Water Rewards FAQ

Why is it called Water Rewards?

People who buy Water Rewards pre-pay their water bills. They get a discount when they pay for their water. The discount is a Reward. Those who consume less water get more Rights to Buy Water Rewards. The extra Rights to Buy is a Reward for consuming less of the Commons.

If people get a discount won’t the Water Authority make less profit?

The Operating Costs to supply water are one-third the price of water.  Repaying loans with water costs one-third as much as repaying loans with money.  Because it costs less the water authority can give a higher return to investors and at the same time make a higher profit.

Who benefits from the reduction in profits?

All loans reduce profits. With Loans the reduction benefits the financiers. With Water Rewards the reduction benefits the customers as they finance the infrastructure.

Is it necessary to account for depreciation?

Depreciation is used to build a fund to replace the asset depreciated. With Water Rewards the Water Authority asks the Water Rewards Coop to pre-pay for asset replacement when needed and only when needed. It removes depreciation from the Profit and Loss so increasing profits.

Can the Water Authority issue more Water Rewards than needed for Water Infrastructure?

The Water Authority can accept as many Water Rewards pre-payments as the cash flow of payments will support. Typically the value of pre-payments is set to the total asset value of the Water Infrastructure. The Water Rewards Coop can use the extra funds to invest in other community infrastructure.

Are Water Rewards a security?

Water Rewards are pre-payments for water. They only apply to purchasing water. Contract Law rather than Securities Law covers the operation of Water Rewards.  When a Water Reward is sold it ceases to have discounts added and ceases to be inflation adjusted.  Its value can only be realised by using it to pay for water.  That is why it is not a currency and why it is not a security.

Does the Co-op need a financial license?

The Co-op does not need a financial license to operate Water Rewards because Water Rewards are not a financial product like money or shares or units. Water Rewards are nothing more than a pre-payment with existing money for water delivered in the future.

What if the discounts reduce the profits so that there is not enough money to pay for the Water Authority operations?

If the Water Authority makes a loss in one year because too many Water Rewards reduced the cash input it can cover the loss by selling replacement Water Rewards. It is fiscally responsible because new Water Rewards are a replacement of Water Rewards, not an addition.

Are Water Rewards expensive to operate?

All the rules and regulations for Water Rewards are in the app that each person gets. The app has low running costs. The costs are much lower than the cost of transaction fees and loan establishment fees.

Does it change the Water Authority Operations?

The only change to the Water Authority Operations is to allow invoice payment with Water Rewards.

What impact does it have on the ACT Government Budget?

The ACT will receive higher profits from sales of water.

What are the benefits for buyers of water?

Buyers of water pay less because they get a discount. The return on investment can be set to be twice as much as commercial inflation-adjusted investments.

Is it socially equitable?

The Co-op can provide more Rights to Rewards to low-income people or to people who have difficulty paying water invoices.  The Co-op can supply more Rights to people who consume less water so Rewarding sustainability.

What are the immediate benefits to the ACT?

The ACT Government will have $100M+ extra profit from the Water Authority to spend on running government services. There will be $3 Billion in Capital available for other infrastructures such as hospitals, roads, education, public transport, and renewable energy.

Why is the Discount Rate set at 10%

The Discount Rate can be set at any figure to make it an attractive investment.  The discount is returned to the customers so does not affect the price.  The price of water is set by the ICRC.

If this is such a good idea why isn’t it operating elsewhere?

Water Rewards generates distributed money through the use of the Water Rewards application. Distributed money costs less than centralised money created with money loans. Until recent advances in computing, communications and software technology it was expensive to scale distributed money. It has been technically possible for the past ten years, but it disrupts existing financial systems, and financial systems are difficult to change.

Isn’t a money loan from a bank just the same as a money loan of a prepayment from a Co-op Member?

No.  The Co-op is a community. The community gets the benefit from the actions of the Co-op members. The Co-op community as a whole does not repay the loan nor does it pay interest. How much each individual shares in the benefit depends on the Co-op rules for distribution. Think social insects. How much benefit does an individual bee get from doing a task like feeding Queen Bee? With a Water Rewards Co-op, the community as a whole does not pay interest or repay any loan money. Those costs are avoidable costs for the community.

What Economic Theories explain Water Rewards?

The closest theories that explain Rewards come from the broad church of Evonomics.  Water Rewards is an instance of a complex adaptive system where autonomous entities co-operate to achieve a given outcome. In this case, it is the economically sustainable exploitation of a natural resource.  Most economic theories are based on the idea of free-markets setting the price for a goods or service.  With Water Rewards the economic idea is for a finite resource to provide the greatest value to a community for the least cost.

