Cost benefit alaysis

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

Taxonomy for Understanding Digital Community Currencies: Digital Payment Platforms and Virtual

Community Feelings

Paper Category: Research Paper

Eduardo H. Diniz

Escola de Administração de Empresas de São

Paulo, Fundação Getulio Vargas

[email protected]

Erica S. Siqueira

Escola de Administração de Empresas de São

Paulo, Fundação Getulio Vargas

[email protected]

Eric van Heck

Rotterdam School of Management,

Erasmus University

[email protected]

ABSTRACT

Community currencies are known for decades and observed in developing and developed countries. They are, usually, created to fight financial and social exclusion and promote local development. Although there are several community currency projects around the world, very little studies have covered the particular case of those that circulating in digital format. Regarded as a way to improve management of community currency systems, new implementations based on plastic cards cell phones, or blockchain technologies, are becoming more common, as technology is becoming more accessible and financial crisis creates opportunities for the emergence of alternatives to the traditional financial system. If technology is expected to collaborate in transparency, costs and speed of transactions, it also imposes challenges to communities that implement them. In this scenario, the objective of this article is to explore conflict and benefits of the community currency that circulates in a digital format, investigating this phenomenon as a particular case of digital payment platform. Analyzing 22 digital community currencies, we propose a taxonomy that divided them in four groups, and then explore emergent conflicts and benefits for each of them.

Keywords: community currencies; digital payment; digital currencies; payment platforms; taxonomy

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

INTRODUCTION

Virtual currencies can be defined as “a type of unregulated, digital money, which is issued and

usually controlled by its developers, and used and accepted among the members of a specific

virtual community” (European Central Bank, 2012:13) or as “a medium of exchange that

operates like a currency in some environments, but does not have all the attributes of real

currency” (US Department of Treasury, 2013:1). It is implicit in those definitions the concern of

regulation institutions with the emergence of digital currency platforms and the communities

surrounding these platforms. Taking the incredibly complex arena of digital currencies, this

paper will concentrate only on digital community currencies universe, despite their potential

connections with the mainstream payment industry.

Community currencies are generally regarded as tools for fighting social exclusion and

encouraging local development by promoting financial inclusion (Blanc, 2011). The same way as

all currencies are increasingly becoming digital, community currencies are also entering in the

digital payment platforms universe as the so-called digital community currency (DCC). Based on

the use of cell phones, plastic cards, blockchain, or the Internet, DCC is being considered one of

the main trends in the field of community currencies (Freire, 2011; Warner, 2014) and also

regarded as a way to promote cost reduction and better management of community currency

systems (Diniz, Nascimento, & Cernev, 2016).

Although there is some knowledge already built around community currencies and its role to

promote social and financial inclusion, studies on DCC, however, are rather rare. In one hand,

previous studies extensively covering worldwide cases of community currency – in developing

and developed countries – have not been paying much attention on the particular issues related to

its digital format (Freire, 2011; Schroeder, Miyazaki, & Fare, 2011; Fare & Ahmed, 2014). On

the other hand, studies on digital payments usually ignore the particular case of community

currencies. Comprehensive studies on mobile payments for financial inclusion (de Albuquerque,

Diniz et al., 2016; Dahlberg, Guo, & Ondrus, 2015; Duncombe & Boateng, 2009), for example,

do not mention any case of DCC.

In this sense, this article aims to shed light on the subject of DCC by understanding it as part of

the digital payment platform scenario and, given the general trend towards digital payments, the

research question guiding this study presented on DCC is: what are the conflicts and benefits

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

faced by community currencies when implemented in digital platforms? To answer this question,

we propose a taxonomy for classifying DCCs based on combination of elements taken from the

literature about community currencies and digital platforms. We then discuss conflicts and

benefits of each group of DCC identified in the taxonomy.

This taxonomy was created to classify 22 selected cases of DCC, captured from an extensive

search in sources related to the community currencies. Based on this analysis, four different

categories of community currencies circulating in digital format were noted. The presented

taxonomy is useful to researchers interested on the community currency topic, as well as the ones

investigating digital payments platforms. Discussing each of the emerging categories from the

proposed taxonomy helped us to provide insights about the conflicts and benefits for

implementing DCCs, offering a new theoretical frame for investigating particular cases of digital

payment platforms.

