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Comment by random28345 | Hacker News Reader

> I'm really liking the Gresham dollar idea. The main point is that it expires, thus forcing you to circulate it.

I like the idea as well, but in the description it said that vendors would be onboarded with a promise to allow g-bucks to be converted back to dollars at par. The obvious outcome is that issuing a g-buck is going to immediately result in depleting USD reserves by a dollar as soon as the g-buck is spent. Anything that inhibits immediate redemption for USD is going to inhibit adoption.

You need a real-world use-case that USD is less than ideal for, like being able to buy illegal drugs or pay cyber-ransoms or avoid currency controls for a cybercurrency to get real traction as a store of value.

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The obvious outcome is that issuing a g-buck is going to immediately result in depleting USD reserves by a dollar as soon as the g-buck is spent.

It's kind of the opposite of that. Every time a GD is spent, it protects our USD reserves by resetting the expiration time on the GD.

Anything that inhibits immediate redemption for USD is going to inhibit adoption.

I don't think adoption is a huge obstacle. The plan is to hand it out as free money to low income people. If someone comes up and offers you free money, are you going to say no?

We go around to merchants (e.g. convenience stores) asking them if they want business from any of the people we're handing free money to. Some of them will undoubtedly say yes.

If we fail, we'll have done the equivalent of taken a bunch of money and handed it out to poor people for a period of time. If we succeed, that money will be circulating on its own, and hence not converting back to USD very fast. We will have established a new currency.

As the currency circulates, we can lower our reserve ratio. In much the same way that banks don't retain enough cash to cover all their deposits, our total USD reserves can fall below the total amount of GD in circulation without breaking the peg.

We're immune to a currency run, because if people panic, they want to get rid of their GD. The only way to do so is to spend it, and spending it protects our USD reserves.

You need a real-world use-case that USD is less than ideal for

People who don't have USD, but still want to buy things.

get real traction as a store of value

We get traction as a store of value by pegging it to USD and backing it up with USD reserves using the resetting timer mechanism that I've previously described.

Many business have a net-30 policy, so they will not mind sitting on the GD for 30 days until they convert to 30 dollars.

I'll copy a comment from other user:

> What happens if there's a "bank run" where everyone waits for their GD to mature rather than spending it?

In a normal "bank run", the people are afraid that if they don't exchange the bad currency now at a discount, they will get a worse exchange later. But in this case there is a guaranty that waiting only 30 days they will be converted to dollars.

Hmm. Not exactly. Initially, this is true, but that's just an early part of the bootstrapping process. Further down the road, the total amount of GD will be greater than the amount of USD in our reserves. At that point, if everyone decides to sit on their GD at once, not all of it will convert because we would run out of USD reserves.

But this is what makes Greshm Dollar shine. If people don't trust their GD to convert to USD in 30 days, the only way for them to get rid of it is to spend it. By spending GD , they cause the GD's expiration to reset thereby protecting our USD reserves.

If people don't trust their GD to convert to USD in 30 days, the only way for them to get rid of it is to spend it.

Who would accept it (at par value) under such circumstances?

Who would accept it (at par value) under such circumstances?

Right. So, during the initial phase, all GD will be guaranteed to convert to USD when it expires because we'll literally have enough USD in our reserves. During this first phase, we will sign merchants to contracts that require them to accept GD at par with USD (i.e. one price) so a dollar is a dollar.

If there are people who happen to be paranoid about Greshm Dollar during that time, they will be able to spend their money to get rid of it. If they're not paranoid about it, they'll still probably spend it before they spend their USD because a dollar is worth more to them than something that will become a dollar in x number of days.

Then, later on, once we've established that GD is continually circulating and that our USD reserves are stable, we start increasing the supply of GD to be greater than our USD reserves. This process will be very transparent. Nobody will get screwed over. We won't make any promises to pay and then go back on them. For example, if we decide to only back GD at 90%, merchants can decline to renew their contracts.

It's all outlined in my white paper:

https://drive.google.com/open?id=0B2jhCMrrxoeONVNQTVd6NG5pNz...

Hey, I'm sorry you weren't picked for the YC fellowship, but keep it going. I think you may have something there.

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