FT Alphaville chaired a fortuitously timed Chatham House panel on Bitcoin, alternative currencies and the future of money on Tuesday evening. The panel included the man who signs all the UK banknotes, Chris Salmon (a.k.a. the chief cashier of the Bank of England), Dave Birch, a consultant and alternative currency "thought leader" from Consult Hyperion, Shane Happach, chief commercial officer of eCommerce at WorldPay and Leander Bindewald, who leads research into complementary currencies at the New Economics Foundation. The audio can be found here. What was pretty amazing about the event was the calibre and quality of the attendants (including the audience), as well as the open mindedness of the participants towards the idea that a paradigm shift may be taking place. A consensus was generally formed around the following points: While Bitcoin is a Napster-like disruptor challenging the established way of doing things, it is more a means towards a new way than an end game solution in its own right. There are major flaws in Bitcoin, but there are also lots of things that can be learned from the movement and adopted by existing currency regimes. The money system is likely to get more complex. Cash has more criminal potential than digital currency. There's a difference between anonymity and privacy, and it's not clear if anonymity is actually desirable in money. A question that unsurprisingly came up: "what's the real value of a Bitcoin?" David Birch's view was that it's probably close to zero, though, he did concede that the community-based tech that underpins the system may have some intrinsic value. So, might Bitcoin's value be linked to its capacity to incentivise people to learn about computing, programming and cryptology and generally to think about the nature of money and value? He didn't see that as value inducing. But it got us thinking that perhaps the best way to think of Bitcoin is as any other high-tech social-platform stock. For example, both Twitter and Facebook depend on their communities" participation to make their models work. So why should Twitter and Facebook be considered valuable in the modern marketplace but Bitcoin less so? One reason is undoubtedly copyright and patent law. Both Twitter and Facebook have the ability to draw economic rents from anyone who dares to copy their system. This does not apply to Bitcoin because the tech that backs the system is a public commons. What's interesting, however, is that even with copyright protection, valuation in the conventional marketplace is tricky. The recent IPOs of Twitter and Facebook show how uncertain the market is about their intrinsic worth, largely because it's really hard to put a price on the intangible intellectual property-right component. The same applies to revenues generated from the ability to extract personal data out of a flighty user base. So here comes Jaron Lanier's argument that we should all get some compensation for the profits Twitter and Facebook extract from our cooperative participation (though in Twitter's case those profits aren't even here yet). But that doesn't completely make sense either. We, as users, are beneficiaries of an infrastructure the companies pre-fund on our behalf. The compromise is our data transfer, which helps them centrally capture revenues to cover costs. With Bitcoin, however, the costs of operation are funded by the community. If you want "in" you need to compensate the miners who fund the energy and server costs that support the network. The payoff for you is that you get privacy (not necessarily anonymity) for your efforts. That makes the Bitcoin value system a promising alternative to what is an increasingly unsuitable and outdated equity value model. The paradox of monetisation Both Facebook and Twitter - and stocks like them - face what is best described as a paradox of monetisation. The more companies like Facebook attempt to extract profits from a user base (rather than just covering costs) the more they risk alienating the community, diminishing the network's monetisation potential. The more people are turned off due to explicit rent extraction, the greater the risk that the "human capital" backing these systems flees to alternative networks that circumnavigate the marketing and advertising people love to hate. With Bitcoin, however, the network is protected by every participant's investment in the community. By definition everyone is an equity holder to some degree. Flight risk is not overcome completely - but it's much more likely to be prompted by soaring operation costs that go beyond the value of the system to the user base than by intolerance towards the exploitation of its participants. Thus, the value of Bitcoin is in many ways the value of the human capital that backs its network. It's not a rent extraction community as much as a cooperative that derives value from its own pooled human capital resources. This pooled human capital has purchasing power in the real world in and of itself. It also has a value relative to other pooled groups of human capital. What's more, as human capital becomes more knowledge than muscle based, this only enhances the value of the common stock. Knowledge-based human capital pools by definition draw more synergies than muscle-based ones because ideas have the capacity to multiply exponentially and enrich everyone by doing so. Muscle, on the other hand, is finite and absolute. The boundary to knowledge is hard to cap, especially if you engage in a crowd-based system that expands the limits of your own cerebral capacity. Perhaps this is why the paradigm shift from a muscle to a knowledge economy looks so bubbly and singularity-like, and why the economy increasingly needs bubbles to support it? The problem occurs if you try to enslave that human capital pool to extract rents from it. Especially if those rents flow to a single central organizer. Bitcoin is not the solution to this problem because it too derives a type of economic rent. The difference is that Bitcoin's rent flows not to a central organiser but to a new elite - the system architects and early adopters. The rents themselves are extracted by artificially capping the human capital network and limiting its continuous and equitable expansion. The flaw is that the community aims to create hierarchy very purposefully. The rents are transferred via transaction fees and forward expectations, moulded by the clear deployment of an artificial scarcity mechanism. The inbuilt expectation that prices can only go higher thus creates a contango market that rewards hoarding, and generates a synthetic yield - at least until a better alternative comes into being and encourages the human capital to flee or gather elsewhere on more equal grounds. This perhaps justifies the recent slew of Bitcoin alternatives, none of which should be required if Bitcoin is an answer in and of itself. Since the rentiers - system architects and early adopters - depend on continuous demand-based appreciation and expansion of the pool for purchasing power, the system risks going through an inflationary crisis if and when there is flight. Bitcoin is therefore definitely not the answer or the end game. It is, however, an important step towards understanding the new nature of value and human capital in a knowledge age. The really exciting thing here is that these lessons can be applied to all sorts of human capital pools in the long run, including those currently disadvantaged by the paradox of monetisation. This paradox is epitomized by the fact that human knowledge, talent and creativity diminish in value if they are constrained. Monetisation strategies by definition devalue the knowledge experience by trying to make something scarce that shouldn't be scarce. So perhaps media industries can learn from the lessons of Bitcoin and move towards leveraging the equity found within their human pools of capital? A thought experiment Thinking of an example close to home. What if, rather than depending on advertising revenues, FT Alphaville equitised its community instead? Not just the writers - the commenters and participants too. What if FT Alphaville were placed behind a hybrid paywall system - a kind of freewall? You could think of it as an encrypted community (which is basically what a paywall is) but the price of entry would be set by the market. Our stock would be freely floated just like any other, with price determined solely by demand. Think of it like a lifetime subscription or membership. Alphaville could act as the subs central bank and encryption enforcer, releasing a finite supply of entry passes that would be traded in the market. Not only would sub holders have the right to participate in Alphaville's happy little community, their active participation would help boost the compensation price should they choose to sell. Double spending (or, double reading) - which in this case means allowing access beyond the sub holders - would have to be policed in the same fashion copyright is policed today. But, taking its cue from the Bitcoin community, the sub rights would have value in themselves so the participants would be financially incentivised to play nice. Though the transfer of rights could also generate a transaction fee for us as well. Hey presto our stock would have value! Of course, if velocity of access rights was poor, or it was clear prices were getting too frothy and began discouraging entry, unlike Bitcoin we would be keen to float more stock and expand the community base. The value system would be entirely meritocratic as well. If FT Alphaville's standards fell we'd know via the price of our equity. If they went up we could draw more funding. Authors could be paid not in salary but in equity gain. This could be an entirely new value system based on the relativity of pools of human knowledge and community relationships. Or, of course, it might be an exercise in communal crash and burn. For that reason alone, you should probably not expect to add FTAV:NYSE to your watch list any time soon.