[ANN] Freicoin: demurrage crypto-currency from the Occupy movement (crowdfund)

[dego]

At the current state there won't be an alternative to mining, aight? But if mining continues as slow as it is, there will be more energy efficient miners to do that necessary job...

[1714594389]

1714594389

[Explodicle]

More interesting to think that this coin, with nearly 80% of its production being held by one person could be considered a coin for the masses--but then it came to me. Gesell thought one should earn according to his ability. FRC's "foundation" is doing just that. While opining about the need for social change, the foundation is quietly amassing huge wealth under the notion that "they" are best to decide how it's used and spent. Strange...that sounds just like the current rash of premine and scam-coins only its ongoing and since its "to further the movement," the sheeple don't bother to dig any deeper.

No, the notion is to avoid a huge waste of energy by issuing that money through mining.
The foundation doesn't wants to decide how to spend the money directly, that's why the community is proposing several alternatives to distribute the coins without wasting energy and without "central decisions" by the foundation. Ideas like curecoin (cure cancer instead of mindless hashing for issuance) or increasing voluntary donations in a crowdfunding platform.
The point of the proposals is to take responsibility out of the foundation and back to the community and individual decisions.
Please, post your own alternative to mining if you have any idea.

I've been thinking more about this problem:

1) I'm not certain that the amount of energy spent is directly proportional to mining revenue, because Freicoin is merge-mineable with Bitcoin. If Freicoin hash power is much less elastic (relative to Freicoin mining revenue) than it is with Bitcoin, then you're making Freicoin more vulnerable to swings in Bitcoin price (which are arguably caused by deflation). This is because the decision to mine or not mine SHA256 depends more on what the merge-mined Bitcoins are worth than the price of Freicoin.

2) I can't think of any way to poll "the community" fairly, in a way that includes everyone, and you certainly didn't think of a way to do so before adopting this centralization aspect in the first place. How do you know who is and isn't a sock puppet? Do you expect people to trust you, or to audit your entire distribution process? There's only one provably fair way to distribute this hoard - to destroy it.

Any time someone criticises this money grab, you put the burden on them to solve the problem you created.

[jtimon]

1) I'm not certain that the amount of energy spent is directly proportional to mining revenue, because Freicoin is merge-mineable with Bitcoin. If Freicoin hash power is much less elastic (relative to Freicoin mining revenue) than it is with Bitcoin, then you're making Freicoin more vulnerable to swings in Bitcoin price (which are arguably caused by deflation). This is because the decision to mine or not mine SHA256 depends more on what the merge-mined Bitcoins are worth than the price of Freicoin.

First things are valued, then producers (looking at prices) calculate costs and decide to produce or not.
To merge mine or not to merge mine only affects security, but the economics are the same:

miner's profits + capital costs + energy costs = revenue

Of course this is not a universal law, one part tends to equal the other and miner's profits should tend to zero, but those things happen only in perfect markets not real ones...
In the same way, the 80% issuance doesn't make mining unprofitable (that's dynamically adjusted), it only hires less security.
Without merged mining you will cap the security you have, with merged mining, Freicoin could be as secure as Bitcoin more or less independently of its price.

2) I can't think of any way to poll "the community" fairly, in a way that includes everyone, and you certainly didn't think of a way to do so before adopting this centralization aspect in the first place. How do you know who is and isn't a sock puppet? Do you expect people to trust you, or to audit your entire distribution process? There's only one provably fair way to distribute this hoard - to destroy it.

The first mechanism will be transparent donations in Freicoin and Bitcoin to registered non-profits. The Foundation will issue some freicoins to match those donations in proportion to what they have received.
This can be transparent, clean and productive. More than mining in all these three aspects.
People will vote with their pockets. It's not "perfectly fair" (whatever that means) but it's fair enough for most of us.

Any time someone criticises this money grab, you put the burden on them to solve the problem you created.

No, I tell them to propose new issuance mechanisms and discuss the current proposals.
Seigniorage is a problem we haven't created (it's much older than us)
and Bitcoin hasn't solved by destroying real resources in a sterile
attempt to mimic gold. But this technology gives the opportunity to
use it for the commons and positive things instead of financing states and
wars like other times, or just produce more heat like Bitcoin.

