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Author Topic: Freicoin: bitcoin with demurrage  (Read 30229 times)
rebuilder
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February 24, 2011, 06:35:44 PM
 #21

Does deflation encourage commerce? Can anyone explain me how?

That's really neither here nor there if your proposed solution requires people to voluntarily give up some of the value of their assets on the expectation that everyone else will do the same. At least that's what I understand you to be proposing? You'd have to have a system that makes that obligatory. How?

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February 24, 2011, 06:35:55 PM
 #22

The problem with an inflationary currency is why would anybody choose to spend or trade within that currency?

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February 24, 2011, 06:37:55 PM
 #23

The problem with an inflationary currency is why would anybody choose to spend or trade within that currency?

They wouldn't. They'd have to be forced (e.g. at gunpoint) to accept it. Freely, they would choose to get rid of it as fast as possible.

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February 24, 2011, 06:39:32 PM
 #24

Even assuming you are willing to put off buying food til later, eventually your hunger will outweigh the pressure to save. Or you'll die, and unless you've provided for them in a will, your bitcoins get lost, improving the value of our bitcoins. We thank you for your sacrifice.

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February 24, 2011, 06:47:44 PM
 #25

If you can buy an apple today with a bitcoin and two apples tomorrow with the same bitcoin. Why would you buy anything today?

Because you're hungry?

Well, of course you would expend the necessary to survive, but nothing else.

How do you get people to do this? If I'm getting this right, either you have to find a way to force them to do it, or they have to voluntarily choose to take part in this system on ideological grounds. I'm sceptical of solutions that rely on ideology - they lose out to more pragmatic approaches in the end. Maybe I don't understand what you're proposing to actually do?

I'll tell you why the worgl experiment was successful during the great depression until the currency was prohibited by the central bank.
Of course sellers did prefer the traditional currency over the one with demurrage.
But no one wanted to buy anything to them for traditional money. Was their choice to sell in exchange for the currency with demurrage or not to sell. They choose to trade.
There are examples of currencies with demurrage being used today.
Here's one:

http://en.wikipedia.org/wiki/Chiemgauer

And here are some more:

http://en.wikipedia.org/wiki/Demurrage_(currency)#Current_examples
  
I think there has too be more, today and through the history.
They don't appear in the media.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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February 24, 2011, 06:52:16 PM
 #26

Well, of course you would expend the necessary to survive, but nothing else.

If I can get a 3DHDTV next year, why buy the standard HD now?

Because I want one.

Every decision is an economic choice between two options. You simply have to decide what you want more, the TV, or the extra .0001 BTC by keeping for a few days.

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kiba
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February 24, 2011, 06:54:19 PM
 #27


Well, of course you would expend the necessary to survive, but nothing else.

Human beings, with few exceptions, are not monks. We like sex, romantic partners, games, gambling and all sort of stuff.

You see, we don't horde money for the sake of hording money and getting rich, we horde them for the good stuff in life.

Would it make sense to wait for 50 years before purchasing sex, games, and gambling? Heck no. We like them, now, all things being equal.

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February 24, 2011, 06:57:32 PM
 #28

Even assuming you are willing to put off buying food til later, eventually your hunger will outweigh the pressure to save. Or you'll die, and unless you've provided for them in a will, your bitcoins get lost, improving the value of our bitcoins. We thank you for your sacrifice.

None of us would stop paying for food, clothes, housing, internet...
But you won't die if you don't buy a car, a tv, a new GPU...
Yes survival is priceless. That's not the point.

Well, of course you would expend the necessary to survive, but nothing else.

If I can get a 3DHDTV next year, why buy the standard HD now?

Because I want one.

Every decision is an economic choice between two options. You simply have to decide what you want more, the TV, or the extra .0001 BTC by keeping for a few days.

0.0001*365 = 0.0365% anual deflation
I think we could live with that. It is very very low.

 

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
kiba
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February 24, 2011, 06:59:09 PM
 #29


None of us would stop paying for food, clothes, housing, internet...
But you won't die if you don't buy a car, a tv, a new GPU...
Yes survival is priceless. That's not the point.
 

No, human beings don't like to just "survive". They like to thrive, have sex, etc.

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February 24, 2011, 07:00:40 PM
 #30


Well, of course you would expend the necessary to survive, but nothing else.

Human beings, with few exceptions, are not monks. We like sex, romantic partners, games, gambling and all sort of stuff.

You see, we don't horde money for the sake of hording money and getting rich, we horde them for the good stuff in life.

Would it make sense to wait for 50 years before purchasing sex, games, and gambling? Heck no. We like them, now, all things being equal.

