The Power of Money: Lessons from Introducing Digital Currency to a Barter Community

The white paper download is in the article…it’s worthwhile to give a read if you may be curious about this niche…

Mostly Economics

Michael Wong of MIT in this interesting paper:

I investigate how digital currency issuance by a private online platform affected the exchange of used goods in a large North American barter community. Since the community banned cash, users initially relied on beer, gift cards, and transit tokens to complete transactions. The community then introduced a digital token that could be transferred among users and redeemed at designated local stores for retail goods. Using comprehensive transactions data, I show that a large monetary expansion persistently increased transaction volume by 70% but did not create inflation. However, when token redemption was suddenly halted at a subset of stores, a run on the token ensued and transaction volume fell. I use a search-theoretic model of money to interpret these findings.

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