[Explodicle]

2) I can't think of any way to poll "the community" fairly, in a way that includes everyone, and you certainly didn't think of a way to do so before adopting this centralization aspect in the first place. How do you know who is and isn't a sock puppet? Do you expect people to trust you, or to audit your entire distribution process? There's only one provably fair way to distribute this hoard - to destroy it.

The first mechanism will be transparent donations in Freicoin and Bitcoin to registered non-profits. The Foundation will issue some freicoins to match those donations in proportion to what they have received.
This can be transparent, clean and productive. More than mining in all these three aspects.
People will vote with their pockets. It's not "perfectly fair" (whatever that means) but it's fair enough for most of us.

I'm not sure what "perfectly" fair is either, but a provably fair system would be one in which all participants can prove that the 80% coins were handled according to strict rules without having to trust anyone. You're asking us to either trust you or independently verify that these recieving addresses belong to registered charities. That's a non-trivial cost that doesn't exist with "wasted" heat.

And this of course assumes that users are OK with a government having veto power over acceptable charities - those of us who would donate to Wikileaks or Defense Distributed might be disappointed. I think you'll find that every new rule you make is "fair enough" when you only ask people who have not yet left the project; it's an echo chamber.

The only thing that differentiates this system from pure 100% subsidy is you are requiring us to spend a minimum on state-approved charities instead of productive for-profit activity, and you are retaining the right to say when this hoard is released into the money supply (much like a central bank). Miners who value these charities will mine at a "loss" and then you have wasted heat again.

Any time someone criticises this money grab, you put the burden on them to solve the problem you created.

No, I tell them to propose new issuance mechanisms and discuss the current proposals.
Seigniorage is a problem we haven't created (it's much older than us)
and Bitcoin hasn't solved by destroying real resources in a sterile
attempt to mimic gold. But this technology gives the opportunity to
use it for the commons and positive things instead of financing states and
wars like other times, or just produce more heat like Bitcoin.

How hasn't Bitcoin solved seigniorage? Seigniorage is the difference between the value of money and the cost to produce and distribute it. Right now the value of each Bitcoin block is worth roughly 100% of the cost to produce and distribute it. The value of each Freicoin block is roughly 500% of the cost to produce and distribute it.

[maaku]

I'm not sure what "perfectly" fair is either, but a provably fair system would be one in which all participants can prove that the 80% coins were handled according to strict rules without having to trust anyone. You're asking us to either trust you or independently verify that these recieving addresses belong to registered charities. That's a non-trivial cost that doesn't exist with "wasted" heat.

We have better things to do with our time than come up with a cryptographically secure distribution method that's only going to see use once. “Provably fair” was never a design requirement.

[jtimon]

You're asking us to either trust you or independently verify that these recieving addresses belong to registered charities. That's a non-trivial cost that doesn't exist with "wasted" heat.

Everybody will be able to see the transactions in the public chain,
100% transparency in this reward. The only way we could cheat is by
lying on what address belongs to what organization.
We could say:

-See? we're giving the money to this address, which belongs to the
Electronic Frontier Foundation.

But if it didn't belonged to that organization, that organization
would have something to say.
If we cheat with this system it will be easy to catch us, that's the
whole point. If we cheat, it's never too late to go back to the
only-mining hardfork.

And this of course assumes that users are OK with a government having
veto power over acceptable charities - those of us who would donate to
Wikileaks or Defense Distributed might be disappointed.

I don't see why wikileaks could not take funds in the same way. But,
yes, it's centralization, isn't perfect and that's why it's limited
to 3 years.

The only thing that differentiates this system from pure 100% subsidy
is you are requiring us to spend a minimum on state-approved charities
instead of productive for-profit activity, and you are retaining the
right to say when this hoard is released into the money supply
(much like a central bank).

It is for profit activity but it's not productive. Nobody benefits
from having such high currency production costs.
Again, the central issuing is not perfect. We hope to gradually
substitute it with more p2p mechanisms like proof of stake. If 3
years of issuing experimentation cannot give as a fully p2p
alternative to mining, the full 5% demurrage will have to go to
miners.

