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.
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.
But there's no reason for not accepting freicoins.
But this one is.
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).
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.
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.
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.
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.
