Circulation of a digital community currency

TL;DR

This paper introduces a network analysis method to study the circulation of a digital community currency, Sarafu, in Kenya, revealing patterns of local, modular, and cyclical monetary flow among diverse users.

Contribution

It applies network flow analysis to digital currency transaction data, uncovering circulation patterns, community roles, and the importance of early adopters and women in the system.

Findings

Circulation is highly modular and geographically localized.

Network cycles are essential for circulation.

Community institutions act as local hubs and early adopters are central.

Abstract

Circulation is the characteristic feature of successful currency systems, from community currencies to cryptocurrencies to national currencies. In this paper, we propose a network analysis approach especially suited for studying circulation given a system's digital transaction records. Sarafu is a digital community currency that was active in Kenya over a period that saw considerable economic disruption due to the COVID-19 pandemic. We represent its circulation as a network of monetary flow among the 40,000 Sarafu users. Network flow analysis reveals that circulation was highly modular, geographically localized, and occurring among users with diverse livelihoods. Across localized sub-populations, network cycle analysis supports the intuitive notion that circulation requires cycles. Moreover, the sub-networks underlying circulation are consistently degree disassortative and we find evidence of preferential attachment. Community-based institutions often take on the role of local hubs, and network centrality measures confirm the importance of early adopters and of women's participation. This work demonstrates that networks of monetary flow enable the study of circulation within currency systems at a striking level of detail, and our findings can be used to inform the development of community currencies in marginalized areas.