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

[nybble41]

The alternative to scarcity is not necessarily "superabundance", there might be a mythical third option where there is "just enough."

"Mythical" is correct. Your "third option" is just a point close to the boundary line, but still on one side or the other. If the way a resource is allocated matters--if there is any need whatsoever to balance competing demand for it--then it's scarce. Otherwise, it's superabundant. There is no middle ground.

... why anyone would expect others to prefer it over BTC is a bit of a puzzle.

Because an appreciating currency is a bad thing for investment. I've mentioned in other threads, if businesses can't get BTC loans because they are untenable compared to fiat loans, businesses are not going to accept BTC for payment.

This is a blatant non-sequitur. If businesses can't get loans in BTC because the rate of deflation is higher than the prevailing interest rate, that means BTC is more valuable, and the demand for BTC as payment will be higher, not lower. Businesses are not going to arbitrarily turn away a form of payment which will increase in value after they accept it. The problem (if any) is getting buyers to part with it.

The more typical complaint regarding appreciating currency is that no one will want to spend it, knowing that if they wait it will buy more in the future. Of course, that doesn't take into account that at some point present demand exceeds the net present value of the currency, even if that currency is appreciating, or that the seller can take appreciation into account when setting the price (which generally works out to the seller's benefit, as the party with the lower time preference). There have been markets with consistent relative currency appreciation before (e.g. electronics), and trade didn't come to a halt because of it.

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[galambo]

Yeah people will perceive bitcoin as more valuable and demand it more often than freicoin. The only time I see freicoin being useful is during a price shock period in bitcoin. But because freicoin is still using the same or similar distribution, it is going to have the same problem. All other things being equal, and all other things will be equal, bitcoin will either have a better return for taking it over freicoin, or they might be about equal but freicoin came second. The idea does not compete at all.

Freicoin is definitely a step in the right direction, but it is not nearly enough to overcome the first-to-market power of bitcoin.

Many in the community think Bitcoin has value something simply because scarcity is programmed into it. I agree that this, alone, is meaningless.

Freicoin will be more stable for those that actually want to conduct business with the currency and not have to worry about it greatly appreciating (or depreciating) due to external circumstances.

As to your currency proposal, Decrits/EnCoin -- I don't to see any evidence you are actually working on it, or know how to make it happen.  Other than "it would be nice if my currency had a stable value" I don't really see anything. Mark spells out precisely what the mechanism is used to achieve stable value, and it will work.

I do not have the technical ability to make Freicoin or any other cryptocurrency happen. Mark does. So I help in what ways I can. If you believe in your EnCoin idea you should help too, because this is your best bet for it to actually happen. One step closer is vastly superior to nothing at all.

[Etlase2]

Freicoin will be more stable for those that actually want to conduct business with the currency and not have to worry about it greatly appreciating (or depreciating) due to external circumstances.

But this simply is not true. They will have to worry about it greatly appreciating every time the network expands, just like bitcoin. It's going to take what, 15 years for half of the money supply to recirculate?

As to your currency proposal, Decrits/EnCoin -- I don't to see any evidence you are actually working on it, or know how to make it happen.  Other than "it would be nice if my currency had a stable value" I don't really see anything. Mark spells out precisely what the mechanism is used to achieve stable value, and it will work.

And I don't see any evidence that you guys are working on anything either. Just asking for $28k for a couple line changes and to create advertisement. Freicoin was proposed over a year ago and the best this group has come up with is a webpage to ask for money. Demurrage is not some precise mechanism that will bring a stable value on top of an inherently unstable coinbase, no matter how well Mark may be able to spell.

I do not have the technical ability to make Freicoin or any other cryptocurrency happen. Mark does. So I help in what ways I can. If you believe in your EnCoin idea you should help too, because this is your best bet for it to actually happen. One step closer is vastly superior to nothing at all.

Anything built off of bitcoin just isn't worth the time. And you guys should be very careful about merged mining when there are 12-year-old l33t h4x0rz running large pools.

[jtimon]

Freicoin will be more stable for those that actually want to conduct business with the currency and not have to worry about it greatly appreciating (or depreciating) due to external circumstances.

But this simply is not true. They will have to worry about it greatly appreciating every time the network expands, just like bitcoin. It's going to take what, 15 years for half of the money supply to recirculate?

