Protocols, Promises & Power _06_11_18
- 1. Fintech 2.0 - Promises, Protocols & Power University of Strathclyde Chris Cook 6 November 2018
- 2. About Me – Legal Designer & Developer Forensic accounting – insolvency & fraud investigation Regulation – markets & enterprises Market & enterprise development Networked market development Research into resilience – institutions & instruments
- 3. Context Reality-based economy Location (3D Space) Energy Intellect Market 3.0 - evolution of markets Market 1.0 - decentralised but disconnected Market 2.0 - centralised but connected Market 3.0 – decentralised but connected Trend to Services Energy Intensity Capital intensity
- 4. Institutions & Instruments Property & Money as Relationships Rights & Obligations Institutions as risk/cost/surplus/data/knowledge sharing protocols Instruments as transactable objects
- 5. Fintech 1.0 - Blockchain & Coins Blockchain as Agreement - collective machine protocol for encrypted transaction database - authenticates electronic transactions – no 'double spend' - But entire database is encrypted & replicated for every new transaction Coins as Instruments - Proof of past value creation (eg Proof of Work/Stake) - Subjective exchange value but no objective utility
- 6. Fintech 1.0 Machine-centric, Transaction-centric & Time-less Blockchain as Institution: Coin as Instrument Dissociated from Reality New protocols aim to link coins to the real economy Smart contracts: Mattereum, Holochain, ChamaPesa
- 7. Fintech Case Study - Venezuela and El Petro Petro is based on oil - acceptability of currency is based on utility - many different types & qualities of oil - consumers use gas, oil products, energy services not oil Petro is a Proof not a Promise - Proof of payment 'backed' by oil reserves - No obligation to deliver either oil or money - Petro cannot be used instead of Dollar to pay for Venezuelan oil
- 8. Fintech 2.0 - Lessons from the Past Number/Quantity - Notches Description of value exchanged & Counter-party Identities Encryption - grain of the wood (Nature's hash)
- 9. Fintech 2.0 – Back to the Future Tally-as-Proof - receipt for past, not future utility eg energy use Tally-as-Promise - prepay credit obligation to provide future utility requires trust in promissor Single Entry – the instrument IS the accounting record Authentication – the grain of the wood is nature's encryption!
- 11. Credit Obligation– What it is & How it Works Credit returnable in payment for goods & services Issued by supplier in exchange for value received Issuer obligation is to accept credit if & when presented in payment for goods & services Rate of Return - rate over time at which credit returnable to issuer in payment for services Rate not fixed - depends on existence & amount of flow
- 12. Custodian % Platform Investor Platform Service Provider % Platform Users Prepay Nondominium – Platform Cooperation
- 13. Nondominium – How it Works Production shares allocated to users & service providers Balance of production allocated to Investor returns No stakeholder has dominant rights, but each has veto rights over matters which concern them Custodian has right of final veto
- 14. Energy Fintech - Resource Resilience Since 1973 Denmark's GDP has doubled, energy use has been stable and carbon fuel use declined How? Mandate - minimum carbon fuel input for a given output of electricity, heat or power (Energy as Service) Least energy cost policy; not Least DK (or €, $, £) Cost Massive investment in renewables, heat, energy efficiency, transport Outcome – decentralisation – trend to a Natural Grid
- 15. National Grid Denmark Natural Grid
- 16. Energy Fintech 1778 - James Watt Atmospheric Engine James Watt Steam Engine
- 17. Energy Fintech - Pumping as a Service James Watt steam engine much more efficient at pumping water than Newcomen Atmospheric Engine In exchange for use of the pump, miners agreed a share of one third of coal savings Smart Swap – Intellectual value exchanged for value of carbon fuel savings at the retail price Not pumps-as-a-commodity - Pumping-as-a-Service
- 18. Energy Fintech – Energy Credit Obligation (ECO) ECO is - Returnable in payment for energy supply - Issued energy service provider (not bank) vs value received ECO is not - Debt - no right to demand money - Derivative – no right to demand energy delivery - Equity – no ownership right in respect of energy assets ECO issuance, exchanged, cleared within Nondominium
- 19. Energy Fintech – Energy Loans Producer - sells energy forward and locks in price - interest-free energy loan until credit returned vs supply Consumer - prepays for energy and locks in price Investor - energy-linked return on investment