Although digital payment platforms, in particular mobile payment, has been described as a topic

of relevance for financial inclusion in developing countries (Duncombe & Boateng, 2009), the

importance of DCC is not only restricted to developing countries, since there are many projects

also in developed countries, as we show in the selected cases for this study.

The main dimensions adopted in this paper to analyze DCCs were built according to community

currency and digital payment platforms literature and are presented in the next two sections. The

following sections describes the taxonomy building method used to classify the DCCs. Then the

22 selected currencies are presented and analyzed according to their classification in the

proposed taxonomy. The paper closes with a discussion of the conflicts and benefits for

implementing each group of DCC identified and comments on the digital payments platform as a

way to understand community currencies.

COMMUNITY CURRENCIES

While money has intrinsic relationship with a territory (Santos, 2009), community currency

redefine the hierarchy between the local and the national in order to stand as a means of

payment, which may also be an instrument for fighting the problems caused either by money in

the capitalist system or by the system itself (Burigo, 2001). In addition to being “a trading

instrument and means of payment created and operated by self-managed associations” (Singer,

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

2009, p.3), community currencies generally circulate in a restricted geographic region or

community (Freire, 2011).

Important to notice that, by studying the theme of community currencies, we find references

mentioning "complementary currencies", "social currencies" or "local currencies" (Renert, 2013;

Blanc, 2011) as well as references to Local Complementary Currency Systems and Local

Exchange Employment and Trading Systems as common names used for identifying the same

phenomenon (Gómez, 2010; Seyfang & Longhurst, 2013). In this paper we will adopt the broad

term community currency for all kinds of alternative currencies with an explicit social goal

(Place & Bindewald, 2013).

There are several community currency goals in the literature. For example, Ranalli (2013)

discuss the usefulness of community currencies in the refugee camps, suffering from shortage of

currency and local resources. Bácsi and Herczeg (2014) explore the potential of local currencies

as a useful tool for liquidity risk management for small and medium-sized enterprises. Coetzee

(2010) discusses the use of community currencies in virtual communities. Gomez (2009) studied

the case of “Club de Trueque” in Argentine, that achieved more de 2 million people during a

financial crisis, and Freire (2011) discusses the potential of community currencies as a tool for

improving financial inclusion and for strengthening solidary relationships.

The use of community currency has been rising over the past two decades and it is possible to

count a large number of active community currencies (Seyfang & Longhurst, 2013). Crisis in the

mainstream global economy and new possibilities enabled by information technology can be the

main reason to explain the growth of community currency projects worldwide (Carroll and

Bellotti, 2015). Despite their differences, these currencies represent an alternative financial

system and, together with community banks, mutual credit, crowdfunding, and credit unions,

they are said to promote a financial revolution led by civil society (Sanchis-Palacio, 2015).

Typologies of Community Currencies

It is hard to say the exact number of systems in operation in the world due to the lack of reliable

data on the matter (Seyfang & Longhurst, 2013), nevertheless there are several tentative

classifications for this phenomenon. Blanc (2011), for instance, proposes a typology dividing the

currencies according to their nature covering territorial, community and economic dimensions.

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

Another classification (Martignoni, 2012) organizes community currencies into eleven different

groups, according to their purpose, trust mechanism, issuance, and circulation. Seyfang &

Longhurst (2013) used a community currency database with 3,428 currencies from 23 countries

in 6 continents to propose 4 categories based on the projects’ goals and Tichit et al. (2015),

based on lexical analysis of 320 community-currency websites, proposed 5 categories

considering how those projects defined themselves in relation to the standard monetary system.

Although it is very difficult to compare all these classifications, they seem not to properly

explore the technological dimension of the community currency projects. This gap is very

important, especially when considering the disruptive potential of digital payments combined

with alternative payment methods that community currencies represent.

Digital Community Currencies

Even though the use of community currencies is spreading, problems related to community

currencies management and implementation can undermine their acceptance (Warner, 2014).

Some problems, such as difficulty in making community currencies to be used as change, to

access exchange channels, and to be accepted by local businesses, are commonly mentioned

(Freire, 2011). Other problems, such as operational management of paper money, its durability,

and storage security, are related to the paper-printing format (Diniz et al., 2016; Lietaer &

Hallsmith, 2006). Blanc and Fare (2013) also mention problems with fraud and counterfeiting.