Miners who value these charities will mine at a "loss" and then you have wasted heat again.

No miners should always mine at a profit or stop their equipment.
Freicoin miners have mined at a profit most of the time, they
periodically mine at a higher profit that bitcoin miners.

How hasn't Bitcoin solved seigniorage? Seigniorage is the difference
between the value of money and the cost to produce and distribute it.

Since scarce money needs no backing you could maximize seigniorage
and minimize money production costs.
The seigniorage value comes from the people that accept the newly
created currency in exchange for real products. But since that value
will never be explicitly redeemed back by anyone it can be put to
use. Since money is a social agreement, the challenge is to invest
that value back into society, preferably (at least to me) developing
the commons (free software/hardware, free culture...)
Bitcoin does the opposite: it tries to minimize seigniorage (in this
case is profits for the miners) by maximizing money production costs.
It distributes the value by destroying it.

-How do you distribute 4 candies between 5 kids?
-You throw all the candies to the river so they don't fight.

-How do you prevent fires in the forest?
-You kill the forest first.

That's not solving the problem to me.

Right now the value of each Bitcoin block is worth roughly 100% of the
cost to produce and distribute it. The value of each Freicoin block is roughly 500% of the cost to produce and distribute it.

That's the whole point. The ratio cost to produce/value of Freicoin is
20% that of Bitcoin's. Freicoins are produced more efficiently and
the gains derived from this increased efficiency is what must be
distributed by the foundation.

The most important thing is that the value comes from the demand and
not from miners. That demand is explicitly approving the issuance
mechanisms in both cases Bitcoin and Freicoin. There's also demand
for other issuance schemes like xrp, where the marginal cost of
production is zero and 100% of the supply starts in the hands of a
private company.

Believe it or not, there's people that prefer Freicoin's issuance
experiments over btc destruction and xrp privilege, and that's why it
has demand and a market price.

[Explodicle]

“Provably fair” was never a design requirement.

Peer-to-peer was, and unless you have equal rules for all participants it is not peer-to-peer. So yes, provably fair was never in the initial plans... it's just the only way to restore that plan.

You're asking us to either trust you or independently verify that these recieving addresses belong to registered charities. That's a non-trivial cost that doesn't exist with "wasted" heat.

Everybody will be able to see the transactions in the public chain,
100% transparency in this reward. The only way we could cheat is by
lying on what address belongs to what organization.
We could say:

-See? we're giving the money to this address, which belongs to the
Electronic Frontier Foundation.

But if it didn't belonged to that organization, that organization
would have something to say.
If we cheat with this system it will be easy to catch us, that's the
whole point. If we cheat, it's never too late to go back to the
only-mining hardfork.

Since we're not assuming trust, this requires that every participant goes online and researches every receiving address. Do you think this wasted effort is less than the effort wasted by mining? What about charities which close their websites someday after they've recieved funds, are new users expected to check those? Unless you're requiring trust, every user from now until the end of Freicoin will need to spend energy and time performing verification - it's like meatspace mining.

Miners who value these charities will mine at a "loss" and then you have wasted heat again.

No miners should always mine at a profit or stop their equipment.
Freicoin miners have mined at a profit most of the time, they
periodically mine at a higher profit that bitcoin miners.

I don't think I was being clear here. If mined coins allow for matching funds, then any miner who would otherwise donate to charity has a greater incentive to earn them. So if I gain $1 of utility from donating 1 FRC to the EFF, I would rationally mine all the way to $2/FRC. So I pay $2 to mine 1 FRC @ $1/FRC, but get $2 worth of utility. At best, this means the same amount of energy spent.

How hasn't Bitcoin solved seigniorage? Seigniorage is the difference
between the value of money and the cost to produce and distribute it.

Since scarce money needs no backing you could maximize seigniorage
and minimize money production costs.
...

Right now the value of each Bitcoin block is worth roughly 100% of the
cost to produce and distribute it. The value of each Freicoin block is roughly 500% of the cost to produce and distribute it.