Yes, freicoin will have price deflation when the network expands.
But who exactly need t worry about it? Mainly borrowers, so they won't denominate their loans in neither bitcoin or freicoin, at least until those risks become smaller. I don't expect merchants to price in freicoins neither, at least not soon. But bitcoin seems to be dealing well with that "problem".
You can define a stable unit like usd1970, terras, a basket of 30000 different goods and services or whatever you prefer. But you cannot create a cash-money that ensures a stable price. Well, you could do it with a central bank issuing monopoly freigeld. But you can't do it without manipulating the market or redistributing wealth somehow.
The only thing a cash-money needs that bitcoin doesn't have is a compulsion to circulate.
For the financial problem, I think we will see some innovations too. Decoupling loan contracts from cash-money units and using indexes or virtual baskets instead. That way you may not need to factor the inflation premium into the interest rate.

[chrisrico]

The only thing a cash-money needs that bitcoin doesn't have is a compulsion to circulate.

Why does cash-money require a compulsion to circulate? I'm sure you'll explain this away as saying you didn't really mean this word, but something like "incentive", but I find it interesting nonetheless.

compulsion

1. An irrational need to perform some action, often despite negative consequences.
2. The use of authority, influence, or other power to force (compel) a person or persons to act.
3. The lawful use of violence (i.e. by the administration).

Do you understand the concept of time preference? Even if the exchange rate between bitcoins and some good I desire is constantly changing in my favor, I still desire that good and at some point my preference for the good now overrides my preference for a lower cost later. For a real life example, you must look no further than consumer technology like computers and televisions. If I wait a year to buy one, the cost will go down and the quality will go up. Yet, I still buy one today because otherwise I will be forced to go a whole year without.

[Explodicle]

Freicoin will be more stable for those that actually want to conduct business with the currency and not have to worry about it greatly appreciating (or depreciating) due to external circumstances.

But this simply is not true. They will have to worry about it greatly appreciating every time the network expands, just like bitcoin. It's going to take what, 15 years for half of the money supply to recirculate?

Yes, freicoin will have price deflation when the network expands.
But who exactly need t worry about it? Mainly borrowers, so they won't denominate their loans in neither bitcoin or freicoin, at least until those risks become smaller. I don't expect merchants to price in freicoins neither, at least not soon. But bitcoin seems to be dealing well with that "problem".
You can define a stable unit like usd1970, terras, a basket of 30000 different goods and services or whatever you prefer. But you cannot create a cash-money that ensures a stable price. Well, you could do it with a central bank issuing monopoly freigeld. But you can't do it without manipulating the market or redistributing wealth somehow.
The only thing a cash-money needs that bitcoin doesn't have is a compulsion to circulate.
For the financial problem, I think we will see some innovations too. Decoupling loan contracts from cash-money units and using indexes or virtual baskets instead. That way you may not need to factor the inflation premium into the interest rate.

EnCoin is "manipulated" by predetermined rules. Instead of a specific quantity of coins, it has a specific difficulty based on Koomey's law. This introduces trust/coordination problems that are addressed in different ways, but it doesn't introduce money supply manipulation.

[Etlase2]

But who exactly need t worry about it? Mainly borrowers, so they won't denominate their loans in neither bitcoin or freicoin, at least until those risks become smaller. I don't expect merchants to price in freicoins neither, at least not soon. But bitcoin seems to be dealing well with that "problem".

You claim that bitcoin is doing well, but we don't know what could have happened had it not already experienced a bubble. But c'mon, the system is just designed to bubble and burst. It may always end up better than before the bubble, but the waves created in the mean time will be fierce.

You can define a stable unit like usd1970, terras, a basket of 30000 different goods and services or whatever you prefer. But you cannot create a cash-money that ensures a stable price. Well, you could do it with a central bank issuing monopoly freigeld. But you can't do it without manipulating the market or redistributing wealth somehow.

I have definitely conceded these things with my own latest proposal, and I think it is a much saner system than bitcoin's or freicoin's.

For the financial problem, I think we will see some innovations too. Decoupling loan contracts from cash-money units and using indexes or virtual baskets instead. That way you may not need to factor the inflation premium into the interest rate.