Although those mentioned problems could damage the reliability of community currencies, as

pointed out in a Bank of England document about banknotes, positioned as local initiatives “the

limited scale of current schemes is also a mitigating factor” (Naqvi & Southgate, 2013). On the

other hand, issuing community currencies in a digital format could represent a solution to some

of the aforementioned problems, besides allowing cost savings and better management of the

money circulating within a community (Diniz et al., 2016; Cassoni & Ramada, 2013; Schroeder,

2013). However, the creation and maintenance of DCC do not take place without some

difficulties.

One difficulty discussed by Diniz, Cernev, and de Albuquerque (2013) is related to interaction

among actors that bring the new technology infrastructure and the community that issues the

currency. The authors analyzed a Brazilian DCC implementation via mobile phone that did not

prosper and pointed out the project governance as the main cause of its failure.

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

Another difficulty is related to how technology affects social aspects of financial transactions in

a community. Ferreira et al. (2015) explored the technology dimension of the British local

currency Bristol Pound and found out that face-to-face transactions help to reinforce the trust on

payment. These authors noted that the SMS (acronym for Short Message Systems, used in

mobile phones) payment system implemented in this project required more time to complete the

transaction, allowing buyers and sellers to talk more to each other, increasing the “conversation

and sociability” within the community (p.6). However, they pointed out that this social ties came

from the weakness of the implemented technology (SMS and more time to complete

transactions), thus the expected rapid, anonymous digital transactions will reinforce the potential

for losing sociability and interaction between local buyers and sellers, weakening social bonds,

and consequently the community connections.

Weakening social bonds could be a seriously problem that could compromise the success of

social goal of a community currency as Nascimento (2015) observes, studying another Brazilian

DCC based on card technology. For this author, the failure of a DCC implementation is related to

the loss of community feelings and shared understanding about concepts such as “local

belonging” and “solidarity”. So, while digital format can lower the operational costs and provide

a better management to the use of the community currencies, on the other hand, it might not

contribute to improve transparency and to increase the desired community feelings expected

from them.

As the mentioned projects vary from technology infrastructure, partners involved, types of

transactions allowed and many other aspects, we believe that a deeper understanding of DCCs

will be more valuable if we could classify them in a way that conflicts and benefits imposed to

community currencies in digital format could be analyzed by groups of projects, instead of just

looking to each independent project. Thus, we propose a classification for DCCs considering

them as a particular case of digital payment platform.

DIGITAL COMMUNITY CURRENCIES AS DIGITAL PAYMENT PLATFORMS

Platform architectures are complex modular systems built in such a way that a stable core group

of components (the platform itself) interacts with another group of complementary systems that

varies in cross-section or over time (Baldwin & Woodard, 2009). These platforms mean to

provide economies of scale and scope within and across companies, offering low-cost,

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

decentralized solutions for the various groups that transact with each other, either in a single

company or supply chain or spread over ecosystems that comprise many different companies.

In this sense, digital payment platforms are, using Abbott (2007) classification, a platform is a

specialized system that provides payment services through any form of digital technology

(Bapna, Goes, Wei, & Zhang, 2011). In general, considering retail applications, these digital

payment platforms allow users to access funds in their deposit or credit accounts in financial

institutions to initiate payments using plastic cards, the Internet, or mobile devices (Fung,

Molico, & Stuber, 2014).

Four Dimensions of the DCC as digital payment platforms

An extensive literature review on the concept of platform in main journals and conferences of the

IS field (Sun, Gregor & Keating, 2015) proposed six dimensions to be considered when

investigating platforms. We took three of these dimensions that are directly related to the

particular case of digital platform represented by DCC: technological base (here named as

“architecture”), governance and transactionality. We also propose another dimension – virtuality

– because it is particularly important for the discussion of community currencies, besides being

also relevant for other cases of payment platforms. Each of these dimensions is explained next.

Platform architecture

Magnetic and electronic card systems are the base of a technology infrastructure that has

dominated digital payment platforms for decades. In the card infrastructure, one dominant

partner (the card issuer) issues cards to consumers and processes payment transactions from data

collected by outsourced partners (acquirers). These platforms are highly centralized because of

the card issuer’s control over the whole payment-processing system (Baldwin & Woodard,

2009).

