We've discussed this on the Freicoin forum and I see zero utility for PoS mining, which effectively makes the security of the system PoS -or- PoW, whereas other proof-of-stake proposals would have additive security.

In the future we plan to pursue (as a one-off test coin) a combination of Meni Rosenfeld's proof-of-stake proposal and a demurrage coin, which we believe would strangely enough result in a bicameral, parliamentary-like system proof-of-stake/proof-of-work voting on demurrage budgets. If the test works, this could be something integrated into Freicoin in a hard-fork.

However @Impaler's main point stands. In Wörgl the velocity of money was observed to be 50x higher than the rest of Austria, meaning that with unconstrained currency markets the Wörgl banknote would have traded at 0.02 the equivalent Austrian note. 5% of the monetary base sounds like a lot... but that could end up being 5% of a 50x smaller pie. Would Bitcoin mining be profitable if the subsidy were only 0.1%?

Let me rephrase. If I go to the website, there is only a submission form to be part of a panel discussion (worthless, imho). Where do I submit a paper or sign up to give a talk?

No, if you simply hold the coins that does not simulate demurrage. Not unless your coins were also subject to demurrage as well, and everybody else's too. The positive effects of demurrage are observed at the macroeconomic scale. One person providing negative-interest loans is a very different (and useless) experiment.

Well seeing as the convention center is less than a mile from my house, I'll be there

Is it just going to be panels, or will there be individual speakers, breakout rooms, etc?

I have 1x Radeon 5770 (single-slot), which I'm selling for 12,500frc.
I have 2x Radeon 5850 (dual-slot), which I'm selling for 17,500frc (each).

Buyer pays actual shipping from USA (in freicoins, 185frc / $1.00).

I'll update post with actual photos soon.

We're on a bit of a tangent here, but actually Gesell advocated variable interest rates set by a state mechanism (pricing of demurraged stamps affixed to paper bills). Our concern was that there's no decentralized mechanism for adjusting rates that is not subject to influence/attack. However compared to other indicators basic interest is incredibly stable.

The basic interest rate / liquidity premium is a natural feature of money unrelated to the artificially-imposed demurrage rate. Basic interest does not go up or down if demurrage parameters are adjusted. Gesell argued that demurrage should be equal to the basic interest rate, which at his time and now hovered around 5% (but like the undeveloped value of land, it's not something easy to measure). We chose 4.89% because the math was better (2**-20 per 10min block) and it stayed within the error bars of ~5%.

I'll reword that sentence. The correct meaning we were striving for is “partially unfair,” but maybe “insurmountable” conveys it better. A communist says the money-holder has no claim to the return on his capital: that is not our belief. It's only the basic interest that we claim is usurious/unjust.

If the basic interest truly offered no unfair advantage, than around the world wasteful heirs would be squandering their inheritance, and entrepreneurs rising from rags to riches in a single lifetime. Yet that experience is rare except in places like Silicon Valley, where capital returns far exceed basic interest rates. In most of the world what is happening is social stratification and the entrenchment of an even more monied multi-generation elite. What we're proposing is monetary reform that would make the entrepreneur-friendly Silicon Valley experience much more normal.

That is what I had in mind. Demurrage forces us to be a little more exact in specifying behavior and dealing with these race conditions, but so far as I've seen it doesn't present unsolvable problems.

There is none. If there were, then a transaction would be invalidated if it didn't make it in the blockchain in time. I think we'd agree that'd be a worse outcome.


Yes, but the fraud could only be pulled off if there's a human in the loop, and one which didn't bother to correlate. Any application (payment service, exchange, etc.) would properly account for demurrage and know that 100 coins sent from a reference height 1 year in the past is still only ~95 coins.

Neither jtimon, Impaler, galambo, or any of the other core contributors have access to the Foundation wallet. It's currently in cold storage in safe deposit box only I have access to. The Foundation is currently an existential risk for Freicoin: how well we keep to our promises about those funds will determine the future of FRC.