Ok, sex is priceless  too Wink
That's not the point neither.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
kiba
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February 24, 2011, 07:01:28 PM
 #31


Ok, sex is priceless  too Wink
That's not the point neither.

It's called prostitution Wink.

myrkul
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February 24, 2011, 07:15:27 PM
 #32

None of us would stop paying for food, clothes, housing, internet...
But you won't die if you don't buy a car, a tv, a new GPU...
Yes survival is priceless. That's not the point.
---
0.0001*365 = 0.0365% anual deflation
I think we could live with that. It is very very low.

I don't think it would be higher, even once the mining has stopped. Deflation is caused by money loss or destruction, so with reasonable wallet security, I doubt much would be lost per year, except through rounding errors.

And the point is, everything is a decision on preferences. Human beings are rather impulsive, by nature, so if you see a candy bar at the checkout, you're not too likely to think, "If I wait, I'll get a few extra satoshis back when I buy that." No, I'd say it would be more along the lines of:

 "Ooh! candy bar!" *tosses candy bar on counter*

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rebuilder
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February 24, 2011, 07:20:50 PM
 #33

As far as I can tell there's nothing "hard" being proposed to force people to use demurrage? Perhaps that's why it's worked with local currencies - social pressures can enforce compliance in a small community where in a large one - let alone one where identity is as ephemeral as it is here - they no longer function quite so well. I just don't think it will work at this scale. You'll have to develop a practical implementation to convince me it can compete with a currency not encumbered with demurrage.

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February 24, 2011, 08:10:40 PM
 #34

If you can buy an apple today with a bitcoin and two apples tomorrow with the same bitcoin. Why would you buy anything today?

Because I'm hungry.

Quote
Maybe I'm missing something.

Time preference.

Quote
Does deflation encourage commerce? Can anyone explain me how?

It neither encourages nor discourages, in any significant way.
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February 24, 2011, 08:15:24 PM
 #35

As far as I can tell there's nothing "hard" being proposed to force people to use demurrage? Perhaps that's why it's worked with local currencies - social pressures can enforce compliance in a small community where in a large one - let alone one where identity is as ephemeral as it is here - they no longer function quite so well. I just don't think it will work at this scale. You'll have to develop a practical implementation to convince me it can compete with a currency not encumbered with demurrage.

I understand that you don't believe people would use it. Let me put it this way.
If you have both currencies, what of the two would you spend first?
Obviously you should spend the one that loses value first.
But why did you accept the money with demurrage in the first place?
Maybe your client can't offer (or doesn't want) you the one without it.
But why he did accept it?
Fiat money can be accepted for various reasons. A government can force you to pay taxes with it and to accept it for clearing debts.
An agreement within a community can be enough like in LETS. You can even trust money "printed" by your friends with Ripple.
But the agreement doesn't have to be based on the commons. You can accept it because is good for YOU.
Bitcoin is accepted because it has qualities that make it better than national currencies.
I claim that a bitcoin-like currency with demurrage has qualities that make it better than bitcoin.
Not for the owner, but FOR THE USER.
Here Gesell can tell you the advantages of free-money (money with demurrage) for different types of money users:

http://wikilivres.info/wiki/The_Natural_Economic_Order#Part_IV._Free-Money.2C_or_Money_As_It_Should_Be

Note that it includes the saver.
I recommend you reading the full text.
Unlike him, I don't want the free-money to be issued by any government. Not after reading David D. Friedman's "The Machinery of Freedom". Unlike Friedman, I don't want metals to be money.
Like many of you, I buy bitcoins with fiat national currency.
Like probably some of you, I buy silver with fiat national currency too.
I'm not advocating to save in a currency that loses nominal value. I just want to use it as a medium of exchange. You can always buy deflationary bitcoins or Precious metals if you want to save.


2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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February 24, 2011, 10:03:18 PM
 #36

As far as I can tell there's nothing "hard" being proposed to force people to use demurrage? Perhaps that's why it's worked with local currencies - social pressures can enforce compliance in a small community where in a large one - let alone one where identity is as ephemeral as it is here - they no longer function quite so well. I just don't think it will work at this scale. You'll have to develop a practical implementation to convince me it can compete with a currency not encumbered with demurrage.