ACT WaterRewards Co-op

ACT Water Rewards Co-op

I’ve drunk water or intend to drink water from the ACT and I want to become a member of the ACT Water Rewards Co-op http://eepurl.com/crfT0j

Traditionally water infrastructure has been funded with bank debt. With bank debt, the bank loans money to the water authority. The water authority builds the infrastructure and sells water to customers. The customers give money to the water authority, and the water authority repays the bank loan.


With a Water Rewards Co-op, the Customers/Investors loan money to the Water Authority and the Water Authority repays the loan with water. Investors get a return on their money by receiving a discount on their water bills.



With Water Rewards there is no interest cost. Instead, the Water Authority receives less money over the life of the water infrastructure. Unlike interest, discounts do not compound. The reduction in profits is small and spread over the whole life of the water infrastructure.

What Water Rewards means for the ACT

The ACT government can replace water infrastructure loans of $1.3 Billion dollars with Water Rewards. ICONWater profit will increase by $70M each year. The holders of Water Rewards will have the equivalent of a 10% inflation-adjusted annuity. They can decide when to activate their annuity. Each year they leave it the discount increases by 10%. If a holder of Water Rewards does not wish to use them to pay for water, they can sell them to a person who can. An equivalent inflation-adjusted annuity from a bank currently has interest rates of 2% to 3%.

Water Rewards are a desirable investment and will be in high demand. The ACT Water Rewards Co-op will control demand by issuing free, transferable Rights to Buy Water Rewards to Co-op members. Any person whose water is metered by ICONWater will be entitled to Rights to Buy. To replace the current debt, the Co-op will issue, on average, about $4,000 worth of rights to each member.

The Rights to Buy can be sold and are likely to be the same value as their face value.

ACT Water Rewards Co-op

SEE-Change ACT is forming an ACT Water Rewards Co-op and will invite ICONWater customers to join for no cost. The Co-op will take the proposal to the ACT government as the owner of ICONWater.

A small money transfer fee will cover the cost of operating ACT Water Rewards and will impose no burden or cost on the ACT Government or ICONWater.

There is no change to ICONWater operations. For the ACT government, it can ask the Water Rewards Co-op to raise further funds for other water basin infrastructure such as the development of wetlands and better use of stormwater.

ACT Water Rewards Co-op FAQ

Data Availability and Use – Submission

This submission was a response to the draft report of the Productivity Commission.

The Data Availability and Report from the Productivity Commission is an important document because better access to data will lead to substantial productivity improvements.  This submission addresses two critical questions asked by the Productivity Commission.

The Commission seeks more information on the benefits and costs of a legislative presumption in favour of providing data in an application programming interface (API) format, specifically:

  1. In which sectors would consumers benefit from being able to access data in an API format?
  2. What are the main costs and barriers to implementing APIs?

The answers are:

  1. All sectors of the economy will benefit from the provision of API access. Benefits accrue to business, governments and consumers.
  2. APIs can be deployed to give access for close to zero cost.  Systems can be built to make it easy for organisations to implement existing or new APIs to access data.  Ease of access goes a long way to removing barriers.

The use of APIs to access data is low-cost because the rules of access to data can provide a smart contract in response to a request.  It means organisations can give permission to applications to access data in a standard way and in a way that the requestor can fulfil programmatically.  The hard part of accessing data is specifying and enforcing the rules under which an organisation grants access.  Many initiatives use the approach of attaching smart contracts to data, and it results in lower cost solutions to many problems.

A further development of the idea is the builder of the application to put the reasons or rules for access in the application accessing data so saving the organisation the effort and expense of rules enforcement.

Without APIs both the organisation and the recipient must store the rules with the data.  It costs more to put rules in two places and to coordinate the rules than it does to put the rules in the application that accesses both organisation and recipient data stores with APIs. Further, if the same application accesses other parties, there is still only one copy of the rules.  It means a common set of rules for access to all databases using the application.

The only thing stopping the introduction of APIs are existing rules and regulations around data access.  These rules and regulations have meant that organisations have created gateways to access. The gateways permit the owners of the gateways to extract tolls.  Certified applications that access the APIs can embed existing standards and regulations and remove the need for gateways and the accompanying charges. If justifiable, charges to the owner of the data source rules are included in the application.

Bureaucratic inertia and existing players in the marketplace of information, including government agencies, combine to preserve their regulated access advantages by impeding the introduction of APIs.

