Local Exchange Trading Systems, or LETS, are alternative economic systems that allow people to exchange goods and services without using traditional currency. These systems operate on a local level and are based on mutual credit, relying on trust among participants to facilitate exchange within a community. The purpose of LETS is to promote economic activity and increase wealth within a community, especially in disadvantaged areas where traditional economic systems may not be serving the needs of the community. 

Local Exchange Trading Systems can also create more equitable and self-sufficient communities by facilitating exchange within a local area and reducing dependence on national currencies and the traditional economic system. While there are many potential benefits to LETS, such as their ability to promote economic activity and increase wealth within a community, there are also some challenges to consider. These challenges include the limited scope of LETS, which can make it difficult for them to facilitate larger or more complex transactions, and the potential for trust to be difficult to maintain in larger or more impersonal systems. Additionally, LETS may be vulnerable to external economic and political forces.

The origins of Local Exchange Trading Systems and how they have evolved over time

The concept of Local Exchange Trading Systems can be traced back to the early 1900s, with the establishment of the WIR Bank in Switzerland as a way for businesses to trade with each other during the Great Depression. The modern concept of LETS emerged in Canada in the 1980s, with the creation of the first LETS system in the town of Nelson, British Columbia. Since then, LETS have spread to various countries around the world and have taken on various forms. Some Local Exchange Trading Systems operate as non-profit organizations, while others are run by for-profit businesses. Some use traditional currency, while others use alternative forms of currency or mutual credit.

The evolution of Local Exchange Trading Systems has been influenced by a variety of factors, including economic conditions, technological advancements, and political and social movements. For example, the development of the internet has made it easier for LETS to connect with one another and facilitate exchange, while economic recessions and economic inequality have spurred the growth of LETS as a way to create alternative economic systems.

Examples of successful Local Exchange Trading Systems in different countries

There have been numerous examples of successful LETS around the world. The Bristol Pound, for example, is a local currency that was launched in the city of Bristol, England in 2012 as a way to promote economic activity within the city and reduce the city’s reliance on national currency. The Bristol Pound has been successful in encouraging local trade and has even gained the support of local businesses. As of 2021, the Bristol Pound has over 500 businesses accepting it as a form of payment and has facilitated over £2.5 million in local trade.

Another successful example is the Ithaca Hours system in Ithaca, New York, which was established in 1991 as a way to promote economic activity within the local community. The Ithaca Hours system uses its own local currency, which is accepted by participating businesses and organizations in the Ithaca area. As of 2021, the Ithaca Hours system has over 200 participating businesses and has facilitated over $500,000 in local trade.

Other successful examples of Local Exchange Trading Systems can be found in countries such as Australia, Japan, and Germany. The Kurri Kurri Community Exchange in New South Wales, Australia, for example, is a LETS system that was established in 2002 to promote economic activity and social connections within the local community. As of 2021, the Kurri Kurri Community Exchange has over 130 participating businesses and has facilitated over $200,000 in local trade.

LETS have also gained popularity in Japan, with the establishment of the Fureai Kippu system in the late 1980s. The Fureai Kippu system is a time-based currency system that allows individuals to exchange goods and services through the use of units of time. As of 2021, the Fureai Kippu system has over 5,000 participating businesses and has facilitated over $10 million in local trade.

In Germany, the Berlin Time Bank is a successful example of a LETS system that uses time as a form of currency. The Berlin Time Bank was established in 2003 as a way to promote economic activity and social connections within the local community. The Berlin Time Bank operates by allowing individuals to exchange goods and services with one another using units of time as currency. As of 2021, the Berlin Time Bank has over 1,000 members and has facilitated over 10,000 hours of local trade.

Overall, these examples demonstrate the potential for LETS to facilitate economic activity and promote social connections within local communities. LETS can provide an alternative to traditional economic systems and can help to promote economic activity and social connections in a way that is more localized and community-driven.

How Local Exchange Trading Systems work

The process of setting up and participating in a LETS

The process of setting up and participating in a LETS can vary depending on the specific system in question. However, there are some general steps that are common to most LETS.

First, individuals or organizations interested in setting up Local Exchange Trading System will need to establish the rules and guidelines for the system. This can include determining the unit of exchange (such as a traditional currency, mutual credit, blockchain-based cryptocurrency, or units of time), setting up a system for recording and tracking exchanges, and establishing a process for resolving disputes.

