Presentation about the alts & Ripple

[ripper234]

Here is a presentation I gave last week about alt currencies in the Israeli Bitcoin Meetup.
About 160 people showed up, I think most of them sort of understood my talk (we had a total of 4 talks, mine was the most technical).

http://www.slideshare.net/ripper234/alternative-payment-technologies-march-2013

[1715152359]

1715152359

[1715152359]

1715152359

[1715152359]

1715152359

[1715152359]

1715152359

[jtimon]

Nice, thanks.

But actually Freicoin's motivation is not to "tax the rich" but to eliminate basic interest (an economic rent). That is, make risk-free real interests drop to zero. That is, putting an end to capitalism within a free market context (for us they're different things, capitalism implies rents on real capital and money [symbolic capital], while the free market permits rents to disappear).
So it's not about "taking from the rich what they've earned" but about "Stopping to give them what they've NOT earned".
I guess "tax the rich" is just easier to explain.

And the logo is not the "official one", although there was some talk about substituting it with something using the Artic tern mascot.

[ripper234]

Nice, thanks.

But actually Freicoin's motivation is not to "tax the rich" but to eliminate basic interest (an economic rent). That is, make risk-free real interests drop to zero. That is, putting an end to capitalism within a free market context (for us they're different things, capitalism implies rents on real capital and money [symbolic capital], while the free market permits rents to disappear).
So it's not about "taking from the rich what they've earned" but about "Stopping to give them what they've NOT earned".
I guess "tax the rich" is just easier to explain.

And the logo is not the "official one", although there was some talk about substituting it with something using the Artic tern mascot.

Yeah, I admit Freicoin was the hardest one to explain as I don't fully understand the model myself - I don't understand why Freicoin supporters believe it will catch on.
Thanks for your comments!

[Meni Rosenfeld]

Nice, thanks.

But actually Freicoin's motivation is not to "tax the rich" but to eliminate basic interest (an economic rent). That is, make risk-free real interests drop to zero. That is, putting an end to capitalism within a free market context (for us they're different things, capitalism implies rents on real capital and money [symbolic capital], while the free market permits rents to disappear).
So it's not about "taking from the rich what they've earned" but about "Stopping to give them what they've NOT earned".
I guess "tax the rich" is just easier to explain.

And the logo is not the "official one", although there was some talk about substituting it with something using the Artic tern mascot.

Yeah, I admit Freicoin was the hardest one to explain as I don't fully understand the model myself - I don't understand why Freicoin supporters believe it will catch on.
Thanks for your comments!

I'll point out that while I don't fully agree with Freicoin's model, I sort of understand it, and will be happy to talk with ripper234 about it at some time...

[jtimon]

Yeah, I admit Freicoin was the hardest one to explain as I don't fully understand the model myself

I understand that.
You could mention Silvio Gesell for the economic theory behind it.
As a very simplified summary, Gesell said "The only problem with capitalism is the interest and the solution is demurrage".
According to him, the basic interest (excluding risk and inflation premiums) is what causes unemployment through artificial scarcity of means of production (real capital) and cycles through cyclical runaway deflation when capital yields get below the basic interest.

I don't understand why Freicoin supporters believe it will catch on.

The first question is why merchants should not accept them?
I think that it will become the preferred currency for borrowers and later the crypto-currency more used for lending in general.
We expect the foundation's grants to be an effective tool for expanding the user base too.

[jtimon]

I'll point out that while I don't fully agree with Freicoin's model, I sort of understand it, and will be happy to talk with ripper234 about it at some time...

Great!
In any case,  ripper234, you're always welcomed to ask any questions you have on #freicoin (freenode) or at freicoin.org (the forums).
Well, or just here.

[Nyx]

After the recent upswing of Terracoin, I think you should add it on slide 3

[ripper234]

I'll point out that while I don't fully agree with Freicoin's model, I sort of understand it, and will be happy to talk with ripper234 about it at some time...

I "understand" the model as a theoretical model, what I don't understand is why people think it's a good investment. I suspect that you aren't invested in Freicoin and so might not be able to fully explain this to me...

I understand that.
You could mention Silvio Gesell for the economic theory behind it.
As a very simplified summary, Gesell said "The only problem with capitalism is the interest and the solution is demurrage".
According to him, the basic interest (excluding risk and inflation premiums) is what causes unemployment through artificial scarcity of means of production (real capital) and cycles through cyclical runaway deflation when capital yields get below the basic interest.

