Time Based Currency Explanations & Examples
One of the key components to any exchange of labor or goods is the ‘medium of exchange’. In the case of timebanks, the ‘medium of exchange’ is time and so timebanks deal in time based currency. People or groups perform tasks and in return, they receive time credits. The person receiving the credits can then use their time-based currency to pay other people for performing tasks.
Below we look into how this concept of ‘time’ to replace ‘money’ made its way into the public eye, how popular it is becoming, and how timebanks use time currency as payment. Plus we dig a little deeper into the subject of ‘time as a currency’ by delving into subjects such tax, issues that can arise with time based currencies within time banks, and whether or not we can pin a monetary value to time as a currency!
The Birth of the Time Based Currency Concept
Time based currency first came to light in the 19th century via the ‘The Cincinnati Time Store’ which ran for 3 years from 1827 to 1830. It was a test by Josiah Warren who had a theory known as the ‘Economic Labor Theory’ which we cover in detail in our ‘History of Timebanking’ article.
In that blog, the flow diagram that depicts the history of timebanking shows that the very birth of timebanks came in 1827 thanks to Josiah Warren’s successful experiment.
In his theory, the very definition of time based currencies is that they are a type of money measured in ‘time units’ and used as the ‘medium of exchange’. This ‘currency’ does not fluctuate in value, and this is a currency that enables people to swap labor to get jobs done without paying taxes on the ‘medium of exchange’ because the time has no monetary value to the inland revenue.
That said, this does open another can of worms because governments could one day tax time banks. It seemed a hard enough task to place taxes on cryptocurrencies, but governments have found ways to tax these virtual currencies. Likewise, governments could find a valid way to tax timebanks if timebanking communities continue to grow due to mass adoption.
The first time based currency was courtesy of Josiah Warren
The Cincinnati Time Store used time as a currency in 1827
Time based currencies are essentially money measured by time
Time ‘money’ or ‘credits’ are a medium of exchange for 1 hour’s labor
Would Taxing Time Based Currency Work?
A sensible tax solution could work. For example, it may be a tax that requires timebank community volunteers to donate ‘tie credits’ as tax or ‘labor’. Most timebank communities would probably accept this form of taxation if it benefits the community.
For example, someone earns 50-time credits, and the tax is 5% on those credits. 2.5 hours of time to help clean the local park, serve food to the homeless, paint park benches, or any other task that helps to benefit the community. Although there are holes in this concept, if governments can find ways to tax the mass uprising of crypto investors, they will find a way to tax time based currency if there is an angle.
The idea of time based currencies is to not pay tax
If a government introduced tax, it may benefit the community
Tax could require people to give hours to the local government
An hour of tax could be an hour of volunteer work in the community
Understanding the Value of Fiat Currency & Taxation
Most currencies throughout history use a specific method to determine their value. For example, the US government used gold as the determining factor for the value of the US dollar. However, today the value of world currencies ultimately hinges on profit and loss for the government, businesses, and people in a country.
Today the of the US dollar value pins itself to several factors. Firstly, a global free market which uses the supply and demand of dollars against other world currencies all known as fiat currency. Each of these fiat currencies further determines its value using the same supply/demand system.
However, the value of a currency also hinges on a government’s taxation policies which include business taxes, direct taxes from citizen earnings, and indirect taxes. Economies in which GDP grows, in general, the government has a decent tax base from businesses, people working, and spending which also reflects on the value of the currency. Also, imports and exports play a huge role in currency fluctuations as these 2 factors create demand and supply of US dollars and other currencies.
Fiat currencies can fluctuate immensely
Their value stems from a global free market
The value fluctuates according to demand
The domestic economy affects fiat currency value
Understanding How the Value of Time Based Currencies Functions
Time based currencies do not fluctuate because they do not reply on fluctuating systems such as the ability to make a profit or to keep a currency in demand. Instead, currencies that use time to depict the value reply one credit base themselves on equality and mutualism.
Already you can begin to get a sense that time based currencies are more stable compared to fiat currencies. In fact, there are few comparisons to make if we were to tackle the subject of currency stability and make the topic 'fiats vs time based currency' = Fiats fluctuate heavily Vs Time as a currency never fluctuates - comparison done.
In a timebank community, labor is equal. It is the economic source of value for 1 time credit, and 1 credit equals 1 hour with no fluctuations between each. Quite 1 hour of labor is 1 hour of time spent on a task which means 1 credit as payment.
