"Gesell's phrase, "... a monstrous hallucination, the doctrine of 'value'..." hints at another effect of demurrage—it makes us question the notion of “value.” Value assigns to each object in the world a number. It associates an abstraction, changeless and independent, with that which always changes and that exists in relationship to all else. It is part of humanity's descent into representation, the reduction of the world into a data set. Demurrage reverses this thinking and removes an important boundary between the human realm and the natural realm. When money is no longer preferred to goods, we will lose the habit of defining a thing by how much it is worth.

Whereas interest promotes the discounting of future cash flows, demurrage encourages long-term thinking. In present-day accounting, a forest that has the capacity to generate one million dollars a year every year into the foreseeable future is considered more valuable if immediately cut down for a profit of 50 million dollars. (The net present value of the sustainable forest calculated at a discount rate of 5% is only $20 million.) This state of affairs results in the infamously short-sighted behavior of corporations that sacrifice (even their own) long-term well-being for the short-term results of the fiscal quarter. Such behavior is perfectly rational in an interest-based economy, but in a demurrage system, pure self-interest would dictate that the forest be preserved. No longer would greed motivate the robbing of the future for the benefit of the present. The exponential discounting of future cash flows implies the "cashing in" of the entire earth as opposed to an immediate wholesale “liquidation” of our remaining resources.

Whereas interest tends to concentrate wealth, demurrage promotes its distribution. In any economy with a specialization of labor beyond the family level, human beings need to perform exchanges in order to thrive. Both interest and demurrage represent a fee for the use of money, but the key difference is that in the former system, the fee accrues to those who already have money, while in the latter system it is levied upon them. Wealth comes with a high maintenance cost, thereby recreating the dynamics that governed hunter-gatherer attitudes toward accumulations of possessions.

Whereas security in an interest-based system comes from accumulating money, in a demurrage system it comes from having productive channels through which to direct it – that is, to become a nexus of the flow of wealth and not a point for its accumulation. In other words, it puts the focus on relationships, not on "having". The demurrage system accords with a different sense of self, affirmed not by enclosing more and more of the world within the confines of me and mine, but by developing and deepening relationships with others. It encourages reciprocation, sharing, and the rapid circulation of wealth.

In today's system, it is much better to have a thousand dollars than it is for ten people to owe you a hundred dollars. In a demurrage system the opposite is true. Since money decays with time, if I have some money I'm not using right now, I am happy to lend it to you, just as if I had more bread than I could eat, I would give you some. If I need some in the future, I can call in my obligations or create new ones with anyone within my network who has more money than he or she needs to meet immediate needs. As Gesell put it:


No longer would money be a scarce commodity, hoarded and kept away from others; rather it would tend to circulate at the maximum possible "velocity". The issuer would ensure stable prices (P) according to the equation of exchange (MV=PQ) by regulating the amount of currency in circulation (M) to correspond to total real economic output (Q). The same result could be achieved by linking the currency to a basket of commodities whose level corresponds to overall economic activity, as proposed by Bernard Lietaer.

The dynamics of a demurrage-based currency system ensure a sufficient amount for all. This is in contradiction to today's economy in which a surfeit of material goods is coupled with their grossly unequal distribution. Hence the deeper contradiction in which, on the one hand, there are hundreds of millions of people who are unemployed or engaged in trivial, meaningless jobs, while on the other hand there is much important, meaningful work left undone—highlighting a disconnect between human creativity and human needs. "With Free-Money demand is inseparable from money, it is no longer a manifestation of the will of the possessors of money. Free-Money is not the instrument of demand, but demand itself, demand materialized and meeting, on an equal footing, supply, which always was, and remains, something material."

Freicoins can be created forever as an incentive and still have a fixed monetary base if the amount of newly created reward for miners is equal the amount of destroyed freicoins.
How can freicoins be removed from circulation?
Each time a transaction is done a percentage of the freicoins in the transaction are destroyed depending on how much time the freicoins have been hold since the last transaction. This is called demurrage.

It reduces interest rates. Concretely, it attacks the basic interest or liquidity premium. Defined as
gross interest = basic interest + risk premium + inflation premium
Demurrage has other benefits. For example, money with demurrage is crisis resistant: it will continue to circulate even with deflation. Deflation discourages real capital accumulation and demurrage can solve it.
Also, interest makes the financial market "think" in the short term.