More recently, technologies related to internet and smart phones have raised the interest on

digital payment platforms. Mobile payment (m-payment) is defined as any payment that requires

a mobile phone to initiate, authorize, and confirm a payment transaction (Kim, Mirusmonov, &

Lee, 2010). M-payment is a natural evolution of digital payments and can be made via SMS or

other protocols and provides access to money transfers and online payments (Kim et al., 2010).

These digital payment platforms tend to include a bigger number of technology elements –

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

mobile applications, devices, mobile operators, etc. – having a more complex interaction among

all of the elements since the hierarchy level among them is not so straightforward as it is in the

card platforms.

Jamari, a currency that circulates in the Brazilian Amazon is an example of digital payment

platform that architecture is based on card (Gondim, 2012). The British Bristol Pound, in turn,

operates in a more complex architecture, supporting transactions through mobile devices (SMS

or mobile applications) and over the internet, through specific software (Ferreira et. al., 2015).

Architecture describes how a complementary set of modules (technology infrastructure) is

designed to operate into a relatively stable platform (Tiwana et al., 2010). From the architecture

dimension perspective, we could see DCC divided in two broader groups: one, named “simple”

that operates based on cards, and the other, named “complex” operating through the internet,

mobile phones and other new technologies, such as blockchain.

Platform governance

Governance refers to the power of decision on what a platform effectively does, and who will

approve its future directions. The degree of openness in a platform is one of the keys issues about

governance (Staykova & Damsgaard, 2015; Ondrus et al, 2015). If the governance over a

platform is shared among multiple owners or it is based on open standards, it represents a shared

rather than proprietary platform (Tiwana, 2014).

When a platform is not locked down, it can be adapted through the addition of new modules that

enable a range of new uses (Tilson et al., 2013). While openness is important in terms of

potential marketing (Staykova & Damsgaard, 2015), the control (or ownership) of the platform’s

stable core is critical to its performance, affecting technical issues as well as business

arrangements that involve all the participants (Ballon et al., 2011). Thus, the decision of what a

platform effectively does and who will approve its future directions is vital to its technical

performance and business success.

An example of proprietary governance is the currency Sardex, from the region of Sardina, Italy.

Based on a mutual credit with zero balance – when two local businesses transact with each other,

credit for one of them is recorded as debit for the other – it is a business-to-business (B2B)

system fully controlled by the company that provides the technology (Littera, Sartori, Dini,

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

Antoniadis, 2014). A different model, Palmas, a Brazilian DCC, is an example of shared control

on the platform, since the community bank take strategic decisions about the currency in a

communitarian forum with the neighborhood association (Fare at al., 2015).

Thereby, taken the governance dimension, it is possible to capture the diversity of a DCC

business model by understanding the payment platform according to two broader categories:

shared or proprietary.

Platform transactionality

Another critical dimension of platforms is the transactionality, referring to the distinct groups of

users that the platform brings together (Staykova & Damsgaard, 2015). From this perspective, a

platform could perform one-sided, two-sided and multi-sided transactions (Hagiu, 2006).

When a payment platform allows transactions between peers, such is the case of peer-to-peer

(P2P) and B2B payments, it is called one-sided platform. This is the case of Wir, a Swiss DCC

based on a B2B payment platform designed to operate transactions between small businesses in a

delimited region of the country (Seyfang & Longhurst, 2013). A P2P example is Faircoin, a

Spanish cryptocurrency system, designed for payments between people that avoid the banking

system (Lucarelli et al., 2014).

In cases where transactions happen between users with two different profiles, then we have a

two-sided platform. UDIS, a community currency from Costa Rica, is an example, which

connects producers/merchants to consumers (Brenes, 2011).

A multi-sided platform places more than two economic agents making transactions among

themselves (Evans & Schmalensee, 2013; Hagiu and Wright, 2011). Chiemgauer, a German

DCC, is a platform that connects business to consumers, but can also connect charity institutions

that could receive donations through it (Thiel, 2012). Social government benefits can be also

delivered through social currencies, allowing beneficiaries to buy basic products in local stores.

Such is the case of currency Mumbuca, in Brazil, another case of multi-sided transaction.

