The P2P lending sector is growing all the time with the main companies starting to increase custom and size. The rise of P2P lending is helping bring money and its nature into the wider consciousness. Alongside this sits other proposals for fully distributed money systems. Many of these revolve around traditional and tested complimentary currencies such as LETS, Time$ and other locally based systems.

One proposal is Ripple. It’s been around for a few years and there is some good information on the site including the initial paper from Ryan which I have posted up in the research section. There’s plenty of commentary around about it which is worth a look at. Essentially it proposes to replace bank created debt money with personally created credit through a fully distributed network based system. What is good about this proposal is that it takes the concept of local currency systems to its logical conclusion which is a globally based one with servers finding the right path to the appropriate relationship or network.

The most important part of this is identifying that most of what we think of as money is in fact simply an IOU. So why should banks create this? Well the main reason is trust. What Ripple proposes is the creation of that trust through networks, which as we know are already widely in use.

Jamesey proposes a further layer on top of this adding in microfinance structures and leveraging off the Paypal system.

We also have very well embedded and established credit card systems (Amex and Visa) who already have the distribution systems. So the trust system is going to be a key issue. Who is in your network? Who can you trust? I’d suggest and I hope that VortexDNA will play a role in helping this kind of global protocol to develop.

The main problem is the control of supply. One would like to think that a complex system, such as proposed, would regulate itself constantly adjusting to feedback. We know that the current system is close to imploding because of rampant money creation. So cculd it be any worse? Could governments participate also?

It’s open season and anything is possible.

News comes of a huge class action suit brought in Canada by a litigator called John Dempsey. Following on from John Kutyn’s (a Canadian living in NZ) paper “the Nature of Money” it takes the next step of actually calling banks to account under the law.

It’s being held up in the courts but at some point the suit must be acknowledged and heard. Its a tough one for the judges as they are being asked to rule on one of the most accepted practices in society today, namely the equivalence of “digital money” and cash in the form of notes and coins.

With the relentless advance of Peer to Peer lending systems coming online and complimentary currencies in every country it is easy to see how a major change is underway. Sure the banks may not be too concerned now but we are seeing the beginnings of a major revolution in what we know as money.

CircleLending has been snapped up by Virgin and rebranded as Virgin Money USA. It’s a spunky move by Virgin as they seek to expand into the US market. Branson has big plans for the US and this is a great starting point. He’s already beamed himself down to Boston today for the usual PR fest that accompanies any of his moves. What can you say? He’s a great showman as well as a passionate entrepreneur.

The face of money is changing all the time and whilst money will not disappear as some forecast the process of exchanging it will and the web will be the platform for that whether online or mobile.

Lend us a tenner?

Giving is in the news a lot recently especially with the publication of Bill Clinton’s book, Giving. I’ve mentioned previously that i  am a big fan of Kiva and today some of my first loans were repaid. So far i’ve made 15 and 4 have repaid all ahead of time which is great.

So with new money available to re lend i searched out some new potential borrowers but could only lend $25 at a time and then just two loans in total. Why?

Because Kiva is so overwhelmed with support that there are not enough businesses to lend to. They want to make sure as many people as possible get to be involved.

That’s great news on all fronts.

Ultimately we are moving towards a point where money will be viewed more and more as energy, not to be stored up but to be spread around. P2P finance, as well as other forms of exchange, have the opportunity to subvert current systems because it is people led. Social capital via the web is being built at an astounding rate.

Giving  is just one way of building this social capital which will be so important to the success and prosperity of society.

Kiva has been a remarkable success story and one which could really change the way we spread our hard earned around. Charity has always been a core value for humanity as a way of expressing gratitude for what we have and compassion for those who don’t.

But Kiva is not a charity it is a lending organisation with a difference: they don’t charge interest on their loans. So in effect you are donating money but you get it back!

This changes the dynamic from charity to help.  I love this  approach. I made a deposit of $1000 about 6 months ago and lent money to 15 different people all over the world and so far 2 loans have fully repaid whilst the total amount lent is $1075 and repaid $595 (you only get fully repaid when whole loan is paid up).

What is exciting is helping out so many people but as help rather than charity. There is no interest, which as you know from previous posts is the cause of all human suffering.

I am also keen to see how far that $1000 can go because as soon as loans are fully repaid you can lend out again.

Try it out….its a great experience.

I’ve been following the spread of microfinance for a while and have been getting involved with Kiva which has been a great experience. I have also noted the rise of social lending businesses such as Zopa, Prosper and even Facebook. Jason has written a good piece on the rise of new forms of financing.

What interest me further is whether all finance can move to a P2P platform and seriously eat into the major lending markets currently controlled by the commercial banks.

I think it could do. This crosses the web with money and complimentary currencies.

Remember that anyone can create “money” if they really want, it just can’t be in the form of bank notes issued by the Reserve Bank. Commercial banks create bank loans by a simple bookkeeping entry. Only 2% of the money supply in NZ is in the form of notes and coin so banks don’t actually hold any money other than a bit of cash.

My point is that P2P finance could take off in a very big way once we get the hang of it. My guess is that the firms currently involved don’t realise how big this could be.

Expect the central banks to cast their beady eyes over these operations once they get a roll on. For now it’s just some web bizness but this feels like 1694 all over again.