Freicoin: bitcoin-like currency from the Occupy movement
indiegogo.com
indiegogo.com
I am skeptical too, as I don't see why freicoin is worth using over bitcoin. The only other currency I would use is namecoin, but that's because it actually occupy a different niche.
Fees higher than linear -> sybil attack brings them back to linear.
Fees lower than linear -> store value in shared accounts aka banks.
What I'm more concerned about here is making sure that under all circumstances credit is available to those who need it, interest rates are low, and money continues to flow through the economy at a predictable and at least minimum rate.
This is not an attack on the upper class, nor am I trying to redistribute wealth. In fact I'm explicitly trying to avoid that--some of the other #occupy currencies that have been floated in the past amount to little more than progressive asset taxes, the very idea of which I am categorically against. Rather, I want to create a fixed and unchangeable monetary policy which would keep the economy moving in good times and bad.
Presently, banks can loan out ten times the money they've obtained, so any asset-based system is going to be a step back for easy credit (which imho is a good thing). Availability of credit and low interest rates have more to do with the risk of default (assuming a sound money supply). As such, if you want to improve the availability of credit, you should work on improved tracking of people/collateral (which imho is a bad thing).
Fundamentally I think you're looking at this from the wrong perspective. Improving people's ability to live paycheck to paycheck is only further perpetuating the system where most people are at the mercy of the economy.
Is there some reason why those with modest savings can't buy treasury bills? TIPS will match inflation and other treasury notes will often perform better. And you can buy them directly from the US government bypassing the "fraudulent consumer-financial industry" altogether.
edit: s/TIPS/Treasuries
Inflation isn't a measure of how much debt the US federal government takes on or how much money is in circulation after all, but rather the price increases of various commodities and services.
The Keynesian view is that inflation has little to do with monetary supply. The Austrian view is it does, though there are enough real-world examples of inflation without monetary supply increases and deflation with monetary supply increases to safely say that the effect is indirect at best. At the very least, it certainly isn't a 1:1 correlation.
p=2m, q=0.7m, r=1.4m, s=8m, t=0.2m, u=0.6m, v=4.5m
after a while the prices change and now the relationship is the following:
p=2.5m, q=0.5m, r=1.2m, s=7m, t=0.2m, u=2m, v=4.6m
What role has an inflation in the monetary supply played in the change in prices and what role has factors such as scarcity, difficulty of production, labor costs, etc. played in the change of prices? The answer is it's impossible to tell. Sure, you could calculate an average price change between all the goods, but who is to say that this average stems from monetary inflation and not an increase in wages or an incrase in energy costs, for example?
When analyzing inflation in terms of prices, one must also take into account how much those prices would have otherwise dropped due to non-monetary factors such as technological and market progress. If a certain widget is 10% easier to produce than yesterday but the price remains the same due to monetary base expansion, that's a silent 10% reduction of what today's purchasing power should have been. With exponential technological progress, this term is ever-more important.
From a purely moral standpoint I think it's wrong for a government to force an inflating currency onto the public, in order to incentivize the public into buying the government's own debt. I mean, this just seems obviously criminal to me if anyone but the government were caught doing this.
There are certain powers that are useful for someone to be able to exert at specific, well-defined and controlled times. This is why the government has a monopoly on physical force, and for the same reason it has a monopoly on economic force.
Note also that the government doesn't actually force you to use their currency as a store of wealth. You're really only forced to use it to pay your taxes.
I agree with that. But I don't think financially encouraging anyone to use a government-made currency is one of those powers that the government should be entitled to.
> Note also that the government doesn't actually force you to use their currency as a store of wealth. You're really only forced to use it to pay your taxes.
The capital gains tax is an effective way of discouraging anyone from storing their wealth in another asset. Say I had bought gold in 1981 because I (rightly) expected inflation to increase, then in 1986, when the currency had lost half of its purchasing power - and the gold I owned had consequently doubled in dollar-value - I would be legally required to give some of that money back to the government, making the protection of my savings' purchasing power very difficult (if I want to stay on the right side of the law). So while the government doesn't directly force anyone to use their currency to store wealth, they make it less attractive to not do so. And I suspect these efforts would increase should we experience a flee from the dollar in the future.