Next, individuals or organizations interested in participating in the LETS will need to sign up and become members. This usually involves completing a registration process and paying a membership fee, if applicable.

Once a Local Exchange Trading System is established and individuals are registered as members, they can begin participating in the system by offering goods or services for exchange. This can be done through a directory or other platform that lists the goods and services being offered by members. When a member finds a good or service that they are interested in, they can negotiate the terms of the exchange with the other member and complete the exchange using the agreed upon unit of exchange.

The role of trust in Local Exchange Trading System and how it is maintained

Trust is an essential element of LETS, as it allows for the exchange of goods and services without the need for a central authority to oversee and enforce the exchange. In LETS, trust is maintained through a variety of methods, such as establishing clear rules and guidelines for the system, setting up processes for resolving disputes, and relying on the reputation of individual members.

One way that trust is maintained in LETS is through the use of a scoring system, which records the exchanges that individual members have completed within the system. This scoring system can help to build a reputation for members within the LETS and can serve as a way for other members to gauge the reliability and trustworthiness of potential trading partners.

Another way that trust is maintained in LETS is through the use of a central accounting office or other neutral third party that oversees the system. This entity can help to ensure that exchanges are recorded accurately, resolve disputes, and ensure that the rules and guidelines of the LETS are being followed.

The use of alternative forms of currency or mutual credit in LETS

In some LETS, traditional fiat currencies (such as dollars or euros) are used as the unit of exchange. In other cases, alternative forms of currency or mutual credit may be used.

One common alternative to traditional fiat currency in LETS is the use of units of time as currency. In these systems, goods and services are exchanged based on the amount of time that it takes to complete them. For example, one hour of gardening might be exchanged for one hour of accounting services.

Another alternative to traditional currency in LETS is the use of mutual credit. In these systems, exchanges are recorded as credits and debits in the accounts of individual members. Members can then use their credits to purchase goods or services from other members, or they can earn credits by providing goods or services to other members.

In recent years, the use of blockchain technology and cryptocurrency as an alternative form of currency in LETS has gained popularity. Cryptocurrencies, such as Bitcoin or Ethereum, offer a decentralized and secure way to facilitate exchanges within a LETS. These digital currencies can be used in much the same way as traditional fiat currencies or mutual credit , allowing members to purchase goods and services from other members using the cryptocurrency.

The use of alternative forms of currency or mutual credit in LETS offers several potential benefits. For example, it can help to reduce reliance on traditional fiat currencies, which are often subject to inflation and other economic fluctuations. Alternative forms of currency can also offer a more equitable way to facilitate exchanges, as they are often based on units of value that are not subject to the same type of price fluctuations as traditional currencies.

However, there are also potential drawbacks to using alternative forms of currency or mutual credit in LETS. For example, these systems may be more complex and harder to understand for some members, and there may be a learning curve involved in using them. Additionally, there may be security risks associated with the use of blockchain technology and cryptocurrency, as these systems are still relatively new and untested. Overall, the decision to use alternative forms of currency or mutual credit in a LETS will depend on the specific needs and goals of the community in question.

Benefits of Local Exchange Trading System

The ability of LETS to promote economic activity and increase wealth within a community

One of the primary benefits of LETS is their ability to stimulate economic activity and increase wealth within a community. By providing a means for individuals and businesses to exchange goods and services without relying on traditional fiat currencies, LETS can help to create new economic opportunities and foster greater financial independence within a community.

For example, in a LETS, individuals and businesses who may not have access to traditional sources of credit or capital can still participate in economic exchange and build their wealth. This can be especially beneficial in disadvantaged or underserved communities where access to traditional financial services may be limited.

Additionally, LETS can help to stimulate local economic activity by keeping money circulating within the community. When individuals and businesses participate in a LETS, they are more likely to spend their money on goods and services from other members of the community, rather than on products or services from outside the community. This can help to create a virtuous cycle of economic activity, as the wealth generated within the community is reinvested back into the community, creating new economic opportunities for all members.

The potential for LETS to create more equitable and self-sufficient communities

In addition to their economic benefits, LETS can also contribute to the creation of more equitable and self-sufficient communities. By providing a means for individuals and businesses to exchange goods and services outside of the traditional economic system, LETS can help to reduce dependence on external sources of capital and resources.