As DCCs can perform these three different ways of transaction – isolated or altogether –, this

should be considered as a dimension for analysis when investigating them (Ramada-Sarasola,

2012). This way, from the perspective of the transactionality dimension, we could see DCCs

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

focused in one-sided (e.g., P2P), two-sided (e.g., business-to-customer, or B2C) or multi-sided

(e.g., government-to-person, or G2P) transactions in a single platform.

Platform virtuality

Based on two constructs proposed by the process virtualization theory: sensory and relationship

requirements (Overby, 2008), we add a fourth dimension to a discussion about digital payment

platforms: virtuality of the payment, since this is a point of concern when evaluating digital

payments (Jansen, 2013).

In the DCC scenario, the sensory requirements construct represents the first aspect of the

virtuality dimension based on the fact that the convertibility to the official currency provides the

“sensory connection” needed to ensure its real value, thus making it more amenable to adoption.

An example of a convertible currency is Brixton, from England, issued by a community bank

and backed 1-to-1 with the official currency, also possible to be redeemed (Blanc & Fare, 2015).

On the other hand, there are a number of community currencies operating totally in parallel with

the official currency system, without caring about any convertibility rate or not having any way

to make a correspondent value between the two. Auroracoin, a criptocurrency from Iceland, is an

example of totally virtual DCC that has transactions digitally signed in a blockchain (Lucarelli et

al., 2014). Another criptocurrency without convertibility to the official currency, Cadastral, from

Ghana, is used to pay for real states services and land registering in the countryside by means of

blockchains to guarantee transparency for the parts involved. Many time banking type of

currencies are also included in this category (Carroll, 2013).

Relationship requirements represent the second aspect of the virtuality dimension. It is related to

the physical closeness between the two sides operating a payment transaction. The face-to-face

transactions improve “knowledge acquisition, trust and friendship” since buying physically in

local shops offer opportunities for sociable interactions in local communities, reinforcing the

community feelings desired for a community currency.

Payments made by inserting cards or Near Field Communication (NFC) technologies are

examples ot transactions where physical presence is demanded. For DCCs, the face-to-face

payment can have effects on the community feeling usually associated with the level of

acceptance of the currency. Transactions happening without physical presence could affect the

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

raison d’être of the community currency itself, which was created to keep the money circulating

inside a particular community, and thus compromising its local development goals (Warner,

2014; Ramada-Sarasola, 2012). In the case of afore mentioned Brixton, face-to-face payments

are kept to reinforce community feelings.

Considering these two aspects of the virtuality dimension – convertibility and physical closeness

–, we see the extreme case of a totally virtual DCC, one that is not convertible or not demand

users to be physically close to each other to perform a payment, in opposition to the others with a

lower level of virtuality, being either convertible to official currency or being used only when

users are in the physical presence of each other (or both at the same time).

METHODOLOGICAL APPROACH FOR CREATING A TAXONOMY FOR DCC

Classifying emergent phenomena is an important first step for science (Carper & Snizek, 1980)

and is useful in the construction of descriptive theories (Fawcet & Downs, 1986; Gregor, 2006).

In social science, classifications are commonly made via taxonomy or typology. These two

approaches are different since typologies are based on classes that have been previously defined

whereas, in taxonomies, classes emerge in the course of the empirical research (Bailey, 1994).

Considering that DCC is an emergent phenomenon and that previously typologies do not

properly include the technological dimension of them, we propose a new taxonomy. We first

identified a number of DCCs to be investigated and classified according to the main attributes to

be compared. Then, we developed the taxonomy in three steps (Miles and Huberman, 1994).

At the first step, also known as the open coding phase, we started with the identification of

relevant attributes gather from an intensive search about selected DCCs. In the second step, we

looked for connections between the labels found in the previous step in order to aggregate them

in more abstract concepts, or classes. The taxonomy itself came in the third step, when classes

are integrated in higher-level categories of attributes and the selected currencies are classified

according to these categories. This procedure is detailed bellow.

Selecting a list of DCCs to be classified

Based on secondary data, an extensive search to identify existing DCCs was carried over initially

from August 2015 to November 2015 and then updated from August 2016 to September 2016.

The search was taken on the literature about community currencies and on cases of DCC

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

available online. The main sources of data collection in this search were the International Journal

of Community Currency Research, and two data bases containing information about community

currencies: Community Currency Info and Community Currencies in Action.

