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12/20/2014 Houston FORESIGHT: Preparing Professional Futurists

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Alternative Currencies: The Future of Societal Transactions

By Adam Cowart

http://www.google.ca/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://online.wsj.com/articles/ajay-banga-says-the-future-of-money-will-drive-equality-1404762892&ei=mSpRVM6LKJawyASQ_ILACQ&bvm=bv.78597519,d.aWw&psig=AFQjCNHQmj-aJhtGEChwdXzHtXli57E82w&ust=1414691747557115


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Table of Contents Executive Summary……………………………………………………………………………………………………………….3 1.0 Framing……………………………………………………………………………………………………………………………4 1.1 Domain Description 1.2 Domain Map 1.3 Domain Description: What’s Out? 2.0 Scanning…………………………………………………………………………………………………………………………..6 2.1 Current Assessment 2.2 Stakeholder Analysis 2.2.1 Government 2.2.2 Financial Institutions 2.2.3 Local/Virtual Communities 2.3 History 2.4 Scanning Hits (Appendix A) 3.0 Forecasting……………………………………………………………………………………………………………………….12 3.1 Trends Analysis

3.2 Baseline Future 3.2.1 Baseline Future Inputs Worksheet 3.2.2 Baseline Future Summary Worksheet 3.2.3 Baseline Narrative Description

3.3 Alternative Future 3.3.1 Alternative Future Inputs Worksheet 3.3.2 Alternative Future Summary Worksheet 3.3.3 Alternative Future Narrative Description 3.4 Futures Wheel Prep Worksheet 3.4.1 Futures Wheel Worksheet Summary Appendix A……………………………………………………………………………………………………………………………..26


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Executive Summary “The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market.” Milton Friedman "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction." John Maynard Keynes, The Economic Consequences of the Peace

Today’s global economic system relies predominantly on the fiat system; nation-based currencies which are regulated by central banks and government institutions. This paper looks at alternative forms of currency and economic exchange and the potential for these alternatives to become ubiquitous in the future. What emerged during the scanning and forecasting of alternative currencies is a picture of two seemingly divergent trends from nation-based currencies: virtual currencies and LETS (Local Exchange Trading Systems). The first trend, virtual currencies (offered referred to as cryptocurrencies, or encrypted virtual currencies), is a decentralized form of online currency that is “mined”. These currencies have no tangible value. But some, Bitcoin principle among them, have become a viable form of economic exchange. Bitcoin exchanges have been set up in several parts of the world and, more importantly, Bitcoin is recognized as an unstable but acceptable currency which can be exchanged for American tender. As the cryptocurrency ecosystem matures, there is the potential for a stable, globally recognized alternative to nation-based currency. The second divergent trend is LETS models. The barter economy and other locally based models of exchange have gained popularity in niche markets (such as car sharing, community book exchanges, etc.). But computer programs are increasingly being employed to optimize the exchange of goods and services which operate outside the boundaries of the traditional market. While these two trends appear at first to be at odds, they share one key similarity: they are both community based. With LETS, the community is physical; with cryptocurrencies, the community is virtual. In the Baseline Forecast, virtual and physical communities turn to alternative currencies as a complimentary form of monetary exchange that does not replace the existing nation-state currency system. Chief among the drivers of this alternative, parallel, economic micro-system is increased disenfranchisement with the international banking and finance systems and an increased need to cultivate community-based relationships. The paper concludes with an Alternative Forecast which considers the possibility of these two alternative currency trends converging. With the advent of powerful computing programming, LETS models could create a highly efficient market that eschews the traditional tenants of capitalist economic exchange. Intelligent systems managing virtual “credits”, and community based cooperation, could be a threat to the basic capitalist tenants on which our current model adheres to. Demographics will play a critical role – baby-boomers will look to alternatives as boom-bust cycles wreak havoc on their retirement savings.


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1. Domain Description

1.1. Domain Description Worksheet

Category Description

Domain definition Alternative Currencies

Client International Bank that deals in currency exchange and capital investment, considering the direction of alternative currencies and whether they are a viable investment opportunity and why (what are the potential outcomes?).

Geographic scope Global

Time horizon 2025

Key Issues and Questions?

Are alternative currencies viable options both national and internationally? What type of adoption rates might be realistic/plausible? What will drive individuals and companies to begin exchanging in these currencies? Will currencies become increasingly global or indigenous (to geographic location, virtual/political affiliation, etc.)?


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1.2. Domain Map

Alternative Currencies

Credit Systems

Adoption Capacity Global Economy

Environment

Virtual vs. Physical

Government

Augment

Reject

Overthrow

Regulations

International Enforcement

Gold Standard (Regressive Models)

Fiat Systems (Progressive Models)

Collapse Economies

Localized

Network Effects

Debt Reconciliation

Raising Capital

1.3. Domain Description: What’s Out?

• Impacts of current currencies on each other • Explicit barter economy (direct exchange of services) • Potential for organized crime laundering/exploitation

• Note: Feels like Government Regulation is TOO big/unwieldy for scope, but hard to avoid it…


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2. Scanning

2.1. Current Assessment Worksheet for Alternative Currencies

Category Description

Current conditions

Cryptocurrencies have proven to be extremely volatile (Bitcoin, in the final 4 months of 2014, rose from $130 value to $1,242… before falling back to $455, and then back up around $900.)

Several governments have declared bitcoin and other currencies “illegal” (Russia as of February 9, 2014).

