Temple Melville, CEO of The Scotcoin Project CIC, recently shared his thoughts on Sardinia with City AM. He wrote:
You would be forgiven for thinking that a crypto, is a crypto, is a crypto. Yet, there are systems out there which make use of something other than fiat cash as a medium of exchange, but definitely are not using what we think of as cryptocurrencies.
There are crossovers between the two that are worth exploring. For instance, these systems are focussed on small areas and one of the most impactful uses of crypto is in local areas to enhance people’s lives. I’ve talked about Switzerland’s WIR before, so let’s take Sardex in Sardinia as an example.
Sardex is centred in Sardinia, with only companies and people within this area eligible to participate. Although it is being set up in other regions of Italy, the different ‘unions’ – for lack of a better expression – in the wider network do not and cannot trade between themselves.
To that end, all of the effort expended in Sardinia remains in and is spent locally. This retention of circulating money in specific areas has long-been recognised as one of the drivers of growth for regional economies, going back decades.
Two examples in the UK come to mind. The first is Norwich, which is a long way from any other big cities, yet has retained a prosperous ecosystem. Cash earned in Norwich – and brought in from outside, via the likes of Norwich Union – ensured the city has flourished.
Another case in point is Liverpool. The city had its very own bank called Martins Bank until 1969, when it was acquired by Barclays. Arguably, part of Liverpool’s success in the year prior was Martins’ localised situation, with managers knowing their customers and reacting accordingly.
Once Barclays took over – and Liverpool was already in decline for a number of reasons – that localised knowledge degraded and lending decisions inevitably became more automated. Might the city have fared better than it did during the 1970s, 1980s, and 1990s with its own bank? Quite possibly.
This neatly brings us back to Sardex. Its member companies use a digital platform that allows them to extend each other credit. A dentist can offer to fix the teeth of a carpenter and be paid in Sardex credits and the dentist can then use Sardex credits she’s earned to buy groceries from a grocer.
From there, the grocer can pay the carpenter to build new shelving in his store, closing the ‘credit loop’. Several transactions have occurred without anyone having to pay any actual euros to one another.
HOW IT WORKS
The system works by each Sardex business member being encouraged to buy and sell their services using credits in roughly equal volume, so their net balance remains roughly even. Each Sardex user negotiates an upper limit to how much debt they can get into and how much credit they are willing to accept as payment. Each member’s credit status and limits are open for anyone in the network to view online, building trust and transparency.
Perhaps as importantly as providing the online platform and credit accounting framework, Sardex actively helps members find trading opportunities. Sardex brokers monitor members’ online offerings and accounts, looking for possible matches – say, for instance, an olive oil producer and a grocer.
They contact prospective counterparties and suggest they do business with each other using Sardex as a medium. There are various systems based on similar ideas – BBX, and organisation we are involved with, and Bartercard come to mind – but they have slightly different rules and aims.
There you have it – hours of work or expertise are used as the currency and the Sardex is used to keep a tally. In reality, that is very much what cryptocurrencies are doing on a much larger scale.
Within the system, people are content to accept work in exchange for Sardex credit. Using a crypto like Bitcoin – and, in time, Scotcoin – exactly the same concept could apply. So, while Sardex is not a crypto, it operates very much like one – and it’s an idea we should embrace in the UK.