Nordic Enterprise Trust - The Community is the Currency - Innovation in Complementary Currencies

The Community is the Currency Money 3.0 Philosophy Conference Chris Cook, Kragerø 07 June 2009

Today I am going to be talking about the future of Money......Money 3.0

Money 1.0 - Money of the Past

Currencies consisted of valuable objects

Exchanges for value – money’s worth required physical market presence

Money 1.0 - Decentralised and Disconnected

Money 2.0 - Money of the Present

Currencies are interest-bearing IOU objects or claims over value...

...issued by Private Banks

...and Central Banks

...who step between borrower and lender

Borrower

Lender

ÂŁ Loan

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...or seller and buyer

Seller

Buyer

ÂŁ Credit

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...to provide a framework of trust through an implicit guarantee

Lender (Depositor)

Banking System

Borrower

ÂŁ

ÂŁ

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...supported by a base of Regulatory Capital

Bank Credit Bank Equity

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Money 2.0 - market presence is typically through intermediaries

Money 2.0 - Centralised and Connected

Money 3.0 - Money of the Future

Money 3.0 - involves direct, instantaneous Peer to Peer (P2P) connections....

Money 3.0 - market presence is “network presence�

Money 3.0 - Decentralised and Connected

Cool....but what is Money 3.0?

Nordic Enterprise Trust works where the Internet and Markets converge

With a little help from Innovation Norway...

....NET has developed a new framework for P2P Finance

P2P Credit and P2P Investment together comprise Money 3.0

Let’s look first at P2P Credit

Sellers

Buyers

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Sellers give buyers interest-free credit –or “time to pay”

Value Sellers

Buyers Credit

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Credit is guaranteed by a Guarantee Society of seller and buyer members...

Sellers

Buyers

Guarantee

Guarantee

Pool

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...with some kind of “common bond”: geographical, functional, or both

Sellers

Buyers

Guarantee

Guarantee

Pool

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Both sellers and buyers pay into a Pool for the use of the Society’s Guarantee

Sellers

Buyers Fee

Fee

Guarantee

Guarantee

Pool

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Buyers settle credit in money, or money’s worth of Value acceptable to sellers

Value

Sellers

Buyers Fee

Fee

Guarantee

Guarantee

Pool

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If buyers default, the Pool pays sellers, and collects from buyers

Sellers

Buyers

Collects

Pays

Pool

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A service provider sets guarantee limits, handles defaults & manages the system Buyers

Sellers Fee

Guarantee

Fee

Pool

Services

Guarantee

Fee

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Now that Banks’ ability to create and support credit has evaporated....

Credit Bank Equity

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...a Guarantee Society provides a complementary trust framework...

...where Banks may manage credit creation as service providers Buyers

Sellers Fee

Guarantee

Fee

Pool

Services

Guarantee

Fee

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If a barter system incorporates time to pay – Credit - the result is a monetary system

Since 1934 the Swiss WIR business network has cleared credit for SME businesses....

...for billions of Swiss Franc’s worth of goods and services

No Swiss Francs change hands as a currency or Unit with exchange value

The Swiss Franc is an abstract Unit of measure - a Value Standard, or benchmark

The WIR is a monetary system which is complementary to the Swiss Franc

The WIR takes security over members’ property to protect against defaults...

...so the WIR framework of trust is backed by property

NET’s Guarantee Society is a new framework of trust for P2P credit....

Buyers

Sellers Fee

Guarantee

Fee

Pool

Services

Guarantee

Fee

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...enabling value to circulate and the creation of new productive assets

Although Credit is necessary for the circulation of currency....

...contrary to conventional wisdom it need not actually be currency....

...and other Units of Value may be generally acceptable as currency

This is where P2P Investment through Unitisation comes in

There are conventionally two types of ownership - Public or Private...

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...and there are two types of investment: Debt and Equity

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Investment through a Limited Company...

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....a 19th Century legal dinosaur...

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...is what makes the Private Sector Private

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Credit is typically issued by banks and secured by legal claims

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...giving two conflicting claims over the same productive asset

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But there’s a new furry mammal out there....

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...the 21st Century UK Limited Liability Partnership (LLP)

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A UK LLP is a corporate body with limited liability....

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...and...errrr...that’s it!...

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As far as the UK Tax Man is concerned it is a Partnership

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It’s an “Open” Corporate where partnership working is possible....

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... even without a written agreement

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It enables direct Peer to Peer (P2P) Credit and Investment

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Over 46,000 UK LLPs are now in pervasive use for purposes never intended...

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...even in the Public Sector, where Glasgow has four municipal LLPs

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Capital Partnership – direct Peer to Peer investment in productive assets

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Hilton Capital Partnership ( > ÂŁ1bn) Gross

Revenues

Capital Partnership LLP 10 UK Hotels

%

%

Consortium LLP

Hilton Group

Capital Provider

Capital User

%

%

Bank

Property Developer

% Hotel Specialist

Capital Partnership Users Payment

Use

Assets % Investors

Custodian

%

Managers

Productive assets are held by a Custodian

Ownership

Assets

Custodian

...who safeguards the asset on behalf of the Community

Ownership

Assets

Custodian

Investors put in Financial Capital in money, or money’s worth‌

Ownership

Assets

Custodian

Financial Capital

Investors

Managers provide Human Capital of time, expertise and experience....

Ownership

Assets Financial Capital

Investors

Custodian

Human Capital

Managers

Users pay for the use of Capital Users Payment

Use

Assets %

Custodian

%

Investors

Managers

Result: Capital Partnership Users Payment

Use

Assets % Investors

Custodian

%

Managers

Capital Partnership reinvents Equity

Equity Shares - % age shares in revenues or production...

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‌..which may be transferred, but never redeemed, since there must always be 100%

Units – Redeemable in production e.g.

Kilo Watt Hours, natural gas

Units have a value in exchange, but no rights to production or income over time‌

Equity Shares in property – the Value Proposition

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A new form of Co-ownership between Occupiers and Investors

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Occupiers may invest simply by paying more rent than is due

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...and if they wish, they can pay their rent in Equity Shares, rather than £

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Co-owner Occupiers who maintain property may receive Units as “Sweat Equity”

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Energy Units - the Value Proposition

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Investors - direct investment in energy with no return...

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....similar to an investment in gold...

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...except that while gold may be pretty...

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....it’s not useful in the way that electricity is

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Consumers – the ability to lock in the price of future consumption

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But Investors wanting to sell may not find Investors wanting to buy....?

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No Problem! Consumers will buy if the Unit price falls below the market price...

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...because they gain by buying Units and redeeming them against energy used

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Interest-free financing through monetising renewable energy...

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...by issuing - for value now - Units that will cost nothing to redeem

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Capital Partnerships are not Organisations

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They do not own anything, do anything, employ anyone, or contract with anyone...

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They are simply frameworks for P2P investment with cross border application

...transcending borders through interactive consensual agreements

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...rather than adversarial contracts imposed by national statutes or courts

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Master Partnerships require no legislation...

Users payment

Master Partnership %

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Custodians (National)

%

Financial Capital

Human Capital

(Money, IP etc)

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..and there are no national or international institutions and hierarchies

My vision of Money 3.0 is of a networked Clearing Union

Units redeemable in land/ location rental will be acceptable domestically

Units redeemable in energy will be acceptable globally

Transactions will be priced by reference to an energy standard or Unit of measure

Credit issued by individuals and enterprises will be backed by mutual guarantees...

...so communities with a common bond provide frameworks of trust

Money 3.0 is not an Object: it is a Relationship

The Community is the Currency

Thank You

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