Calls are emerging for regulations and oversight of bitcoin in particular, and virtual currencies in general.

Increasingly, businesses that operate online are accepting bitcoin and other cryptocurrencies as payment for goods and services

At the opposite end of the spectrum, LETS (Local Exchange Trading Systems) have gained popularity, and have been considered as serious options for countries with depressed/indebted economies (Greece).

LETS have become easier to establish thanks to software programs that cater to community based financial exchanges.

Virtual currency lifecycles can be extremely short, moving from creation, early adoption, usage, and then usage decline, within 2-3 months. This is in stark contrast to traditional, fiat currencies which have an average “life expectancy” of 27 years.

Stakeholders Governments – in theory, any sanctioned currency exchange can be influenced by host countries. Likewise, violations of currency laws or use of currencies to launder money can draw government oversight. Long-term potential for alternative currencies to achieve scale and have the ability to impact rates of national currencies.

Currency/Credit Exchanges – how these exchanges maintain currency valuations and trading, as well as adding legitimacy and acting as potential “gatekeepers” of virtual currencies and LETS credits.

Local/Virtual Communities – recognizing need for new monetary systems to address niche need, establishing rules and boundaries, driving trade and exchange.

Banks – developing operating procedures and rules of engagement with exchanges and communities that take into account national and international regulations, while mitigating risks and developing profitable enterprises.

Businesses – determining whether or not to accept alternative currencies in exchange for goods and services.


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LETS

(localized)

National Currencies

(centralized)

Virtual Currencies

(decentralized)

LETS

• Local (Geographic) Exchange

• "Barter Economy"

• Often reactionary (Gov. or Banking)

• Some "scaleability" in LETS-to-LETS trading activity

• Alternative to credit/debt lending

• Varying degrees of government involvement at municipal levels

National Currencies

• Globally Recognized

• Low to high volatility

• Highly regulated

• Government Oversight

• Increasingly at the mercy of currency investors and speculators

Virtual Currencies

• Global reach (but often initiated by online "community")

• Rapid speed (of creation, adoption, relinguish, de/valuation)

• Inconsistent government involvement

• Decentralized


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2.2. Stakeholder Analysis

2.2.1. Government

Government

Interests, Goals,

Values, Fears,

Positions

Interests:

No or very little interest in virtual currencies

Cautious support of LETS at municipal levels

Interests in supporting “time-banking” programs for community service Goals:

Maintaining control over national economy

Mitigating associative criminal activity Values:

Depending on nation, either maintaining centralized control, or providing as much freedom as possible.

Fears:

Concerns over money laundering and organized crime

Concerns over tax evasion

Concerns over undermining of national currencies Positions:

Governments have not yet embraced virtual currencies

Short-term will focus on control – either outlaw or heavily regulate

Long-term, may prove to be viable alternative to traditional currencies

LETS being considered as a complimentary community currency, which could generate efficient volunteer systems, relieving government of certain social responsibilities

Plans, Intended

Actions Nations looking to develop their own, government sponsored, virtual

currencies

Governments will outlaw virtual currencies like Bitcoin

Assumptions Government decides they are unable to control current virtual currencies on the market and so must develop its own to maintain a desired amount of control over economy and remain relevant

Bitcoin has already been “outlawed” by Russia – however, no one appears to have been charged (globally) for the actual usage of virtual currencies… only for using currencies for criminal activity. If no one is ever charged, then usage isn’t really that illegal and will not impact usage/growth

Implications Movement into a sort of “hyper fiat” monetary system could generate an even less stable global economy and drive more regular and severe boom/bust cycles

A scenario where certain countries actively allow/trade/ exchange in currencies, vs. activities deemed illegal in other countries


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2.2.2. Financial Institutions

Financial Institutions (Currency/Credit Exchanges, Banks)

Interests, Goals,

Values, Fears,

Positions

Interests:

Investment potential of virtual currencies

Flexibility in currency exchange markets with additional currencies Goals:

Become gatekeepers of virtual currency and crossover/exchange for ‘national’ currencies

Generate revenue off of exchange, investment, and hedging of currencies

At LETS levels, facilitating local activity and investment in bank and financial system (ensuring banks are not left out of a potentially active trading community [time banks, exchanges, etc.])

Values:

Maintaining relevancy for customers and institutions - profitably Fears:

Inconsistent government response to virtual currencies could prove costly if regulations are inconsistent from country to country

Unconventional communities have potential to manipulate currency value

Rapid boom/bust currency valuation cycles Positions:

Regulations are necessary

Greater integration into the more “accepted” financial markets (US, etc.)

Plans, Intended

Actions Open US based exchange to impose regulations/order onto Bitcoin and

virtual currency market

Assumptions US government and financial regulatory bodies will allow such an exchange to be set up

Other virtual currency players will adopt rules over time, and follow the US lead as many markets do when dealing with traditional market regulations

Implications Ability of institutions (largely private) to preemptively regulate virtual currency exchanges could limit eventual government regulations and make market more favorable to exchanges and banks

Consolidating virtual currency exchanges in the traditional financial global hubs could force early adopters of virtual currencies to start “playing by the rules” or quickly risk becoming obsolete


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2.2.3. Local/Virtual Currency Communities

Local/Virtual Currency Communities (Alternative, Virtual, and Complimentary Currencies)

Interests, Goals,

Values, Fears,

Positions

Interests:

Developing alternative forms of payment and exchange to meet specific needs

Creating currencies and investments that could prove profitable should higher rates of adoption materialize

