Comments: The Facebook model succeeds. Next steps: copying, responding, losing.

@ Iang,

The real problem with "digital currency" is the various Governments around the world.

Government democratic or otherwise is parisitic in nature and it treads a fine line between alowing it's host to survive and even thrive or slowly sucking the life out of it.

The host is obviously a respective nations economy and the life blood a government leaches is the efforts of the respective nations citizens in the form of taxation.

Money is said to have came into being as a way to tokenise effort in a predictable and usually readily portable way, thus make trading possible.

If that was the sole reason then there would only be one currency used throughout the world.

It's not there is "taxation" to consider, this used to be directly by effort, where a "citizen" would be required to expend labour directly for their "Lord and Master". However there is only so much direct effort a Lord can profitably put to use, thus they resorted to taking a share of the product a citizens efforts produced as tithes. This had it's own problems so as merchants developed trade tokens the respective Lords started taking that instead.

This created all sorts of problems that we still see today one of which is denying the Lord of what he considers is his share by right (divine or otherwise). The failure to "render unto Ceaser..." or "cheating on taxes" comes about in a number of ways one of which is "services" that is effort that does not produce direct physical goods but some other non tangable value cannot be taxed by tithes.

The original "service" was that of a merchant thus various methods where tried one of which is "import" duties. originaly as a percentage of goods at the point of entry into a Lords domain. Laterly as an assessed value expressed in trade tokens.

Now traditionaly most trade tokens are of little interest beyond their national borders and thus each sufficiently large domain ended up with it's own tokens. Having many different token systems had the same problems that the tokens themselves where supposed to solve. And an odd thing happened it became clear that providing trade tokens was a service in it's own right and brought to the issuer of such tokens some significant advantages. One of which is the right to set the rate of exchange.

Thus as a Lord you can demand off of a trader tokens you have issued and thus force them to buy them at a rate you set. A prime example of this on a very local scale was the mining industry and the "company store" where a worker had to buy their tools and equipment, but only in a token system issued and controled by the mining company...

Thus for a Government having your own currancy brings many many hidden advantages they covert jealously

So anybody setting up their own currancy (E-Gold for instance) is going to run bang into not just the Government of the nation they reside in but other Governments as well all of whom assume (correctly) that it is a system to deny them taxation on "effort" that is their rightfull dues...

And nearly all Governments have set the bar so high one way or another to prevent their being compeating currencies in their domain that it is going to be close to impossible to do in a settled and stable nation.

Thus a new currency will probably come about in places like Africa and the Middle East where there is either conflict or significant turmoil, where the Governments concerned will not be able to stop a new currency arising and gaining sufficient traction to be beyond their control.

However there is the question of settlement etc which requires as a minimum way of transfering tokens at a distance in an accountable and low cost fashion.

Step forward the telecoms companies whose billing systems are based on systems where transactions are very small (pennies) but the cost of a transaction remains considerably less by comparison. Like Bank's Telco's usually have sufficient "fixation clout" with a Government to be able to "fix" any problems a Government would inflict on other less influential organisations.

Thus I suspect that the likes of Facebook will not succeed where as "Third world" organisations using Telco's will.

Posted by Clive Robinson at September 21, 2010 12:52 AM
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