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New Internet Money March 10, 2008

Posted by olvidadorio in Money.
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Most National Currencies, such as Euro, Dollar, Yen or Renminbi are not backed by sufficient gold reserves to cover the total value of money in circulation. Nevertheless, they are used and trusted. But why?

Well, probably because they have the backing of a powerful state. We rest assured that if push comes to shove, our government would do anything to protect our economy from collapsing. That’s how money gets a value: It’s nothing but numbers with an army and a navy.

What if there were a different type of money? What if it weren’t based on a single nation, but on a very different kind of power?

Imagine a currency specifically designed for worldwide use in electronic payments. Issued by an Internet Central Bank and backed by… by, well – you might have guessed it: by Google.

Weird as this idea may sound, just as the state has inhabitants and weapons, Google has lots of users and heaps of cash to defend its interests.

So why not use this potential to build a new type of money. But how?

Picture a currency centered around Googles business model: Attention: One unit of this money (call it GOOGLE VIEW / gv) would buy one click at an online advertisement. A hundred gv would be one GOOGLE ATTENTION DOLLAR. Voila – the GDollar is born! A currency who’s value is guaranteed by Google’s commitment to accept it in payment.

Why would Google want to do such a strange thing?
For one, it’s a nice way to bind customers; once they’ve acquired GDollars, they’re bound to let them flow through Google’s hands at one point or another. For another, Google has a vested interest in fostering a lively net-culture…

There still seems to be an unsatisfied demand for micro-payments. Such a currency would make it much easier to exchange small amounts worldwide. No need to fumble around with credit cards in varios dubious places. PayPal anyone? Nice try! With community currencies (CCs) like GDollars, one can taylor a payment system that directly funnels into a content economy, on the internet, through the net and for the net.

So where do the hard dollars come into play? Companies wanting to buy advertisements can get GDollars for US Dollars via the internet central bank’s currency market. Google, in turn, will want to sell its GDollars on the same market. Hence the community currency can be exchanged for national currency, and users can be confident that they will not lose their funds invested in GDollars.

Though isn’t this a lot of new infrastructure for nothing more than a marketing measure? In other words: why do I find community currencies so attractive?

Even though one may view GDollars as a sophisticated, many-party customer relations program, there are some larger economic benefits:
• Using community currencies online, prices can be developed that are stable all over the world, independent of (for example) the ailing US Dollar.
• The challenge of finding a viable method for recompensating cultural producers such as writers, filmmakers or musicians can be addressed using a sleek micro-payment system.
• Community currencies bound to a product and backed by a steady buyer (such as Google in GDollars) can be quite resistant to inflation.

Ramifications are many, the question remains whether the involved parties can get their act together. Also, there might be quite strong opposition and pressure from classical centers of power. Complementary currencies have almost always been eyed with great suspicion and contempt by national banks. In some cases, such as the Wörgl experiment (a small town in Austria that developed its own currency around 1930) they were actually outlawed.

It remains to be seen whether this idea catches on. I would gladly implement it.

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