Goals:

Systems for monetizing community-specific activities

Decentralized control of currency and activities

Complimentary to national systems, or:

Rejection of national systems, debt structures, etc. Values:

Decentralization

“new”

Community focused

Greater input into valuation

Traditional community cooperation (LETS) or embracing technological capabilities (Virtual)

Fears:

Too much government oversight and regulations

Nefarious manipulations

Indifference to adoption (lack of network effects)

Exploitation and lack of reciprocity in LETS Positions:

Do not try and control us

Recognize our models as legitimate

Plans, Intended

Actions Virtual currency developers are looking at increasingly targeting specific

communities with specific interests: examples include a virtual eco-currency to balance financial activities and environmental impacts in a monetary way…

Currency developers looking at a differentiation market for their products to drive adoption by special interest groups

Assumptions Special interest groups are willing to buy into a monetized convergence of their ethical beliefs and alternative (or complimentary) financial systems

These currencies will be exchangeable, at some point, and have an inherent value on the open market

Implications Currency could be imbued with specific moral values

Individuals and groups could begin to identify with a specific currency and the currency they use could become a signal to others as to who they are and what they believe in / represent

Something as intangible as virtual currencies could draw attention to social and environmental impacts on the world caused by financial activity


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and ultimately drive lasting change in how humanity (or at least significant #’s) interacts with resources, etc.

2.3. History

History Legal tender became the primary means of economic exchange – starting with China in the 11th century. The fiat system is now almost universally accepted.

LETS systems, in their current incarnation, began in the 80’s. Most systems were developed as running in parallel with national currency systems, and were not meant to replace them.

Many alternative currencies were traditionally tied to some type of anti-government movement or alternative society movement. Alternative currency was seen as a critical step in rejecting the dominant economic system.

Virtual currencies first emerged in 2009 with Bitcoin, which continues to be the dominant virtual currency. Bitcoin is a peer-to-peer system of monetary exchange, utilizing cryptography. Largely decentralized process of creation, adoption, and exchange. Value is meant to be driven by the community which uses it, rather than a centralized bank which is able to manipulate currency on the open market.

Alternative currency movement has moved in opposing directions from the fiat system. On one hand, bartering, LETS systems, as well as those who use gold standard (and gold/silver currencies) have moved more in the direction of physical value; on the other hand, virtual currencies have moved entirely away from the notion of monies holding intrinsic value. They are digitalized and are only as valuable as others willingness to accept and exchange for them.

2.4. Scanning Hits

See Appendix A


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3. Forecasting

3.1. Trends for Alternative Currencies

Trend Assumptions Implications 1. Rapid/Significant

Price Fluctuations of Virtual Currencies

Fluctuations will continue as market moves from infancy to maturity

In early stages, high risk investors will consider potential for rapid increase/profits to be a benefit rather than a drawback

A blend of experience, government oversight, and virtual community pressure will help to stabilize currency

As certain virtual currencies stabilize, those that do not will be pushed “to the fringes” and die – relative stability will become a key indicator for investors

2. Calls for Government Regulation

Governments will eventually catch up to virtual currencies and begin regulating

Some governments will decide virtual currencies undermine their own national currency

Regulations will provide some levels of stability and security for investors and those who trade in virtual currencies

Virtual currencies will not be available globally as certain countries will outlaw/ban usage

Opens the door for governments to issue their own virtual currencies as the trend becomes commonly accepted and the government looks for ways to maintain control over local economy

3. Involvement of Criminal Elements

A recognized form of international payment/exchange that has little oversight will attract international gangs for a variety of reasons

Overall involvement is still minor compared to traditional currencies

Ongoing, and high profile usage of virtual currencies could damage the reputation/legitimacy of these currencies with more traditional investors

Concerns over potential for criminals who become virtual currency-literate to try and manipulate valuation to benefit themselves


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4. Customizable

Currencies Customization is a growth

market in almost every industry as people look increasingly to express their individuality

As education levels around the world increase, and awareness of global issues become more urgent, alternative forms of economic value systems will emerge

Currency increasingly becomes a form of expression as opposed to a mindless transaction

Increased transactional mindfulness will benefit companies who can tap into and exemplify customer belief systems, while organizations that cannot will show reduced sales as process becomes a simple exchange of goods/services for cash

Sustainable growth could become more “valuable” on the market than forms of growth/industry that is not; other key issues could also drive a sort of “rate of exchange” in which a sweatshop labour made pair of shoes costs a certain amount with one currency, and another amount with another currency, driving behavioural and buying patterns to change

5. LETS as a growing response to recession and national debt crises

The “great recession” has created a number of developed, educated countries that have to endure heavy debt loads and (arguably) punitive terms of loans from IMF and other institutions

Boom/Bust cycles will increasingly become the norm

Local and sustainable products will become increasingly available

Communities, fed up with government ineptitude, will focus on ways to circumnavigate the national currency and develop exchanges to work together

Local communities who disengage from the national economic system to a certain degree, will navigate economic downturns more successfully that those communities who do not have sophisticated LETS in use – these examples will be noted by other communities, prompting an increase of adoption

As adoption increases, demand for locally sourced and produced products will grow, which will in turn increase the number of


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products available

3.2. Baseline Future

3.2.1. Baseline Future Inputs Worksheet

Category Description Citation

Constants National currencies are still the dominant world currencies

Online and real world communities will continue to innovate and develop alternative currencies

