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Pitch

Encouraging reuse and raising funds for charity through the sale of an electronic barter currency used to purchase second-hand goods


Description

Summary

Let’s face it. Governments around the world have failed us. Whether we are talking about the 29,000 children under the age of five that die every day, or the farcical window dressing at the UNFCCC.

The public feel powerless to do anything about this injustice, until now.

Those who are tired of government inaction will be able to raise funds for their favourite charities through doing nothing more than trading goods.

First, it’s important to understand the monetary mechanics of issuing an electronic barter currency. Have a look at the following presentations.

For a short one minute presentation of a simplified charity barter system:

http://youtu.be/19no-6M3qr0

For a twenty minute explanation including using risk free credit to trade:

http://youtu.be/4C7qN_tJiwA

An explanation in diagrams:

(T$ = Trade dollars)

 

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The above presentations explain the process of barter using a trade currency. In reality, the funds raised for charity would not go through the Charity Barter website, but go directly to the charities. The Charity Barter website would register this payment, and then issue the electronic barter currency. This is important because if the government instructs payment institutions, such as Mastercard, Visa, Paypal etc, to cease transfers at Charity Barter, the traders will be able to pay the charities directly, and the issue of the electronic currency will still take place.

The system is already in use by barter companies, for example, those associated with the International Reciprocal Trade Association. However, instead of the system being used to generate huge profits for private companies, it will raise funds for those most in need, via charitable donations generated by simple trade, especially of second hand goods.

The system is quite different from the way charity funds are raised at ebay, because there is no apparent cost to those trading.

Presently, it is illegal to issue electronic currency. However, allowances have been made for currencies which are not redeemable.


Category of the action

Reducing consumption


What actions do you propose?

The whole system should be set up in a similar fashion to the dating application “Tinder”. The users decide the region and size of region they want to trade in. It might be their local town, or their local county, or if they are willing to travel to exchange, purchase or sell goods, their local state. Any further afield, deliveries could be made by a delivery service like UPS or DHL etc.

The system is so profitable, that escrow, valuation and delivery services could be offered free of charge for items worth over a certain value.

Despite the system running from a centralised online application, volunteer administrators from local communities would be able to customise what the website looks like in their community, taking into account the local culture etc.

It will still be possible for different communities to trade with each other, across state or national boundaries, because they will all be using the same electronic barter currency, issued from one central server.

Because the issuing of the electronic barter currency will happen from the centralised server, local communities will not be able to create electronic barter currency for themselves.

Electronic barter currency will be issued when the charity receives conventional fiat currency or on receipt of online promissory IOU contracts after creditworthiness checks. As demonstrated by the long video presentation, there will be no risk to the charities accepting these loan contracts, because they will not have lent the money in the first place, but they will certainly be happy to receive the monthly payments used to pay back those loans.

The fact that the website will be able to issue interest free loans at no cost risk (it costs nothing to issue electronic currency) doing trade at Charity Barter will become very popular. This will allow the website to meet its administration costs from online advertising revenue.

To prevent bogus charities from benefitting, each community (perhaps of one million people) would vote for the charities which they want to benefit. From this list, perhaps the top 200 national and international charities could be chosen, and 50 local charities (local hospitals etc.) The website would only issue electronic barter currencies for these charities.

Full accounting will be put online, updated in real time, showing where funds are being raised and which charities are in receipt of those funds.

 

Controlling Inflation

If the growth in quantity of goods and services is too slow compared with the amount of money being issued, it will be necessary to introduce some inflationary control mechanisms within the barter community. There are many options available, and these would be communicated to the barter community using a colour coded scheme.

Code Green - No inflationary measures applied.

Code Blue - Users who have held on to the electronic barter currency the longest would get priority over purchases. This is only fair if there is too much money chasing too few goods and services.

Code Purple - The issuing of the electronic barter currency is restricted to the increase in value of goods and services entering the barter economy. In other words, if you want to buy electronic barter currency from the website, offer additional goods or services of the same value or more.

Code Yellow - Offering a less favourable exchange rate for new electronic barter currency issued. This would result in less new electronic barter currency flowing into the barter economy, but would increase the amount of money raised to charity per unit of electronic barter currency exchanged.

Code Orange - Unused electronic barter currency would be withdrawn. For example, funds lying around in individual user accounts for more than three months could be reduced by 1% per month.

Code Red - All accounts have their funds reduced, for example, by 0.3% per month. This is the most extreme measure, but in reality is no different to what inflation does to real world money.

In reality, the value of the electronic barter currency would be linked to the real economy so inflation would be restricted. The barter economy would still be competing with the real economy, so prices in both would stay roughly the same. However, prudence suggest that flooding the barter economy with the electronic barter currency would increase inflationary pressure, which is why certain checks would need to be put in place in a timely manner.

 

Why will the public choose Charity Barter over trading on other platforms, or even over trading offline?

Offline, the main people who barter do so informally, for example a car mechanic may maintain an accountants car in return that the accountant keeps his tax in order. No cash changes hand, neither is trying to profiteer, so the benefit is mutual. Done with care it will lead to lasting friendships, a bonus not measurable in monetary terms. And yet this form of bartering is limited to people who already know each other, or traded with each other in the past. A website will allow users to meet people from further afield than their circle of acquaintances. For those with cash flow problems, this could be especially useful.

The other large attraction to the website is the money it raises for charity at no cost to the buyer. When a buyer purchases the electronic barter currency, the real money will go to charity, the buyer will then use the electronic currency to purchase the goods. There will be an inflationary cost to the holders of the barter currency, and measures to control are discussed above.