From an initial list of more than 100 community currencies identified in this first search, some of

them were excluded due to: a) do not circulate in the digital format, b) do not have a clear social

goal (Place & Bindewald, 2013), c) do not circulate as a particular community currency (only as

official currency) and e) do not have enough information available about the currency in its

digital format (the used technology, for example). After this filtering process, 22 digital

community currencies were selected for this study, circulating in thirteen different countries in

Europe, South America, Asia and Africa.

From this selection of currencies, we proceeded to a new search to find out more about the

features and characteristics of each selected DCC. Besides the references previously used for

finding the DCCs, we used Google and Google Scholar to obtain more detailed information

about the currencies. In order to “avoid creating an inflexible model”, as described by Blanc

(2011:2), a number of features for each currency were also highlighted, what could help us to

understand and/or formulate the taxonomy, as well as contribute to the discussion of suitability

and the benefits and conflitcs facing the studied DCCs.

Open Coding based on Data Collection of Existing Community Currencies

In this first step, 28 features of currencies were labeled for all 22 selected DCCs:

provider/partners; social goal; type of sponsor; existence of demurrage rate; charge fee for

conversion to official currencies; charge fee per transaction; charge membership fee; scriptural

condition (the use of technology just in order to assign debit and credit); use of card; use of SMS;

use in a mobile applications; use through the internet; use NFC; operates in online market places;

works as cryptocurrency; circulate as P2P, B2B, B2C, B2E (business-to-employee, or salary

payment), G2P (via government benefit); is integrated to transportation services; is integrated

with telecom services; is integrated to donation projects; keep the circulation of the paper version

in parallel with the digital version; is paired with the official currency (1 unit of community

currency corresponding to a x units of official currency); is valued in hours; is backed by official

currency (convertible in official); works under the zero balance system (one person's credit

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

equals another's debit, accounts sum to zero). Thus, in this step, we listed all the potential

features that were possible to find for all the analyzed DCCs.

Hierarchizing and grouping DCC features (or labels) in classes

Comparing the 28 initial labels with concepts from the literature review we then created 9 second

order classes. This way, the labels providers, partners and sponsors, were aggregated under a

class named management; demurrage rate and fees for transaction, conversion and membership

were joined under the business model class; scriptural type, online market place and card became

a class named simple; SMS, mobile applications, internet, NFC and criptocurrency were

aggregated in another class, titled complex; P2P, B2B, became one-sided; B2C and B2E became

two-sided; G2P and integration with transportation, telecom and care systems became multi-

sided; DCCs that are paired with official currencies, also circulate in paper format and is valued

in hours (time banking) were considered in a class named valued; backed by official currencies

and zero balance system were aggregated under the class backed. Thus, in this step, we came up

with second order codes and more abstract categories aggregating attributes from digital

community currencies.

Creating the categories for a taxonomy of DCCs

The 9 classes of the previous step were then grouped in 4 more comprehensive categories related

to the 4 dimensions of payment platform of the community currency previously presented in this

paper: architecture, governance, transactionality, and virtuality. Thus, for creating the taxonomy,

we ended up with four major categories to discuss DCCs in a more abstract way. All the four

categories found are also based in the literature on digital platforms and community currencies

presented previously in the paper and were important help in the creation of this higher level of

aggregation for DCCs categories. The final aggregated categories and their elements are

presented in figure 1.

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

Figure 1 – Aggregated Categories

The taxonomy for DCC

Based on the four categories identified in the previous step, four questions were proposed to each

DCC in order to classify them in groups:

• Concerning the architecture dimension, is the DCC architecture simple or complex? • Concerning the governance dimension, is the DCC platform shared or proprietary? • Concerning the transactionality dimension, is the DCC focused on: one-sided, two-sided or multi-

sided transactions?

• Concerning the virtuality dimension is the DCC totally virtual or non-virutal (operates in presence of the users or is convertible to official currency)?

Based on answers to these 4 questions, we group the 22 DCC in 4 distinct groups and named

them: Restrict, Intensive, Proprietary and Closed. There are, for each created group, relevant

dimensions that group the currencies, e. g. governance and virtuality are the most relevant

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

dimensions for Restrict group. Table 1 present currencies and their groups according to the

taxonomy.