Criminal syndicates will capitalize on freer flow of capital when possible

Trends More virtual and LETS based forms of currency based on “localized” groups

More accessibility to alternative currencies for the general public

Less confusion about what virtual currencies and LETS are, due to more public understanding

Less faith in government and financial institutions

The creation/development of more complimentary as well as alternative currencies

Continued instability of existing virtual currencies

More customization

More organized crime involvement

More calls for regulations and government oversight

http://crcresearch.org/community-research-connections/crc-case-studies/local-exchange-trading-systems-lets-and-community-re

Plans Development of regulations by government bodies

Opening of exchanges to handle movement of currencies

Development of virtual and localized “marketplaces” with own currencies and decentralized monetary systems

New virtual currencies being launched

http://www.bloomberg.com/news/2014-03-13/singapore-to-regulate-bitcoin-operators-for-money-laundering.html http://www.escapistmagazine.com/news/view/132893-Wall-Street-Tech-Firms-Open-Bitcoin-Exchange http://theurbantechnologist.com/2012/07/05/could-the-future-of-money-be-city-currencies/







http://www.bloomberg.com/news/2014-03-13/singapore-to-regulate-bitcoin-operators-for-money-laundering.html





http://www.escapistmagazine.com/news/view/132893-Wall-Street-Tech-Firms-Open-Bitcoin-Exchange




http://theurbantechnologist.com/2012/07/05/could-the-future-of-money-be-city-currencies/





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Projections Proliferation of virtual currency as a cheap alternative to traditional banking in under-developed economies of the world

Ability of oppressed peoples to circumnavigate tight financial controls by governments – able to participate in global market exchange

Peak Bitcoin available pool will hit 20,343,750 in 2025 (96.88% of total). Ceiling will be reached in 2040 (21 million) by design.

Intelligent computers coordinating and monetizing community exchanges and activities. I.e. “capturing acts of reciprocal altruism”

http://epublications.marquette.edu/cgi/viewcontent.cgi?article=1030&context=econ_workingpapers http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=6567197&url=http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D6567197 https://en.bitcoin.it/wiki/Controlled_supply

3.2.2. Baseline Future Summary Worksheet

Title & 1-line description

The De-hierarchization of the Global Financial System Through Alternative and Complimentary Monetary Systems

Abstract

Over the next 11 years, alternative and complimentary currencies, and the associated monetary systems that support them, will gain acceptance and become popular with wide-ranging communities. This increased activity will occur in both the virtual and physical realms. Current, volatile events with Bitcoin signal the growing pains of a new form of monetary exchange which will pave the way for other alternative virtual currencies through learning by trial-and-error and varying levels of regulatory oversight by the government. LETS systems will grow in popularity as communities increasingly look locally for food, services, and other goods as “the barter economy” matures and software systems are in place to support the exchanges. This will also allow communities to achieve greater levels of independence and a certain degree of insulation from global “shocks” brought on by unrest and environmental issues which will impact the global economy.

Key Drivers Global financial inequality; accelerating boom-bust cycles; less confidence in economic systems; less confidence in government; environmental degradation; increased supply chain costs; virtual communities.

http://epublications.marquette.edu/cgi/viewcontent.cgi?article=1030&context=econ_workingpapers




http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=6567197&url=http%3A%2F%2Fieeexplore.ieee.org%2Fxpls%2Fabs_all.jsp%3Farnumber%3D6567197






https://en.bitcoin.it/wiki/Controlled_supply

https://en.bitcoin.it/wiki/Controlled_supply


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3.2.3. Narrative Baseline Description

The usage of virtual currency will be widespread and knowledge of virtual currencies and how they function will become common knowledge. Bitcoin, or a direct offshoot, will be exchanged and traded online as interchangeably as traditional, national currencies. The one area virtual currencies will struggle in gaining acceptance will be a result of the large number of fringe currencies that continually pop up. As virtual currencies become commonplace, they will be used far more as a complimentary currency to those who are suspicious of “Wall Street Fat Cats” who they feel are manipulating currency exchange rates. Virtual currencies will also find a large following amongst the “gold standard”, tech-savvy crowd. Online virtual groups will spring up and develop currencies and systems with the purpose of di-hierarchizing the valuation of the monetary system. The occasional involvement of criminal elements will be seen as a trade off with circumventing the “rigged” government systems. Some regulations will be accepted willing, some grudgingly, and some will be rejected and online communities will work around host-nation laws. Virtual currencies will also increasingly have a social and environmental component that the younger generation will buy into. One to two virtual currency communities will adopt a model where positive and negative externalities of goods and services will be monetized and cost will be reflective of this. In the physical realm, LETS will grow as market boom-bust cycles become more frequent. While many of these systems have traditionally sprung up in North America, they will become more popular in European countries, as local communities and disaffected ethnic groups look for an alternative to the Euro. Rather than break away from the Euro zone, they will use LETS to insulate their local economies, and develop stronger social ties. These LETS will become organized and highly efficient from a market perspective with the aid of computer programs which will track and monitor these systems. Increased fuel costs, and an emphasis on quality and sustainability, will also drive increased community economic involvement.