Once API access is available, it is possible to deploy distributed applications to coordinate the activities of independent agents like people. Without APIs, we centralise applications because of the cost of enforcing distributed rules held with all agents.  Using distributed applications removes the advantages of scale in centralisation.  Distributed applications that achieve the same outcomes will always be lower cost than centralised applications. The main reason being the replacement of intermediaries with help when needed.

To illustrate the benefits and productivity improvements of distributed applications the submission outlines the deployment of a possible nationwide device location service that operates indoors and outside.  The service uses existing infrastructure and does not require an expensive satellite GPS service.  It does not use Apple or Google Location services.  It is 100% distributed, and its cost is the cost of distributing the app on devices plus the calls to APIs to data held on actual or virtual devices.  The productivity comparison is between the deployment of apps on devices and Australia putting up a GPS satellite service. That is billions of dollars versus a few million.  This submission outlines how to deploy the app on fixed devices like mobile phone towers and wifi routers and on mobile devices like mobile phones.

The submission also outlines ACT Water Rewards – a distributed app for investment loans in water infrastructure.  This app will save the ACT government $70M in interest payments and double the profit of the local ICON Water Authority for no cost to the Authority or the ACT government.  Presumably, we could call this a 100% productivity improvement.  Opponents to Water Rewards use access to data as the gatekeeper.  There is strong opposition from the finance sector who lose the rent on money.  Treasury and Price Regulators oppose the system. They measure economic efficiency as the most money received for a given amount of water rather than getting the same value from using less water.  The Water Rewards app gives access to money data including the rules associated with the money and water usage. Without API access such systems are impractical at scale.

Like all complex systems emergent properties of the system will appear. The emergent property of the commercialisation of the internet was the loss of privacy.  An emergent property of the marketing of the distributed internet will be privacy.

A Distributed App to find the location of a mobile device

Distributed algorithms are the same app executed on many devices. The separate instances of the app collaborate to achieve a common goal. Using the same app means the same rules apply to all devices.

A distributed app to find the location of a device is one that works with its near physical neighbours to find its location.  Each instance of the app executes the same code.  It calculates where it is by first guessing its location. It measures the distance to any other device by estimating how far away the device is from the strength of Wifi, Bluetooth, ultrasound, light or another signal broadcast by the other device.

Having made a calculation, it asks, via API calls to the other devices, where they think they are and the strength of the signal.  Devices only provide these two measures. They do not ask who or what the other parties are.  Having received back the guessed locations of the other devices and the signal strength the requesting device recalculates its position.

A device keeps asking until it is confident of its position. The devices are connected because they use the same app, and the physical connection happens when the app is activated.  The app can, on request, show the identity or other information stored on the device to trusted parties.  The device is the place containing the authoritative data on position.

Even if a device does not join the network and puts itself into the network, the network of connected apps can still include it by setting up a virtual device in the cloud and attaching an app to it.  The virtual device can guess where it is and ask the other apps where they are and operate the same algorithm.  The best protection for a device owner is to join the network and take control of the virtual device.

The system is low cost as it uses wifi signals, standard https protocols, existing transmission paths, little storage or computational resources.  It is several orders of magnitude cheaper than the centralised location services created by GPS.

This distributed algorithm works because devices connect with APIs via a trusted app and because each device is autonomous.  There is no need for permissions on the location and signal data because the data never goes outside the trusted device’s control without permission.

For a device owner to use the network it needs to download the app. If it wants to use the network to tell others who or what is at the location or any other information, then it registers that information by filling out a form on the app and fills out any restrictions it wishes to make on the release of the data.  Other applications can integrate with the network by registering through the location network.  Those apps can access data accessible by an API to a user’s data if the device owner approves these other apps.

Water Rewards a distributed application

Water Rewards is a distributed app for crowdfunding water infrastructure.  ACT Water Rewards Co-op has members who use water from the ACT water infrastructure.  The Co-op purpose is to replace bank lending to fund ACT water infrastructure. The Co-op decides who can invest, the returns on investment, what to invest in, and who receives the investment returns. Each person who receives the right to invest becomes a member of the Co-op by agreeing to receive and own a Water Rewards app.

The ACT government as the owner of ICONWater decides on how much to invest in ICONWater, and what price to charge for water.  The ACT government works with the Co-op to take decisions on the returns on investment, what to invest in, and who receives the investment returns.  The Co-op members get a return on investment by using their investment to pay for water.

