If you are considering setting up a new currency, whether it is a small local currency or you are more ambitious, this presentation describes how you might go about designing a currency that meets your needs.

1. Thoroughly
Modern Money
Considerations when Designing a New
Currency
Phoebe Bright
member of the Feasta Currency Group
Tuesday 26 March 13

2. Background
• Phoebe
• Feasta
• Liquidity Network
• Currency Group
Tuesday 26 March 13
Phoebe Bright
- The City - banks, the london stock exchange side business starting flying school
- the country - generalist, web, project management, mentor
Feasta
- hooked in after reading Richard Douthwaite’s The Growth Illusion
- called him up and soon became friends and Feasta member and on the Feasta Executive
Committee
- Liquidity Network a group in Feasta to explore Richard’s ideas for a new currency that
would increase liquidity in a local area by spending or giving money into circulation.
- Currency Group is a recently started Facebook group of people interested in local currency.

3. Purpose of a Currency
• Measure of Account
• Means of Exchange
• Store of Value
Tuesday 26 March 13
Measure of Account - a measure of how much different items are worth by creating a
common measure - how many marrows are required to buy a jar of honey? Worth changes of
course and depends on supply and demand. At the end of the season it’s hard to give
marrows away!
Means of Exchange - the unit we use to transfer value from one person to another. This can
be tangible like a note or simply a number in a computer. Whatever it is, the person
receiving the unit trusts that they will be able to use it to purchase something else in the
future.
Store of Value - A store of value may be a tangible unit like a gold coin or a house (!) or an
agreement like the bank agreeing to hold your money and pay you interest or a company
agreeing to pay you a dividend in return for investing in their company. The person with a
Store of Value unit trusts that it will maintain it’s purchasing power in the longer term.

4. Why a new currency?
• National currencies - jack of all trades
• Promote local
• Resilience
• Increase Liquidity
Tuesday 26 March 13
Our current national currencies are not serving us well in all areas. They were designed to be
a jack of all trades with the benefits focusing on it’s Store of Value. This means in a
recession, there is little incentive for people to spend. Their money will gain or should at
least hold it’s value in a bank. In the current recession people are actively paying down their
debts rather than spending or investing in local businesses. With the Euro experiment
showing serious flaws, there is a real possibility we may reinstate our national currencies and
this is a great opportunity to look again at how we want to design our currencies.
Promoting local loyalty by creating a local currency has used successfully many times.
Sometimes the currency need only be temporary to raise awareness of the buying public.
Having an alternative means of trading with each other that does not depend on the banking
and payments systems is a sensible precaution in uncertain economic times.
With the amount of money in circulation shrinking, a new currency can add liquidity if it puts
new money into circulation. Note that currencies that are exchanged for “national” currency
do not add liquidity. What amount would you need to really make a difference?

5. Decisions to make if you design a
new currency
Tuesday 26 March 13

6. How is money supply
managed?
• Created
• Monitored
• Destroyed
Tuesday 26 March 13
How is new money created?
- exchange for national currency
- lent into circulation (via mortgages or loans)
- spent or given in circulation
- earned (LETS)
How is the supply of money going to be monitored?
- how much money is still in circulation?
- what is the velocity of money - how quickly is it being spent?
- electronic money is much easier to monitor than paper
How will currency be removed - to avoid inflation, you will want to be able to remove
currency if supply exceeds demand.
- currency has an expiry date or loses value over time - “rusting”
- negative interest for hoarded money - demurrage
- manage exchange of money for other currency

7. How do you inspire
Trust?
• Backing
• Security
• Stability
Tuesday 26 March 13
Backing more important for store of value than means of exchange currencies. Means of
exchange only have to be trusted long enough for it to be spent, store of value requires
longer term trust.
Currencies can simply be backed by the equivalent value of national currency and be freely
exchangeable. This is a simple method of backing that people readily understand, however it
is open to a “run on the bank” if people loose trust for any reason as it is easy to exchange
your money for national currency.
Currency can be backed by anything that holds it’s value - precious metals, commodities,
energy.
Currencies do not need to be backed - our national currencies are no longer backed even
though most people still believe there is a hoard of gold somewhere. National currencies are
effectively backed by their governments and their countries ability to pay.
Security
- how will you limit fraud? Probably unrealistic to expect to prevent it altogether but being
able to spot it quickly and limit is size is probably enough.
- how will you ensure peoples transactions remain private - security data and prevent
hacking. Data Protection laws apply.
- how will you prevent gaming - if you are offering bonuses for certain types of behaviour,
how do you ensure these are being given out appropriately? Like fraud it is likely to be
impossible to prevent entirely, but how to focus on limiting its effect. You also need to think
about how people outside the system might try to manipulate it, either for financial gain or
because it threatens vested interests.
Ensuring a stable system will build trust over time. How will you scale up in a manageable
way so as not to be a victim of your own success?

