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Author Topic: Freicoin (was Re: Deflation and Bitcoin, the last word on this forum)  (Read 6570 times)
jtimon
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October 05, 2011, 07:58:02 AM
 #61

Your point of deducing the basic interest from the premium on non-perishable coins is interesting. But the grace period will influence that premium, it is known that the non-perishable coins are going to be perishable in the future.
Apart from the technical difficulties, it makes the coins non-fungible, which I don't like.

Maybe it can be deduced by comparing the bitcoin premium within the decentralized cross-chain exchange, but more things would have to be taken into account.

What I don't understand is why you consider the possibility of avoiding demurrage so important.
People can buy bitcoins (or gold, or goods and services, or ripple credits) to avoid paying demurrage.

For example, consider a business that has always 1000 fcn available for liquidity. They will pay 50 fcn a year for this liquidity. When they get more than 1000 fcn, they can sell the remaining freis for ripple credits. For example, Alice can't pay Bob with her ripple network and buys 100 fcn for 100 fcn ripple IOUs. She pays Bob with the freis and owes 100 fcn to one of her neighbors, who owes to another one, who owes to...who owes to the business 100 fcn. The business trusts this last party, possibly is one of their suppliers.
When they spend some of their freicoins, they can sell some ripple credits to buy freicoins and hold 1000 fcn again.

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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MoonShadow
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October 05, 2011, 01:56:48 PM
 #62


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Your point of deducing the basic interest from the premium on non-perishable coins is interesting. But the grace period will influence that premium, it is known that the non-perishable coins are going to be perishable in the future.
Apart from the technical difficulties, it makes the coins non-fungible, which I don't like.


The grace period will influence the premium, but in the same way that the period chosen influences the interest rate metric.  If the grace were a full year, the premium should reflect the "basic interest" (assuming that it exists) as expressed as an APR.  If the grace period is a month, a quarter or half a year; the premium should be adjustable.  As for not being (quite) fungible, that's a temporary condition.  Nothing at all needs to be done for those same coins to become completely fungible in time. 

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Maybe it can be deduced by comparing the bitcoin premium within the decentralized cross-chain exchange, but more things would have to be taken into account.


Too many things.

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What I don't understand is why you consider the possibility of avoiding demurrage so important.
People can buy bitcoins (or gold, or goods and services, or ripple credits) to avoid paying demurrage.


Because some capacity for value storage is a market requirement for a currency not backed by the force of law.  There will always be someone who is holding the coins, it's unavoidable.  Taken to an extreme, your plan to increase velocity in this manner, if there is no alternative while holding the coins themselves, is likely to backfire.  A high velocity is also a sign of a collapsing currency value.  The velocity of the mark in the Reimar Republic was huge.

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For example, consider a business that has always 1000 fcn available for liquidity. They will pay 50 fcn a year for this liquidity. When they get more than 1000 fcn, they can sell the remaining freis for ripple credits. For example, Alice can't pay Bob with her ripple network and buys 100 fcn for 100 fcn ripple IOUs. She pays Bob with the freis and owes 100 fcn to one of her neighbors, who owes to another one, who owes to...who owes to the business 100 fcn. The business trusts this last party, possibly is one of their suppliers.
When they spend some of their freicoins, they can sell some ripple credits to buy freicoins and hold 1000 fcn again.


Again, there would always be someone holding the coin, it's unavoidable.  If you were the business, would you prefer to hold your slush fund in a currency that automaticly dropped in value or one that did not, all things else equal?  That is the difference between Bitcoin and Freicoin as it is presented.  So given a choice, the business would prefer to hold the slush fund in bitcoin, and the value of those bitcoin would be higher (due, in part to the thousands of such vendors holding slush funds) and the business would prefer to accept payments in bitcoin, because they have some place to put it and won't have to seek out a buyer quickly.  However, if it's possible to avoid the demurrage, than vendors might be willing to hold some of their slush fund in Freicoin, and thus be willing to accept payment in same.  It's a vicious circle.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
jtimon
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October 05, 2011, 02:56:36 PM
 #63

But according to your explanation this would give value to the grace freicoins not to all of them.
The only reasons why people could prefer to hold freicoins instead of bitcoins (or graced freicoins) is that they were more stable or more accepted. It's reasonable to think that they should be more stable, specially if you think their value is going to be very small.

But there's no reason for not accepting freicoins. You can exchange them for another currency if you don't want to hold them or better you can spend them. You can lend them (the easiest way, by selling them for freicoin denominated Ripple credits).
Merchants would accept them even if they don't want to touch them, like some merchants using bit-pay. And that is what gives them value: people accepting them.
People will hold them only for liquidity purposes. Say I want to have always 100 fcn in cash, I will only pay 5 fcn a year for it.
You say, why paying at all if you can hold bitcoins?
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.
Also, the cost of freicoin transactions would be lower, since miners get already payed through demurrage (assuming both monetary bases are completely issued). The limit in transactions per block can be higher in freicoin because miners don't have to rely only on transaction fees.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
MoonShadow
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October 05, 2011, 06:05:51 PM
 #64

But according to your explanation this would give value to the grace freicoins not to all of them.


It would give a premium to the grace freicoins.  It will not give them their base value.

Quote

The only reasons why people could prefer to hold freicoins instead of bitcoins (or graced freicoins) is that they were more stable or more accepted. It's reasonable to think that they should be more stable, specially if you think their value is going to be very small.