The app contains the rules of the Co-op.  These rules include:

  • The criteria for membership.
  • The returns on Loans.
  • The size of Loan, each member, is permitted.

A set of rules, made in consultation with the ACT Government, might include anyone who pays for ICONWater is entitled to be a member.  The return on the Loan could be 10% fixed per year of the inflation adjusted amount still on Loan.    

ICONWater has $1.4 Billion in debt and pays $70M in interest on the debt.  The Co-op will first raise $1.4B by selling ACTWaterRewards to repay the loans.  Anyone who uses water measured by an ICON water meter receives the Right to Purchase Rewards inversely proportional to their previous year’s consumption. The app records each person’s Rights and the Rights converted into Rewards.  The app records the value of Rewards.  The person can sell their Rights and sell their Rewards to another via the app.  The buyer must also have an app.  All the apps link via APIs and all the data defining the Rewards and Rights are kept with each app for each Co-op member.

For this system to operate efficiently and securely, ICONWater should provide API access to water meter billing records to each Co-op member.  The app contains the rules on what meter each Co-op member is entitled to access.  A 0.2% fee on the transfer of funds will cover the Co-op operating and build costs.

ACTWaterRewards will result in an immediate increase in ICONWater profits of $70M.  Because there is no interest costs the profits from the investment go to some water users as they get some of the water they purchase at a lower cost.  On average each Co-op member will receive the free Rights to Purchase $4,000 worth of Rewards to pay off the $1.4B. The market in Rights determines their value.  The return on the Loan, set by the Co-op in consultation with the ACT government, influences the market.

Privacy an Emergent Property

The productive economy will move to distributed apps because of lower financial and operational overheads.  Every application has to register what data it accesses hence sources of data are aware of the data they provide.  As access to data is valuable data sources will only release the data they wish to and will actively work against the operation of the “adnet”. The adnet continually collects information as the result of our online activities.  If the data sources want to, they can stop it gathering information.  

Those organisations that move to distributed applications will have a new marketing tool of privacy they can offer their customers.

Privacy concerns will cripple the adnet.  It will still exist, but it will be easier to avoid.  We will want it to stay around so that distributed systems develop strategies (antibodies) to attack the virus of surveillance.

Kevin Cox

White Label Personal Cloud

20th November 2016

A Housing Crowdfunding Co-op

Housing Crowdfunding Co-ops brings together long-term savers with people who wish to live in a home they own. It is a sad fact that anyone who has a mortgage does not have the security of tenancy over the dwelling in which they live. If they fail to meet their mortgage repayments, the mortgage holder can force them to sell. The mortgage holder gets priority over the money from a property sale and typically, in cases of a forced sale, the homeowner loses some or all the equity for which they have paid.

A Housing Crowdfunding Co-op changes the relationship between lenders and borrowers by sharing the risk of default in mortgage payments across all members of the Co-op. The Co-op also shares the risk of the destruction of a dwelling and removes the need for insurance.

On the positive side, the lenders in a Co-op also share in the capital gains from the sale of the properties.

An even greater positive is that both lenders and borrowers share the benefit of the removal of interest payments and money inflation. Eliminating these costs typically more than halves the cost of purchasing a home. The Co-op members share these savings according to the rules they establish.

The following is a possible set of Co-op rules, but each Co-op determines its set of rules for its particular circumstance.

The Co-op has the title to the dwelling. It buys the dwelling and creates a mortgage. The buyer of the home buys the mortgage through regular repayments. The regular repayments are 5% annually of the value of the home at the time the buyer buys their first part of the mortgage. The payments increase with inflation. When the buyer owns all the mortgage on their property, they stop repayments. In this Co-op, the title of the property stays with the Co-op to make it easy for the buyer to sell a mortgage back to the Co-op. The 5% payment purchases 2/3 or 5% or 3.33% of the mortgage. The extra 1/3 goes to pay lenders for the use of the money and to pay for losses due to fire or damage. The proportion of 2/3 is set by the Co-op and depends on the expected life of the dwelling and the risks of physical losses.

Lenders purchase a share of all the mortgages the Co-op owns. When they want to get their money out of the Co-op, the Co-op sells their share of mortgages at the price they paid adjusted for inflation. While-ever they own mortgages their share of the mortgages increase by 8% of their initial purchase price adjusted for inflation.

What does this mean for Buyers?

Assuming a buyer purchases a $500K home with no deposit. They will pay $25,000 a year to purchase their mortgage and continue paying that for 30 years. Repairs and cost of changes to the property are paid for by extending the mortgage.

