For local economy Community Currencies (or LETS, local exchange trading systems), the security requirements are not as high as for electronic money aimed at the global economy.
In fact, and until a number of enterprises is running at the local markets and the relationships are understood intuitively, probably at the beginning its safe to issue the currency contracts electronically but the circulation is all in paper vouchers. That is, to conceive the Community Currency as electronic by design but with a stamping of the electronic records in paper vouchers.
Community Currencies are directly backed by real products and services, not an artificial intermediary of value like gold or silver. And, the Issuer of Credit Coin is only responsible for providing its own products and or services in return for its Credit Coin, never “money” in any form. This is a very important point. In the Credit Coin System, an Issuer’s ability to honor its credit is never dependent on the general availability of “money” in the economy, the way the ability to pay back bank loans are. The Issuer’s sole responsibility in issuing Credit Coin is that the Issuer must be able to redeem its own Credit Coin with its own products and/or services.
In order to facilitate the coexistence of different currencies at multiLETS economy islands is important is that all LETS currencies express the commitment about redemption of goods or services in the same common format, like, for example, a Ricardian Contract (
http://www.systemics.com/docs/ricardo/issuer/contract.html) using a common schema (
http://tools.ietf.org/html/draft-ietf-trade-voucher-lang-07) .
In the simplest possible terms, a Ricardian Contract is a formatted document that is both human readable and program parsable. It identifies a Legal Issuer and an Issuance Server, and includes (OpenPGP) keys for those parties. The document is signed in (OpenPGP) cleartext form by the Legal Issuer's contract signing key. A unique identifier is formed by a canonical message digest (hash) which provides an unforgeable link to the accounting system.
Note, anyhow, that BitCoin does not represent any good, does not embody any Ricardian contract committing products or services, and is therefore not suited for internal local economy barter trade based on Community Currencies.However, Community Currencies are not suited at all for capital, investment or credit, as they extinguish in the period of one production cycle. Another type of contract is needed. For this purpose we could use a crypto coin not linked to the Fractional Reserve Banking, but exchangeable whenever needed. All in all, a good candidate to play that role looks to be BitCoin. It is also very suited as a tracking tool for non secured transactions of coins Ricardian Contract based schemas.
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