Blockchain-Based Local Currencies
Description
Norman Shaw:
"To provide a local currency, which can be used for payment within a specific geographical area. By basing this currency on a blockchain platform, such as Ethereum, transactions are secure without the need for any central financial institution. Merchants who sign on to accept this currency are able to advertise their location to consumers who have downloaded the local currency app to their smartphone. Incentives can be offered to attract customers. In addition, the merchant has no need to handle physical cash for smaller transactions."
(https://link.springer.com/chapter/10.1007/978-3-319-91716-0_52)
Examples
MONI, refugee currency in Finland
"Finland has introduced a form of local currency by partnering with MONI, who have provided a pre-paid MasterCard to refugees. These refugees lack documentation and are therefore unable to access the formal banking system. MONI has streamlined their sign-up allowing them to submit a photo of themselves with some authenticated proof of identity. Within minutes, they have an account. They can receive deposits to their account and the immigration services can keep track of them."
COLU - Blockchain-Based Local Currency in Tel Aviv
Norman Shaw:
"Colu is an Israeli company whose head office is in Tel Aviv. They have a digital wallet app, which allows consumers to find local businesses and pay by simply clicking on the merchant’s name and then transferring the amount to be paid electronically. No physical cash is exchanged. The merchant receives the funds via Colu and pays a small transaction fee that is less than the credit card fee. Merchants who subscribe to the service are able to promote their business via the app and can be easily located by consumers who are nearby. The local currency is securely implemented on the blockchain platform and can be used in any country. Currently, Colu is in Haifa and Tel Aviv in Israel plus Liverpool and East London in the United Kingdom.
The merchants have a number of benefits. As a ‘local currency’, the app is targeted to local businesses and helps them compete with the major national and international brands. Consumers are encouraged to support the local community. Transaction fees are less than visa and additional tools are made available, such as data analysis and bookkeeping. For the consumer, the Colu wallet is more convenient as there is no need to carry cash.
In Tel Aviv, one Colu currency is currently worth 1 Israeli shekel (US$0.28) and is immediately transferable. When they first sign up, consumers receive 25 shekels (US$7) and, when they top up, they receive an extra 10% in addition to their top up amount. These customer acquisition costs have been funded from an initial round of investment. Future plans are to replace these acquisition costs with crypto-tokens earned when the Colu local currency is used for payment. The tokens are sourced from an Initial Coin Offering (ICO) and their value will fluctuate based on supply and demand. As indicated in Colu’s Whitepaper [14], the supply of tokens is finite and over time, as activity with the local currency increases, the value of the tokens is expected to rise, thereby encouraging more local currency activity.
...
The local currency introduced by Colu is secured by blockchain technology. Initial financing has been raised via an Initial Coin Offering (ICO) and future plans are to provide digital tokens as rewards to participants. This literature review gives a brief overview of blockchain technology, followed by the increasing acceptance of ICOs by investors. In this paper, the theoretical framework for the spread of local currency is based on Rogers’ Innovation Diffusion Theory (IDT) and propositions are developed based on IDT."
(https://link.springer.com/chapter/10.1007/978-3-319-91716-0_52)