8. Who is it for?
• Business
• Personal
• Black Market
• Government
Tuesday 26 March 13
Trying to meet the needs of all interest groups with a single currency is (probably)
impossible. Choosing who your primary users will be will help in making design decisions.
Business Currencies need to offer a clear business advantage to it’s users. It’s either got to
increase their business or decrease their costs, and ideally both, without increasing their
administration (much). Our experience has been that unless there is a clear message as to
why business will want to use this, they would prefer to stick with what they know.
Additional advantages, once they are hooked:
- faster, safer transactions
- easy to implement loyalty schemes
- more information on their customers
- reduced administration
- free marketing
Personal or sole traders will look have different requirements
- easy to use for everyone (not requiring technology)
- creating opportunities for new business ventures
- personal - linking people rather than businesses
- building a community
Black Market includes people just starting out in business who want to experiment with their
ideas and products without the overhead of starting a proper business. They will require that
transactions be anonymous.
Governments budgets are being repeatedly cut back, a new currency issued by the (local)
government to pay for normal services or as grants to community groups, individual or
businesses will need to be easy to integrate with existing systems. A local currency may be
able to appear as an additional payment type within the computer systems but there will still
be significant work to implement on more than a trial basis.

9. Where are your Users?
• Geographically
• Virtually
• Supply Chains
Tuesday 26 March 13
Local currencies have usually been for geographically local people but local online can mean
a single app (game) or platform (facebook) or across the internet (bitcoin). Currencies are
appearing that work down supply chains. A fast food company part pays it’s suppliers in
tokens that can be redeemed in it’s outlets. Multinationals use credits with each other to pay
or offset their invoices.

10. Use of Technology
• Paper/Coins
• Web
• Mobile Phones
• Cards
• Apples
Tuesday 26 March 13
Bearing in mind your primary users, what is the most appropriate technology to use?
Paper/coins are an obvious starting point because we are all familiar with their use and there
is plenty of collective experience in implementing a paper currency. You might decide to
start with paper and move to an electronic currency later, in which case you need to think
about how that transition might be done and when you know it will be the right time to do it.
Web based currencies are flourishing from Bitcoin to Facebook credits. The tools to create
online currencies are starting to mature. Some solutions are complete solutions:
A more flexible approach is look at using a collection of solutions for each part of the system:
- manage money supply
- manage transactions
- device payments on mobile phones, internet, cash cards
- reputation system
- directory of services
etc.
There are two types of cash cards - use once cards that have an initial value, say 20 units, as
when they are used up you throw them away. The advantages of use once cards is that they
can have an expiry date and you can easily give the cards to others. More familiar are cash
cards that are topped up - like those used on the London Underground.
Or create your own - Future Orchards in Cork create coins from apple pulp. One coin buys
you one apple.

11. What scenario and for
how long?
• Collapse Scenario
• Economic cycle
• Event
Tuesday 26 March 13
What problem(s) is your currency intended to solve? Is it primarily to ensure we can continue
trading in the event of an extended bank holiday (!) or is it to address the current problems
we are having in the economic downturn? If the currency is a to promote a community or
encourage loyalty, how you market that will be as important as how the currency works. How
will you launch and wind down the currency?
If your currency is intended for a limited period of time, how are you doing to wind it down?
You might want to have a time limited trial of your new currency before launching properly.
You could do this for an event, a week long festival for example, or a three month trial within
a defined group.

12. Exchange?
• with National Currency
• with other currencies
Tuesday 26 March 13
Will people be able to freely exchange your new currency for the national currency or other
currencies? There is a big difference between exchangeability that increases or decrease the
supply of currency, a system run exchange, and a private exchange where currency is bought
and sold but the amount of currency in circulation remains the same, it just changes
ownership.
System Exchange
If your currency is freely exchangeable this will encourage trust but it also carries some risks:
- bad publicity could mean the currency collapses as people quickly exchange your currency
for something they trust more.
- fraud or gaming is easier because you can cash out easily.
You might consider having limited system exchangeability:
- have a fee to transfer in and/or out
- only a certain amount per person in a period of time
- have a total limit that can be exchanged in or out depending on whether you have a need to
increase or decrease your money supply.
Private Exchange
The above concerns still apply to some extent but provided there is not one individual or
business doing all the exchanges for the network, taking all of the risk the money supply will
remain stable.
Closed System
Having no authorised means of exchange means the system is in total control of the amount
of money in circulation. It means if fraud is committed, the ill-gotten gains remain in the

