Bitcoin — billed as an open source, peer-to-peer digital currency — looks to some enthusiasts like the latest stage in the evolution of money, a journey that included the first coins in Greece or Persia in 700 to 650 B.C., the first paper money in China in the seventh century and the first credit cards in the U.S. in 1950. To skeptics, the volatility of the Bitcoin, which has fluctuated wildly in value, shows the danger of using a currency not issued or backed by any government.
But the truth is that money is worth what we believe it’s worth, and there have always been mediums of exchange beyond the government-minted variety.
Click ahead for a look at 10 alternative currencies that have been popular in various places over the years.
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In 1955 Tennessee Ernie Ford had a No. 1 hit with the song “Sixteen Tons,” which described the hard life of a Kentucky coal miner in the early years of the 20th century. Besides their backbreaking work, such workers often had to deal with being paid in company scrip rather than cash. They thus were forced to spend their pay in stores owned by their bosses, which meant saving money and shopping around for good deals were not options.
That kind of system is not just a relic of America’s distant past. Mexico’s Supreme Court ruled in 2008 that Wal-Mart’s subsidiary in that country was violating the constitution by paying workers, in part, with vouchers good only in its own stores.
The economic crisis in Greece has made euros scarce in parts of the country, forcing many Greeks to barter for what they need or find other ways to pay for everyday goods and services. In the port city of Volos, 200 miles north of Athens, locals developed an alternative currency called TEMs. People earn them by doing jobs for one another; instead of being paid in euros, they get credits called Local Alternative Units (TEMs in Greek) for their labors. The credits are stored in an online account and can be used to buy goods and services from others in the town.
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In an effort to keep their dollars from destabilizing local currencies, military personnel in some countries were paid with colorful paper notes called Military Payment Certificates or MPCs. The practice began after World War II in Europe and continued until just after the end of the Vietnam War.
The idea behind the MPCs, also known as scrip, was to avoid disrupting the local currency with a flood of U.S. dollars. In Vietnam, however, local merchants began accepting MPCs, and a healthy black market blossomed. To stymie the black market activity, U.S. military authorities would conduct surprise currency exchanges, requiring soldiers to convert their existing MPCs into a new style of scrip. Black marketeers and others left with the old MPCs would suddenly find the currency worthless.
Millions of young people in Spain are unable to find paid work. The unemployment rate among 16- to 24-year-olds topped 57% in the first quarter.
Since they are unable to trade their labor for money via a traditional job, many are swapping an hour of their labor for an hour of someone else’s, via a time bank like the Barcelona Banco del Tiempo, which was established in 1998.
Rather than swapping jobs directly, the time bank allows members to get credit for hours of service they’ve performed for others and then use those credits to pay for work they need done. The credits are valued ashoras (hours), with one hour of any type of work — from home repair to child care — worth the same as any other hour worked.
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The alternative currency in Ithaca, N.Y., provides a different twist on the idea that time is money. Ithaca Hours are paper bills worth $10 each, because when the currency was launched in 1991 by community organizer Paul Glover, $10 was the average hourly wage in Ithaca and surrounding Tompkins County.
Currently more than $100,000 worth of hours are in circulation, supporters say, and more than 900 businesses and individuals in town accept the scrip for goods and services. Bills are available in quarter-, half-, two- and four-hour denominations. Proponents say the main value of a local currency is that it stays in the community.
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The U.S. dollar went off the gold standard practically in 1933 and completely in 1971, but from 1998 to 2007 some Americans were using a precious metal-backed currency called the Liberty Dollar. It was the brainchild of Bernard von NotHaus, who for years made collectible coins in Hawaii. In 1998 he began producing the Liberty Dollar as an alternative currency, and by 2006, millions of dollars worth of Liberty Dollars were in circulation across the country. They included coins made from actual gold and silver and notes said to be backed by silver reserves.
The operation ran afoul of the U.S. government, and in 2011 von NotHaus was found guilty of minting and distributing his own currency.
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BerkShares, an alternative currency used in the Berkshire region of western Massachusetts, was launched in September 2006 with the aim of promoting local businesses. More than 1 million BerkShares were circulated in the first nine months, and more than 400 area businesses accept the paper currency, which bears the likenesses of prominent figures from the region’s past, including Herman Melville, W.E.B. DuBois and Norman Rockwell.
The currency is available through five area banks, which have 13 branch offices that serve as exchanges. Customers can buy $100 in BerkShares for $95. Because local businesses accept the currency for purchases as if they were dollars, paying with BerkShares means getting an automatic 5% discount.
If you want to succeed in the online role-playing game World of Warcraft, you need a lot of gold. You need the in-game currency to buy skills, equipment and other things, and to earn it you have complete tasks (gathering herbs, say) or quests. Some players find the effort tedious and time-consuming, and that has created a business opportunity: Some players earn vast fortunes of in-game money that they then sell to other players for real-world currency. With nearly 10 million people playing the game worldwide, the market is huge.
Blizzard Entertainment, the company behind the game, bans the practice, which is called gold farming. But a quick search shows it hasn’t managed to stop it.
Second Life is an online virtual world where you can see through walls, teleport yourself or even fly. Participants also do some of the same kinds of things people do in real life, including buy things, start businesses, travel or hear live music. As in the real world, these things cost money, and the virtual currency is Linden dollars. A virtual motorcycle for your avatar to zip around might set you back 900 Linden dollars, while an oak gazebo for your Second Life apartment is L$10. As with the currencies of the big multiplayer roleplaying games, you can earn your money within the virtual world, or you can just spend some real money to buy some. What’s different is that the purchase of Linden dollars is perfectly acceptable, and can even be done from within Second Life. A dollar will buy about L$250, although like other currencies the value of the Linden dollar fluctuates. You can track the exchange via Twitter.
Gift certificates and gift cards are considered a form of scrip, or alternative currency, and have become a major way consumers pay for goods and services. Sales of gift cards were projected to top $110 billion in 2012, according to CEB TowerGroup research, which predicted in mid-December that 85% of the U.S. population would exchange gift cards during the holiday season.
One of the problems of using gift cards as currency is that some of the money is never spent. That residual value — what the industry calls “spillage” — was about $1.7 billion in 2012, down from about $8 billion in 2007. Restrictions on expiration dates have helped, as has the emergence of gift card exchanges like Plastic Jungle.