Currencies as a Catalyst for Cultural Evolution (Part 2): Reimagining Currency in the Information Economy
Welcome back to our series on currency design theory! In Part 1, we explored some of the incentive structures that make up our collective behaviour and how these relate to a broader understanding of currency. In this article, we take a more formal look at this broader understanding and offer new perspectives for thinking about wealth, the economy and living systems.
A Living Systems Perspective of Social Organisms
As mentioned in the first article, we are basing much of our understanding off the work of The Metacurrency Project, including their definition of currency. One of the primary objectives of The Metacurrency Project is to enable communities and organizations to build social systems that sustain flows of life-affirming wealth — well beyond the hyper-individualistic material accumulation our current economic system rewards. To do so, they are actively developing models of wealth based on the organizing and coordination principles observed in living systems. To this end, their work and theory is deeply inspired by biomimetic design. From their perspective (as well as ours), social systems are living systems and social organizations are social organisms.
Through observing nature, it’s clear that all living systems are made up of numerous interrelated flows & processes; fundamentally, flows of energy, materials, and information, but in more abstract social contexts these can also be flows of reputation, trust, value, goods, services, knowledge, and so on. For any living system to remain adaptable, robust and healthy in constantly changing environments it must maintain the integrity of all of the flows it is made up of. If any of these vital flows are disrupted, the system cannot survive — this is no different for social organisms (i.e., human societies). Currencies, as defined by The Metacurrency Project, can help us understand, measure, and shape these flows to ensure our social systems remain adaptable, robust and healthy in the face of unprecedented environmental change (ecological, cultural, technological, ideological, etc).
Redefining and Reclaiming Currency
When we think of the word currency, we typically think of it as being interchangeable with money, however, money is only one form of currency within a much broader framework. The word currency can be more generally applied to most currents and flows (not just the flows of tradable and ownable products and services). In fact, the words currency and currents share the same latin root, “correre” which means “to run”. As defined by The Metacurrency Project, a currency is “a formal symbol system for shaping, enabling, or measuring currents (or flows).”
This is quite a broad definition and may take some time to wrap your head around it — hopefully this series of articles will help with that. Another way to think of this is that a currency is a set of symbols to record flows which are otherwise difficult to observe or make sense of. These symbol systems can then enable flows which otherwise may not occur. Just as written language (like in this article) helps us understand, shape and communicate the flow of thoughts within our heads, which otherwise would be difficult to express, currencies can help us understand, shape and communicate the flows of materials, energy, and information (and any abstract derivatives thereof) that make up the social systems we live within.
Just like footprints left in the snow which record the movement of someone walking, currencies are the tracks left behind by actual currents of resources and relationships that have occurred. Currencies can be thought of as maps or roadsigns, helping us visualize a much larger process, or as Art Brock puts it, “we use currencies to build shared, living maps of flows in social spaces.” Without currencies, we would be completely overwhelmed with complexity and information as we try to create mental maps of all the flows around us — our brains are much better at working with static symbols.
The Main Dimensions of Currency Design: transactional vs non-transactional
The Metacurrency Projects thinks that equating currency with money is a mistake, as it confuses a specific form of currency (money) with the broader etymology of the word currency. In the currency design framework presented in the online course, there are two main dimensions of currency design — transactional and non-transactional. We are likely more familiar with transactional types of currencies — like money — where the currency itself can be exchanged for other things.
However, there is a whole spectrum of non-transactional currencies which fall under the broader definition. Most of these non-transactional currencies are reputational in nature, like online ratings or university degrees. For instance, a university degree cannot be traded, rather, it is used to repute someones knowledge and abilities. It is a formalized symbol system that shapes the flow of education and employment, but it remains tied to the person it was granted to. This will make more sense in the formalized symbol system section later in this article, but if you are interested in understanding non-transactional/reputational currencies and how they are different in nature than transactional currencies like money, we recommend this article.
It might seem odd to think of reputational and relationship-based markers as forms of currency, especially since they are non-transactional, but once one adopts such a worldview, many seemingly unrelated patterns of social behaviour can be better understood as a unified framework.