Legal tender laws is another type of legislation that gives unfair advantage to the government's own currency. So forcing citizens to pay their taxes in the government's currency isn't all the government does wrt. hindering currency competition.
Where is all this alleged currency hoarding? Who's sitting on piles of cash? The rich certainly aren't. Does anybody really think that rich people keep vaults full of cash? They keep their money in stocks, bonds, and real estate.
The only people who do hoard actual cash are the poor and unsophisticated, who are often unable to take advantage of banking services.
The only other significant chunk of hoarding going on right now is actually being perpetrated by The Fed itself. They created vast quantities of new money in 2008 and gave it to the banks to patch up their balance sheets. The Fed is paying good interest on that money so the banks will keep it on deposit with The Fed instead of loaning it into the economy -- because that would obviously spark a firestorm of inflation.
http://www.forbes.com/2009/02/03/banking-federal-reserve-bus...
“Firms' Cash Hoarding Stunts Europe”
http://online.wsj.com/article/SB1000142405270230472440457729...
Basically, there are two different circuits of money: central bank money (aka reserves), which is what the banks have in their accounts at the Fed, and regular money, which is what you and I have in our bank accounts.
Those circuits never cross. The money in a central bank account can never move into a regular bank deposit, and vice versa.
Therefore, the banks are actually incapable of loaning out all that money that they have, because the design literally doesn't allow it. To talk about their willingness to loan that money out is completely nonsensical.
What banks actually do when they give a loan to a non-bank is that they simply create a deposit for that entity, which means they create money out of thin air by adding an appropriate entry to their accounting system.
The system as is actually makes a lot of sense. It is a very logical design, which becomes very clear when you really trace where money shows up on balance sheets. The first circuit is central bank liabilities/bank assets, the second circuit is bank liabilities/non-bank assets. It's no wonder they can't cross.
Unfortunately, we don't learn such things at school, so pretty much everything you read about the monetary system in the media is an incoherent and illogical mess.
> The major central banks' post-WWII policy of steady monetary inflation as proposed by Keynes was influenced by Gesell's idea of demurrage on currency,[2] but used inflation of the money supply rather than fees to effect the goal of increasing the velocity of money and expanding the economy.
More noteworthy, demurrage is assessed immediately whereas inflation is delayed. Under a demurrage system, this places an incentive to invest in assets which lead to longer-term sustainable growth. Inflation can instead incentise nearsighted short-term growth (and all the ramifications that has).
Some groups have had success in introducing local currencies with similar features. One path we've looked at is getting communities of people (perhaps starting with some #occupy groups and their supporters) to use it and convince local businesses to accept it, hence the subtitle of being the worlds first “global-community currency”.
We're open to other ideas as well.
Unlikely.
One of these assets being money that acts as a store of value? :)
Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
No, inflation is measurably delayed and hurts the poor and middle class more than it does the wealthy because insiders have preferential access to credit, allowing them to benefit from inflation. Instantly and continuously assessed demurrage would remove that preferential treatment.
> Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
Demurrage reduces interest, where interest can have negative/short-sighted effects. As the value of an investment is calculated by discounting future cash flows by the expected interest rate, a lower interest rate means investments generating sustainable cash flow are more likely to be preferred than a one-time ROI.
The classic example being clear-cutting a forest vs. sustainably harvesting it. The incentive is to clear-cut the forest when there are high interest rates, as the cash can be re-invested, whereas a sustainable logging model makes more sense as the long-term interest rate approaches zero.
The same applies under demurrage. You're just shifting the loss of value form the real variables to the nominal variables.
I've read a lot of advocacy for demurrage, but somehow nobody is ever able to put a finger onto where the difference is supposed to be exactly.
Demurrage reduces interest, where interest can have negative/short-sighted effects.
Perhaps it reduces the nominal interest rate. Why should it reduce the real interest rate? (Unless you suppose that after introducing demurrage inflation stays the same; but then you might as well go ahead and increase inflation to achieve the same effect)
Can you provide that measurement, then? How long is the period between the moment I pick up a dollar bill and the moment inflation starts to reduce its value? A month? A week? A day? If I pick up two dollar bills, 24 hours apart, is the former bill worth more than the second bill, since inflation hasn't reduced its value since I picked it up?