If they were able to get a 5% mortgage for 30 years, it would cost them $975K or $475K more than $500K to pay off the mortgage.

What does it mean for a Lender?

Assume the Lender buys $500K of mortgages and leaves them for ten years. They then decide to get their money back by selling their mortgages. After ten years they would have $500K + 8% * $500K * 10 = $900,000K. They could sell mortgages and obtain a return of capital of $67,500 for 20 years.

A person can be both the buyer of the particular property in which they live and a buyer of other mortgages. As mortgages are an attractive investment people who live in properties of the Co-op would get first preference on purchasing other Co-op mortgages.

How much does it cost to operate a Crowdfunding Co-op?

A 0.2% transaction fee on all money transfers would pay for the system operation.

Crowdfunding Cooperatives

A Crowdfunding Cooperative obtains money from members then lends it to other members for a given purpose. The members receive benefits not money in return.  It replaces money loan repayments, with repayments in goods and services.  The longer the loan is outstanding, the more goods and services received.  

Crowdfunding removes the cost of interest and eliminates the cost of inflation.  The returns in goods and services are defined when the loan is made and remain the same throughout the life of the loan.  With money repayments, the value of money changes day by day, and these costs express themselves as interest and inflation.

For loans, for any time greater than zero, Crowdfunding always results in a lower cost loan. But, the cost savings are little for short-term loans and become evident when the loans are over several years.

The details of any Crowdfunding project will vary depending on the needs of the investors, the existing arrangements for funding, the political situation, and the needs of both lenders and borrowers.  It means Cooperatives are tailorable to be large or small and to cover any investment for any purpose.

Crowdfunding Cooperatives leave existing operational systems in place. For example, a Water Authority can implement Crowdfunding by replacing existing loans with Crowdfunding Loans with no change to the operations of the Water Authority.  A housing co-op can replace traditional loans with Crowd Funding Loans and not alter the functions of the housing co-op.

Each situation is unique, and each Crowdfunding Co-op is also unique.

Any existing lending body can replace their loans with Crowdfunded loans, but the change destroys the main reason for its existence and meets with resistance.  Lending institutions exist because there is a market in money.  Crowdfunding Loans removes the need for a money market.  

Within borrowing bodies, centralised budget allocation units are no longer required.  Budget allocation within an organisation performs the same function as a money market.  Replacing money loans with Crowdfunded loans distributes control within any organisation.  This change in the organisational power structure is disruptive as it removes much of the need for the budget cycle.

However, most resistance to the idea of Crowdfunding Loans comes from the economics, financial and political professions.  Removing the need for centralised control of the allocation of money changes the skill set required within organisations.  The change from centralised control through money distribution to decentralised collaborative control in functional units will take years to achieve and will only happen gradually.  

In the meantime, Crowd Funding Co-ops can change money loans to collaborative loans one loan at a time.

Crowd Funding not Debt Finance

We can fund the development of capital works by borrowing money, or we can Crowd Fund it. Crowd Funding removes the cost of interest and will always be a lower cost than loans.

Let us assume we wish to build a renewable energy plant that will produce energy that we can sell for ten cents per kWh. Let us assume that the cost of constructing a plant that produces on average one kW continuously is $10000 and will generate electricity at no extra cost for 20 years.

In 20 years the total value of the power produced is $17520 or a profit of $7520.

Assume we can fund the capital cost of a loan at 5% repaid each year from the income from the electricity. The total cost of the loan is $16,048 leaving an excess of $1,471.

Instead of borrowing money let us borrow the money from the Crowd or Customer. Instead of paying back the loan plus interest lets give the Customer a Discount on the electricity they purchase. In other words, let us give back more energy at a lower price. There are various ways to do this. The only requirement is to make sure we can cover the operating costs of producing electricity and produce enough electricity to pay off the loan. One way to do it is to pre-purchase electricity and buy Rewards. The Reward is a discount coupon that pays for electricity at a discount depending on how long before redeemed. The value of the discount is independent of the price of money because we do not pay interest on the Funds from the Crowd.  We give a return with more electricity.

Using this approach the Crowd, who want renewable energy, can purchase Rewards from suppliers who can build renewable energy plants or roof-top systems and batteries. If the Rewards discount is high enough then, the Crowd can borrow money at a lower rate but secured against Rewards. Rewards are transferable so a buyer can sell some to pay off their loans.

Using this approach, we can fund the development of enough renewable energy to replace coal, gas and oil-fired plants as fast as we can build them – and they do not have to be “economically efficient”.