The Concept of Currency as a Unifying Model
The Metacurrency Project is working to build a knowledge base for a unifying model of currencies — a set of concepts and frameworks to help us understand currency theory more generally to use as a foundation for designing novel solutions to social problems. The benefit of understanding currencies as a unifying model for interpreting reality is that this conceptual framing ties together many seemingly unrelated phenomena we observe in our social systems and in doing so, provides a set of tools for understanding and altering these phenomena in interesting ways.
What do we even mean by a unifying model? A unifying model provides a conceptual and theoretical framework for understanding various phenomena which may seem unrelated at first glance. Such frameworks can be quite useful in many ways, one being the ability to better understand cause/effect relationships to be able to design truly effective solutions to problems — solutions that can address the underlying causes rather than treating outward symptoms.
The Impact of a Unifying Model: Germ Theory
An example of a unifying model which connected seemingly unrelated phenomena under one theoretical framework and enabled solutions addressing problems that arose from these phenomena was germ theory. Before germ theory, people would treat diseases and illnesses in incredibly diverse and often ineffective ways, often explaining the causes of the symptoms as arising from unseen and intangible forces like angry gods or evil spirits, etc. Under the unifying model of germ theory, an extraordinary variety of of illnesses could be linked to hygiene practices (the cause/effect relationship), as we understood that the transfer of certain kinds of microbes was the underlying cause to the illnesses. Such a framework enabled the widespread adoption of a very simple solution to an array of problems: washing one’s hands to prevent the spread of pathogens.
Introducing: Currency Theory
We believe (and so does The Metacurrency Project) that there is a similar way to unify our understanding of various social phenomena and problems under one framework — that of currency theory. The aim here is that by further exploring and developing a unifying model of currencies, we will be able to better understand and address phenomena in our social systems — just as exploring the underlying principles of illness led to a unifying model on which effective solutions could be designed. Perhaps solutions to seemingly intractable problems such as ecological collapse, maintaining open societies, and compounding inequality will become much more clear under a unified model.
Before we can attempt a unified theory, we first need to get clear on the definition of currency. On that note, let’s return to the definition of currency we introduced previously: “a formal symbol system for shaping, enabling, or measuring currents (or flows).” Breaking down this definition, the two main concepts are:
- Currents and flows
- Formal symbol systems
The next two sections in the article explore both of these conceptual components, aiming to converge on a clearer understanding of a unifying model of currency theory.
Current-sees and Flow-centric Perspectives
A clever reminder of how to think of currencies in the broader framework is to spell it as ‘current-see’ or the ability to see currents/flows. But what do we even mean by flows or currents? How do we begin to see all of these flows, to recognize them in our daily lives? First, let’s explore how to think about flows in general, as it can be tricky for our brains to grasp such a fundamental feature of reality.
We are all very familiar with object-centric perspectives; we can visualize picking up, manipulating and moving objects — we can “hold” objects in our minds easily. When it comes to flows, the concept is not as easy to grasp mentally. However, if we want more accurate ways of understanding reality, we can’t escape the concept of flows. Considering that we are constantly flowing through time, any experience or entity can be expressed as a pattern of flows. Referencing the fundamentals of physics, everything in the universe is flowing from a state of highly ordered energy (low entropy) to less ordered energy (high entropy) — this is known as the 2nd law of thermodynamics.
Flow-Centric vs Object-Centric Thought Experiment
Without getting too cosmic, let’s use a familiar example to clarify the point that flows are a fundamental part of our experience of reality. Consider an object we are all familiar with: a tree. From an object-centric point of view, a tree is a single, static entity that simply exists. We see a tree as a stand-alone thing that exists at any moment in time. In this context, the word tree is a static symbol to represent the static object we perceive as a tree. However, from a flow-centric perspective, a tree can be seen and perceived as a much different phenomenon.
When factoring in time as a fundamental component of the tree’s existence, we see that a tree is actually a particular pattern of flows that are in constant flux. Starting from a seed, certain patterns of organization are genetically encoded in the tree’s DNA. From these patterns, tree cells coordinate their own self-replication while self-organizing themselves into the higher-ordered organism we typically think of as a tree. During this dynamic process, cells are constantly coordinating flows of material, energy, and information.