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3.3. Alternative Future

3.3.1. Alternative Future Inputs Worksheet

Category Description Foundation, rationale, weak signals

Trend Breaks Growth of LETS adoption

Rapid Fluctuation of Virtual Currency Price

Customizable Currencies

Faith in Financial Institutions

“Gateway” Currencies

Conventional (baby boomer) retirement savings plans

1. If virtual communities grow at the expense of physical communities, then LETS adoption will slow/stagnate as people opt to engage online

2. Push for government regulation could stabilize key virtual currency prices and shorten horizon times for new virtual currencies to reach “maturity” stage

3. Could instead move in the direction of homogenization led by fears of financial instability and the rise of nationalist sentiments in which use of currency is seen as act of patriotism

4. Another economic crisis could trigger system reform which restores faith and transparency to financial institutions and instills historic levels of confidence

5. Virtual currencies could move towards more of an alternative/counter-culture ethos and those who use it move it away from being a complimentary/compatible currency

6. Inadequate or unstable


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retirement savings could lead boomers to pursuit alternative models to maintain standard of living

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Unfulfilled Plans

Instead of regulating virtual currency markets, governments could simply outlaw virtual currency usage, stunting growth of industry

Virtual exchanges continue to experience security breaches and currency valuation collapses, prompting them to shut down as cost of operations and liability skyrocket and profits fail to materialize.

Decentralization of virtual and localized marketplaces falls apart as financial instability causes communities to retreat further into national currencies and systems, rather than break away from them.

1. Weak signals, hard to implement/enforce

2. Medium potential,

currently a major issue in the virtual currency world

3. Potential for this, though

not likely unified/consistent. Could see an uneven distribution of certain regions moving closer (conservative) and other regions rejecting/stepping back from national currency

Events A wealthy and conservative community launches “gold standard” currency

Global market begins to pull back from US currency, triggering rising interest rates for US government and collapse of currency

Amazon/Large online retailers develop strong, encoded virtual currency designed to reduce growth in credit card fraud, etc.

1. A realistic outcome to libertarian-style movements who call for “Fed abolishment”

2. Low – but key creditors such as China, coupled with continual partisan bickering, could destabilize the US currency and cause global uncertainty and the end of US currency as the global transactional currency of choice

3. A further step in online retailing and virtual integration. As crime increasingly becomes a virtual enterprise, online retailers will take matters


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into their own hands

Issues Should we impose strict regulations on virtual currencies?

People are already terrible with money and credit – will virtual currencies and LETS systems make this better or worse (or the same)?

Should we eliminate physical currencies altogether (either national or alternative)?

Will virtual currencies become a threat to national currencies?

How will exchanges and alternative currencies effect GDP and other key economic indicators?

Tax laws and enforcement

Ideas Large swaths of global populations will reject globalism and return to a local form of trade system

AI systems will control a series of altruistic exchange systems in which individuals will be guided into different forms of work that will maintain communities and ensure equal prosperity for all – all with a higher degree of market efficiency than current capitalist system

Currency will become homogenous as opposed to disparate and localized. A single, global currency will arise in order to reflect the inter-connected nature of the economy

Key uncertainties

Governments long-term response to alternative currency systems

Will there be a global governance response to virtual currencies

Economic boom-bust cycles and whether it will compel citizens to move closer towards the current economic system or reject the


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current model

Will virtual currencies become secure and hacker-safe?

12/20/2014 Houston FORESIGHT: Preparing Professional Futurists 21

3.3.2. Alternative Future Summary Worksheet

Title & One-line Description

The Birth of a Fragmented and Discontinuous Global Financial System Through Alternative and Complimentary Monetary Systems

Abstract By 2025, nation-state currencies will have lost their dominance of global currencies – in large part due to boom-bust economic cycles. Many citizens will opt for virtual currencies on one hand; or take the opposite approach and look to LETS-style programs for the bulk of their economic exchange activities. Advanced algorithms and programming will help make these types of exchanges far more efficient than they are today.

Key Differences from Current Conditions and the from the Baseline

Tech-heavy, AI exchange systems allow for an enhanced economic system which will allow citizens and communities to move away from traditional capitalism and globalism while maintaining high levels of market efficiency. While di-hierarchization of the system in limited circumstances, as under the baseline forecast, the alternative forecast calls for a new system which will not have the same inefficiencies of the di-hierarchization model.

Changes in the alternative forecast will happen far more naturally and subtly than the baseline forecast

The alternative baseline is driven by the key demographic baby-boomers

While both forecasts predict the undermining of national governments as they lose varying degrees of control over their economic systems, under the alternative forecast there will be systems and processes in place to account for underprivileged individuals through the efficient market systems of the computer exchange facilitation systems.

3.3.3. Alternative Future Narrative Description

By 2025, the global financial system will be poised for radical reinvention. While not collapsing, segments of the global community will have rejected direct involvement in the system. Where once “the hand” of Adam Smith, coupled with varying degrees of government regulation, was viewed as the most efficient way to run a market economy, advanced computer programs will provide the basis for a new and more efficient system. In the physical world, LETS style systems will become a significant part of the financial system. This will be aided in part by 2 key factors:


