Innovation in payment systems

The Bitcoin protocol is not just about sending money from A to B. It has many features and opens many possibilities that the community is still exploring. Here are some of the technologies currently being researched and in some cases, turned into real products and services. The most interesting uses of Bitcoin are probably still to be discovered.

Resilience and decentralization

By its high decentralization, Bitcoin created a different form of payment network with an increased level of resilience and redundancy. Bitcoin can handle millions of dollars in trades without requiring military protection. With no central point of failure such as a data center, attacking the network is a more difficult project. Bitcoin could represent an interesting step forward in securing local and global financial systems.

Innovation - Bitcoin

Here's a blog looking at a possible role in sustainable development:
Bitcoins and a sustainable economy

And here's another considering the energy efficiencies:
Experiments in Cryptocurrency Sustainability | Lets Talk Bitcoin
... with an alternative take:
bitcoin | Sustainability in Crisis
Bitcarbon's Guy Lane says Bitcoin carbon footprint could soon be greater than nations | Sustainable Business Oregon

Here's where permaculture and bitcoins meet:
Are Permacredits the Future of Sustainable Living? – Bitcoin Magazine

Here's a look at the notion of 'alternative marketplaces' from the Guardian - with a note of warning:

Because alternative marketplaces circumvent traditional transaction channels or create new ones, they run the risk of raising the hackles of those who depend on current systems. There are also inherent challenges in creating an entirely new infrastructure for exchange, such as educating customers about how or why to use an alternative marketplace.

To be clear, we do not view alternative marketplaces as inherently more sustainable. For example, the online illegal drug marketplace Silk Road, whose customers used the alternative currency Bitcoin to circumvent the scrutiny of authorities, is an alternative marketplace being used for less than desirous effect.

But marketplaces like those outlined here are increasingly being used to advance sustainability and provide more value to more stakeholders in a company's ecosystem. Perhaps these examples can provide other companies with inspiration to find new ways to make greater social and environmental impact.

Beyond Bitcoin: some alternative marketplaces lend social empowerment | Guardian Sustainable Business | theguardian.com

And from earlier this month:

Hull's bitcoin idea needs local government with backbone

HullCoin, a local digital crytocurrency, has huge potential but its backers must be prepared to work through problems

Hannah Fearn Guardian Professional, Friday 4 April 2014
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Inspiration and aspiration: a HullCoin would reward voluntary work for the local community. Photograph: Alamy

In case you missed it, here's a quick overview of the HullCoin saga so far. Hull city council's team of social innovators had a brilliant idea. They wanted to create a local currency to help boost the city economy and do something tangible to help manage the worst impacts of welfare reform.

They had in mind something like the Brixton or Bristol Pound – a currency that, by design, has to stay within the local economy – but also something rather more radical. HullCoin would be a digital cryptocurrency, a form of bitcoin. Its designers had exciting things planned: the coins could be earned through voluntary work or contribution to the local community, and exchanged for food or rent, making a real difference to the poorest households. The big digital society, if you will.

According to Dave Shepherdson, financial inclusion officer at Hull city council: "It's about people on low incomes, in financial distress, being able to subsidise to an extent and complement their incomes … as the currency matures, we can extend, so people can pay their rent and utilities, or for food through this sort of service."

Here's where things started to go awry. The council got a bit ahead of itself. The creation of the bitcoin, currently the subject of a small pilot scheme, suddenly made the national news as a result of a quiet conversation between Shepherdson and a writer for the CoinDesk blog, which covers the world of digital currencies.

Now everyone wanted to know about it, but the council got cold feet. A statement released by the authority welcomed the work done so far but added, "at this stage Hull city council has made no firm commitments to this scheme and, along with other partners, is in the process of assessing potential viability".

Why the backstep? This is both an inspirational and aspirational bit of policy work – and happily it also puts policy into action.

But after a bit of digging, all is not what it first seems. The scheme was devised as a way of contributing to the incomes of the poorest residents in a way that both rewards community work but avoids direct cash payment, which could affect benefit entitlements and have tax implications. Yet HullCoin could arguably still place the council and the scheme's participants at financial risk.

HMRC has set out very tough rules over local exchange and trading systems (LETS) which essentially rely on sweat equity or trade in favours and effort. Where residents are unemployed it seems the scheme could be exempt, but if those who have some work participate it could leave the council facing large national insurance liabilities on their behalf.

Participation in the scheme could also threaten residents' benefits. LETS advisors Michael Linton and Angus Soutar said as early as 1996 that claimants may unfortunately have to accept a reduction in their benefits where LETS schemes are used to "obtain the basics of life such as food, rent, etc" – but that's exactly what Hull intends.

And what about the effect on the subjective elements of today's welfare and work schemes? If HullCoin volunteers make a major contribution to the council and community, will they face questions over their commitment to finding employment resulting in sanctions?

This confusing picture is what emerges when innovation is sidelined in local government. Clearly an exciting idea with huge potential, HullCoin now faces an inauspicious start. One wonders whether the senior management team spent time with the financial inclusion team, crossing and dotting where necessary. They may have already done so – but the communications team clearly didn't get the message.

Finding new ways to work on behalf of residents is the job of everyone in our councils. Let's not see it become a niche interest.

• Want your say? Email sarah.marsh@theguardian.com to suggest contributions to the network.
Hull's bitcoin idea needs local government with backbone | Local Leaders Network | Guardian Professional
Move aside Bitcoin, here comes HullCoin? | City A.M.
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Thursday 17 April 2014

Transition Towns, local currencies and the Bitcoin revolution

Innovation in payment systems

Resilience and decentralization

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