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Title: Comparison of currencies and trading schemes Post by: herzmeister on January 13, 2012, 12:56:31 PM When discussing Bitcoin, I noticed that we have been brainwashed into believing that there can be only one currency. In my view, Bitcoin can help to free currency and trading from the hands of governments (depoliticization, in the spirit of division of power). In that vein, I try to explain that in a free world, there will be different currencies we can use, each have their own advantages and weaknesses, and we would choose accordingly in each situation.
In order to illustrate that and because I don't want to shove Bitcoin down people's throats praising only its advantages, I started to make an overview that compares strengths and weaknesses of currencies and trading schemes: Code:
Any questions, suggestions, corrections, opinions, additions welcome. Updates:
Title: Re: Comparison of currencies and trading schemes Post by: Elwar on January 13, 2012, 12:59:06 PM You may want to add something about how divisible it is....
Title: Re: Comparison of currencies and trading schemes Post by: Boussac on January 13, 2012, 02:35:06 PM You may want to check what Bernard Lietaer has to say about monetary diversity (Poptech video in English): http://www.e-ducat.fr/?p=195 (http://www.e-ducat.fr/?p=195).
In essence, we are stuck today with an outdated monopolistic monetary system (dating from the 17e century) when in fact monetary diversity is waht s needed in a digital age. Technology allows us to run different systems in parallel when the 1% want us to keep using the system they are controlling (USD or EURO or whatever). Patrick Villeret, a French economist, also advocated complementary currencies as early as 2006 when he set up the SOL in used today in several cities of France (the SOL is pegged to the Euro). In Switzerland, the WIR has been in use since the thirties. Its important to realize that in current estimates 97% of the transactions in Euros or USD (in volume) are performed by the financial community and only 3 % by the rest of the economy (ie the productive sectors). Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on January 13, 2012, 02:42:11 PM You may want to check what Bernard Lietaer has to say Yap, it was him who criticized Bitcoin of being speculative. I acknowledge that. He advocates local currencies. But these also have weaknesses. Hence my motivation to create this overview. Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on January 13, 2012, 02:51:52 PM You may want to add something about how divisible it is.... I tried, but I find any of these currencies is basically "divisible" enough. I find I have to explain this to people only specifically in the context of the 21 million limit of Bitcoin. Title: Re: Comparison of currencies and trading schemes Post by: finway on January 13, 2012, 02:55:58 PM Good comparison.
Title: Re: Comparison of currencies and trading schemes Post by: grondilu on January 13, 2012, 03:01:35 PM That's a usefull and apparently accurate overview. Should be in the Wiki if it's not already.
Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on January 13, 2012, 04:46:51 PM tnx, didn't find such an entry in the wiki yet.
Title: Re: Comparison of currencies and trading schemes Post by: Boussac on January 13, 2012, 06:03:21 PM You may want to check what Bernard Lietaer has to say Yap, it was him who criticized Bitcoin of being speculative. I acknowledge that. He advocates local currencies. But these also have weaknesses. Hence my motivation to create this overview. It seems that bitcoin fits in the "think global" of the now famous "think global, act local" motto. Local currencies are an expression of local initiatives but they lacked a resilient technology implementation before the inception of bitcoin. Title: Re: Comparison of currencies and trading schemes Post by: smiles on January 14, 2012, 01:34:23 AM In a free market there is competition in everything, even currencies. Ron Paul wants to allow competing currencies against the USD. Monopolies should never be protected. The only thing that needs protection is personal Liberty.
Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on January 14, 2012, 03:57:10 PM Lietaer failed in connecting the dots between local currencies and complementary currencies. It seems that bitcoin fits in the "think global" of the now famous "think global, act local" motto. Local currencies are an expression of local initiatives but they lacked a resilient technology implementation before the inception of bitcoin. There is a slide at 21:50 in your video that shows "Matrifocal Societies" and "Dual Currency Systems: Patriarchical one for long distance trading, different type of currency (bottom up) for local exchanges". The patriarchical one can be Bitcoin, and the bottom up would be local trading schemes based on trust. I agree and that is exactly what I intend to say with the overview as well. I do not necessarily agree with you that these local currencies have to be based on and backed by Bitcoin. Title: Re: Comparison of currencies and trading schemes Post by: niko on January 14, 2012, 05:56:23 PM Good idea. I would argue that cash in fact is perceived as "precious material." An average person would have same thoughts at the sight of a pile of gold or a pile of cash. Both kinds of materials are treated as precious - guarded, etc. Also used to show off by people who are inclined to.
Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on January 24, 2012, 10:37:07 PM I experienced most folks know by now that today's money's doesn't have any inherent material value, and also that it isn't backed by and redeemable for any. For the aspect you mention I introduced "tangible".