Because of the gravity of the situation, we're keeping very strictly to the promises that we made. The Foundation outputs will only be spent through grants, and no funds will be disbursed until a process is in place for public solicitation of proposals and comments on proposals, and a disinterested review board setup to evaluate and select proposals for funding according to published criteria and a transparent process.

I would have liked to have helped fill the faucet funds, and given support as needed to the explorer, mining pools, and exchanges currently being worked on. But in the absence of a Foundation decision making process, I would have done so unilaterally. And that's a slippery slope none of us want to go down.

The 320 Foundation addresses are a matter of public record (see GetInitialDistributionBudget() in main.cpp). You can lookup their history at any time on the block explorer. I promise you this: those addresses will not be touched until grants are awarded by a fully functioning Foundation. theymos can mark me as a scammer if I renege on that.

Now you've gotten into the mechanics of how demurrage works. Demurrage is calculated based on the reference-height, which is embedded in the transaction itself, not the height of the block containing the transaction. So the exchange would create the withdrawal transaction at the current block height, and that's the amount that would be go to the client and be reported in the client's transaction tab.

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And I just realized that while discussed in depth on our own forums, this probably hasn't been made clear here: always check the reference-height of an incoming transaction to make sure it's close to what you'd expect. The creator of a transaction is allowed to select the reference height value.

Some people are probably sitting up in their chairs at reading that, thinking “oh my god that's exploitable!” Well it's a bit more complicated and some thought has been put into it. There are some new rules for validating transactions: the reference height must be greater than or equal to all of its inputs reference heights, and less than or equal to the block height, and coinbase transactions must have a reference height equal to the block height. And even if you purposefully constructed a transaction with an old reference height (there are no tools to do this currently), it'd still show up as less than the advertised amount in the recipient's balance.

However it is possible for someone to construct a new transaction with an old reference height, if they have access to suitably old outputs, such that it would show a larger amount on the transaction tab than is added to the recipient's available balance. More than anything else, that's why the transactions tab includes the Ref-height column - always check the reference-height of an incoming transaction.

We are considering client updates which would make it more difficult to pull off a demurrage fraud, such as visually calling attention to an unusually old reference height, for example. But the long-term solution is to add a payment/invoice protocol which specifies the request block height in a payment request. The received amount can then be checked against the requested reference height.

The payment/invoicing protocol is only just now being discussed on the bitcoin developer's mailing list, however, so it might be some time before that is implemented.

I've written up on the Freicoin github wiki an article explaining how to properly handle demurrage in your own applications:

https://github.com/freicoin/freicoin/wiki/How-to-properly-handle-demurrage-in-applications

And a specific example of how to handle demurrage on an exchange:

https://github.com/freicoin/freicoin/wiki/How-to-implement-a-Freicoin-exchange

Congratulations to Vorksholk, FuzzyBear, Bowjob, and all the posters here. This is, to my knowledge, the first marketplace exchange in FRC!

The primary factor in rate selection is the basic interest / liquidity premium, which demurrage is meant to exactly compensate for. Although there are models for determining what this rate should be, pragmatically we should look to history. For the past century (and the 19th century which Gesell looked at in his analysis) the basic interest rate has stayed stable around 4-5%. Even the Great Depression, both World Wars, hyperinflation, and numerous revolutions around the world don't seem to have affected the liquidity premium by more than a percent or so. Basic interest appears to be a general property of money anywhere and anytime.

For simply illustrative purposes, let's put our Keynesian central-banker hat on. The central bankers watch economic indicators and set interest rates in an attempt to control inflation. Why? Not because inflation is bad - they shouldn't print money at all if that were the case - but because historical experience shows that 2-3% inflation combined with 2-3% GDP growth is most likely to result in a sustainable economic growth. Keynesian economists do not satisfactorily explain why this is; they just do it because it works.