1. a massive, retired population which is still very much capable and interested in staying involved and, 2. coupled with uncertainty retirement savings plan at the mercy of the traditional market. This will spur greater interest in exchanging services and goods with each other, rather than spending valuable “official” currency. This involvement from a large percentage of the population will draw others in as network effects and critical mass are achieved. Governments will be unable to regulate and tax these exchanges in any meaningful way, losing tens of billions in tax revenue in the process. On the virtual side, virtual currencies will gain acceptance with almost all online retailers. Retailers will also begin to develop their own alternative currencies as a component of loyalty programs and for heightened security purposes. A few of these currencies will become popular beyond the retail space. Governments will create regulatory bodies for virtual currencies and exchanges, but this will only serve to heighten the demise of nation-state currencies. Governments will lose the degree of control over their economies that they currently enjoy today. This will create positive and negative externalities: in the positive realm, local economies and communities will be able to influence prosperity to a higher degree. Many low-income economic zones today will emerge as prosperous and sustainable communities; in the negative externality realm, the government’s ability to extract rents will become limited, and government services will become increasingly inconsistent; those communities that struggle to prosper will have limited support from the government. This will be accepted by communities as a whole, however, as governments were not seen as particularly good at managing financial crisis and assisting struggling communities in general. Government hierarchies will largely be displaced by local community councils and, by 2025; there will be calls to dismantle layers of government across the world. Virtual and community credit unions will flourish, undermining international banks seen as largely predatory and responsible for many of the past financial crises. Conservative and libertarian movements will develop gold-standard currencies. Much like the gradual integration of humans and machines, the displacement of national currencies will be innocuous and feel natural.


3.4. Futures Wheel Prep Worksheet

1. Baseline or Alternative Future

Alternative Future

2. Categories 1. Social Corporate Responsibility 2. Strategic Positioning 3. Regulations 4. Investment Operations

2. Implications 1. Social Corporate Responsibility: Positioning of the

organization and public relations; when LETS/alternative currencies are seen as solutions/socially responsible but not necessarily profitable/government approved. If bank is unable to assist their customers in being profitable and with their investments, then the bank no longer serves one of its key purposes.

2. Strategic Positioning: Fragmented and fluid economics defined by individuals and their AI systems (not government and banks). Not centralized planning by any means, but rather millions (billions) of intelligent systems working at rapid speeds to develop monetary and service exchanges for their human counterparts – including the development and production of new products deemed important/wanted by human hosts.

3. Regulations: Governments will first attempt to regulate LETS and alternative currencies to make them safe for investors. As AI systems advance and individuals and their systems reject conventional modes of exchange, governments will react with regulations to maintain decision making primacy over the national and international markets. This will ultimately fail, and some governments will work towards a diminished but accepted role while others will continue fighting with strict regulations which will devastate the remaining conventional market economy.

4. Investment Operations: The rules for investment banks will change and the question will become how


to make money in a highly efficient, decentralized system made up of disparate currencies and LETS?

4a.Single Most Important Implication

Number 2, the Strategic Positioning implication, and how banks will respond to a decentralized and fluid system, which can change and evolve in less than a second, and is able to largely self-sustain without second-tier interference (banks and government). Question becomes: under this long-term forecast scenario, what role does the bank play? Should banks become involved in process and hope their role evolves along with the system, or actively fight to keep it down?

4b.Single Most Provocative Implication

If systems and AI are able to create a hyper-efficient economy, what does the world actually look like? What does a complete removal of inefficiencies and asymmetrical information mean for the global economy? This implies that governments, banks, and basically every institution formed today would no longer be necessary. Human/AI integration and interaction would be self-sufficient and self-sustaining… assuming system is altruistic in some critical degree.


3.4.1. Futures Wheel Worksheet Summary

Future

Alternative

CategoryCorporate Social

Responsibility

Future

Alternative

Future

Alternative

Future

Alternative

CategoryStrategic Positioning

CategoryRegulation

CategoryInvestment

ImplicationsPR Position of Organization

ImplicationsAI and

Dihierarchization of Financial

Systems

ImplicationsGovernment Maintaining

Control

ImplicationsInvestment Operations

Customers Leaving

Reduced ProfitsShareholder

FlightNew Product

Offerings

Multi-Governmental

Crackdown

Systems replace traditional

transactions/exchanges

Systems adopt alternative currencies/

methods

Systems circumnavigate

financial institutions

Banks in current form no longer

necessary

Government reigns in

alternative markets

Markets continue largely unabated

Government forced to relax

regulations

Some government accept lesser

economic role

Some governments

tighten regulations

Individual AI will outperform bank

portfolios

Banks will invest heavily in AI technology

Technology will rapidly reach citizen level,

wiping out bank advantage

Banks adopt new value

propositions or perish


Appendix A Scanning Forms

Scanning Form 1

Title The Rise of Cryptocurrencies Author Jacob Powell

Brief source Aljazeera Date February 2, 2014

STEEP

Category/s

Economic, Technological, Social Keywords Cryptocurrencies, Dogecoin, Bitcoin, “less than seven

weeks”

URL http://www.aljazeera.com/indepth/features/2014/01/rise-cryptocurrencies-201413012034867124.html

Type

(bold one) Actual event New trend New cycle New plan Potential event New information New issue

Brief description

of the item

Describes the use of Dogecoin, a cryptocurrency, and how it was used to fund projects via Reddit Describes how

cryptocurrencies work, which is through a form of computer algorithmic “mining” which is very much like a form of digital gold

mining. Pros of the crypto (or virtual) currencies, specifically Dogecoin, are its rising value, its acceptance as a useable currency

among online communities, and the ability to exchange for “real” currency by first exchanging to bitcoin and then into US $$$;

cons listed are primarily around the volatility of virtual currencies, lack of government regulation and oversight, and potential

for ‘bubbles’ to emerge.

How could the

future be

different as a

result?