When you look at a tree, you are actually looking at:
- a flow of materials: chemicals and nutrients are absorbed from the soil and atmosphere, converting into biomaterials used to maintain the overall function of a tree. All the material that makes up a tree once existed in the soil and atmosphere;
- a flow of energy: photons (electromagnetic energy) from the sun are converted to chemical energy through a process known as photosynthesis. This chemical energy is required for all the work done by the cells to move and convert materials and information;
- A flow of information: patterns of genetic information stored in DNA are transcribed to RNA, which is then used to synthesize proteins. Some of these proteins become signaling mechanisms known as hormones to transport vital information throughout the organism.
Of course, when we look at a tree, we don’t see these flows happening visually, since they occur over a long time frame and happen at mostly microscopic scales. Nonetheless, these behind the scenes patterns of flows are an ongoing, never ending process. Even when the tree’s life comes to an end, these patterns of flows don’t stop. The materials and energy flows of the tree are used by other living systems (for example, we burn wood for heat, mushrooms grow in decomposing wood). Additionally, the patterns of organization are encoded into new seeds, some of which will succeed in undergoing a similar process.
A Renewed Perspective of Living Social Organisms
To see the patterns of flows that make up a tree is to take a living systems perspective of that tree — to see it as an ever-changing and flowing living system that is deeply interconnected and interdependent with the surrounding world. Just as we can think of a tree as a living system, so too can we think of societies, communities and economies as living systems that have similar patterns of resource flows, interconnectedness and interdependence.
Of course, thinking of a tree as all of these overlapping flows comes with a lot of cognitive overhead. It’s much easier to represent all of that with a simple, static 4-letter symbol: the word tree. Likewise, trying to think of all the complex flows that make up our social systems comes with a lot of cognitive overhead too — which is where currencies come in handy. We use currencies as static symbols to represent these kinds of flows and help us grasp them mentally. However, these can’t be any generic symbols, it’s important for them to be formalized so that they can be used to create shared understanding and coordinate collective action.
Formalized Symbol Systems
A key part of understanding currencies, besides adopting a more flow-centric perspective, is to also understand what is meant by formalized symbol system. There are countless symbols out there that can relate to flows in certain ways, like traffic signs, language, etc. but to be considered a currency (or at least useful as a currency in specific ways) the symbols that are used should fall within a certain formalized framework. Although the specific details of this framework are still in development, many of the most important components were discussed and explored in the online course we took, An Introduction to Currency Design.
The Currency Life Cycle
One major aspect that formalizes a symbol system as a currency is in relation to the life cycle of the currency — how does it come to be, how is it used, and how does it go away? Every currency has two levels of life cycle:
- The currency tokens or symbols themselves
- The system which establishes and maintains the rules for the currency tokens
Both of these levels follow a formalized process, which distinguishes certain symbol systems as current-see as opposed to other kinds of symbols. Let’s explore each level and the involved aspects and components.
The Token Life Cycle
By tokens we mean, generically, an embodied marker of a currency. A coin could be a token, which is probably the first thing that comes to mind, but the word token is being used in a much more generic sense here, as there are many currencies that do not need a coin-like token, such as mutual credit currencies, which we’ll get into in future posts.
There are four main steps in the token life cycle:
Issuance
How is the currency token created? Who gets to create it and where does it come from? There are multiple ways a currency token can come into existence, with different rules that affect the dynamics of that currency and what can happen to it in the other parts of the life cycle. For example, the most common form of currency issuance we are familiar with is fiat issuance, which means that the currency is spoken into existence from nothing — there is no action that offsets the creation of this token in any way. National currencies are fiat currencies, as banks and the government can create more money out of nothing and put them into circulation in the economy. Surprising for most, bitcoin and many other blockchain based currencies are also fiat currencies, as currency tokens are created from nothing by miners and put into circulation. The creation of a bitcoin is not tied to any physical activity in the real world that offsets the creation of it — this is an unhealthy pattern because it means that the value of bitcoin is purely speculative rather than tied to the productive economy.