For example, in a community that relies heavily on external sources of food, the establishment of a Local Exchange Trading System that enables the exchange of locally-grown produce can help to reduce the community’s reliance on external sources of food and increase self-sufficiency. Similarly, a LETS that enables the exchange of locally-produced goods and services can help to reduce the community’s reliance on external sources of goods and services, and increase the community’s economic independence.

Overall, the establishment of LETS can help to create more equitable and self-sufficient communities by providing a means for individuals and businesses to exchange goods and services that is not reliant on traditional financial institutions or the larger economic system. This can help to level the playing field for those who may not have access to traditional sources of credit or capital, and enable greater economic independence for all members of the community.

The social and community-building aspects of Local Exchange Trading Systems

In addition to their economic benefits, LETS also have the potential to create stronger, more connected communities. By facilitating exchange between individuals and businesses within a community, LETS can help to build social connections and foster a sense of community ownership and pride.

For example, participating in a LETS can provide opportunities for individuals to connect with their neighbors and build relationships with other members of the community. This can help to create a sense of community ownership and pride, as individuals feel invested in the success of their community and the well-being of their neighbors.

Furthermore, the establishment of a LETS can provide a platform for community organizing and decision-making, as members come together to discuss and address issues affecting the community. This can help to create a sense of collective ownership and responsibility for the well-being of the community, and can lead to greater community engagement and participation.

Overall, the social and community-building aspects of Local Exchange Trading Systems can contribute to the creation of stronger, more connected communities that are better able to address the needs and challenges facing their members.

Challenges of Local Exchange Trading Systems

The limited scope of LETS and their ability to facilitate larger or more complex transactions

One of the primary challenges facing LETS is their limited scope and ability to facilitate larger or more complex transactions. As LETS rely on trust and personal relationships between members, they may not be well-suited to facilitating transactions between strangers or those who are not personally known to one another. This can limit the potential reach and impact of LETS, particularly in larger or more diverse communities.

Additionally, the use of alternative forms of currency or mutual credit in LETS may also pose challenges for facilitating larger or more complex transactions. As these forms of currency are not backed by any central authority or asset, they may not be accepted by individuals or businesses outside of the LETS community. This can limit the ability of LETS to facilitate trade with external parties or to access a wider range of goods and services.

The potential for trust to be difficult to maintain in larger or more impersonal LETS

Another challenge facing LETS is the potential for trust to be difficult to maintain in larger or more impersonal systems. As LETS rely on personal relationships and trust between members, the maintenance of trust may be more difficult in larger systems or those that are not as closely knit. This may be particularly true in systems where members are not well-known to one another or where there is a lack of personal accountability.

The potential for Local Exchange Trading Systems to be vulnerable to external economic and political forces

Finally, LETS may also be vulnerable to external economic and political forces. As LETS operate outside of the traditional financial system and are not subject to the same regulations or oversight, they may be more vulnerable to fraud, abuse, or other forms of misconduct. Additionally, LETS may be affected by broader economic and political changes, such as changes in national or international currency values or economic policies. This can create uncertainty and risk for members of LETS, and may limit the stability and sustainability of these systems over time.

Local Exchange Trading Systems have the potential to offer numerous benefits to communities, they also face a number of challenges that may limit their effectiveness and impact. It will be important for communities considering the adoption of LETS to carefully weigh the potential risks and benefits, and to carefully consider the structures and governance of these systems to ensure their sustainability and success.

Conclusion

Local Exchange Trading Systems have the potential to serve as an alternative economic system to traditional systems. By facilitating the mutual exchange of goods and services within a community and using alternative forms of currency or mutual credit, LETS can promote economic activity and increase wealth within a community. They also have the potential to create more equitable and self-sufficient communities, as well as fostering social and community-building aspects. However, it is important to understand and address the challenges of LETS in order to maximize their potential benefits. These challenges include the limited scope of Local Exchange Trading Systems and their ability to facilitate larger or more complex transactions, the potential for trust to be difficult to maintain in larger or more impersonal LETS, and the potential for LETS to be vulnerable to external economic and political forces.

Understanding and addressing these challenges is crucial in order to fully realize the potential of Local Exchange Trading Systems as an alternative economic system. While LETS may not be a panacea for all economic and social issues, they offer a unique approach that has the potential to provide valuable solutions. As the world continues to face economic and social issues, the exploration of alternative systems like LETS is worth considering.