Perhaps the biggest attraction to the Charity Barter Website will be the interest free loans. Because the website will issue loans, but the charities receive the monthly paybacks, there will be no risk to the charities. Further, because it doesn’t cost anything for the website to issue the loans, if the borrower defaults on payment, it won’t have cost the website anything. The website can never lose, and the charities can only win.


Who will take these actions?

“Computer programmers and website developers unite!”

Setting up a centralised application flexible enough to allow local customisation, and carry out local and international trade transactions is no small task, but would probably suit developers working at MIT perfectly. So to all you MIT developers, there is no work more satisfying than putting the world to rights. Further, you’ll be raising a whole lot of much needed cash for charities, and last, but definitely not least, be seriously cutting carbon emissions within our overly consumer societies.

Unfortunately, it will not be possible to approach the owners of present barter websites for help. Many of them have proven themselves untrustworthy.

In might be the case that the agendas of Charity Barter and MIT are not aligned, in which case support would be sort from anti-corporate, left of center hackers, who have long lost faith in Adam Smith's ‘invisible hand’ to bring about social justice.

Another approach would be to ask 200 of the biggest charities to each pay a small contribution for website development, and then ask an established international website developer to set up and run the website.


Where will these actions be taken?

This is a perfect project for MIT, though many educational and research establishments would be up to the task. Many of today’s successful projects come about through those involved understanding why the project means so much to them. Cutting carbon emissions is, unfortunately, still a pretty abstract cause. Raising money for charity has more “immediacy” about it, and would probably be the main driving factor. However, whatever the driving factor is, the actual reduction in carbon emissions will be equally significant.

Unfortunately, there are many cultures around the world where profit is the driving factor. A project such as this one would quickly degenerate into corruption and sleaze if profit were the main motive. MIT is full of young idealistic dreamers, so this would be perfect for them.

There would still need to be major international collaboration. Websites designs will need to reflect local culture before they become acceptable, trustworthy and finally trendy. However, each website design will still run from a centralised server.


How much will emissions be reduced or sequestered vs. business as usual levels?

According to a study done by the Center for Innovation, Technology and Policy Research, Lisbon, approximately 10% of the embodied CO2 in household products are in items which can be sold off as second hand items.

ANNUAL EMBODIED CO2 2002.png

Items marked red come under this category. Perhaps 10% of this is lying around unused.

10% x 10% = 1%

CO2 emissions in the USA are 5.3 GT  - 79% from fossil fuel use.

25% of energy use is used to make household products

(5.3 GT CO2) x 1% x 79% x 25% = 10,467,500 T CO2

In the UK, 7% of the population sell on ebay. If we were to estimate that 10% of the U.S. population sell stuff via the internet, that leaves a potential 90% increase

(10,467,500 T CO2) x 90% = 9,420,750 T CO2 emissions reduction.

                                             = 0.22 % of U.S. fossil fuel emissions

Using the same percentage, potential global emissions reductions, where world fossil fuel CO2 emissions equal 31.6 GT,

potential global emissions reductions:

31.6 GT x 0.22 % = Approx 70 million tonnes.


What are other key benefits?

In reality, the sky is the limit. It is organisations who issue currencies (through loans) who shape society. Governments don’t decide where investments are made, banks do. In the same way, Charity Barter would be able to choose where to issue currency on moral and ethical grounds, boycotting services detrimental to the environment or society. It would even be possible to set a price on carbon using the electronic barter currency. The possibilities are endless if you are the issuers of money.

Bartering systems, if run well, come with a whole host of other advantages too

1) Keeping value within the local community.

2) Building local relationships.

3) Helping small businesses survive international competition.

4) Encouraging local startups.

5) Increasing local employment.

6) Increasing demand for local escrow and delivery businesses.

7) Raise funds for local charities, which normally get overlooked.


What are the proposal’s costs?

Initial costs will be expensive, but not prohibitive. The cost of hiring experienced developers and programmers could be brought down if they thought that this project was worthwhile and they had free reign over how the revenue raised through online advertising would be spent. In other words, the programmers and developers would run the business, deciding their own compensation packages vs paying for the cost of hardware (servers etc.)

Further, as this project is socially beneficial to society, it may be possible to raise funds from charitable trusts in the beginning.

With a good business plan, it should be possible to attract private investment, even if all profits made through the purchase of the barter currency went to the charities. The project has a bigger chance of becoming popular if 100% of the profit from the website users goes to charity. The public have to feel that trading on the website really is making the world a better place, rather than just making the website owners a profit.


Time line

2015 - Build a team of website developers and economists who will be charged with developing a robust, yet flexible centralised platform, using algorithms based on sound economics to keep the electronic barter currency stable. Confidence in the electronic currency is central to the projects long term success.

Study national and international regulations to determine any changes which may need to be made to make underhand and deceptive issue of electronic currency illegal, and open up the way for transparent non-profit barter websites to issue complimentary electronic barter currencies.

Build an alliance of charities who may want to politically advocate favourable changes in regulation.

Seek financial investment from online crowd investment, private businesses wanting a return from advertising revenue, charitable funds who will eventually benefit from funds raised through the sale of complimentary electronic barter currencies.

2016 - Developers and economists to get the centralised application online ready for launch. Charities to get the support of media outlets to publicise the launch of the new charitable barter websites.

Website designers from all major cities to take part in competitions to design what the websites will look like in their regions.

2017 - Launch!

How long it will take the websites to become popular will depend on sensitive local marketing, as well as the prudent control of the electronic barter currency to ensure stability and confidence. However, the funding of charities will start with the first sale of the barter currency, and carbon emissions reduction will probably be proportional to the funds raised.


Related proposals


References

Legal References:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:267:0007:0017:EN:PDF

http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf

http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Wikipedia:

http://en.wikipedia.org/wiki/Barter

The International Reciprocal Trade Association:

http://www.irta.com/