This may not seem alarming at first, but imagine—for a moment—a scenario where all the money you’ve acquired literally becomes worthless? When wads of your hard-earned cash can barely buy you a loaf of bread, and your banknotes are reduced to toilet paper or repurposed into handbags…

But despite the promises that may be printed on our banknotes, fiat currency isn’t backed by anything. Governments can print as much as they want, whenever they want. So a £10 note in your piggybank today will still be a £10 note next year, but its purchasing power is ever decreasing with so-called quantitive easing by central banks. Fiat currency is not a store of value.

Fiat currency is not your friend. Sure, it may have the characteristics we have collectively agreed to represent money: it’s fungible, durable, divisible and portable. We might even agree on its trade value; Bob’s basic tomatoes should cost £1, Alice’s organic tomatoes are more scarce and cost £3 etc, because supply and demand dictates an object’s value in our society.

It might be hard to fathom the idea of it happening to you, but no one expects their life savings to become worthless... until it does. It’s a toxic side effect of hyperinflation which has happened throughout the history of fiat currency; Germany in the 1920s, Zimbabwe in the late 2000s and even now in Venezuela, where just last month a kilogram of meat would have cost 9,500,000 bolívares ($1.45).

Interestingly, in a bid to curb its staggering inflation rate the Venezuelan government decided to simply “paint the roses red” and remove five zeros from its currency. A curious strategy. The new banknotes are called the sovereign bolívar, and the country’s exchange rate has now been pegged to a new state-backed cryptocurrency, the Petro.

The Petro has also come under a lot of scrutiny. The government claims the cryptocurrency is backed by the country’s oil and mineral reserves, however according to recent reports those reserves are yet to been found and the currency’s volume is virtually non-existent. But despite the fact that government-backed cryptocurrencies seem to contradict the decentralised nature of blockchain, it has once again thrown cryptocurrency into the mix as a solution to real-world economic crises.

Bitcoin is immune to hyperinflation; Satoshi Nakamoto wrote into the code that there can only ever be 21 million coins. Also the miners can only mine at a certain pace, and everything is open-source and transparent. But although some crypto-enthusiasts are encouraging Venezuelans to adopt Bitcoin, it’s not currently fast or efficient enough to be a viable payment method for processing day-to-day transactions, such as buying a loaf of bread.

Other crypto communities, such as Smartcash, have also made efforts to utilise blockchain technology in Venezuela to help people in poverty. But is it time to take crypto one step further and introduce blockchain-based community currencies to combat economic issues?



The Smartcash community allocated some of their own funds to help people in need

On the surface, everyone creating their own local coins sounds almost inflationary, but let’s imagine going to your home city, and purchasing some fruit with your very own citycoin. Your local greengrocer accepts your citycoin and pays his landlord with it, circulating the wealth within a localised area, and so on and so forth. If the landlord chooses to hold on to his citycoin and save up his wealth, he can do it safe in the knowledge that the currency supply can’t be manipulated by an external force. But could this actually work in practice?

A community currency pilot is currently taking place in Kenya right now, and in the city of Mombasa, people have successfully traded tomatoes, chapatis and other market goods using a tokenised version of their own local currency, the Bangla-Pesa.