There are other forms of issuance, of course, and of particular interest to us is asset-backed and mutual credit issuance. Asset-backed means that the creation of a currency token is tied to some real asset in the world, say, 1kWh of energy or a certain amount of food, or even computing power (as is the case with HoloFuel). Mutual credit issuance means that anyone can issue credit to someone else, but for every credit issued, an offsetting debit is issued to the creditor. This ensures that trade and exchange is more stable, as opposed to the exponential growth imperative built into our current model of interest-bearing loans of fiat issued national currency. More specific details about these kinds of currencies will be explored in the next article, but for now if you’re interested in learning more about mutual credit currencies, we recommend this article. All currencies, whether transactional or non-transactional, have to be issued somehow by someone or something.
Transaction
Can the token be traded or exchanged for anything? What are the rules that shape these transactions? For example, there may be transaction fees or tax rules applied when a currency token is transacted. Or perhaps it cannot be traded, like a university degree or a food certification standard. In the case of mutual credit currencies, there would be credit limits imposed which shape the kinds of transactions that can take place.
Interplay
How do the currency tokens operate with other ones? Are there dependencies? For example, a student must receive a passing grade before being issued credits for a course, and a student needs a certain amount of credits to be issued a degree. In this case, a degree is dependent on receiving credits, which is dependent on receiving grades. To be clear, a grade is not transacted in exchange for a credit, but there is a relationship and dependency between the two.
Redemption and Retirement
How does the currency go away? Does it leave circulation — when and why? Perhaps there is an expiration date, or certain rules around revoking a token if the rules are broken. In asset-backed currencies, the currency can be redeemed for the asset that backs it, taking the currency out of circulation (this is not the same as buying — which is a transaction, not a redemption).
It’s important to understand these various phases because making rules in each facet of the token life cycle will affect the dynamics of the whole cycle, and ultimately the economic system the currency is a part of.
The System Life Cycle
The other level of the currency life cycles is the system life cycle. This is all about the governance and decision making for the currency — who and how are the rules made for each phase in the token life cycle? It’s important to consider this life cycle because controlling the way a currency system works effectively alters how the tokens are used and circulate — do they concentrate wealth in a power law distribution, as fractional reserve fiat issuance does so well? Currency systems don’t run themselves, and thus we need to design proper processes around using currencies.
Ideally, these governance systems are democratic and participatory. When was the last time you felt agency participating in shaping the rules of our current monetary game? How are national currency systems governed, and how are decisions made about the token life cycle? Do you find it odd how we have participatory collective decision making processes for determining laws that guide society, but for some reason the rules of the monetary system seem to be set in stone, outside of democratic deliberation? If the rules of currency systems were held collectively by all the participants and transparent to civic criticism and subject to change, what would our currency systems of the future look like? Excitingly, this is beginning to become possible at the scales needed to be viable alternatives to contemporary national currencies thanks to technology like Holochain.
In this model/process, the focus is on targeted currencies. Currencies that focus on specific problems within a community, especially with regards to flows of resources or patterns of social behaviour. In this framing, the cycle is meant to be iterative and also come to a close eventually. It is iterative because targeted currencies are social technologies, and thus go through similar design processes as other innovative technologies. They eventually come to a close because once a problem is solved and healthy flows have been established, perhaps the currency is no longer needed — it has served its purpose of embedding certain patterns of social behaviour.
Transitioning into the Information Economy
I get that some of this stuff may seem a bit abstract or confusing. After all, I’m trying to synthesize the knowledge from an entire online course (which we encourage you to take if you find this stuff interesting) that initially came from decades of practice and theory. If you truly want to understand currency theory, you will have to embrace that it will take a significant amount of time — you can’t get a university degree after reading two articles, nor will you be able to fully understand currency design theory.
We are doing our best to share our own understanding (which is ongoing), but think of this series as a very high level introduction, as a starting point to dive into your own currency journey, broadening your understanding well beyond the limits of our captured imagination of money, national currencies, and blockchain-based cryptocoins. We hope that you will continue to return to this series, finding new bits of insight and understanding each time. With that said, I want to step back for a moment and see things from a different perspective, outside of the weeds of defining currencies.