That's the whole point. The ratio cost to produce/value of Freicoin is
20% that of Bitcoin's. Freicoins are produced more efficiently and
the gains derived from this increased efficiency is what must be
distributed by the foundation.

The most important thing is that the value comes from the demand and
not from miners. That demand is explicitly approving the issuance
mechanisms in both cases Bitcoin and Freicoin. There's also demand
for other issuance schemes like xrp, where the marginal cost of
production is zero and 100% of the supply starts in the hands of a
private company.

I think the comparison to XRP is fair. I can understand your argument that seigniorage can potentially be efficient, but I'd like to see how efficiently these coins are actually distributed when the time comes. My guess is that more time and effort will be spent, and most charities will just convert to BTC and then to local fiat.

Believe it or not, there's people that prefer Freicoin's issuance
experiments over btc destruction and xrp privilege, and that's why it
has demand and a market price.

No offense, but I heard the exact same thing from RealSolid of SolidCoin. There is demand for every single alt coin here.

[maaku]

“Provably fair” was never a design requirement.

Peer-to-peer was, and unless you have equal rules for all participants it is not peer-to-peer. So yes, provably fair was never in the initial plans... it's just the only way to restore that plan.

No aspect of the protocol is centralized. None. Zero. Zilch. This whole initial distribution thing happens outside of the freicoin/bitcoin protocol.

[Explodicle]

“Provably fair” was never a design requirement.

Peer-to-peer was, and unless you have equal rules for all participants it is not peer-to-peer. So yes, provably fair was never in the initial plans... it's just the only way to restore that plan.

No aspect of the protocol is centralized. None. Zero. Zilch. This whole initial distribution thing happens outside of the freicoin/bitcoin protocol.

So the protocol doesn't require 80% of new coins go to a specific address under your control? I was under the impression (incredibly sorry if mistaken!) that miners who tried to opt out of the seigniorage would be rejected by other nodes.

If the 80% seigniorage is completely optional and can be configured client-side, my whole argument is invalid. 

[maaku]

What do you mean by centralization? Let's taboo the word.

A centralized network protocol requires a specific network resource to be online and available in order for the protocol to work. Examples include a trusted timestamping, checkpointing, or routing server. This is the technical meaning that is prescribed to the opposite word "decentralized" as it applies to bitcoin - bitcoin is designed without any centralized network resource, and so among other things can continue to operate even in the face of powerful but not omniscient censorship. The same is true of Freicoin: so long as your blocks include the foundation outputs for the first three years, you will reach consensus with the Freicoin network.

Calling the budgetary requirements “centralization” is a twist of meaning. I wonder what you mean by that phrase? That is to say, if you taboo'd the word, what would you call it instead?

[shakezula]

Calling the budgetary requirements “centralization” is a twist of meaning. I wonder what you mean by that phrase? That is to say, if you taboo'd the word, what would you call it instead?

Hold on, he's got a valid point, the "FRC Foundation/you" control the 80% of FRC created...via a single wallet or not is irrelevant. Perhaps not "centralization," but it is certainly a single point of control. What word would you rather we use?

[maaku]

Single point of control... over that limited supply of coins. 80% of the monetary base, yes, but still finite. (1) Once those coins are spent they're gone. (2) Their movement can be tracked by anybody. (3) If anything funny happened, he market would pull the rug out from under us so fast, there'd be no hope of recovery.

When we conceived the idea of the Foundation in its current form, we were just weeks away from release. Our options were (1) release as-is with 100% miner subsidy and the associated opportunity cost; (2) add a simple, hardcoded budgeting system and issue the coins through non-profits; or (3) spend a year or more developing a fair, decentralized voting system for determining what to do with the coins, which may or may not have worked in its first incarnation. We chose the middle path, but for reference the most championed proposal for decentralized, non-mining issuance is described here:

http://www.freicoin.org/demurrage-should-it-all-go-to-miners-t20-40.html#p354

Are the keys to 80% of the eventual monetary base physically in my possession? Yes. Are we asking users to trust us while we figure out how to start a not-for-profit Foundation and do the distribution legally? Yes.

