Our digital local currency is a great tool to promote sustainable economics. Here’s why.
As we head into this winter facing a global energy crisis, the need to transform the way we do things – to find sustainable solutions on every level of economic activity – has never felt more urgent. The good news is that those greener solutions have also never been closer, and in Zurich, the digital currency Leu is one example.
Leu was launched in May 2022, the first local currency to be created on the Encointer platform. It is distributed unconditionally to participants in Zurich, which is where the environmental advantage comes in.
The key benefit of a local currency – something that can be spent only within a single town or neighborhood – is always that it can strengthen the local economy. This is because it reduces the drain of local spending out of the community; money that is circulated within a single area has a strong multiplier effect, boosting overall consumption and income. And with Leu, local spending also promotes more sustainable consumption. How?
The key point is that Leu is not bought with regular currency, but regularly issued. So it acts as an unconditional income, boosting spending power in the community. Leu is also subject to demurrage: this means that unspent balances are reduced by a fixed percentage each week, in order to encourage spending rather than hoarding the currency.
The net effect is to make it easier for participants to afford locally produced goods, which tend to cost more than imports financially, but far less in carbon emissions. Imported food, for instance, is a big problem. In Zurich, food accounts for a third of the overall environmental impact of consumption (largely because of the huge carbon footprint of air transport), so food strategy forms a major part of Zurich’s commitment to achieving net zero carbon by 2040.
But apart from the transport savings, Swiss goods are also produced to higher environmental standards. That means there’s a double sustainability benefit to buying local – but those high standards do make goods more expensive. So the Leu boost is helpful in reducing the cost barrier, and supporting the city’s goal of promoting sustainable consumption.
Resource-light and community-building currency
As for the payment system itself, Leu uses digital infrastructure that already exists. Participants need only a mobile phone and internet connection. Unlike physical local currencies, no notes need to be printed and no coins need to be minted. (And unlike Bitcoin or similar cryptocurrencies, Leu is not mined, sparing the heavy carbon cost of the proof-of-work consensus. In fact, the underlying blockchain has the lowest carbon footprint of any network.) As a result, the energy consumption required is comparable to that of centralized payment systems like Visa or Twint.
Encointer’s community-led design is another strong advantage for promoting sustainability. Top-down directives will always struggle to gain support, even when the end goal, such as fighting climate change, has broad support. But research has shown that public participation in decision making promotes better results – and not only does it drive greater commitment to declared goals, it also gives participants more confidence in their own voice. That creates the foundation for further community action.
What does this mean in the case of Leu? The currency is entirely ruled by community governance: participants jointly decide the size and frequency of the income issued (currently 44 LEU every 10 days) by democratic vote. Everybody who claims the income or accepts the currency has a say, so Leu belongs to everyone. Even the value of Leu is self-determined, and so self-sustaining: 1 LEU is worth 1 CHF because participating merchants have agreed to that, not because it is backed by Swiss francs. That keeps the currency independent of external funding.
But beyond the mechanics, Leu encourages identification with Zurich and brings together people who might not otherwise meet. Members need to attend key-signing gatherings where a random selection of participants confirm each other’s attendance using the app (to ensure that only real, local people claim the income, and nobody can claim more than their share). Every gathering is an opportunity to share concerns and motivate fellow Leu holders to join in sustainability initiatives. Every gathering holds the potential to spark new social activism. Leu forms the basis for a cohesive city-wide network that transcends culture or politics, providing the widest possible base for community action.
Could an Encointer currency deliver the same benefits for your town? As shown, encouraging consumption of locally produced goods can have an outsized impact on indirect emissions, while creating economic uplift. On top of that, Encointer’s unique design intrinsically strengthens the social fabric. What can your community achieve with Encointer?