Okay.  A rational perspective.  I'm not entirely in agreement, as I think that it's more complicated than that, but the above statement isn't wrong.

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But there's no reason for not accepting freicoins.


But this one is.

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 You can exchange them for another currency if you don't want to hold them or better you can spend them. You can lend them (the easiest way, by selling them for freicoin denominated Ripple credits).


If there is an established, accessible and liquid market; then you can exchange them for another currency.  But this is not an easy target.  Again referring to Bitcoin, it took almost two years for the first market exchange to appear, and even now bitcoins aren't very liquid.  As a vendor, I could now set up an account with MtGox to exchange bitcoins received immediately, and can generally expect that exchange to process within an hour if I price it right.  However, if every vendor who accepted bitcoins were to do this, bitcoins would have no value.  In order for anything to have value, someone must be willing to save something in it, even if that amount is relatively small and simply amounts to a spending account.  Otherwise, the currency is simply a transfer mechanism and cannot rise above a nominal zero value, and thus never attract vendors willing to go to the trouble of accepting a new currency to begin with.  It's a chicken and egg problem that bitcoin took more than two years to solve, even though there were hundreds of people willing to save in the currency during those first two years (at great risk of losing all investment if a flaw was discovered or it never took off).

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Merchants would accept them even if they don't want to touch them, like some merchants using bit-pay. And that is what gives them value: people accepting them.


Not true.  Your credit cards are transfer mechanisms, but do not have any market value in themselves.  The digits that represent currencies do.  Same with bit-pay, it's not the transfer mechanism that holds value, it's the currency used by the mechanism.  And the currency must be able to hold value at least as well as comparable methods.  If (small) demurrage were part of the original design of bitcoin, then freicoin might stand a chance (although it would then be redundent) but because bitcoin is now the benchmark against which derivatives will be judged, vendors are not just going to accept freicoin because a few customers prefer it.  It would require that a significant number of their customers prefer it, and since bitcoin exists, most of them aren't going to ever favor a currency that generally buys less in two weeks than one that generally does not.

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People will hold them only for liquidity purposes. Say I want to have always 100 fcn in cash, I will only pay 5 fcn a year for it.


But then you pay nothing for the same exact functionality with bitcoin.  Again, you misunderstand that the market is now different that bitcoin exists and is established.  The market always favors the first (functional) solution that reaches the market, and will remain hostile to new competitors unless they offer an obvious advantage to the customer.  Unavoidable demurrage might be an advantage for the economy at large, but it's not an obvious advantage to the individual consumer.  Quite the opposite.

Quote
You say, why paying at all if you can hold bitcoins?
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.


Not really.  If the value of freicoins is increasing faster than the demurrage rate, then some people (vendors who accept payments in freicoin, perhaps) will be hording it as a speculation play.  Once that trend reverses, these same speculators will have no expectation that holding what they have will rally further latter, so most will dump.  If anything, demurrage could make voltility greater percentage wise.  There is no reason that it would reduce voltility.

Quote
Also, the cost of freicoin transactions would be lower, since miners get already payed through demurrage (assuming both monetary bases are completely issued). The limit in transactions per block can be higher in freicoin because miners don't have to rely only on transaction fees.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.


But not advantages that they can enjoy with any certainty.  The certainty is much higher with bitcoin, and that is why you will fail.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
jtimon
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October 06, 2011, 08:09:05 AM
 #65

1) Bitcoins competitors doesn't need an obvious advantage, they just need an advantage. If it is not obvious, the currency will just wait more before taking off.

2) You say that a liquid market is needed for merchants that don't want the currency and that's true. recent forks had a market from day 1.
With merged mining and people thinking like you, there's definitely going to be enough sellers. With a few "believers" like me that buy them at a low bottom price (say 10 satoshis), there will be enough bids. So a think that a liquid market (even if it a btc/fcn market and not a fcn/usd) is easily achievable. Bitcoin is very liquid in my opinion, I can buy, for example JPYs with them, for me is the easiest way to convert one currency to another, it's like a currency glue.
With a liquid btc/fcn market, there's really no reason for not accepting freicoins as payment.

3) You say that freicoin won't be more stable than bitcoin but at the same time you say that nobody will hoard it. That seems a bit contradictory to me. You say "If the value of freicoins is increasing faster than the demurrage rate..." I thought you considered that impossible, but let's assume that happens. That may encourage some speculation for some time, but the situation will not go on forever and the speculators will eventually get out. I'm not saying is going to be perfectly stable, I'm just predicting that it's going to be comparatively (to the market cap) more stable than bitcoin.

4) "People accepting a currency don't give value to it, you need people hoarding it"
I strongly disagree here. In fact, I think that the value of "stores of value" like gold comes from the fact that they are (or can be) a medium of exchange. But anyway, if people accept it to sell them, they're holding it for some minutes. If they prefer to pay with it directly instead of converting them to bitcoins before spending, they can hold it even for days or months.

5) "The grace freicoins won't increase the freicoin base value"
So their only intent is to measure the basic interest from the premium. I think that would be rather complicated if even possible and I really don't like the non fungibility.
The question here is what happens if the basic interest is below the demurrage rate?
Say that basic interest moves between 3% and 4% and demurrage is always at 5%.
Why is so important to measure precisely the basic interest?

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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