Silvio Gesell, on the other hand, does provide the unifying underlying theory. In The Natural Economic Order he explains how the non-perishable nature of money gives rise to the liquidity premium, how the usurious liquidity premium is an unjust negotiation advantage of money-holders over money-borrowers, and how while this does not create economic disparities, it does increase social stratification and entrenchment of the monied elite. Look to the Rothschilds for the most obvious example - Nathan Mayer Rothschild understood this principle very well.

The goal is not to prevent large capital build up, not to coercively equalize society, or anything like that. It's simply to level the playing field, allowing fair competition, in the process creating macroeconomic incentives that will lead to long-term sustainable growth.

Regarding market capitalization, one can expect that the steady-state situation with any demurrage currency is each participant only holding what they need for cashflow purposes. Velocity will be very high but steady, as money doesn't stay in any one account for very long, cashflow needs tend to rather stable, in aggregate. So yes, market capitalization will be lower but stable. However since most coins will be kept for cashflow purposes they won't be listed on an exchange either. So you'd have a hard time executing such an attack.

A more complete wiki entry for Freicoin:

http://p2pfoundation.net/Freicoin

And our About page:

http://freico.in/about/

You are. If you make a 1-year loan at 0%, then 1 year later you get your full freicoin balance back with no demurrage applied. In essence you got a 4.89% return, exactly cancelling the loss due to demurrage.

Let's go back to the apples. Let's say you have 1,000 fresh apples and don't know what to do with them. Most of them will rot before you can eat them, and you don't have any equipment or know-how to preserve them. I own a grocery store and I make you an offer: give me your crates of apples for safekeeping, and I'll give them back one small quantity at a time when you need them. Not the same apples, mind you, but ones of equal quality to the ones you gave me. In other words, I've given you free pass to walk into my store at a time in the future of your choosing and walk out with an apple, without paying, a total of 1,000 times, at which point I will consider the debt repaid.

Have we not both benefited? You're now able to enjoy your apples fresh without fear of rot, and I've acquired inventory/capital for my business. And I did it without charging interest. We both gain because we found a mutually beneficial relationship that allows us to avoid asset depreciation by investing in real capital. That is the essential value of demurrage.

I don't know why you insist on using the word “tax” for the initial distribution. A tax is a coercive transfer of wealth; an initial distribution materializes out of nothing. 20% of the initial distribution goes to the miners, 80% is distributed through Foundation grants. We've been upfront about this.

I would not call the demurrage rate and perpetual subsidy a tax either. It is part and parcel with the implicit contract binding the Freicoin protocol together. It's something everyone agrees to by using the coin, and which cannot be retroactively changed. And there's an easy way to opt out: don't use Freicoin.

Yes, I agree that the Foundation represents an existential risk for Freicoin right now. In the near-term Freicoin will succeed or fail based on public perception of how open, transparent, fair, and efficient the grant selection process is. That's why work on the Foundation is our top priority now that the reference client has been released.

However even in the very long-term the Foundation's assets will eventually decay to zero, with those coins re-entering the marketplace through miner subsidies.

Freicoin is performing exact internal arithmetic, using arbitrary-precision rational type (basically two BigNums, a numerator and a denominator). This is for a variety of reasons, but chiefly because tracking sub-satoshi amounts internally allows us to later increase divisibility by switching to a decimal floating point type for CTxOut::nValue.

How exchange operators should handle demurrage in a fair and equitable manner is outlined here: How to properly handle demurrage in applications

EDIT: The fraction that follows the balance is always in the range (0, 1) satoshi; in other words it's what's left over if you were to truncate to a "normal" bitcoin balance of 8 decimal places. For many applications it is fine to simply ignore/truncate these sub-satoshi values (and indeed, this is what the GUI does).

Explanation of the practicalities of demurrage accounting, written with application developers in mind:

https://github.com/freicoin/freicoin/wiki/How-to-properly-handle-demurrage-in-applications