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The Community is the Currency
Philosophy Conference
Chris Cook, Kragerø
07 June 2009
Money 3.0
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 LenderLender
£ Loan
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...or seller and buyer
Seller BuyerBuyer
£ Credit
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...to provide a framework of trust through an implicit guarantee
BankingSystemBankingSystem
Borrower Lender(Depositor)Lender
(Depositor)£ £
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...supported by a base of Regulatory Capital
Bank Credit
BankEquity
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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 BuyersBuyers
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Sellers give buyers interest-free credit –or “time to pay”
Sellers BuyersBuyers
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Credit
Value
Credit is guaranteed by a Guarantee Society of seller and buyer members...
Sellers BuyersBuyers
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Pool
GuaranteeGuarantee
...with some kind of “common bond”: geographical, functional, or both
Sellers BuyersBuyers
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Pool
GuaranteeGuarantee
Both sellers and buyers pay into a Pool for the use of the Society’s Guarantee
Sellers BuyersBuyers
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Pool
GuaranteeGuarantee
Fee Fee
Buyers settle credit in money, or money’s worth of Value acceptable to sellers
Sellers BuyersBuyers
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Pool
GuaranteeGuarantee
Fee Fee
Value
If buyers default, the Pool pays sellers, and collects from buyers
Sellers BuyersBuyers
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Pool
CollectsPays
A service provider sets guarantee limits, handles defaults & manages the system
Sellers BuyersBuyers
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Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
Now that Banks’ ability to create and support credit has evaporated....
BankEquity
Credit
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...a Guarantee Society provides an complementary trust framework...
...where Banks may manage credit creation as service providers
Sellers BuyersBuyers
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Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
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....
Sellers BuyersBuyers
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Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
...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 ( > £1bn)
Capital Partnership LLP10 UK Hotels
Gross Revenues
Hilton GroupCapital User
Consortium LLP Capital Provider
BankProperty
DeveloperHotel
Specialist
% %
%%%
Capital Partnership
AssetsAssets
Investors
Payment
% %
Custodian
Use
Managers
Users
Productive assets are held by a Custodian
AssetsAssets CustodianCustodianOwnership
...who safeguards the asset on behalf of the Community
AssetsAssets CustodianCustodianOwnership
Investors put in Financial Capital in money, or money’s worth…
AssetsAssets
Investors
CustodianOwnership
Financial Capital
Managers provide Human Capital of time, expertise and experience....
AssetsAssets
Investors
CustodianOwnership
HumanCapital
Financial Capital
Managers
Users pay for the use of Capital
AssetsAssets
Investors
Payment
% %
Custodian
Use
Managers
Users
Result: Capital Partnership
AssetsAssets
Investors
Payment
% %
Custodian
Use
Managers
Users
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 eg 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...
Master Partnership
Master Partnership
Financial Capital(Money, IP etc)
Financial Capital(Money, IP etc)
UsersUsers
Human Capital(Developers, Operators)
Custodians(National)
Custodians(National)
% %
payment
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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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