It's an economic theory, these theories are sometimes based on wrong assumptions that don't hold in real life. I am unconvinced that interest causes unemployment. In the future, unemployment might even be a good thing - there will be plenty of every basic need for free, so a lot of people might not need to work at all.

The first question is why merchants should not accept them?
I think that it will become the preferred currency for borrowers and later the crypto-currency more used for lending in general.
We expect the foundation's grants to be an effective tool for expanding the user base too.

Merchants won't accept them because it adds overhead and friction. In fact, a lot of merchants won't work with Bitcoin directly but rather will work through a mediator such as BitPay. BitPay might indeed integrate some alts, but still they can't add every alt in the world - it adds complication to an already complicated process, and every feature needs to be considered in terms of ROI. The only way they will accept alts is if the alts gain enough market share ... it's a bootstrapping problem that was solved by Bitcoin through being the first decentralized crypto currency, but so far no alt has shown a clear path to achieve market share.

Grants might be useful as a kickstart, but the virality factor of the idea need to be high enough for it to spread itself. I don't see Freicoin doing that ... maybe others alts in the future (Litecoin is the leader right now, PPCoin has some interesting technical properties that might earn it this place ... maybe some other coin we haven't heard of yet).

[Sunny King]

Very good presentation. I especially like your selection of altcoins to present. If I were to do a presentation on altcoins I would likely select the same set and give more weight to ripple just like you did.

Merchants won't accept them because it adds overhead and friction. In fact, a lot of merchants won't work with Bitcoin directly but rather will work through a mediator such as BitPay. BitPay might indeed integrate some alts, but still they can't add every alt in the world - it adds complication to an already complicated process, and every feature needs to be considered in terms of ROI. The only way they will accept alts is if the alts gain enough market share ... it's a bootstrapping problem that was solved by Bitcoin through being the first decentralized crypto currency, but so far no alt has shown a clear path to achieve market share.

It's hard to say, I think altcoins would have their chances in the market, the events in the last month demonstrated it. Lolcust probably is kicking himself these days for giving up so easily in the face of competition from coblee, first forking a copycat of tenebrix called fairbrix then launch another semi-copycat that is the litecoin of today. I can understand that he was sort of demoralized by the two-fanged attack. But still, if he persisted who's to say tenebrix would not have a chance? So I think being persistent and nurturing your creation is important.

[ripper234]

Very good presentation. I especially like your selection of altcoins to present. If I were to do a presentation on altcoins I would likely select the same set and give more weight to ripple just like you did.

Thanks!
I tried not to scare away the crowd, which had a lot of non-technical people, and still give a good sampling of the alts.

It's hard to say, I think altcoins would have their chances in the market, the events in the last month demonstrated it. Lolcust probably is kicking himself these days for giving up so easily in the face of competition from coblee, first forking a copycat of tenebrix called fairbrix then launch another semi-copycat that is the litecoin of today. I can understand that he was sort of demoralized by the two-fanged attack. But still, if he persisted who's to say tenebrix would not have a chance? So I think being persistent and nurturing your creation is important.

Well, I'm not a prophet... I think that alts in general do have a chance, at least some of them. Some people predict an alt currency explosion ... I think that it's really hard to predict. The one scenario that I would assign low (but not zero) probability to is that the alts will overthrow bitcoin as "kind of the cryptocurrencies". Its network effect is just too big IMHO. I could be proven wrong of course.

To me the top indicators of a cryptocurrency (or perhaps of any startups) is the quality of its leaders, their communication and transparency (btw, you score relatively high on that scale from what I've been following). Bitcoin has Gavin and a lot of other top notch people, which is one of the reasons that strengthens my belief in the currency so much.

[jtimon]

I'll point out that while I don't fully agree with Freicoin's model, I sort of understand it, and will be happy to talk with ripper234 about it at some time...

I "understand" the model as a theoretical model, what I don't understand is why people think it's a good investment. I suspect that you aren't invested in Freicoin and so might not be able to fully explain this to me...

It's just an speculative investment just like bitcoin. If Freicoin greatly increases its user base it should rise.
Freicoin is less speculative than Bitcoin since hoarding is discouraged though.

I understand that.
You could mention Silvio Gesell for the economic theory behind it.
As a very simplified summary, Gesell said "The only problem with capitalism is the interest and the solution is demurrage".
According to him, the basic interest (excluding risk and inflation premiums) is what causes unemployment through artificial scarcity of means of production (real capital) and cycles through cyclical runaway deflation when capital yields get below the basic interest.