So if you have a choice between (1) x% demurrage and 0% inflation, or (2) 0% demurrage and x% inflation, you should always prefer option (2). This allows prices to adjust faster, which is generally a good thing.
Since it's a donation campaign I wasn't sure if it was kosher to self-post it to HN, but raising funds isn't why I did it. I know there are a lot of people here with finance experience, and I'd be interested in engaging with you if you have something to say.
It's better for everyone involved to simply start a fresh block chain.
EDIT: But yes, the client would be an open source fork of bitcoin.
Just did a very quick skimming trying to understand demurrage currency. Sounds very, very different from normal currency.
From a practical standpoint, would a two-step process make more sense: 1) Widespread adoption of peer-to-peer commodity currency (bitcoin). 2) The implementation of a second peer-to-peer currency on a different basis (demurrage).
Both of these seem like very difficult undertakings. And doing both at the same time seems like it would compound the difficulty.
Apart from Woergi, has there ever been a real-life implementation of a demurrage currency?
Excepting of course the natural cost of storing gold (vaults, guards, etc.). Which is easy for people to accept on a wide scale because its necessity is self-evident.
Yes.
> How many changes have you made?
In terms of the protocol, chiefly I have instituted mandated transaction fees based age of outputs (and updated the block verification code, wallet and knapsack selection algorithm, etc. to account for this).
There's still a fair amount of code that needs to be written for the Qt user interface and RPC calls to reflect the constantly-changing balance, as a number of sections of the Bitcoin coin base frustratingly assume that account balances stay the same over time.
> Have you started mining with it?
Only on a testnet to prove it out.
> Whats to prevent you from mining the difficulty up while we fund your indiegogo?
I'll have a coordinated release so that everyone can get in on the easy difficulty, and will use the same technique of encoding a news headline in the genesis block to prove I didn't mine it early in secret.
It'll be released with just two blocks pre-mined: the genesis block (hand-crafted), and one follow-on block as a verification step.
In the end, I decided the security of a fixed rate was better than the uncertainty that someone might come along and figure out how to game the system.
If there were such solution, it would attract different kind of sellers and buyers than bitcoin attracts now.
Because, for example, building a business that achieves steady positive cash flow would be better than a short-term one-off opportunity, since that one-off would only delay the issue of demurrage.
> And if the wealthy transfer their stagnant wealth to something other than currency, like gold or real estate, their dollar value will skyrocket over time as the value of the dollar plummets.
There's nothing in that argument unique to a demurrage currency. That same is true for inflationary currencies like the dollar. You've taken a rather extreme case of a bank-run, which is disastrous no matter the circumstances, but doesn't prove anything.
2. A bank-run is a good thing. It permits to see which banks have overextended themselves and, ultimately, punishes them (unless you have a government giving them cash through the backdoor...). It's like going to the dentist. Not necessary pleasant on the spot, but it can save you a lot of pain later.
Keynes centered his attention on the macroeconomy and used inflation to grease its wheels. Hayek focused on the individual and the value of a deflationary currency at that scale. Gesell showed that these are not, in fact, competing visions and by separating store-of-value from medium-of-exchange you could have your cake and eat it too.
That is why would anyone voluntarily accept Freicoin over any other currency?
http://www.nytimes.com/2009/04/19/business/economy/19view.ht...
I've also seen the idea that a stimulus tax rebate could be offered in the form of expiring debit cards to have a similar macroeconomic effect.
Find individuals, artists, independent businesses, etc, etc and get them registered into a database so that this network can internally experiment with currencies.
Does that seem right to you?
This is something that needs to come from the top - governments need to stop taxing liquidity (sales and income taxes) and start taxing net worth.
The point is to keep cash itself in circulation, regardless of economic circumstances. Had we a demurrage currency in 2008, we might not have had as severe a “credit crunch” as we did--people would still want to loan or invest even in bad times. Demurrage removes, through negative incentive, the “sinks” where money can end up in unproductive storage on the ledger of some company or individual somewhere, and instead keeps it flowing through the economy.
I am happy to be proven wrong, though.