I understand that you don't believe people would use it. Let me put it this way.
If you have both currencies, what of the two would you spend first?
Obviously you should spend the one that loses value first.
But why did you accept the money with demurrage in the first place?
Maybe your client can't offer (or doesn't want) you the one without it.
But why he did accept it?
Fiat money can be accepted for various reasons. A government can force you to pay taxes with it and to accept it for clearing debts.
An agreement within a community can be enough like in LETS. You can even trust money "printed" by your friends with Ripple.
But the agreement doesn't have to be based on the commons. You can accept it because is good for YOU.
Bitcoin is accepted because it has qualities that make it better than national currencies.
I claim that a bitcoin-like currency with demurrage has qualities that make it better than bitcoin.
Not for the owner, but FOR THE USER.
Here Gesell can tell you the advantages of free-money (money with demurrage) for different types of money users:

http://wikilivres.info/wiki/The_Natural_Economic_Order#Part_IV._Free-Money.2C_or_Money_As_It_Should_Be

Note that it includes the saver.
I recommend you reading the full text.
Unlike him, I don't want the free-money to be issued by any government. Not after reading David D. Friedman's "The Machinery of Freedom". Unlike Friedman, I don't want metals to be money.
Like many of you, I buy bitcoins with fiat national currency.
Like probably some of you, I buy silver with fiat national currency too.
I'm not advocating to save in a currency that loses nominal value. I just want to use it as a medium of exchange. You can always buy deflationary bitcoins or Precious metals if you want to save.



Few people save in currency.  It is almost all inflationary.  Bitcoin is different.  Bitcoin inflates, but it is controlled, and should be outpaced by other currencies, yielding a relatively deflationary currency.  This currency happens to have some very nice properties, for example no required fees whatsoever for international exchange.  These properties are what will entice people to use bitcoin for trade.  It's simply cheaper for certain transactions, and that scope will broaden as the exchanging to local currencies becomes smoother.  People save in capital.  And people with capital actually spend "ahead" by borrowing inflationary money.  By spending the money earlier they can purchase more; the value of their debt is reduced over time.  This is the real disparity that leads to stratification.  As long as bitcoin remains relatively deflationary, debts in BTC will increase in value over time.  This will lead to few debtors, and those who manage to obtain large debts will face some form of bankruptcy in the bitcoin economy.  I have no idea how that will be handled, but it seems like a nasty trap a few unsuspecting people will get caught in.  People would like to be able to save in a more liquid form, and bitcoin might just fill that role.  Any merchant who accepts bitcoin can consider it a savings account, spend it, or convert it to another currency.  Your proposition seems to eliminate one of these options without adding any real value.  Also, if the bitcoin market itself is more liquid, bitcoin will lose value because it will be less scarce.  Besides, right now there just isn't enough to spend bitcoins on.  Demurrage really doesn't mesh well with the design of bitcoin anyway.  It breaks down when bitcoin stops inflating.  Perhaps someone should start a bitcoin competitor that inflates at a constant rate and savings deflate at the same rate.  Then we can have a constant supply and demurrage.  Bitcoin can have the liquid savings market and othercoin can be it's cousin with ultrafast transaction processing (the money loses value as it travels, so it needs to go from spendable by A to spendable by B as quickly as possible).  It seems you could drop anonymity from the protocol and still maintain it's p2p nature and get quick transaction approval since you know who to blame for any double spending.  Anonymity can be provided by a web service that handles your othercoins for you like mybitcoin.com, but on tor or something.  They could even integrate the two currencies and store your account in bitcoins and only convert to othercoins to send a payment.  When you receive a payment, it would be converted to BTC so as not to lose value.  As long as the exchange rate between the two isn't too volatile, it seems it could work.  And since we threw out anonymity for othercoin, we can have sane addresses that don't scare people.  Words or even numbers are easier to verify they are correct than something like 1K8gutmz4skgezroqGtF3kQ9SHcouJB9uU.  Of course, anonymity is not something to toss out so lightly, but that's they only way I see speed up transaction times.  And you can't have demurrage when the coins can sit in limbo for an hour.

As we slide down the banister of life, this is just another splinter in our ass.
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February 24, 2011, 10:11:53 PM
 #37

In a highly competitive market, transaction fees, and more worryingly, the network's hash/s, will converge towards zero. 

This is because a miner who discovers a new block only has to pay for the cost of proof-of-work, not for the cost of bandwidth and storage associated with that block. 


Absolutely correct, IMO. Classic externalization of costs.

BitterTea
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February 24, 2011, 10:17:49 PM
 #38

In a highly competitive market, transaction fees, and more worryingly, the network's hash/s, will converge towards zero. 

This is because a miner who discovers a new block only has to pay for the cost of proof-of-work, not for the cost of bandwidth and storage associated with that block. 


Absolutely correct, IMO. Classic externalization of costs.

Except as mining becomes less profitable, less people will want to do it, which will lower the difficulty, which will make it more profitable.
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February 24, 2011, 10:20:42 PM
 #39

which changes what exactly?
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February 24, 2011, 10:26:39 PM
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which changes what exactly?
That transaction fees do not converge toward zero.
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