That's a far cry from a centralized protocol like the fiat banking system, or even lesser claims of centralization like the checkpointing systems that existed in PPCoin or SolidCoin.

Would we prefer a secure, decentralized voting mechanism with incentives structured to provide fair and equitable issuance without undue early adopter bias or vote manipulation? Yes. And while we're at it, I'd also like a pony, a million bitcoin, and to know who shot JFK.

[galambo]

At the current state there won't be an alternative to mining, aight? But if mining continues as slow as it is, there will be more energy efficient miners to do that necessary job...

The average time to solve a block is 29.73 minutes, since the algorithm change, a value which is declining as Freicoin miners realize they should not overreact to fluctuations in the difficulty.

Since the changeover in May 3,748 blocks have been solved.

[gabbynot]

Is anything actually going on with this alt?  What has the "foundation" been up to?

I see the exchange rate is well below a penny now...

[jtimon]

Since we're not assuming trust, this requires that every participant goes online and researches every receiving address.

Yes, we're assuming some level of trust, but not very high.

If we're honest, the only way to be sure about it is researching
every non-profit address and the charities themselves, or trust
someone else's research.

But if we cheat, it only takes a researcher to locate the proof of
fraud in the chain and show it to everyone.

Do you think this wasted effort is less than the effort wasted by mining? What about charities which close their websites someday after they've recieved funds, are new users expected to check those? Unless you're requiring trust, every user from now until the end of Freicoin will need to spend energy and time performing verification - it's like meatspace mining.

Future Freicoin users may have to trust that someone took the time to
audit the public accounting of an organization that no longer
influences freicoin supply in any way.

I don't think I was being clear here. If mined coins allow for matching funds, then any miner who would otherwise donate to charity has a greater incentive to earn them. So if I gain $1 of utility from donating 1 FRC to the EFF, I would rationally mine all the way to $2/FRC. So I pay $2 to mine 1 FRC @ $1/FRC, but get $2 worth of utility. At best, this means the same amount of energy spent.

Oh, I get your point now.
You're saying "if only miners donate to the non-profits and 100% of
miners mine at a loss only to give 100% of their earnings to the
non-profits, both systems are equivalent."
If frc is valued at 1 usd, miners profits should tend to decline so
that "production costs" equal 1 usd. But if miners are not counting
the 1 frc they receiving but the 1.1 frc the non-profits will get,
they will be ok with incurring 1.1 usd donation losses.
I'm assuming 10% donation matching by the foundation.
But miners can't mine 800 M frc in 3 years, so someone else will have
to make donations too, even assuming all miners donate everything
they get. And the matching of those donations cannot be counted as
production costs by the miners.

I think the comparison to XRP is fair. I can understand your argument that seigniorage can potentially be efficient, but I'd like to see how efficiently these coins are actually distributed when the time comes. My guess is that more time and effort will be spent, and most charities will just convert to BTC and then to local fiat.

I need to repeat that miner's profit are also seigniorage and bitcoin
also has it. But ANY seigniorage is more efficient than costs because
at least someone gets the value instead of it being completely
sacrificed by the community as a whole.

My guess is that more time and effort will be spent, and most charities will just convert to BTC and then to local fiat.

Well, that's very likely to happen, at least at the beginning, but
it's not the end of the world, someone will buy them and they're
already distributed. Of course, the ideal situation would be for them
to spend the FRC directly, but they converting to BTC and spending
them directly would help expand cryptocurrencies too, and it's not so
much to ask because there's already many things being sold for BTCs.

Maaku and I plan to operate a FRC/BTC exchange and offer automatic
conversion from it. So if you have FRC deposits, you can withdraw/pay
BTCs to any bitcoin address directly (and viceversa).

But for merchants that accept both, you will probably prefer to pay
FRC directly to save bitcoin's transaction fee, the trading fee and
the gap between bids and asks.

Believe it or not, there's people that prefer Freicoin's issuance
experiments over btc destruction and xrp privilege, and that's why it
has demand and a market price.

No offense, but I heard the exact same thing from RealSolid of SolidCoin. There is demand for every single alt coin here.

