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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