Currency Country Architecture Transactionality Governance Virtuality Taxonomy

Bristol Pound England Complex MultiSided Shared non-Virtual

Restrict

Brixton England Complex MultiSided Shared non-Virtual

Chiemgauer Germany Simple MultiSided Shared non-Virtual

Neuro Brazil Complex MultiSided Shared non-Virtual

Palmas Brazil Complex MultiSided Shared non-Virtual

Sampaio Brazil Complex MultiSided Shared non-Virtual

UDIS Costa Rica Complex Two-Sided Shared non-Virtual

Jamari Brazil Simple Multi-Sided Proprietary non-Virtual

Proprietary Mumbuca Brazil Simple Multi-Sided Proprietary non-Virtual

Sardex Italy Simple Two-Sided Proprietary Virtual

WIR Switzerland Simple One-Sided Proprietary Virtual

Zolkin Brazil Simple Two-Sided Proprietary Virtual

EuroCat Spain Simple One-Sided Shared Virtual

Closed Fureai Kippu Japan Simple One-Sided Shared Virtual

Tovi Finland Simple One-Sided Shared Virtual

TradeQoin Netherlands Simple One-Sided Shared Virtual

Auroracoin Iceland Complex One-Sided Proprietary Virtual

Intensive

Cadastrals Ghana Complex Two-Sided Proprietary Virtual

EcoSol Spain Complex Two-Sided Shared Virtual

FairCoin Spain Complex One-Sided Shared Virtual

Positoo Netherlands Complex Two-Sided Shared Virtual

Sonantes France Complex Two-Sided Shared Virtual

Table 1: Currencies, countries and their classification in each group

Characteristics of each DCC group

The group Restrict comprises shared governance DCCs, generally operated by a community or

cooperative bank, and they are all non virtual. Its social objectives are related to reinforce the

community feelings, thus rely on face-to-face transactions to reinforce human values in financial

transactions. They also have a paper circulating in parallel with de digital version. Those DCCs

located in this group are typically created to promote local development and can simultaneously

support B2C and P2P transactions. In general, their use is limited to geographically restricted

communities; these currencies tend to strengthen the feeling of belonging to a community

(Lietaer & Hallsmith, 2006). As this kind of community currency usually requires more complex

architecture (with the exception of Chiemgauer), they also often involves many social groups in

its implementation, which may increase the risk of failure due to the difficulties of coordinating

those different groups (de Albuquerque et al., 2016). Its redeemability into official currency

increases the users’ trust in this type of DCC, because it allows them to enter and exit the

currency circuit whenever convenient (Renert, 2013). The architecture required, however, can

generate costs for users (the cost of holding a mobile phone, for example) and currency managers

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

(better technological infrastructure), besides excluding the digitally illiterate (Menezes &

Crocco, 2009). Designed to restricted communities, those currencies may require a considerable

effort to be interoperable with larger systems, such as the traditional financial system.

The DCCs in the group Proprietary have proprietary governance and do not make multi-

sideness transactions, being also based on card architecture. This group of DCCs may be

associated with the distribution and control of a social benefit, sometimes being in fact designed

to serve this particular purpose (Nascimento, 2015). They generally have a wider geographic

coverage, transcending the boundaries of a local community, but hardly exceeding the

boundaries of a city, for example. Because they are based on a less complex architecture, those

DCCs are usually integrated to networks belonging to more traditional systems, such as credit or

debit card operators (de Albuquerque e al., 2016), though with low interoperability with

networks outside this particular loop. As it involves a smaller number of groups to be

implemented, the acceptance of those DCCs is facilitated, which increases the trust on it.

Acceptance is also reinforced when associated with social benefits.

The Closed group comprises virtual DCCs operating in a closed system that could be based on

mutual credit system with zero balance between companies (B2B) or time banking (P2P). DCCs

classified in this category support exclusively B2B or P2P transactions. Because they are based

in closed networks, when they are created to make B2B transactions, those currencies are

designed to primarily favor the interests of local merchants, the social issues being only a

secondary objective. The ones that support P2P transactions, on the other hand, were clearly

designed primarily for social purposes. They demand less complex technology architecture of all

DCC analyzed, often requiring only record of transactions, such as DCCs of the “time banking”

type (Fare & Ahmed, 2015). In many cases, the technology is used just to support the basic

infrastructure to process community currency transactions, but is not an essential part of their

operations. They generally cannot be exchanged for official currency, but technology can play an

important role in the transparency of transactions, which helps to increase trust in the DCCs.