It’s important to note that all of this work is in service of catalyzing a new kind of economy. As we all experience with each passing year, we live in a world of exponential technology, where computing is becoming ubiquitous and pervading almost every aspect of daily life. And although there are many disruptive services that have shaped our collective behaviour in novel ways (personal computers, smart phones, social media, etc.) these all fall under the same economic paradigm, which ultimately lead to the same kinds of dynamics/social patterns.
Given the growing ubiquity of information technology, we are at a point where considerably different kinds of economic paradigms are becoming possible. We are in the midst of a transition into an information economy, which will have drastic implications, just like the disruptions caused in the transition from tribal to agricultural, and again from agricultural to industrial economies. A major difference in our modern computerized world is the ability to map and model complex systems of all kinds in ways that help us better understand these systems. It is becoming clear how complex the systems that make up our lives truly are — and how rudimentary (and dangerous) one-dimensional metrics like money and GDP are at coordinating our collective activity.
Embracing this complexity means having higher dimensional models of our social systems and the value flows that guide our collective activity. In an information economy, our models of wealth and value should capture a broader systems perspective of what creates wealth and value in the first place, incorporating more dimensions of measurement.
A Living Systems Model of Wealth
Bringing it back to the work done by The Metacurrency Project, they’ve created a model for wealth based on our understanding of living systems. The whole point here is to be able to have models that enable us to measure whole systems integrity, as opposed to reductionist, one-dimensional models. Because of these limited models of value, we end up with entire industries built around very narrow forms of value, causing irreparable externalities in pursuit of extracting it. Unsurprisingly, this kind of activity compromises the integrity of these narrow forms of wealth in the first place. We see this taking shape in many ways: soil depletion, ocean pollution, deforestation, biodiversity loss, climate change, mental health crises, epistemic chaos, and on and on.
A major problem is that our current economic systems sees value as being the product, as a thing that is tradeable and divisible, like a slab of meat from a cow, volumes of fossil fuels, kilograms of corn, or a statistical model of our behaviour built on extracted data, rather than seeing that the value is embedded in the whole systems that produce the product in the first place — the cow, the biosphere, the nutrients and soil health, a society with stable mental health and epistemics, etc. The problem is that our economic system does not apply enough of a systems perspective, a flow-centric point of view, to understand where value is created in the first place and how we can sustain the integrity of the value creation systems. And so, The Metacurrency Project has developed a model over the years which aims to capture all the various levels in the wealth creation system so that we can maintain the integrity of our economies.
(There is a great presentation given by Arthur Brock explaining this model and using familiar examples to help explain it, which is available here.)
The whole point of all this work in currency theory is to help us see and then shape the systems that provide wealth in our lives and in our communities so that we can enjoy all aspects of wealth without depleting the world around us or within us. The point is not to circumvent regulation to “get rich quick”, as is common in the blockchain/crypto space. The point is to build the foundation for a novel kind of economy which coordinates our collective action in service of shared, multi-dimensional values.
Conclusion
In this article, we hope we expanded your understanding of what currencies are. First, we went deep into exploring what is meant by formal symbol systems for shaping, enabling, and measuring currents by offering a perspective for seeing the world from a flow-centric lens instead of exclusively object-centric. Then, we went into the details of what exactly formalizes a symbol system to be able to consider it a currency in this very broad definition. We also acknowledged that much of this theory and practice is in service of transition to an information economy with different patterns of wealth and value flows.
We are all co creating the future of humanity together. Broadening our perception of currencies can help us direct the future in ways that enable deeper forms of wealth and higher quality of life for everyone. Once a unifying model of currency manifests as currency constellations embedded in our daily lives, guiding our behaviour and shaping social and economic flows, we may find ourselves living in a world where we feel more connected to, and in resonance with, the entire systems that make up our lives. Having an understanding of currency theory can give you some of the tools to help us all get there.
In the next article, we will examine existing currencies we experience in our daily lives and explore tangible examples of new, targeted currencies designed from the currency theory we have been exploring up until now — with the aim of connecting a few dots and grounding this unified currency design theory in practice.
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Hungry for more? Revisit our previous post on this topic Currencies as a Catalyst for Cultural Evolution (Part 1): Patterns of Social Organization
