Top 10 alternative currencies
Traditional currency has been around for centuries, but could it make way for alternative currencies in the near future? This article examines 10 different alternative currencies and the outlook for these as mediums of exchange.
What is an alternative currency?
An alternative currency is any form of tender that is used as a substitute for a legal fiat currency. Any person, company or local government can create an alternative currency, and they are not regulated by national governments or banks in any way. Alternative currencies are normally created to stimulate local economies or to establish distance from national economic trends.
The concept of money has been around for more than 3000 years; what started as bartering eventually led to the thousands of currencies and alternative currencies we have today.
|9000BC||Cattle, food and fabrics used for bartering in Egypt|
|1100BC||Bronze objects used to trade in China|
|600BC||First currency minted in the Kingdom of Lydia|
|400AD||Gold and silver, measured by size and weight, used during the Medieval period|
|1300s||The Renaissance saw the dawn of centrally issued currencies|
|1700s to mid-1900s||Parallel, non-government currencies were used during the Industrial Era|
|Late 1900s to early 2000s||The rise of customer loyalty, credit points and air miles|
|2000s to now||Emergence of cryptocurrencies|
Alternative vs complementary vs community currency
There is a slight difference between alternative currencies, complementary currencies and community currencies, though the terms are often used interchangeably (including in our list below). Alternative currencies are developed in response to financial crises or as solutions to local, social and ecological issues. They aim to provide a complete substitute for traditional tender.
Complementary and community currencies are secondary currencies, often used in local communities (‘hyper-local currencies’). People in the prescribed area will sign up to use them in exchange for goods and services. This helps to keep money in one place and therefore can support local economies.
Note that the currencies listed here are not ranked, but they are some of the popular alternatives around the world.
Bitcoin cash is not the same cryptocurrency as bitcoin– it is a standalone cryptocurrency, created as a branch of the original in 2017. It operates under its own rules and with its own blockchain. The intended use of bitcoin cash is a usable, electronic currency. It can be spent just like normal money in some locations but fees are much lower and transaction speeds are much faster.
According to the bitcoin cash website, it is ‘the most secure and widely used digital currency on the planet’, which allows for 2 million transactions daily.1 But with more than 900 cryptocurrencies in the market, it’s not clear whether bitcoin cash will maintain a substantial value.
Learn more about how you can speculate on its price movements with an IG trading account.
Litecoin is a cryptocurrency that is based on the ever-popular bitcoin. The difference is that transfers are much faster and cheaper, and there are 84 million coins in circulation (four times that of bitcoin).
The factors affecting litecoin’s value are fairly similar to those for bitcoin, and people may claim that litecoin has many benefits as a payment solution. However, it is not yet widely accepted as an alternative currency, and users eagerly await a major company adopting the crypto as a method of payment.
You can earn Starbucks Stars when you buy qualifying products from any Starbucks, worldwide. All you need is the Starbucks card or app. Stars can be redeemed against Starbucks purchases. The aim of this credit system is to encourage purchases at the retailer. The Starbucks ‘currency’ has become so popular that more than 30% of purchases at Starbucks outlets are made using the app.2
After a sales and share price slump in mid-2018, Starbucks revamped its rewards system and started to focus more on what their customers want. Only 20% of US Starbucks customers are signed up to earn Starbucks Stars.2 New methods of engaging with members and attracting them to join the programme has helped Starbucks to launch a new initiative called ‘Stars for Everyone’, which enables unregistered users to earn stars, but at a slower rate than registered members.
Torekes is a currency created for a region in Ghent, Belgium. Anyone who contributes to neighbourhood and environmental care can earn Torekes – the main aim is to make the district more pleasant to live in and stimulate social cohesion. There are arrangements in place at local shops to accept Torekes for goods such as low-energy lamps, green products and fresh vegetables. They can also be exchanged for public transport or event tickets. You can earn 25 Torekes for every hour you spend contributing to urban care; one Toreke is worth ten cents.
Amazon Coins is a digital currency used specifically for Amazon purchases. You can buy or earn coins, and $1 equals 100 Amazon Coins. You can spend your Coins like money – you can buy Android apps, games, and in-game items using your Coins. And, the more Coins you buy, the less you pay. You can also earn free Coins by buying from the Amazon Store.
There is a lot of speculation that Amazon may soon release its own cryptocurrency, as Amazon Coins haven’t been as successful as it had hoped. If there is a surge in demand for this currency, it could have quite an impact on the Amazon share price.
The UK has many different community-based currencies, that can either be used as an exchange or as a credit. These include the Brixton pound, Bristol pound, Stroud pound, Totnes pound and Lewes pound. These currencies intend to stimulate local business and address exclusion. Although some local currencies are subject to tax, these ‘pounds’ are not legal tender, and no one is forced to accept them. It is simply a way to make use of local resources and boost a sense of community.
Ithaca hours is another hyper-local currency, but it is payment in the form of hours. This currency, established in 1991, can only be exchanged in Ithaca, New York. The value of one hour is $10, and Ithaca hours are printed in denominations of a tenth, an eight, a quarter, a half, one and two hours. It is recommended that one Ithaca hour is traded for one hour’s work, but it is negotiable. As with the other alternative currencies, Ithaca hours promote local economic strength and community self-reliance.
More recently, an organisation called Ithacash introduced Ithaca dollars – an internet-based form of the local money. This e-money can be used in an online market place, where users can trade using Ithaca dollars or regular US dollars.
Sweatcoin is gaining a lot of traction in the US – it’s a digital currency that you earn via an app when you work out. To earn and use Sweatcoins, you only need a smartphone and the Sweatcoin app. You can redeem your Sweatcoins against different products or vouchers. One of the co-founders of Sweatcoin, Oleg Fomenko, announced that the business’s long-term goal is to develop open source blockchain technology that will enable users to trade Sweatcoin like any other cryptocurrency.
The number of Sweatcoins available is unlimited, but users can only earn up to 20 coins a day. One Sweatcoin equals $0.05 – so if you want to earn $1000, you need to earn 20,000 Sweatcoins.
LETS is short for ‘local exchange trading systems’. These systems are similar to time banks – where people all over the world trade their time to help perform certain tasks – but the time you spend helping others earns you LETS units, or credits. You can then use LETS units as a currency to buy services from other members that are part of the system.
LETS is locally initiated and democratically organised, and no one profits from the system. All community information, and product and service transactions are recorded, and all members have access to this data. You build up your LETS credits interest free, and you do not need to make an immediate swap.
What is the outlook for alternative currencies?
Economic, social and environmental pressures are forcing countries to look into alternative currencies. Current trends suggest that there could be a transition from centralised authority to decentralised networks, which could have a huge impact on power distribution in the global economy.
While many centralised alternative currency systems are successful at a local level, they are very unlikely to gain traction on a global scale. Decentralised currencies like cryptocurrencies, on the other hand, are already showing increased uptake.
If you want to take a position on popular cryptocurrencies, such as bitcoin, bitcoin cash and litecoin, you can open a CFD account with IG. You can also trade traditional fiat currencies and forex pairs on our platform.
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