This all sounds nice, but you still need to get away from limited supply and the rest of bitcoin's archaism such as using energy to secure the network.

[maaku]

@Etlase2, @jtimon and I simply don't agree with your conclusions, and we'll have to leave it at that. Let's please leave discussion of your proposal to its own thread.

[Etlase2]

@Etlase2, @jtimon and I simply don't agree with your conclusions, and we'll have to leave it at that. Let's please leave discussion of your proposal to its own thread.

At the very least you could stop wasting thought energy on how to implement pruning. Switch to an account ledger instead of a transaction ledger. If at the very least you want to accomplish something, you should try some major improvements on the protocol. That way at least there is actually progress instead of sidegress.

[maaku]

That wouldn't be progress. You can't operate a lite-client with full-node security using an account ledger.

[Etlase2]

You absolutely can. There would be little need to even make the distinction of a "lite-client" with an account ledger. Try thinking outside the box just a little bit.

[smoothie]

I still don't think $28k is necessary to get a project off the ground.

[galambo]

This all sounds nice, but you still need to get away from limited supply and the rest of bitcoin's archaism such as using energy to secure the network.

Using energy to secure the network isn't bitcoin's archaism. Using energy to secure the financial system is a condition that has existed for all of human history. The question: how much energy?

I think Bitcoin uses a lot less energy than any other possible solution. We're trying to trying our hardest to turn the economy from a horse and buggy to a Carnot cycle. Anybody with notions that the Bitcoin method of securing the blockchain is not "sustainable" or "green" has not considered how much energy is spent in just one day of a War. What are we not trying to do? We are NOT trying to create a perpetual motion machine.

[fivebells]

I don't have all the problems written down, but I do have most of the solutions here: https://bitcointalk.org/index.php?topic=91183.0 although I have not gone into much technical detail since I drove through most of that during the encoin process.

Thanks, Etiase

[Etlase2]

Using energy to secure the network isn't bitcoin's archaism. Using energy to secure the financial system is a condition that has existed for all of human history. The question: how much energy?

You say it's not archaic, then go on to say this is the way it has been done for all history. 

I think Bitcoin uses a lot less energy than any other possible solution. We're trying to trying our hardest to turn the economy from a horse and buggy to a Carnot cycle. Anybody with notions that the Bitcoin method of securing the blockchain is not "sustainable" or "green" has not considered how much energy is spent in just one day of a War. What are we not trying to do? We are NOT trying to create a perpetual motion machine.

I'm not saying it's bad because it uses energy, I'm saying it's bad because it's not secure (he who controls the hardware and/or money controls the money) and it only encourages wastefulness when it is not absolutely necessary. Every tx fee or every amount of demurrage is going to have to be paid for again and again and again. But getting around that is more complicated than switching to an account ledger, I think.

[cbeast]

I'm not saying it's bad because it uses energy, I'm saying it's bad because it's not secure (he who controls the hardware and/or money controls the money) and it only encourages wastefulness when it is not absolutely necessary. Every tx fee or every amount of demurrage is going to have to be paid for again and again and again. But getting around that is more complicated than switching to an account ledger, I think.

Having a paper backup does not make your money less secure. Paper, electronic, and brain wallets all work together to provide the ultimate security. The only thing I don't like about paper wallets is the current single address. There isn't a good way to encrypt them to prevent theft. Paper wallets will greatly benefit from multisig.

[maaku]

I'm not saying it's bad because it uses energy, I'm saying it's bad because it's not secure (he who controls the hardware and/or money controls the money) and...

That is hardly a weakness--it is exactly where the security of bitcoin comes from!

But regardless, although this is an interesting and valuable discussion, it should be held in a separate thread; we have wandered significantly off-topic. Freicoin is and will always be a proposal within the framework of bitcoin-like systems.

[Etlase2]

That is hardly a weakness--it is exactly where the security of bitcoin comes from!

It is most definitely a weakness. It makes perpetuating an attack on the security of the network trivial. It also means that if any one of the networks based off of bitcoin is attacked, they can all be.

But regardless, although this is an interesting and valuable discussion, it should be held in a separate thread; we have wandered significantly off-topic. Freicoin is and will always be a proposal within the framework of bitcoin-like systems.

