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

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

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Money 1.0 - Money of the Past

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Currencies consisted of valuable objects

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

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Money 1.0 - Decentralised and Disconnected

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Money 2.0 - Money of the Present

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

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...issued by Private Banks

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...and Central Banks

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...who step between borrower and lender Lender £ Loan 10/06/09 Borrower

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...or seller and buyer Buyer £ Credit 10/06/09 Seller

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...to provide a framework of trust through an implicit guarantee Banking System Lender ( Depositor ) £ £ 10/06/09 Borrower

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...supported by a base of Regulatory Capital Bank Credit Bank Equity 10/06/09

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Money 2.0 - market presence is typically through intermediaries

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Money 2.0 - Centralised and Connected

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Money 3.0 - Money of the Future

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

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Money 3.0 - market presence is “network presence”

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Money 3.0 - Decentralised and Connected

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Cool....but what is Money 3.0?

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Nordic Enterprise Trust works where the Internet and Markets converge

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With a little help from Innovation Norway...

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

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P2P Credit and P2P Investment together comprise Money 3.0

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Let’s look first at P2P Credit Buyers 10/06/09 Sellers

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Sellers give buyers interest-free credit –or “time to pay” Buyers 10/06/09 Credit Value Sellers

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Credit is guaranteed by a Guarantee Society of seller and buyer members... Buyers 10/06/09 Pool Guarantee Guarantee Sellers

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...with some kind of “common bond”: geographical, functional, or both Buyers 10/06/09 Pool Guarantee Guarantee Sellers

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Both sellers and buyers pay into a Pool for the use of the Society’s Guarantee Buyers 10/06/09 Pool Guarantee Guarantee Fee Fee Sellers

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Buyers settle credit in money, or money’s worth of Value acceptable to sellers Buyers 10/06/09 Pool Guarantee Guarantee Fee Fee Value Sellers

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If buyers default, the Pool pays sellers, and collects from buyers Buyers 10/06/09 Pool Collects Pays Sellers

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A service provider sets guarantee limits, handles defaults & manages the system Buyers 10/06/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Sellers

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Now that Banks’ ability to create and support credit has evaporated.... Bank Equity Credit 10/06/09

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

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...where Banks may manage credit creation as service providers Buyers 10/06/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Sellers

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

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

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

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

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

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

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

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

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NET’s Guarantee Society is a new framework of trust for P2P credit.... Buyers 10/06/09 Pool Service Provider Services Fee Fee Guarantee Guarantee Fee Sellers

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

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

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

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

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This is where P2P Investment through Unitisation comes in

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There are conventionally two types of ownership - Public or Private... 10/06/09

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...and there are two types of investment: Debt and Equity 10/06/09

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Investment through a Limited Company... 10/06/09

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....a 19 th Century legal dinosaur... 10/06/09

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...is what makes the Private Sector Private 10/06/09

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Credit is typically issued by banks and secured by legal claims 10/06/09

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...giving two conflicting claims over the same productive asset 10/06/09

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But there’s a new furry mammal out there.... 10/06/09

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...the 21 st Century UK Limited Liability Partnership (LLP) 10/06/09

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A UK LLP is a corporate body with limited liability.... 10/06/09

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...and...errrr...that’s it!... 10/06/09

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As far as the UK Tax Man is concerned it is a Partnership 10/06/09

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It’s an “Open” Corporate where partnership working is possible.... 10/06/09

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... even without a written agreement 10/06/09

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It enables direct Peer to Peer (P2P) Credit and Investment 10/06/09

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Over 46,000 UK LLPs are now in pervasive use for purposes never intended... 10/06/09

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...even in the Public Sector, where Glasgow has four municipal LLPs 10/06/09

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Capital Partnership – direct Peer to Peer investment in productive assets 10/06/09

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Hilton Capital Partnership ( > £1bn) Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist % % % % %

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Capital Partnership Assets Investors Payment % % Use Managers Users Custodian

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Productive assets are held by a Custodian Assets Custodian Ownership

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...who safeguards the asset on behalf of the Community Assets Custodian Ownership

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Investors put in Financial Capital in money, or money’s worth … Assets Investors Ownership Financial Capital Custodian

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Managers provide Human Capital of time, expertise and experience.... Assets Investors Ownership Human Capital Financial Capital Managers Custodian

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Users pay for the use of Capital Assets Investors Payment % % Use Managers Users Custodian

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Result: Capital Partnership Assets Investors Payment % % Use Managers Users Custodian

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Capital Partnership reinvents Equity

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Equity Shares - % age shares in revenues or production... 10/06/09

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

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Units – Redeemable in production eg Kilo Watt Hours, natural gas

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

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Equity Shares in property – the Value Proposition 10/06/09

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A new form of Co-ownership between Occupiers and Investors 10/06/09

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Occupiers may invest simply by paying more rent than is due 10/06/09

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...and if they wish, they can pay their rent in Equity Shares, rather than £ 10/06/09

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Co-owner Occupiers who maintain property may receive Units as “Sweat Equity” 10/06/09

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Energy Units - the Value Proposition 10/06/09

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Investors - direct investment in energy with no return... 10/06/09

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....similar to an investment in gold... 10/06/09

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...except that while gold may be pretty... 10/06/09

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....it’s not useful in the way that electricity is 10/06/09

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Consumers – the ability to lock in the price of future consumption 10/06/09

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But Investors wanting to sell may not find Investors wanting to buy....? 10/06/09

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No Problem! Consumers will buy if the Unit price falls below the market price... 10/06/09

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...because they gain by buying Units and redeeming them against energy used 10/06/09

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Interest-free financing through monetising renewable energy... 10/06/09

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...by issuing - for value now - Units that will cost nothing to redeem 10/06/09

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Capital Partnerships are not Organisations 10/06/09

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They do not own anything, do anything, employ anyone, or contract with anyone... 10/06/09

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They are simply frameworks for P2P investment with cross border application

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...transcending borders through interactive consensual agreements 10/06/09

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...rather than adversarial contracts imposed by national statutes or courts 10/06/09

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Master Partnerships require no legislation... Master Partnership Financial Capital (Money, IP etc) Users Custodians (National) % % payment 10/06/09 Human Capital ( Developers, Operators)

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

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My vision of Money 3.0 is of a networked Clearing Union

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Units redeemable in land/ location rental will be acceptable domestically

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Units redeemable in energy will be acceptable globally

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

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

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

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Money 3.0 is not an Object : it is a Relationship

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The Community is the Currency

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Thank You 10/06/09