System proposal: electronic money (also useful for issuing company shares, promises or game tokens) that combines the advantages of existing electronic LETS, RipplePay.com, loom.cc , cyclos.org and adds some improvements. These are implemented innovative systems, but all lack some essential properties necessary to spread globally: make them robust, and appealing to businesses, individuals and communities. Automated market is very important to make the currencies convertible (so it can be used to purchase any product bank-loan-created money can buy).

Ripple implements the graph-technology that can be used to implement the worldwide automated market.
Loom can be used to issue currency, but to resist defamation attack of bankers and media, essential improvements are needed: it's very important, that the total amount issued must be verifyable, and if some user claims their money was stolen, the court and public must have a mathematical method to verify if it's just the banker's defamation attack, or if the server really did misbehave. Such verification is essential for a court to enforce the contract, and for public to have a realistic picture of the currency issuer's and server's reputation. Without verification methods the behaviour is not measured but believed: reputation is manufactured by media forces (which is the problem we started from).
LETS systems are the most likely first adopters of a currency that is created locally, but use advanced technology and attractable to more users.

Commercial banks cream off the economy by creating legal tender currency (EUR, GBP, USD, etc...) as debt. We can call these currencies "fraud-money". This is an economic parasitism, tool number one to achieve extreme concentration of wealth, destroying democracy, society and environment as side-effects. Without a proper electronic money the future of mankind is very dark. To have any chance to avoid totalitarian fascist world-dictatorship, commercial banks must be prohibited from creating the money which is by means of (media, education and government) corruption making the public believe money is exclusively issued by the government. Congress could do this, but this is unlikely to happen. Alternatively, businesses and individuals must learn how to issue their money and make it convertible so accumulation of fraud-money can be avoided (higher money-velocity of fraud-money lowers the damage done by banks). In either case, the technical requirements of proper electronic money are the same:

auditable money supply: the issuer must PROVE the total amount of issued money. In other words "it is possible to verify that each token offered for payment is actually part of the known amount of issued money".
each unit of payment can change owner from owner(N) to owner(N+1) if and only if the transaction has been authorized by owner(N)
whoever tracks transactions must PROVE that the transactions were authorized.

Cypherpunks stirred a lot of discussion in the 1990's. There were several innovative solutions for anonymous currency. David Chaum comes to mind. Even wikipedia mentions an anonymous currency based on modulo N cubic-root calculation. However, AFAIK they haven't come up with an auditable money supply. A good solution is anonymous, auditable and easy to implement. Is this possible ? These look like conflicting requirements. But it is possible. Actually, the base solution seems simple. Important note: bankers invest a lot into deceiving people to think that "gold" can somehow limit the amount of electronic money. This is bullshit. If a worldwide public audit of ALL electronic money AND ALL gold reserves are executed at the very same time, than the amount of money could be limited, but than it could be limited without gold at all ! To verify the total sum of electronic tokens some electronic method is needed.
Remember that the same gold can simply be claimed to back electronic money N, M, O, P, ... (same "shared" or time-multiplexed reserve for different banks). If audit of electronic money is possible, than gold is not needed at all. If this is not obvious, study the history of money ( The Money Masters I-II movie has never ever limited the amount of "gold-based" currency, and for a good reason: because gold reserves cannot limit the amount of electronic money worldwide. Since the same gold

First, consider the method loom.cc uses for accounting. When you purchase a gizmo, you don't stuff the money into the pocket of the cashier. You don't stuff directly into the cassa either. You place it to a shared drop point where she can pick it up (you can even take it back until she moves it to a place unaccessible to you). In the physical world. the choice for shared-drop-point place is rather limited. However, in the domain of numbers (codes, passphrases, whatever you call them), the space is unthinkably large.

There are billions of dollars on swiss-bank accounts that can be accessed with access code "passphrase". These banks don't ask for your ID. If you know the code, they let you take the (say 7 million) dollars from the account. If you tell the code to your friend, he can take it or transfer it to whereever he likes. It is very easy to make a sufficiently strong ("high entropy") passphrase that costs trillion times trillion times trillion more time (and effort and money) to guess than any gains that can be expected from the access of the account. Even just a 128bit code (like 3a4511c895fc71fdfea08f3f3f8c7a97) allows you to choose between more than billion times billion times billion times billion places. Any two parties (A and B) who plan to engage in transactions can agree in a (eg. randomly picked) shared drop point (an account number) that can be used solely by them that noone else knows. Noone should tell others about their codes, exactly as they don't publish the passphrases for their Swiss-bank accounts and internet bank passwords.