13. Debt Allowed?
• Creation of money by debt
• Loans within the system
Tuesday 26 March 13
Money created from Debt
New money is created in our national currencies when a bank makes a loan. This is money
created out of nothing. As you pay back the loan, plus interest, the amount of money in
circulation decreases MORE than the original capital because you had to pay interest as well.
This is why if we don’t lend more and more our economy shrinks. The Growth Imperative.
We do not recommend this approach.
However, mutual credit is a different matter. Money is created when a service is provided and
the provider is now in credit and the receiver is now in debit. There is no growth imperative.
Debt within the system
You may make a decision that format debt will not be allowed in the system, no balance can
be overdrawn and no loans can be made. Or you may allow people to borrow from each
other and may allow interest to be paid. Provided they are lending money they have this will
not create a need for growth.

14. Liquidity Network
Focus on:
• Creating Liquidity
• Money NOT created from Debt
• System owned by Users
• Easy, safe and cheap
Tuesday 26 March 13
The Liquidity Network is a set of principles for creating a currency that will add significant
additional liquidity to a geographic area. The money will be given or spent into circulation by
a sponsoring user such as a county council or utility, who will agree to take back the same
amount of currency in return for services.
The system will collected usages fees and redistribute these as bonuses to those who are
actively supporting the system. New money will also be created by giving additional bonuses
where the system needs more money.
A Liquidity Network is targetted at businesses and aims to reduce their cost of transacting
with each to practically zero, to make it cheap, safe and easy for people to buy from them,
giving them an advantage over businesses outside the area.
A Liquidity Network is a closed, electronic trading currency with options to exchange, a paper
“cheque” option and online reputation and directory service. We have developed a prototype
to experiment with these ideas.

15. Implementing a Local
Currency
• Assess your needs
• Test the market
• Choose/Design a currency
• Trial period
• Use - Review - Improve
Tuesday 26 March 13
Having clarified what your requirements for a currency are you will need to do some research
and test the market to see if your area is ready for a local currency. Only once this is done
should you make your final decision about which currency model to go for. Bear in mind that
the world is changing rapidly and however well you design your currency, requirements will
change and you will need to be able to adapt.
The currency is going to require strong leadership to make it a success.
Who is going to champion the currency and do they have credibility with your primary users?
Who is going to take on the long term responsibility for managing the currency?
How will it be funded initially? How will you fund it longer term?
How will you know how well you are doing?
How are you going to start?

16. Tools to Assess
Look for Circuits
• Local Business Networks
• What are businesses buying and selling
locally?
• How much local currency can
businesses use?
Tuesday 26 March 13
For a currency to succeed it will need to circulate. Do you know who is trading with who in
your area of influence? In our highly globalised world, most local businesses have to
purchase from outside the area or outside the country (via distributors) in order to provide
you with goods to buy. This severely limits the amount they can take in payment in a local
currency.

17. Tuesday 26 March 13
Sales on the right, Purchases on the left (profit ignored).
The builders sales are all local, 90% doing building, renovation and repairs for local residents
and businesses and 10% repairs for the council.
About a third of his purchases are in wages (excluding taxes)
His local purchases include timber, which is sourced from Canada, plumbing fittings from the
UK. He is not aware of any purchase from the building supplier that is made in Ireland.
Cement which his supplier purchases from Limerick
Sand which is local!
His other big costs include Fuel, Insurance, Taxes, Health and Safety certification and training,
telephone bills.
Like most businesses the main opportunity for spending a local currency is to pass it on as
part of the wage packet. But how much can an individual replace euros with a local currency
in the normal spend?
The other thing to notice is there are no circuits. Money go straight out of the area. Again
this is typical.
We have developed an online survey system to help you understand the circuits in your area
and see the potential scale of a local currency in your area.

18. Assessment tools
The Kerry Note
Please
Spend me
in Kerry
SMS
Web
Text
7DF-88U to
87263
kerrynote.com
register note
7DF-88U
Tuesday 26 March 13

19. Tools to Assess
Spend it Here...
• Local Currency Trial
• Stickers on Euros
• Record their path way
• Assess appetite for local currency +
build database of users + understand
networks.
Tuesday 26 March 13
To try and establish where the local economic circuits are and to test the appetite for a local
currency, create stickers to go on fivers that say “spend it local” and have a link to be able to
record where the person go that fiver. This can be made easy using a QR code or just use the
note serial number.
If all goes well, and you could make a competition out of it, you generate some buzz, have a
database of people who might help promote a new currency and see how easily a fiver travels
around the area.
If you get very little response, chances are your area is not ready for a local currency yet.

20. What Next?
Tuesday 26 March 13
Over to you. Feasta is actively supporting the development of a number of currencies - from
business sponsored to local government sponsored and will share our learning as we go
along.