It doesn’t matter if a solar panel expert spends 20 hours installing a solar energy system and a babysitter looked after the solar expert’s children for the 20 hours he worked, both earn 20 time ‘dollars’ or ‘credits’. Even though the solar panel expert’s labor would probably earn double the pay in US dollars compared to the babysitter on the open market that deals with US dollars, time banks do not distinguish between skills because ultimately ‘time in hours’ is the main factor.
This concept of quality plays a huge role in improving social justice within a community. Everyone involved has a skill they can contribute and the medium of exchange is time credits which are all equal. Therefore, each skill is treated with an equal value regardless of the value of that/those skill(s) in the open market where fiat currencies are used as payment.
Time based currencies do not fluctuate in value
The value of labor versus time is based on equality & mutualism
Every skill is treated with an equal value and equal payment
Time Based Currencies Circulating in Mini Economies
Every time bank has a mini economy where time credits circulate. For example, you can create a timebank community via the Nomos app for your neighborhood. You relative may also use the Nomos app to create a time bank in his/her community which is in another state.
Both time bank communities are visible on the Nomos app. However, the time credits you earn stay within the time based currency economy of your time bank. Your relative’s time credits stay within his/her community. This creates mini economies of time base currency within each time bank.
Each time bank community has its own time credits
Time credits circulate and build up inside a time bank community
Can Time Based Currencies Have a Monetary Value?
The underlying concept of time as a currency and timebanks themselves is to avoid any association with fiat currency or pinning the value of time versus anything that could fluctuate in value. If this began to happen, it would arguably destroy the very fiber of how time banks work. However, it is possible to pin a currency value to time based currencies outside of a timebank community.
One organization in the US called Ithaca HOUR has built up 100s of thousands of hours’ worth of time currency within its community. This is a system that pegs 1 hour of work to 1 hour time, while 1 hour is worth $10.00. The idea of this system was to stop money leaving the local the economy which in turn boosts businesses and commerce within that community.
Many other areas around the US also followed the Ithaca HOUR system. The system still exists today, but since the founder Paul Glover left the organization, it has slowly begun to decline in popularity. You can read more about the Ithaca HOUR system here.
Time based currencies within a time bank cannot have a monetary value
Some non-timebanking organizations pin time and currencies
Potential Issues with Time Based Currencies Within Time Banks
There are of course some issues that time banks will need to iron out as they grow in size. Private deals whereby people pay 2 hours in credits for an hour of time can happen.
In large time bank communities, this is something that the organizers can try to discourage but not something they can always 100% control.
If a particular person’s skills are in demand, some members may start to haggle for that person to work on their project. For example, they may offer double credits for an hour of work. Private deals like this are something that may occur within timebanks, but as long as they stay private, then the idea of equality and mutualism remains.
What timebank organizers and members alike do not want to see is a system that spirals out of control. For instance, lawyers start demanding 3 hours of time credits for 1 hour’s work. Allowing this to happen could create the potential issue of time credits falling into the same valuation systems used by fiat currencies where on the open market hour’s work according to a person’s skills can be vastly different.
Albeit timebank members can quickly put a stop to such instances. Those demanding more than an hour’s worth of credits for an hour of labor are usually caught out by other members who want to stick to the underlying concept of time-based currencies used within time banks. That is an hour of labor for an hour time credit, no matter the value of someone’s skill on the open market.
Time bank members can overinflate the value of their work
Members could increase the value of 1 hour’s labor to 2 hour’s payment
Timebanks have social mechanisms in place to prevent overinflation
Time bank members inherently want to keep time based currency valuation
Time Based Currencies in Brief
The concept of time based currency is based on 1 hour of time for 1 hour in time currency. Time is the medium of exchange and the value of each time credit never fluctuates. People that have a store of time credits do not earn interest on those time credits, they cannot loan time credits, and there is no tax for time credits earned.
In essence, the value of time currency is consistent which the same cannot be said for fiat currencies such as the US$, UK£, EU€, and other major currencies.
That said, some timebanks will need to tackle issues in which a few members may try to overinflate the value of time currency by either offering an extended number of time credits worth more than the value of time spent carrying out the labor or those trying to charge more time credits than the time they are willing to contribute labor.
However, such situations should not become a major issue because the majority of people within a timebank community are likeminded. They work together to sport and prevent people from overinflating time currency or trying to take advantage of the system for personal gain. The common goal of social equality within a timebank will overrule those trying to change the system.
It is also worth noting that time based currency is not something that is only seen within time banking. There are other organizations out there trying to find other ways to introduce time based currencies as solution. You can also see how time is used as a currency in all kinds of industries and organizations outside of timebanking by reading our ‘Time Bank Blockchain: Why Time-Based Currency is the Next Bitcoin?’ article here…