THE SOLUTION

Read the requirements (bullets above): prove total issued amount and prove that transactions were authorized.

Each coin is a signed contract. Issuer publishes N1, N2, N4, N8 .... the number of coins of different denominations issued so far. Coins with value 4 are serial-numbered 1..N4. Total_issued = N1 * 1 + N2 * 2 + N4 * 4 + N8 * 8 ...
holder0 is the party to receive coinX that is just about to be issued (most likely in turn of some other value, obligation or service). holder0 generates public key p0 and secret key s0 and tells the issuer the public key p0. p0 may be written in the contract. The contract is authentically signed by issuer and holder0 in a legally binding way. The issuer publishes the authoritive public key for each coin (you can call it swissbank-account if you like, but anyone can open any number of accounts so he can use different key for each of his coins)
holder0 wants to transfer the coin to holder1. holder1 generates p1,s1 and notifies holder0 about the pubkey p1. holder0 generates a message that he authorizes transfer of coinX to "whoever can prove to know the secret pair of p1" (which is s1): sign( s0, MSG( "transfer", coinX, p1 ))
the issuer verifies the s0 signature (by using the public key p0) and updates the coinX authority (==account==location) to p1. Now anyone in knowledge of s1 can sign( s1, MSG( "transfer", coinX, p2 )) to transfer the coin to p2, which can be someone else, or herself, but different "location". A properly signed message is needed to pass on the coin.

Effectively each coin will have a sequence of signed messages. Since the issuer does NOT know s0, there is no way he can fake a message-sequence that has a message signed by s0. The issuer can use distributed storage (perhaps sg. like a gnunet.org pseudonym) to publish the message-sequences for each coin. The issuer must take care when initially signing that coinX is issued to p0. But after that all accounting can be public, still anonymous (pseudonymous). The issuer can use a separate key (than the key he uses to issue) to sign the "now coinX belongs to p21" messages. Since all transfer messages (proving p0..p20) can be shown to the public, this authority is only interesting (for p22 to reject payment) if s20 generated both sign( s20, MSG( "transfer", coinX, p21 )) and a sign( s20, MSG( "transfer", coinX, p22 )) as well.

Money issued by individuals and businesses.

When a bank creates fraud money, some other business will deliver goods / services for that money.
When an individual or business issues proper money, he, the issuer is required (by law, if the contract is good) to deliver goods / services.
Governments could prohibit banks from creating money and create money for public benefit, but the "free democratic world" somehow gave up this habit a long ago, without people realizing what's happening.

redemption curves make the currency appealing to acquire and hold

An individual or business can make a written obligation, a contract that can be enforced in court. If anyone is interested to receive the offered service or product, being owed to has a value, and passing this on to someone else is equivalent to payment. If it is actually used for payments we call it money. How can he write the contract to make it appeal to hold it ? For obvious reasons, the potential buyers of the issuer's products / services are most likely to buy and hold his tokens.

the red curve shows the redemption value vs. time (say, weeks) that can be achieved when purchasing the products/services of the issuer. This is equivalent to a "discount price".
the green curve shows redemption value when the issuer fails (or chooses not to) redeem in products/services. Doing so can harm the issuer's reputation (and future market value of his issued currency)
the blue curve shows redemption value when the currency holder decides to NOT redeem in products/services of the issuer, but require other currency (issued by some other party). This is normally under the red curve. Perhaps flat (==no yield).

The issuer decides about the curves before issuing, and includes them in the contract written on the coin. The curves can be asymptotic, which means the holders will likely redeem them at some point, and new coins can be issued (in a similar way as governments issue new bonds). Producers and retails, especially big stores will most likely issue different kind of currency for different product categories. Say, for gasoline the max discount is 2%, while on soft-drinks it's 18%. (these are just examples!). The shape of the curves are not interesting for "bank" transactions. However for the purse software to decide which coins to use up and which coins to hold (from the diverse portfolio), the purse software must be aware of the redemption curve to make reasonable decisions.
Note that this system scales very well. Each business can "produce" their own currency needed for the transactions. This system is local and global at the same time.