Ability to raise/utilize virtual funds and convert into “real” currencies (i.e. US dollars). Free flowing exchange between

cryptocurrencies and national currencies. As well, flags Bitcoin as a “gateway” currency of sorts. Dogecoin cannot be converted

into US dollars, but Dogecoin can be exchanged for Bitcoins, and Bitcoin can be exchanged for US dollars. The ability to rapidly

gain adoption for new currencies, as well as the risk of rapid retreat from same currencies suggests potential for serious

instability.

What are the …Stakeholder name: International Bank


potential

implications

for…?

Rapid adoption of new currencies

Ability for currencies to be shared/exchanged

Opportunities for ‘gatekeepers’ of virtual currencies to national currencies (and vice-versa)

Rapid valuation/devaluation cycles possible

Unclear reaction by online currency participants to “established players”

Overall effect

(bold one)

Confirming Creating Resolving

(baseline scenario) (a new scenario) (between two scenarios) Impact

(0-5) 3

Plausibility (0-5)

4

Baseline, new or

resolved

scenario(s)

(Baseline scenario) Alternative currencies have a very real presence,

especially in the virtual realm, but achieving scale/network effects as well as

acceptance in the larger economic system is still uncertain. Although

“confirming” the baseline, some hint of alternative currencies as having a

‘trendy’ quality, where Dogecoin aims to be a virtual currency that doesn’t

take itself too seriously.

Novelty

(0-5) 3 Timeliness

(0-5) 3

Scanner Adam Cowart Date

Submitted February 2, 2014


Scanning Form 2

Title Bitcoin exchange Mt. Gox’s withdrawal halt prompts

SecondMarket action

Author Saumya Vaisham payan

Brief source Market Watch – Wall Street Journal Date February 7, 2014

STEEP

Category/s

Political, Economic Keywords Regulated, US-based, bitcoin exchange, volatility.

URL http://blogs.marketwatch.com/thetell/2014/02/07/bitcoin-exchange-mt-goxs-withdrawal-halt-prompts-secondmarket-action/

Type


Brief description

of the item

A call to establish the first US based Bitcoin exchange in order to (theoretically) bring less volatility to the virtual currency. This

recent call has come after significant investment in Bitcoin by US financial players, but growing questions over the management

practice by the largest Bitcoin exchanges: Mt. Gox (Japan), Bitstamp (Slovenia), and BTC-e (Bulgaria).

How could the

future be

different as a

result?

With a US regulated cryptocurrency exchange, based in New York as per the article, this would give a new legitimacy to the

virtual currency market, Bitcoin in particular. This will not necessarily make the currency more valuable, but it could lead to a

more stable and recognized market, which would pave the way for more crypto and alternative currencies to be

exchanged/traded.



potential

implications

for…?

Discussions underway with regulators and industry insiders

Appears greater regulation and legitimacy could be at the “emerging issues” stage and moving closer to an “event”.

Question: Would entering this market help stabilize virtual currencies, or make them more volatile? How will the online

community respond to government/corporate oversight?

Also unclear as to what are the barriers to entry in this domain – currently, appears to be very few/small. So issue could

also be posed as to whether being an early adopter is the right strategy, or watching closely and taking the market

imitator stance.

Bitcoin is also fluidly traded with other virtual currencies that are not as widely accepted as bitcoin. As well, issues with

money laundering and using the currency for international crime. It is not always clear what the influencers are that

could drive currency up or down.

More oversight could increase stability of currency

A US based exchange makes trading more accessible to the Western financial market

A general consensus appears to be emerging that Bitcoin is “maturing” as a valid currency

Overall effect

(bold one)



(0-5) 4

Plausibility (0-5)

4

Baseline, new or

resolved

scenario(s)

Moves baseline towards “acceptance” and “adoption” future, where

regulations, government oversight, and market acceptance lead to higher rates

of adoption and less volatility for certain crypto and alternative currencies

(though impact on plethora of emergent currencies is still unknown).

Novelty

(0-5) 2.5 Timeliness

(0-5) 3




Scanning form 3

Title Regulation of Bitcoin in Selected Jurisdictions Author The Law Library of Congress, Global Research Center

Brief source Library of Congress Date January 15, 2014

STEEP Category/s Economic, Political, Social Keywords Bitcoin; foreign jurisdiction; regulations; national currency

impacts; criminal misuse; legal tender

URL http://www.loc.gov/law/help/bitcoin-survey/2014-010233%20Compiled%20Report_.pdf?loclr=bloglaw

Type (bold one)

Actual event New trend New cycle New plan Potential event New information New issue

Brief description of the item

An overview/survey of bitcoin and virtual currency treatment by national governments; whether or not they officially recognize currency, sanction it, or consider it illegal. Or whether there is no government position at this time.

How could the future be different as a result?

This article provides a nice overview of the global financial situation in virtual currencies. And, ultimately, it is still a very fluid future, with unclear outcomes. How it can shape the future is that certain countries have developed strict regulations, and many have not, or have determined that bitcoin falls under existing regulations and tax codes… ultimately, there is very little consistency and there does not appear to be any on the horizon. This creates a future environment of instability in the global markets in virtual currencies, as countries are developing labyrinthine laws and stances. The future could be messy.



potential implications for…?

No clear signaling from governments on how they will treat virtual currencies: Many governments are considering which steps to take in response to the growing use of virtual currencies – the overarching implication for the stakeholder is determining which path to take in terms of capitalizing on bitcoins and other virtual currencies when there is no cohesive or coherent international plan.

Governments largely view bitcoin as a non-incumbent currency that falls under their own jurisdiction (an assumption which is both partly true and partly false).