Ok, then just trust my word or ask to them yourself: although they're
still reluctant to use freicoin because of how different it is from
mutual credit, there's many people in the complementary currencies
movement that consider it a great improvement over bitcoin, and at
the same time changes a little bit their perception of bitcoin, which
they tend to criticize aggressively.
Finding out that the issuance doesn't require mining but you still
need it for security seems to make them accept the general concept
better.

[vindimy]

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[jtimon]

Charts here: http://kryptokursy.pl/FRC

Please, advertise it for free here:

http://foundation.freicoin.org/#/trade

[jtimon]

Off topic but I'll address it. The foundation funds are only spent through community mechanisms, e.g. matching donations. Neither Jorge nor I have any significant control over the destination of those coins.

Whether or not there is matching is irrelevant - the foundation must decide either which charities are elligible, or who gets to vote on which charities are elligible. And the decisions to hold the coins pending a full plan, and to give them to charity, were both made without a vote.

Yes, this is the centralization point of the matched donations distribution. But any censored nonprofit can publicly denounce us.
No one has done it so far.

Your opinion is that the seigniorage should be burned in mining subsidies and I respect that opinion, but you have to face that it is not shared by the majority of the freicoin community. Like I was told when I wanted Bitcoin itself to have demurrage: go ahead and fork freicoin to create an altcoin with demurrage and 100% issuance through mining subsidies.

Seigniorage is the difference between the cost to acquire a good and its market value. If Bitcoin has any seigniorage at all, it tends to zero just like mining profits. That's such a far cry from 80% seigniorage that when you first said this to me months ago, I was so disgusted that I remained silent until now.

Yes, profits tend to zero when time tends to infinity in perfect competition (something purely theoretical), so seigniorage to miners should tend to zero with time as well.
The rest is burned in mining costs, basically providing more security than users are paying for.
This is completely anti-ecological and therefore not aligned with Freicoin's core values.
The very inventor of proof of work-based scarcity refers to this as a "environmental crime".   

I cannot stress this enough, avoiding this waste is the primary reason behind the Freicoin Foundation, supporting nonprofits is just a nice side effect, the "less worse" distribution in my opinion.

There are two reasons I haven't forked:
1) I'm not skilled enough to maintain it properly.
2) I'm not convinced that demurrage is beneficial in the first place.
If anyone reading this does start a "equal rules for all" fork, please PM me and you'll have found your first speculator.

I thought you were for demurrage.
Maybe you can find someone here: https://bitcointalk.org/index.php?topic=134629.0
That didn't worked because the Freicoin community didn't think like him, but you could just start a completely new chain.

I won't oppose to a second demurrage cryptocurrency, but the freimarkets crowdfunding thread (or this thread) is just not the right place for starting it.

[HiroS]

Freicoin foundation had lots of time to move but seemed idle with the 80% of initial coins. What a shame for such an interesting solution of demurrage. It is very tempting to put this into a new coin with no foundation as the fork you linked in was not a genuine attempt, more of a protest against the solution chosen. Demurrage is a great idea but unfortunately one that people do not want. If the world could be rebooted to use this perhaps it would work, but not in the world we live in.

Perhaps there is time now to retry demurrage, there needs to be a new tier of crypto using a different hashing algorithm. Currently solutions are scattered and there is no standard. Perhaps this is a good time for Maaku to work on the next hashing standard and put demurrage at the top of it

[Arcurus]

Whether or not there is matching is irrelevant - the foundation must decide either which charities are elligible, or who gets to vote on which charities are elligible. And the decisions to hold the coins pending a full plan, and to give them to charity, were both made without a vote.

Yes, this is the centralization point of the matched donations distribution. But any censored nonprofit can publicly denounce us.
No one has done it so far.

Here maaku has started an discussion about republicon. Who wants help to make decision making fully p2p feel free to join and help developing republicoin!
http://freicoin.freeforums.org/republicoin-design-discussion-t738.html

With simply voting through hashing power I see a big waste of energy, there must be something more democratic and energy friendly. Lets help to find such an algorithm!