It's an economic theory, these theories are sometimes based on wrong assumptions that don't hold in real life. I am unconvinced that interest causes unemployment. In the future, unemployment might even be a good thing - there will be plenty of every basic need for free, so a lot of people might not need to work at all.

Do you agree that profits tend to zero in a free market through competition?
If the products of factory A are sold for twice their total costs (50% profits), Factory B can open and sell their products for less profit.
Basic interest (or so called "time preference" in austrian terms) imposes a minimum yield for real capital.
If basic interest is 5% and factory A yields 5%, factory B can't appear to yield less. Thus basic interest causes an artificial scarcity of producing goods (real capital) which is what causes unemployment.
Capital yields are profits that don't disappear by competition, that makes them economic rents, something that a true free market shouldn't have. Thus capitalism is not a truly free market.
If basic interest disappears, real capital can yield 0% and the demand for producing goods fully satisfied.
Within capitalism, investments are cyclically halted and money hoarded when there's no investments that can yield more or at least the basic interest. That's what caused crises when money was gold.
And as we've seen, inflationary fiat policies aren't effective and cause more problems than they solve. Central bankers must eventually accept the deflation or artificially lower interest to zero and eventually destroy the currency by hyper-inflation. Just as Gesell predicted.

The first question is why merchants should not accept them?
I think that it will become the preferred currency for borrowers and later the crypto-currency more used for lending in general.
We expect the foundation's grants to be an effective tool for expanding the user base too.

Merchants won't accept them because it adds overhead and friction. In fact, a lot of merchants won't work with Bitcoin directly but rather will work through a mediator such as BitPay. BitPay might indeed integrate some alts, but still they can't add every alt in the world - it adds complication to an already complicated process, and every feature needs to be considered in terms of ROI. The only way they will accept alts is if the alts gain enough market share ... it's a bootstrapping problem that was solved by Bitcoin through being the first decentralized crypto currency, but so far no alt has shown a clear path to achieve market share.

Merchants don't have to pay for the overhead, they will just include all their costs on their final prices.
There's no reason why Freicoin cannot have a bitpay equivalent.

Grants might be useful as a kickstart, but the virality factor of the idea need to be high enough for it to spread itself. I don't see Freicoin doing that ... maybe others alts in the future (Litecoin is the leader right now, PPCoin has some interesting technical properties that might earn it this place ... maybe some other coin we haven't heard of yet).

Well, yes, the grants processes is going slow, but I believe that eventually projects will come to get this "free money".

[ripper234]

It's just an speculative investment just like bitcoin. If Freicoin greatly increases its user base it should rise.
Freicoin is less speculative than Bitcoin since hoarding is discouraged though.

Freicoin is more speculative than Bitcoin since it doesn't have the first mover advantage and thus its network effect is greatly diminished.

Do you agree that profits tend to zero in a free market through competition?

As far as I understand, yes, but that's just the model, real life is more complicated than that.

If the products of factory A are sold for twice their total costs (50% profits), Factory B can open and sell their products for less profit.
Basic interest (or so called "time preference" in austrian terms) imposes a minimum yield for real capital.
If basic interest is 5% and factory A yields 5%, factory B can't appear to yield less. Thus basic interest causes an artificial scarcity of producing goods (real capital) which is what causes unemployment.
Capital yields are profits that don't disappear by competition, that makes them economic rents, something that a true free market shouldn't have. Thus capitalism is not a truly free market.
If basic interest disappears, real capital can yield 0% and the demand for producing goods fully satisfied.
Within capitalism, investments are cyclically halted and money hoarded when there's no investments that can yield more or at least the basic interest. That's what caused crises when money was gold.
And as we've seen, inflationary fiat policies aren't effective and cause more problems than they solve. Central bankers must eventually accept the deflation or artificially lower interest to zero and eventually destroy the currency by hyper-inflation. Just as Gesell predicted.

I don't pretend to fully understand all of this. I get the jist, but god is in the details, and even if the economic theory is sound, it is just a model of reality and thus imperfect  - and as economists know, economic models are just imperfect but often way off base.

[jtimon]

Of course I'm simplifying things, the real economy is a complex system.
By "Freicoin is less speculative than Bitcoin" I mean is less attractive for speculators to speculate in Freicoin's future rise.
It is also less useful for speculators that get in and out investments fast, since when they come back to this money they're not in a "save heaven": they're losing money.
This is related: https://www.community-exchange.org/docs/Gesell/en/neo/part4/5f.htm