Acceptance/Rejection by national governments could come suddenly, without warning. The majority of governments have made no official statement or law, which means at any point in time they may come out for or against virtual currencies – which could impact operations and profits within the affected country.

Both China and Brazil have developed regulations/rules governing virtual currencies… one potential opportunity for stakeholder would be to explore virtual currency exchange within these countries, if they have a presence, in order to test/understand laws and become fluent in virtual regulations.

Some discussions going on that would see certain countries print “physical” bitcoins, creating a further opportunity for exchange and a potential signal of a “maturing” of this particular virtual currency.

Overall effect (bold one)

Confirming Creating Resolving (baseline scenario) (a new scenario) (between two scenarios)

Impact (0-5)

5 Plausibility (0-5)

4

Baseline, new or resolved scenario(s)

Moves baseline towards uncertainty and global markets being hesitant in adopting currencies which do not have consistent national regulations governing.

Novelty (0-5) 3

Timeliness

(0-5) 4

Scanner Adam Cowart Date Submitted

February 15, 2014


Scanning form 4

Title Bitcoin Difference Galore, but What’s the Difference? Author Zach Schonfeld

Brief source Newsweek Date February 21, 2014

STEEP

Category/s

Social, Economic, Technological Keywords Kim Kardashian; Kimcoin; brand; Dogecoin; Bitcoin;

Litecoin; alternatives

URL http://www.newsweek.com/bitcoin-alternatives-galore-whats-difference-229859

Type


Brief description

of the item

Article points to a growing trend of new virtual, crypto-currencies popping up and having quirky marketing concepts behind

them.

How could the

future be

different as a

result?

If currency (especially virtual currencies) valuation is driven by demand, and successful marketing drives demand, then it is only

a question of time before new virtual currencies are being launched with heavy marketing concepts behind them, including

celebrity endorsements, commercials, etc. Usage of certain currencies become part of an individual’s projected image (like the

shoes and clothes that they wear); their identity.



potential

implications

for…?

Deciding how, if at all, to get involved with new, untested, much-hyped currencies. Also, with increased online banking and

online shopping, this trend cannot be ignored as major banks can simply be bypassed. Further points to consider:

Currencies with strong marketing campaigns and how to deal with currency

Rapid valuation/devaluation cycles as “new” currencies can be created almost overnight

If any bank/exchange firm were to become involved, social media would become a key element of research and analytics

as emerging trends could have a rapid impact on currency valuation (Think: A “Biebercoin” and its value before getting

arrested in Miami, and the tumultuous hours after he was arrested. How would this have impacted “his” currency?)

Potential for certain currencies to gain legitimacy/adoption and become a trusted general currency that outlives its

celebrity endorsements and flashy marketing campaigns, and become a “gateway” virtual currency which can be traded

fluidly with national currencies

Overall effect

(bold one)



(0-5) 3

Plausibility (0-5)

4

Baseline, new or

resolved

scenario(s)

Pushes the baseline more towards continued instability and uncertainty.

Potential for major personalities/players to become involved in a still very

immature, fluid market. This is likely to lead to further uncertainty, though

there remains the potential for a major new player with market recognition to

consolidate industry to a certain extent and push virtual currencies into the

minds of the general public

Novelty

(0-5) 5 Timeliness

(0-5) 5




Scanning form 5

Title Bitcoin ATMs Open in Singapore Author Newley Purnell and Lorraine Luk

Brief source Wall Street Journal Date February 28, 2014

STEEP

Category/s

Economic, Social, Technology Keywords ATMs; bitcoin; tax guidance; bankruptcy; Mt Gox

URL http://blogs.wsj.com/digits/2014/02/28/bitcoin-atms-open-in-singapore/

Type


Brief description

of the item

Opening of Bitcoin (virtual currency) ATMs in Singapore, at the same time the Mt. Gox (bitcoin exchange) is declaring

bankruptcy. Only a few days earlier, Mt. Gox announced that they had “lost” 750,000 bitcoins belonging to its customers. Article

also looks at the new ATM technology, and the ease with which people in Singapore can purchase Bitcoins.

How could the

future be

different as a

result?

This is a significant example of how investors around the globe are interested in virtual currencies despite large potential risks

from hackers and lack of government regulation. This points to a future where virtual currencies are now accepted as a result of

adaptive persistence, of an ability to continue to be traded and coveted despite risks, and the first steps towards virtual

currencies and access to them becoming ubiquitous.

What are the …Stakeholder name: Bank


potential

implications

for…?

Shows global market adoption despite risk

Example of large, eager market for virtual currency even without regulations and market confidence

Bitcoin evolution is continuing to demonstrate resilience

Growing demand for “gateways”, physical space in which to purchase/trade virtual currency, which shows large market

acceptance could be driven with the inclusion of conventional banking environments – making the purchasing/selling of

virtual currency more accessible can drive interest from the more general public

Overall effect

(bold one)



(0-5) 5

Plausibility (0-5)

4

Baseline, new or

resolved

scenario(s)

This scanning hit confirms baseline scenario in which, despite ongoing

instability, global financial markets are moving closer to adoption and

recognition of virtual currencies. With chaos over Mt. Gox collapse, markets

have responded by continuing plans to open exchanges and ATMs, and have

called for greater regulations; this is instead of backing off investing in virtual

currencies, or calling for currencies to be scratched/outlawed.

Novelty

(0-5) 3 Timeliness

(0-5) 4



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