While devising a new security system would be difficult (although I suggest you take a long look into the idea of a weighted block chain that I briefly talk about here: https://bitcointalk.org/index.php?topic=64637.0), the account ledger really would not be that much effort. But if you'd rather not make any steps forward in crypto-currency technology, that is your unfortunate prerogative.

[bg002h]

...it would be hard for freicoin to have much value if everyone who got some realized they could grow their freicoin wealth by selling, buying anything inflating at less than the freicoin rate, and just waiting. This scenario benefits the last adopter most.

[jtimon]

@maaku
Sorry about going off-topic.

The only thing a cash-money needs that bitcoin doesn't have is a compulsion to circulate.

Why does cash-money require a compulsion to circulate? I'm sure you'll explain this away as saying you didn't really mean this word, but something like "incentive", but I find it interesting nonetheless.

I wasn't thinking on those definitions, I was just citing Gesell translated to English:
"I have denied that paper-money as we know it (without direct, material compulsion to circulate) could ever be as closely adapted to supply as a regular exchange of wares, national and international, requires".
Note that we, unlike him don't aim an elastic supply. But also note how he criticizes the current Keynesian model.

Anyway, back to your question:

Why does cash-money require a compulsion to circulate?

Otherwise it opens the possibility for the money holder to lock the medium of exchange, refusing to spend, invest or lend it. He can enjoy an economic rent in the financial market Gesell called "the basic interest". If he doesn't get it, he hoards. And that's what happens when iterest rates go "too low". Forget central banks manipulated interest rates, I'm talking about a problem that gold-money has.
Capital yields and interest rates are directly linked. By virtue of continued investment and capital accumulation capital yields drop (economic profits tend to zero in perfect competition). But there's an artificial lower bound (the natural would be zero), the basic interest. You prefer to hold the money yourself rather than lending it at 0.1% interest, even if is inflation and risk free.
Holding money represents an insurance against uncertainty. Instead of owning real wealth that perishes or suffers storage/maintenance costs, you own an everlasting wildcard. This free insurance the hoarder does not pay for constitutes an economic rent, and must be paid somewhere else. The terrible byproduct of capital-money is a rent protection for lenders and capital owners (because the investments stop below the basic interest).
When interest go below the basic interest hoarding increases, which causes price deflation which encourages more hoarding.
The financial market gets also severely damaged by the deflationary spiral, but if the governments don't interfere, unemployment, capital destruction and lack of new investments (a war can serve too) rapidly lead to a new price equilibrium where interest rates are well above the basic interest again. The monetary cycle has ended and starts again. Messing with the monetary supply first through fractional reserve banking and then with central banks has been proven to be unsuccessful I guess we can agree. It's about velocity not quantity.

In summary:

1) Because everlasting cash-money springs economic rents
2) Because everlasting cash-money causes monetary cycles.

Do you understand the concept of time preference? Even if the exchange rate between bitcoins and some good I desire is constantly changing in my favor, I still desire that good and at some point my preference for the good now overrides my preference for a lower cost later. For a real life example, you must look no further than consumer technology like computers and televisions. If I wait a year to buy one, the cost will go down and the quality will go up. Yet, I still buy one today because otherwise I will be forced to go a whole year without.

Yes, I do. But we disagree on what causes it. You think time preference causes interest. I think interest causes time preference.
A simple proof is that different money designs produce different interest rates. Another thought exercise would be "Why the time preference is never negative, don't we ever prefer things in the future than in the present?". The austrian concept of time preference only applies to capital-money: you don't necessarily prefer 5000 fresh oranges today over a fresh new orange for the next 5000 days.
But the point you're making is that growth caused deflation isn't bad. I agree, that's why Freicoin has a fixed monetary base. More fixed than bitcoin's by the way.

...it would be hard for freicoin to have much value if everyone who got some realized they could grow their freicoin wealth by selling, buying anything inflating at less than the freicoin rate, and just waiting. This scenario benefits the last adopter most.

Freicoin is not inflationary. If you mean that people would prefer a better yield than -4%...I say more, they will prefer 0% or more. But this medium of exchange is not for saving. If you want to save with it you must lend.
I don't see how the last adopter gets beenfited.