Title: Re: Comparison of currencies and trading schemes Post by: Boussac on February 10, 2012, 10:52:59 PM Lietaer failed in connecting the dots between local currencies and complementary currencies. It seems that bitcoin fits in the "think global" of the now famous "think global, act local" motto. Local currencies are an expression of local initiatives but they lacked a resilient technology implementation before the inception of bitcoin. There is a slide at 21:50 in your video that shows "Matrifocal Societies" and "Dual Currency Systems: Patriarchical one for long distance trading, different type of currency (bottom up) for local exchanges". The patriarchical one can be Bitcoin, and the bottom up would be local trading schemes based on trust. I agree and that is exactly what I intend to say with the overview as well. I do not necessarily agree with you that these local currencies have to be based on and backed by Bitcoin. Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on February 17, 2012, 09:25:35 PM the problem that i have with Bitcoin for local, largely self-sufficient communities is that it just doesn't give them much advantage. Why should they invest anything to mine or buy Bitcoins when all they need is to keep track of the services they provide to each other? LETS, mutual credits, self-made IOUs etc is better suited here, doesn't cost them anything.
but either way, so then let the market of free currencies decide i say ;) Title: Re: Comparison of currencies and trading schemes Post by: Rassah on February 17, 2012, 09:49:43 PM the problem that i have with Bitcoin for local, largely self-sufficient communities is that it just doesn't give them much advantage. Why should they invest anything to mine or buy Bitcoins when all they need is to keep track of the services they provide to each other? LETS, mutual credits, self-made IOUs etc is better suited here, doesn't cost them anything. That's the beauty of internet and Bitcoin. A piss poor village in sub Saharan Africa, with a crap internet connection and a few people with cheap phones, can have powerful datacenters in India, Europe, and USA mine and secure their Bitcoin for them. It doesn't matter where on the planet you are or how weak your hardware is. Keeping that currency locally also allows them to buy globally without worrying if the next town over will accept their local currency, and they don't have to worry that someone in their group will reneg on their IOUs. Also, even mutual credits and IOUs will require some heavy accounting and records-keeping if it gets beyond each person owing only one other person. That's a difficult, full time skill. Bitcoin takes care of that for you, so they can instead spend their time on more important things. Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on February 17, 2012, 10:31:42 PM Self-issued DIY-IOUs like the German minuto-zeitgutscheine (http://www.minuto-zeitgutscheine.de/) are completely decentralized. They are promissory notes in their literal sense. You and everyone can print them at home, sign them with your name (it's notarial!), put them into circulation by buying goods and services from those who accept, while providing service yourself for all of these notes in the community.
Thus, these (and Ripple) don't have much of this centralized "administration overhead" (this will be another good point in my overview, thanks). Title: Re: Comparison of currencies and trading schemes Post by: Steve on February 17, 2012, 10:51:50 PM When discussing Bitcoin, I noticed that we have been brainwashed into believing that there can be only one currency. I'm not sure where you get that impression. I think this is a view that's more prevalent outside the bitcoin community. Or are you saying that when you discuss bitcoin with people that they tend to dismiss the idea because they believe their can only be one currency?One thing I would add to your chart is counter party risk. Debt instruments have counter party risk (of default). Gold and Bitcoin do not. Cash is an interesting one…even though the paper itself does not have counter party risk, it is backed by debt. It's valuation can fluctuate dramatically in both directions when there are systemic debt related problems (such as widespread over-indebtedness). Also, with gold and bitcoin, while they don't have direct counter party risk, you do have valuation risk that can be intimately related to conditions in credit markets. Title: Re: Comparison of currencies and trading schemes Post by: hashman on February 17, 2012, 10:58:41 PM Nice list :) How about adding: publicly verifiable money supply?
There are some advantages to complete elimination of counterfeiting and other secret inflation. Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on February 17, 2012, 11:09:43 PM I'm not sure where you get that impression. I think this is a view that's more prevalent outside the bitcoin community. yap, I meant when discussing Bitcoin with outsiders. They are too used to "officially" enforced currencies, so it's all black-and-white for them. I then say Bitcoin is *not* enforced by anyone, and they could use any of these other currencies or trading schemes if they don't feel comfortable with it (where's that gold bug spray when you need it :D). One thing I would add to your chart is counter party risk. Debt instruments have counter party risk (of default). Gold and Bitcoin do not. Good point, thanks, although "No need for a social net of trust" already may cover this. Title: Re: Comparison of currencies and trading schemes Post by: Rassah on February 18, 2012, 12:27:53 AM Self-issued DIY-IOUs like the German minuto-zeitgutscheine (http://www.minuto-zeitgutscheine.de/) are completely decentralized. They are promissory notes in their literal sense. You and everyone can print them at home, sign them with your name (it's notarial!), put them into circulation by buying goods and services from those who accept, while providing service yourself for all of these notes in the community. Thus, these (and Ripple) don't have much of this centralized "administration overhead" (this will be another good point in my overview, thanks). Without some central ledger, how would I know how many IOUs someone has given out already, or that they will be able to pay everyone back? For all I know, someone could have written millions of USD worth of IOUs, when they only earn a few 10k's a month. That system would require an enormous amount of trust :P I'm sure I'm missing something, though, as I haven't had time to look into it more. Title: Re: Comparison of currencies and trading schemes Post by: herzmeister on February 19, 2012, 01:49:12 PM Essentially, it's still IOUs. It's a legal contract signed with your name and postal code. They know where you live. :D Businesses will have to book those as liabilities. Individuals are obliged to also find two or three bailers. Furthermore, one of such vouchers has a limited validation period of 5 years. This has shown to provide incentive enough for these vouchers to circulate back to you very quickly. And this is exactly what these regional currencies are intended for, to strengthen local communities and self-sufficiency.
Here is an English FAQ: http://www.minuto-zeitgutscheine.de/minuto-english.odt - for further discussion about this specific project, I recommend to open a new (off-topic) thread though. |