Social Currencies: Based on Social Trust

Two weeks ago I discussed Trust as a measure of efficiency. Last week I noted that Social Commerce may soon lead to Social Risk Pools. These two trends then may then lead to Social Currencies.

Currency is nothing more than transferrable credit; it’s an IOU that someone else will accept because of trust in the issuer of the IOU. Currency is based upon trust.

Bitcoin has mistakenly attempted to define a virtual currency that is not based upon trust. But even if the two parties to a transaction do not know each other, they must have trust in the issuer of the currency to complete the transaction. The expense of blockchain “security” is in large part due to this mis-definition of the role trust plays in currencies.

Social currencies may well develop as groups of trusted individuals begin to issue IOUs which can be redeemed by other parties in the group.

This is Episode 107 of Conversations with Kip, the best financial system vlog there is.

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