- 20. Energy Fintech - Outcomes Independent of location/state denominated in energy, not £, $, € Energy return (no interest/discount rate) Banks cannot issue ECO, but provide banking-as-a-service eg risk management & investment banking Energy economics replaces dollar economics Natural Grid replaces National Grids
- 21. Community Fintech Mobilising capacity - people & place People - P2P £ credit obligations based on capacity to provide goods & services Place - Peer2Here £ credit obligations based on productive capacity of land/location Social Credit – community 'loyalty point' tokens voluntarily accepted in payment
- 22. Housing as a Service - Platform Co-op InvestorInvestor Community (Occupiers) Community (Occupiers) £ % in £ or Credits Dividend In Credits ManagerManager Payment in £ or Credits Credits Platform Co-opPlatform Co-op
- 23. Housing as a Service Occupier/Community Members - pay for housing as a service in £ or £ denominated credits - receives any surplus credits (Care/Culture Dividend) Manager Members (Platform Service Provider) - receives %age share of £ Investor Members - sale of discounted £ land use (rental) credits funds housing - £ credits may be used to pay rent or sold to other occupiers - Capital & surplus from discount realised as £ credits are returned against rent - “Rate of Return”
- 24. Housing as a Service - Outcomes Nondominium - Neutral Governance - no dominant stakeholder: custodian has right of ultimate veto Equity Release - superior outcome to Debt (roll-up mortgage) & Equity (reversion) Capital Lite - services relationship not transaction-based Sustainable - interests aligned to maximise benefit & minimise cost Peer2Here - Land Use Credits enable credit/currency local by definition
- 25. Care for Housing Swap? Post war intergenerational transfer of wealth due to property bubbles Older generations are land-rich but care-poor Younger generations are care-rich but land poor Community Fintech enables new policies for intergenerational equity
- 26. P2P Credit - a Traveller's Tale – Hotel A Lady D Butcher B Baker C €20 €20 €20 €20 Traveller€20 Open/Unsettled Promises/Credits A €20 to B B €20 to C C €20 to D D €20 to A
- 27. P2P Credit - Chain Settlement A>B>C>D>A Hotel A Lady D Butcher B Baker C €20 €20 €20 €20 Shared Transaction Repository STR settlement bot identifies €20 chain settlement pathway A< B<C<D<A
- 28. Mutual Assurance – Risk Sharing by P&I Clubs For 150 years, Protection & Indemnity (P&I) Clubs have mutually guaranteed shipping risk Lloyds won't cover For 130 years P&I Clubs have been managed by Thomas Miller as platform service provider
- 29. Data Sharing Seller A Member Credit Value Platform Service Provider Shared Transaction Repository Buyer B Member Data Data Data
- 30. Risk Sharing Seller A Member Credit Value Platform Service Provider Shared Risk Buyer B Member Guarantee Guarantee
- 31. Cost Sharing Seller A Member Credit Value Platform Service Provider Shared Cost Buyer B Member Platform & Performance Costs Platform & Performance Costs Operating Cost & Performance Share
- 32. Settlement - Chain or Currency Seller A Member Value Platform Service Provider Shared Data Buyer B Member Data Data Data
- 33. Service Provider sets guarantee limits, handles disputes/non-performance & manages system Seller A Member Credit Value Platform Service Provider Shared Transaction Repository Buyer B Member Data Data Data
- 34. Community Credit Clearing – Banking as a Service Mutually assured bilateral P2P credit Merchants & Consumers share system costs and non- performance Manager allocates guarantee limits, manages platform, ensures transparency, handles non-performance £ denominated credit obligations may be settled - by conventional £ bank credit - by A>B>C>D>A chains - by £ denominated land use credits - by energy credit obligation – ECO - voluntarily by social credit or donation
- 35. Community Fintech - Development Scottish Universities Insight Institute Call for Proposals Theme “Co-operation & Interdependence” Exploration, Research & Development of Community Fintech Four archetype locations Six months duration – March/August 2019
- 36. Linlithgow Unlimited – the Vennel Vennel
- 37. Dumfries Unlimited – Crichton Care Campus
- 40. Community Fintech – Proposal Plan Initial stakeholder meetings to determine optimal spatial use Location-specific development teams research & develop complementary Community Fintech project funding plan Specification and development of alpha version Fintech with Stirling University Fintech Masters cohort Final presentation to communities of developed projects (and Fintech demonstration)