Barter 3.0

Back to the Future

Chris Cook

IRTA Convention Ocho Rios

14 September 2012

Market 2.0 - Exchanges

Seller

$

Buyer'sBroker

Clearing House

$

Title Title

Seller'sBroker

Buyer

TitleTitle

Financing and Funding Financing People-based creditShort/medium term, medium/high riskFinances circulation of goods & services and

creation of new productive assetsFundingAsset-based creditMedium/long term, medium/low riskFunds completed productive assets

Banking 2.0 – Financing (eg trade credit)

Seller

$

BuyerBank

$

Value Value

Banking 2.0 – Funding

Depositor

$

BorrowerBank

$

Value Value

Banking 2.0 Accounting system – transactions (obligations) and

title (rights)Unit of account eg $Guarantee ('framework of trust') through pool of

capitalSettlement mechanism – payment systemRisk management/ platform provider/system

administration

Barter 2.0

Seller

Trade Credit

Buyer

Operator

Value

TradeCredit

Let's look back to Market 1.0

Settlement 1.0

Merchant A Seller B

Seller C

Seller D

Seller E

IOU

IOU

IOU IOU

IOU

Guarantee 1.0 – Risk Pooling eg Tontines

Member Member

PoolGuaranteeGuarantee

Value Value

Member

Member

Member

Credit 1.0 - Stock

Market 1.0 never went away..... Settlement 1.0Brent/BFOE forward market in North Sea Oil Web applications – Ripple and Circular Multilateral

BarterGuarantee 1.0P & I Clubs have mutually insured big risks (eg

shipping) for 150 years; for 135 years the same broker

Stock 1.0reinvented by Enron (who else?) as 'Prepay' and

used to defraud investors and creditorsbeing used by oil producers eg Saudis to support

price and manipulate the oil market

NewClear - Seller accepts Buyer's IOU

Seller Buyer

IOU

Value

IOU is registered with Transaction Registry

Seller Buyer

IOU

Value

Registry

DataData

NewClear – Transaction Registry Database held by a custodian of all open bilateral

'peer to peer' credit obligationsPositions held gross but the risk may be net: eg +

$8000 and - $6000 gives a net position of +$2000Only members may use the registryUse of registry is subject to NewClear 'club rules'

and standardsRegulatory sanction of suspension or termination

of membership and hence registration Registry maintained and operated by Manager

IOU is guaranteed by Clearing Union of Sellers & Buyers collectively

Seller Buyer

IOU

Value

Pool

GuaranteeGuarantee

Seller & Buyer pay guarantee charge into Pool held by Custodian

Seller Buyer

IOU

Value

Pool GuaranteeGuarantee

Fee Fee

Settlement 1/ - Buyer settles open credits in money or 'money's worth' eg energy stock

Seller Buyer

Value

Pool GuaranteeGuarantee

Fee Fee

Settlement 2/- System identifies a 'chain' of IOUs A<B<C<D<E<A and 'nets' them out

Seller A Seller B

PoolGuaranteeGuarantee

Fee Fee

Seller C

Seller D

Seller E

IOU

IOU

IOU IOU

IOU

Settlement 3/ - Buyer defaults: system pays sellers and collects from buyer if possible

Seller A BuyerDefault

Pool

Collects

Pays

Seller B

Default

Pays

Service provider sets guarantee limits, handles defaults & manages system

Seller Buyer

IOU

Value

Pool GuaranteeGuarantee

Fee Fee

ServiceProvider

FeeService

Outcome – the community is the currency Communities have a 'common bond' eg

geographical or functionalCommunity-based credit provided 'at cost' with

shared operating and default costsService provider's interests are aligned with

system users No 'interest' (money for the use of money) means

system will out-compete conventional 'for profit' credit

Sharing of risk and rewardB2B credit may be extended to B2C