In the past few years we’ve been witnessing the new massive waves of cryptocurrency adoption — you can now pay in Bitcoin for almost anything from coffee to real estate. But the ideas were always above money in community and there is still so much untapped potential from decentralized digital coins. A history of Saber — a Brazilian complementary currency project, developed in early 2000s to promote the educational system, is an important example of the social potential we tend to forget keeping up with the rates of exchange.

Brief history of complementary currencies

Complementary currencies (CCs), also known as community currencies, are basically an alternative (or, indeed, a compliment) to conventional money. Their purpose is usually to strengthen the local economy at times of recession by stimulating additional transactions and therefore keeping the economic cycle in motion or to achieve certain social, environmental, or political goals.

In most cases CCs are not legal tender - i.e. they are not accepted at a national level; you can’t buy whatever you want using it - they only function as a quasi-monetary exchange medium for certain purposes within a restricted area. In theory, CCs should stimulate the local economy and encourage people to act collectively intelligent. Although replacing conventional money and undermining national currency is not usually the goal of a complementary currency, the state often appears to be reluctant to the idea, and the model has developed the reputation of an experiment, not a proven method.

The first complementary currencies could be traced back to ancient Egypt, where local people used otrakas — pieces of pottery — to issue receipts for the amount of harvest farmers would put into storage. Those pieces, in turn, could have been traded for local services. Similarly, in medieval Europe people would regularly turn in bracteates — pieces of jewelry — for new coins, although always with a deduction. The system was designed to prevent people from hoarding coins and keeping them out of the financial ecosystem. That, in turn, would increase the velocity of regular money.

In recent history, CCs started to appear in the first half of the 20th century. One of the most notable example is the Wära free economy experiment held in Germany. The Wära was a currency introduced by Hans Timm and Helmut Rödiger, followers of a German merchant, theoretical economist and anarchist Silvio Gesell. During the course of the experiment, Wära banknotes were printed, available in denominations of 1/2, 1, 2, 5, and 10 Wära (one Wära would be equal to one Reichsmark) to support the economy of a mining town Schwanenkirchen, which had been hit with massive unemployment. Like otrakas in Ancient Egypt and bracteates in medieval Europe, Wära was a demurrage-charged currency, which means that each banknote had a monthly cost fee of one percent of its nominal value. This prevented people of Schwanenkirchen from storing the currency and putting it out of active circulation. It had its benefits for users too: for example, people who bought coal (the local economy’s staple) using Wära received a discount.

During the course of the experiment, Wära allowed local services to continue despite the fact that the national currency was scarce. As a result, new jobs were created and taxes were paid. However, the scheme ended abruptly: the finance ministry of the Reich forbade the currency, and the town returned to its previous decadent state.

Similar experiments were held in other countries around that time: local currencies were used in Wörgl, Australia (1932 - 1934), Alberta, Canada (1936) and in the US during times of Great Depression.

The Saber experiment

In 2003 a Belgian economist Bernard Lietaer collaborated with Brazilian professor Gillian Schwartz of São Paulo University - who has previously worked as an economist at various public and private financial institutions including BankBostal - to submit a proposal for a complementary currency called The Saber to the government of Brazil.

Saber was aimed to help Brazilian schools provide greater educational opportunities “without creating any new financial pressure on the economy”. The educational vouchers were designed to launch a substantial “learning multiplier” so that a given amount of money can produce more learning for a bigger number of students. In other words, The Ministry of Education would allocate Sabers among schools in economic areas where normally there is no funding for higher education. Local students at the age of 7 were to receive a certain amount of Sabers on the condition that they must choose a mentor among older students (they can later earn more Sabers by giving those lessons at the rate of 5 Sabers per hour). At the end, when they turn 17 and graduate from school, they could spend the gathered Sabers to pay (fully or partly depending on the available amount) university tuition fees.