As the value of conventional money is constantly decreasing in mean average terms (occasionally fluctuating up or down but always decreasing over a longer period of time), it is possible to issue a currency that can be purchased at an exchange rate relative to the mean depreciation of the conventional currency. Let us look at the following example, from the ‘Hintertupfing Tauschring’ (Hintertupfing Local Currency System in Germany), which is modeled on the economic theories of Silvio Gesell.

The value of this currency is stable at one 1980 Deutschmark, relative to the current Deutschmark which is valued at only 61.5% of its value in 1980 terms. Thus it costs about 1.68 Deutschmarks in 1999 to purchase one Deutschmark valued at its previous 1980 level.

The use of a parallel currency whether to enhance redistribution (mutual credit model) or to control deflation in value of the official conventional currency is very effective in controlling deflation and exchange-rate fluctuations in value of official currencies on world money markets (exchange-rate valued parallel currency).

The Redistribution of Goods and Services

Since the dawn of human history, communities have redistributed goods and services so that the immediate needs of people living in that area can be met. Through family and kinship ties, resources were shared and managed within the household. Today, we see in modern society a breakdown in the redistribution of goods and services, such that to study redistribution is to do an anthropological study of societies in which redistribution is still a natural occurence. We have become very tolerant of the suffering of others that goes on around us.

Whereas the goal of conventional economic activity is to distribute goods or services to those with the money to pay for them, redistribution involves the sharing of resources without expectation of immediate financial return. Recent research (Stodder, 1998) suggests that by implementing redistribution networks can greater economic efficiency in times of downturn in the conventional economy. Barter systems which do not operate with a monetary medium of exchange have the effect of redistributing goods that are being unused—the material already exists—instead it is human energy that directs them towards further use.

Just as political boundaries establish areas of political responsibility for a particular area, bounded economies, economies which are localized relative to the local, regional and bio-regional geography provide defined frameworks for managing economic activity within a certain part of the environment. It is within these ecologically-defined areas that redistribution can best take place.

The Emerging Network Economy

Rapid technological developments in electronic communication have opened a new era in economics and finance. Markets have become volatile as stocks can now be traded on-line 24 hours a day, from the previous stock exchange office hours. Large volumes of money can be moved electronically, in and out of countries within minutes rather than hours, days or weeks. The 1997 crisis in Asia is being blamed squarely on the ability to move money without concern for its effects on local and national economies. Many are now calling for mechanisms to ensure stability by requiring a penalty fee be paid before moving funds out of a market within a specific period of time (the Tobin Tax).

Rather than seeing the emerging network economy as a distributed network of bounded economies, economists, bankers and financiers continue to view the economy as a top-down centralized mechanism. However, in an enlightening white paper published by IBM, Robert M. Howe, General Manager of IBM’s Banking, Finance and Securities Industry (Howe, 1999) sees the emerging network economy, and the banking and finance industry’s role in it as one in which:

-network technology will democratize financial markets by localizing them.

-consumers will have increased choice provided by internet-based financial service providers.

-intellectual capital will be the primary source of wealth.

-value will be created by the application of knowledge and information to work.

-the rapid adoption of the internet by individuals and companies will cause a polarizing effect, creating micro-markets out of communities of people within specific geographic areas.

-power will change hands from nations and governments to individuals and consumers.


Complementing rapid developments in electronic communications technology and the economic globalization that this emerging form of communication entails, local and regional areas are forming micro-networks for enhancing redistribution, ensuring stabilization, providing a stable form of valuation, and ensuring participatory democratic local control over social, ecological and economic issues. In these networks, individuals are transcending their traditional roles as producers and consumers to be ‘prosumers’, both producers and consumers of the goods and services they consume. By redistributing and reciprocating, the meeting of immediate needs can be achieved in a way that does not increase material throughput. By implementing parallel currency systems, many of the goals that progressive people are working towards: social stability, ecological restoration and preservation, participatory democracy can be achieved.


Daly, Herman. Steady-State Economics. San Francisco: WH Freeman. 1977.

Howe, Robert M. Banking in the Network Economy. IBM White Paper on Living in the Information Society. 1999.

Stodder, James. Corporate Barter and Economic Stabilisation. International Journal of Community Currency Research. 1998.