Modern society has incorporated several uses for money most of which have been tried through the human history. I shall review those which are most important for digital monies with special interest.

Validity of money

Money is a tool which has been invented several times through history, this resource helps social interaction by facilitating the trade of goods, services and repayment of debts, this events have such importance for human communities, that the means to facilitate it, money and the market, have become ways to achieve social status and power.

Still money is only a tool; it should work in our benefit. The financial system was created to help humanity achieve standards of exchange and value, yet money still has one main purpose, to facilitate trading of either goods or services.

Money is anything which represents value, is possible to use commodity such as salt, as money, through history, several materials have been proposed, to store value and be used as keepers of worth; likely the most successful materials have been metals, especially those which are scarce such as gold, metals are durable and dense materials making them easy to store and keep, they are valuable on their own keeping it by themselves.

Yet the most important feature for something to be considered as keeper of value and instrument for trade is, social recognition; for something to acquire this most important role in society, all or at least enough people, need to acknowledge it, and, accept the idea of it being the holder of value. There are two main ways to achieve social recognition

  • By costume. If people from a community become used to the idea of using something as money, that product might be accepted as currency, this is some sort of silent agreement, but is not common, certainly is extremely rare for the globalized economy.

Outside the global economy, community currencies thrive1) for all sort of reasons which would not be discussed here. Whaat is interesting part about them is, they are REAL in the world, and they work because their specific communities share the idea that they have some sort of value which keeps them alive, while they serve as a bond to the people who share them.

  • By law. Money value could be declared legally and people within the territorial boundaries for that law, usually a country, could be forced to accept it and use it as currency. A similar principle is applied to the bonding of the national community who shares the currency, which is the main reason to make it legal tender.

Fiat money, money legally accepted

Fiat money is backed by law, there is no need of anything else to back it, it is recognized by that country as a valuable item regardless (i.e. U.S. dollar abandoned its straight convertibility into gold since 19712), the currency is not bound to the commodity ever since).

Central banks, and centrally emitted currency

The role of centralized coin emitter is important in our system, because that way there is an authorized entity which defines the worth of money, it offers guaranty of value, meaning it backs the representative money with some material which stores value (at least in theory) and makes sure representative money is genuine. These requisites are needed for people to trust and use money.

The big holders of money look for one main characteristic in a currency, the issuer's promise to exchange it for a specific commodity, which could be another currency, on demand at a specified rate. The main problem with the mechanism of operation is that; issuing currency by central bank establishes a monopoly supported legally by the issuer government.

Exchange rate and competitive devaluation

Currency issuing monopoly provides market control mechanisms to the issuer, this results in actions which are not supported by market forces being pushed for diverse reasons not specifically bound to market forces or the value of the economy.

Governments engage on competitive devaluation these actions could develop to a currency war, currency wars were claimed to be waged quite often in recent years by different sources3), claims which could reflect the claim issuer interests, still they come from diverse people with a broad spectrum of interests and supporting evidence from various sources.

Interestingly competitive devaluation has become a regular practice more and more often used since the time central banks started to hold the issuing of currency. I am not saying private banks are the solution either, currency issuing is a fundamental part of the financial system, as long as it is held by few hands, it could be tampered with.

An issuing system held by the users themselves, with no significant restrictions to join, is the fairest way to solve these problems, at least from the philosophical point of view. When people uses a currency consistently it becomes worthy by the force of costume, the popular power of the society which recognizes it maintains it as a keeper of value.

Digital currency is in agreement with the users being the main and at times the only issuer of it. Once the currency is accepted by society as valuable and valid form of payment, then it’s worth depends on the forces of the market and the strength of the economy supporting it, while being at the service of the issuing community which is simply a smaller and representative sample of the users community; this condition puts them in the same path, therefore the interests of the issuers are very similar to those of the users.

Currency market

In the short run currency worth is mainly set by market forces, while its power to set it is lower in the long run; perception of the currency is its main asset to set its value at the starting point. Using bitcoin as example to figure out what makes a cryptocurrency valuable; there are few characteristics which helped to reach the point where it is now.

  • Supportive community. It is the community of people constantly issuing new currency (mining), saving it, and actually using it.
    • Consistent support. The community could be relatively small, especially if we compare it to all people living in the globe or to some BIG nations; as said before, this is only relative, the importance of this group of people grows as it is compared with reduction parameters added, such as people from a small country, or those who define themselves as techno-libertarians. The question is. How many people use bitcoin? It is a hard one. It is a lot easier to know the amount of coins in circulation by consulting blockchain charts online. More important than the amount of people, is the fact that once hooked on bitcoins, people stay with them.
    • Growing community. People stays with bitcoins, and new persons adopt them literally every day, and the charts for transactions at the blockchain website show the adoption rate is increasing consistently. There is a video on this topic in YouTube.
    • Using the coin. Enthusiasts are experiencing the live on bitcoins only; there is one report which states that several merchants accept bitcoin in a neighborhood in Berlin
  • Scarcity of the currency. This might be the characteristic which is most appreciated by the market. This is all about supply and demand, a limited supply which is always below the demand, guaranties a high price of any product, this condition is especially good for a currency.

Other than that, people looks for a way to securely store value on their money through time, while goods and properties could change in value, money and some materials such as gold should behave with higher stability, making them ideal to store value. While bitcoin value remains changing quickly it stabilizes as more people use/accept it for their daily needs.

By using bitcoin as example and proof of concept, I hope to feed the debate for other cryptocurrencies, especially devcoin, any attempt to study or review other coins must consider the fundamental considerations and rules for that specific currency at release, the points of view of its supporting community.

Devcoin is an ethical cryptocurrency, designed to support developers and the products of their work.

Demurrage, money which expires

Expire date is controversial among currency holders. I must discuss about the ethics of using money which is decreased over time. The positions of the two sides in this argument are shown in this document, but let’s have a recollection specifically with this topic in mind. I would like a series of open questions to lead the argument, my personal opinion follow each question; I want to state clearly that the answers about this are mine only.

  1. Is it ethical to be able to inherit enough money to live without working?
    1. Is only fair to enjoy wealth your work has produced. What about enjoying wealth you have not worked for at all? It could be stated it is not fair for others, but it is not good for people, not to be able to develop their skills and ingenuity, due to lack of motivation.
  1. Should money be a source of power?
    1. As holder of wealth, currency has become a holder of power on our society, yet money should be only a tool for trading and repaying purposes. Having expiry date for money makes it more difficult to store power over people, returning money to its original purpose.
  1. Is it worth having currency which is lost over time?
    1. Currency value is defined by the market and the strength of the economy, time limit is not a characteristic of the coin being evaluated to set its worth.

Money and the environment

Ethical coin must promote sustainability through fairness. By engaging on fair practices of trade, payment and repayment, this will result in a win-win situation where social awareness about the coin is enhanced and those involved in transactions spread its use since they favor it due to the benefit obtained by using it.

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