The DCCs in the Intensive group are based in more complex architecture and operate in a total

virtual way, usually with no equivalent in paper format. The currencies grouped in this category

have greater territorial coverage and are more comprehensive in supporting concurrent

transactions (B2B, B2C, and P2P) on the same platform. They are exclusively digital currencies

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

and may involve payments via mobile applications or SMS, cryptocurrencies, or the operation of

an account via the Internet. They keep high interoperability between different systems, which

may increase trust in the use of those DCCs (Renert, 2013). However, the focus on local

development is not clear, betraying community currencies’ traditional role (Lietaer & Hallsmith,

2006). They depend on the integration with other networks, such as the telecom and financial

systems, and may exclude less technologically literate users and those who cannot afford the

costs of technological devices needed to transact in these systems (Menezes & Crocco, 2009).

FINAL COMMENTS

This paper seeks to deepen the discussion on the role of community currencies’ digital format,

identifying categories of use and technology incorporation in the various DCC existing projects.

From the analysis of 22 DCCs, a taxonomy of four categories was proposed, based on the

architecture, governance, transactionality and virtuality of the adopted digital payment platform

for each currency, what led to a four different groups of currencies. For each of these groups we

could explain the potential benefits and conflicts that digital platforms can bring to community

currencies.

For the Restrict group, while is possible to see some improvement in the currency management,

as well as a reduction in the costs to keep it operating, there is a clear risk for the purpose of

develop a community feeling, the most common declared reason for the very existence of this

type of currency. For the Proprietary group, while the main benefit is the potential inclusion of

social grants into the currency circulation the main conflict is expected within the control of the

platform, usually centralized and not well adapted to communitarian goals. For the Closed

group, the main benefit of the digital platform is the cost and practical use, particularly if used

from a mobile device, with not a clear conflict since by the own nature of the currencies in this

group, technology is simple, governance is shared and the community feelings are kept intact in

a closed circuit of users. The Intensive group is the more aggressive in adopting new

technologies and benefit from the potential of expand the territorial base of a community and is

probably the best-suited model for virtual communities, however it can demand users more

digitally include and literate.

As a practical contribution for the DCC managers, this paper organizes the discussion on

potential benefits and conflicts of each type of currency. In sum, the most relevant issues found

Taxonomy for Understanding Digital Community Currencies

Proceedings of SIG GlobDev Ninth Annual Workshop, Dublin, Ireland, December 11, 2016

are the risk to the community feelings because of the virtuality dimension, and the introduction

of new actors that comes along the technology and can compromise the shared governance spirit

of most community organizations. On the other hand, virtual communities – that were not the

focus of this research that listed only currencies from territorial communities – and closed

communities have almost no restrictions to adopt digital platforms for their currencies.

The theoretical contribution of this paper is the proposition of a model of four dimensions to

analyze one particular case of digital payment platform, including the virtuality dimension,

original in the literature on platforms in the IS field. From the model developed in this paper, it is

possible to design new investigations on other cases of financial oriented platforms, which is an

open field since the emergence of the Fintech phenomenon in the last few years. Since among

the issues related to digital platforms are metrics and, by consequence, their evolution (Tiwana,

2014), this model of four dimensions can represent a good point to start new researches.

On the limitations of the paper, the most important one is the choice of relying only in secondary

information about the currencies, what in first place limited the number of currencies that were

included in this study and, secondly, could not clarify many aspects of the studied DDC projects.

Another limitation was the manual process of coding the features to turn them into classes, what

was possible only because of the limited number of 22 currencies investigated. For coding

features of a bigger number of currencies, this manual process would not viable and the use of

tools to support the analysis would be mandatory. A third limitation is the exclusion of the

dimension interoperability from the analysis. This is surely an important aspect, but it was a

decision taken based in two rationalities: first is the fact that community currencies are in general

limited in circulation and thus based on little interoperability; second is also related to the access

of information about the currencies, meaning that by including this dimension it would be

necessary to focus only in a even more limited number of currencies to be studied.

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