For more information about demurrage you can read Silvio Gesell's main book on the web or in pdf.
I think the main flaw of Gesell's proposal is that he wanted the government to issue his freigeld, but there wasn't the block chain back then.

With merged mining, freicoin can co-exist with bitcoin.

One can say that demurrage is worse than inflation for savers, but I think that's not true.
Others claim that demurrage and inflation have the same effect. Inflation is worse at all lights.
Other common criticism is that no merchant would accept a money with demurrage, but there's many local currencies with demurrage operating today.

Whereas interest promotes the discounting of future cash flows, demurrage encourages long-term thinking. In present-day accounting, a forest that has the capacity to generate one million dollars a year every year into the foreseeable future is considered more valuable if immediately cut down for a profit of 50 million dollars. (The net present value of the sustainable forest calculated at a discount rate of 5% is only $20 million.) This state of affairs results in the infamously short-sighted behavior of corporations that sacrifice (even their own) long-term well-being for the short-term results of the fiscal quarter. Such behavior is perfectly rational in an interest-based economy, but in a demurrage system, pure self-interest would dictate that the forest be preserved. No longer would greed motivate the robbing of the future for the benefit of the present. The exponential discounting of future cash flows implies the "cashing in" of the entire earth as opposed to an immediate wholesale “liquidation” of our remaining resources.

Remember the term Open-source and free kind of go hand in hand. Asking people to fund your project goes against that very concept.

$795 raised against a $28,000 windfall for the con-men behind this project with 44 days to go. At that burn rate the final result will be in keeping with the nature of the proposal- FAIL.

How much?

What I will do is become a miner and sell the coins and buy BTC.

I agree, this concept seems impractical to me because it would cause a huge number of transactions with each block. In fact, the transactions would grow O(n²), with n being the number of account holders.

I guess that the most likely use case for freicoin could be that of entrepeneurs, and every other capital manager or borrower, who would prefer to be indebted in a money with the lowest possible price and interest rate. Most likely those guys would take the debt, put the money on safer shores (bitcoin, for example, or any real stock that they are trying to manage), and then they would be buying back the freicoins when they need them, when paying for products or services, or at least when they have to pay back their debt. So freicoin, as opposed to bitcoin, could be like a "debt apt money", and in it's use case would be complimentary to bitcoin, no opposed at it.

Hmm.... How is inactivity defined? What if someone wrote a program to automatically transfer the balance every X number of days?

What's your timeframe for this? Would you be willing to meet with a contact in Mountain View first?

maaku, is this parallel to developing a blockchain for trading computation, or is this your main project, now?

I think Silvio Gessels whole concept of "demurrage" is questionable. Forcing people to spend their money, does NOT create any more goods or services. Society does not get any richer, if money sloshes around faster.

Wealth is created by production, not consumption. When we can make things cheaper and faster, with less labour or energy, then there is more stuff to buy and everyone gets richer.

The inequity of the present fiat system, is because insiders have preferential access to credit, allowing them to benefit from inflation. Bitcoin has already solved that problem, so Freicoin is not needed.

Part of what convinced me that the idea was doomed from the start when I presented it the first time was the observation that people actually DO care about the "There Will Never Be More Than 21 Million Bitcoins" part as a core attraction.  Inflatacoin lacks that appealing attribute, even if the truth of the matter is "You Will Be Long Dead Before There Is Ever More Than 21 Million Inflatacoins".

I would venture to say that's so important, that without it, Bitcoin is just another kind of dollar that isn't even a dollar.  It may as well just be digital Monopoly dollars.

And why $28,000?  Bitcoin is open source software.  Just fork it, give it a new name, make the 2-3 lines of code changes needed to make it into inflatacoin, forge your new genesis block, release it into the wild, and see what happens.  Total cost, $0.

Inflation is simular to how scientists "stimulate" lab rats to solve puzzles by using electroshock. Why do you expect from people to volunteer to use it?

I don't think there is a demand. I enthusiastically proposed something like this long ago and it was completely shot down. And that was without asking for $28k in donations.

The pejorative name given it was "Inflatacoin".

I stopped reading here. You can't prevent the accumulation of wealth. How would Freicoin prevent people from hoarding dollars, gold, or bitcoins?

Is this anything like the Occcu? https://bitcointalk.org/index.php?topic=62983.msg735930#msg735930