To understand how CONVERTIBILITY works, consider this example: This guy just filled the tank on a gas station in Finland. The gas station only accepts EUR (EUR created by Euro banks), but the beer-belly guy has no EUR at all. He came from Sweden, he only has SEK created by Swedish banks. So he exchanges his SEK to EUR on the currency market so he can pay. Using electronic transactions, this is completed in a second. Conclusions:

paying with currency X when you only hold currency H

You do NOT need to accumulate EUR to pay with EUR.
To pay with currency X, you need to have something that can be traded on the market . It can be bond, share, some allowance or some other currency.

The key word is market. As long as there is an electronic market, and a path (in the graph) can be found to convert currency H to currency X, it is possible to use H and pay with X. Technology (and Dijkstra) solved the problem of finding path very efficiently and fast. I-Go map-software plans route in seconds, using the same graph-routines that can find optimal path for currency conversion. Actually, the most highly respected currencies (currently gold and EUR) make the path short and the operation to find optimal path extremely quick and cheap.
See ripple discussion

To understand how economists worldwide are mislead about the most significant effect of economy, the profit of banks (using a bogus deduction and bogus formula)

Why is it difficult to notice ?
How do they do it ?
Why is it VERY bad ?
How can it be avoided ?

Why is it difficult to notice ?
Because it is stolen before you get your salary.. Companies' loan costs push down salaries and raise prices.

How do they do it ?
Commercial banks are granted the right to create money during loaning. In fact most (appr 95%) of money is created by commercial banks, not the government as most people think.

Why is it VERY bad ? People experience economical, social and environmental problems, and try to get answers and choices from mainstream media (TV, radio, newspapers). However, the suggestions broadcasted are well-crafted nonsense, and dangerous. Media encourages "more production" worldwide as a method to pay off debt, which has created a very dangerous situation. More goods are produced and trashed every year, more irreversible damage to the environment. Yet the social, economical and environmental problems get worse every year. This is no surprise if we understand that paying off the debt by producing more globally is a huge bullshit. This suggestion totally lacks understanding of our fraudulent parasitic monetary system.

How can it be avoided ?
There are several methods, we can expect and encourage a combination. One of the best method is http://jamesrobertson.com/ (books / Creating New Money). This method replaces private money by government issued money, getting rid of most private and most government debt on the way. Unfortunately this requires Congress (or Parliament) to reform the monetary system, and prohibit commercial banks from creating new money. While banks have effectively "more say" than citizens, this is a bit hard to achieve.

What can we do without Congress (/Parliament) ?
We can use government bonds as money. In our world of electronic banking this can be fully automatic and transparent. Simply replace a (preferrably huge) part of our money supply with government bonds. Actually, any other real investment helps, but deposits and time deposits, traditional bank savings don't help (they are the problem). How do government bonds help ?
By replacing (for example) 4000 billion USD (bank deposits) with government bonds (of same value), we can get rid of appr 12000 billion USD debt . Debt we owe to private banks is in reality appr 3x greater than the money still in the economy from their loans (28000 USD money and 84000 USD debt per person).
The diagram shows the situation before and after:

replace fraud money with government bonds

Replacing part of the money supply by government issued bonds

The diagram shows the situation before and after "monetizing government bonds" Pushing down the debt is impossible without this, or some similar method. The debt decreases automatically when debt is paid off. However, in our current enslaved situation, someone in the economy must "borrow money" (in fact ask her bank to create new money) and engage in new debt.
People think they are using government-issued money when they pay. But in reality, they use money created by private banks. If people start to think about it, understand it, and do what they think they are doing now (use government-issued certificates for money = government bonds), the parasitism can be mostly eliminated. Than, and only than can we start to build democracy and sustainable economy (not sustainable growth, which is nonsense) on our homelands.
Links:

www.jamesrobertson.com books / "Creating New Money" and "Making it Happen"
www.moneyreformparty.org.uk
www.moneyasdebt.net animation movie by Paul Grignon
www.gv2000.com Multimedia list
rrr100.wikispaces.com 2nd half ot the page contains interesting English links
www.storyofstuff.com is Silent about money but otherwise interesting and related
The Money Masters (movie and web-portal)
www.theclassactionsuit.com