Topic: Freicoin: bitcoin with demurrage - page 7. (Read 31257 times)

They wouldn't. They'd have to be forced (e.g. at gunpoint) to accept it. Freely, they would choose to get rid of it as fast as possible.

The problem with an inflationary currency is why would anybody choose to spend or trade within that currency?

That's really neither here nor there if your proposed solution requires people to voluntarily give up some of the value of their assets on the expectation that everyone else will do the same. At least that's what I understand you to be proposing? You'd have to have a system that makes that obligatory. How?

I'm sure you can think of a few reasons if you try.

Because you're hungry?

Of course the arguments against deflation have been used to defend inflationary policies. I'M NOT DEFENDING INFLATIONARY POLICIES.
I DON'T LIKE BEN BERNANKE NOR WALL ST. Criticizing deflation doesn't make me an inflation advocate just as criticizing the Rothchilds doesn't make me a nazi.

Deflation discourages commerce. I'll try to explain it with an example.
If you can buy an apple today with a bitcoin and two apples tomorrow with the same bitcoin. Why would you buy anything today?
Maybe I'm missing something.
Does deflation encourage commerce? Can anyone explain me how?

As someone receiving payments, I would much rather receive a deflationary currency than an inflationary currency.  With the inflationary currency, I have to immediately spend it before it loses value.  With the deflationary currency, I'm not pressured to spend it.  That's the advantage bitcoin has, and you are proposing to take that away.  The only way bitcoin will see widespread adoption is by convincing merchants and service providers to accept it as payment, and the fact that it holds its value better than the dollar is the only solid argument we have (for legitimate uses anyway).

Given the prospect of choosing a deflating currency or an inflation currency, I think people would choose a deflationary currency.

This sounds to me like a case of asking the individuals to set aside their short-term personal interest in favour of the long-term common good. I.e. subscribing to an ideology is required to get an individual to consent to this system. As long as people can freely choose to not take part, I don't think this can compete.

Dude, put down the kool-aid. Keynes was WRONG. And he knew it.

I say again, If you don't like the interest charged or offered, use another service.

Charging interest on loans (also called usury) is a source of surplus. It has been considered evil by a lot of religions. Maybe the link above can convince you. Maybe "The natural economic" by Silvio Gesell or "Interest and Inflation Free Money" by Margrit Kennedy can.

I guess you all prefer deflation over inflation, but none of you prefer stable prices?

Deflation discourages commerce. I just can't understand how you can see deflation as desirable.

Edit: Ok, that's not a good point against deflation. What if I say that it discourages real capital accumulation?

Interest isn't evil. It's simply the profit made in exchange for keeping safe or allowing someone to use money. If you disagree with the amount of interest charged or offered, use another service.

Also, some of us don't see deflation as a problem, either.

I'd much rather have a currency which increases in value than one which devalues.

Saving rate is a function of time preference, therefore the saving will always be spent EVENTUALLY. Saving does not cause a collapse of aggregate demand.

Deflation growth, especially in the bitcoin economy, is a non-problem.

So, wait, you want to destroy money in order to avoid the effects of destroying money?!?

The main point of demurrage is not avoid fees. There's nothing wrong with fees.
While demurrage decrease the currency's ability to storage wealth, it stimulates the spend and trade with the currency, because the longer you hold the money the more you lose.
The only reason why people would prefer this kind of money is that is more suitable as a medium of exchange. That was what happened during the Worgl experiment.
The problem I want to solve with demurrage is deflation or at least its effects:

http://en.wikipedia.org/wiki/Deflation#Effects

Demurrage suppresses interest too, which I think is evil:

http://finanzcrash.com/english/aberrations.html

The problem of deflation can be solved along with the more general problem of price stability.
Neither Precious metals nor national fiat currencies have been able to solve this problem.
Here we got the formula we're supposed to be talking about if we want to reach stable prices(http://en.wikipedia.org/wiki/Money_supply#Monetary_exchange_equation):

MV = PQ
M is the total dollars in the nation’s money supply
V is the number of times per year each dollar is spent
P is the average price of all the goods and services sold during the year
Q is the quantity of assets, goods and services sold during the year

Demurrage increases V and make it more predictable.
Demurrage (and M) could be adjusted dynamically in function of P, supposing you have a way to measure P.
The typical approach (without demurrage)is to increase M (print money) without knowing anything nor having any control of V. When V is low, crises come. The tool for trade disappears.
With precious metals, M depends on discoveries so you can't control prices with that.
With fiat currencies you can control M, but it doesn't help if you can't control V. When V gets low, Bernanke expands M. But then when V comes higher again, is not that easy to deacrease M and you got inflation.

If you have demurrage and bitcoin generation as an incentive, you can create and destroy money, so you can increase M by creating money faster than you destroy it and viceversa.
Of course, the formula that calculates P, the demurrage to be applied and the amount of bitcoins to be created with each block should be in a free software program and not just in a central banker's mind nor a politician's.
There I think we all agree.  

I don't agree with your viewpoints here.  Transaction fees are and will be a market.  Currently the market price is zero, pricely because network data volume is relatively low, and therefore the cost to the network is almost zero.  There are some limiting factors on the growth of the blocks, however; both intentionally in software as well natural limits due to scale of the network.  As the transaction volumes increase, the average fee will also increase dynamicly.  Some people will be trading in a manner that requires that they get rapid verifications for the transactions, and they will need to provide higher average fees to encourage miners to include their transactions.  Others will be trading or donating in a manner that does not need quick verifications, such as a trade with mutually trusting parties, donations to a charity, or very small purchases; these transactions will not pay transaction fees nearly as high, or not any fee at all, due to the fact that they can wait for days, even weeks, for inclusion into a block.

Nor do I agree that this is a commons situation.  If it were a commons, there would be a resource that can be extracted, without additional costs to the node, without any practical limits; which is not the case here.  Every node must contribute to the overall network just to participate, but not at an equal amount.  In the future, some nodes will be 'lightweight' clients that receive full blocks, but then trim their blockchains for their own needs, keeping only the 80 byte headers to verify transactions that relate to their own trading activities, but neither generating nor maintaining full time network connections.  Also, 'ultra-light' clients that keep no blockchain of their own at all, and depend upon network connectivity to a trusted provider capable of verifying transactions on their behalf.   Neither of these two types of nodes contribute much to the network, nor do they require much; but they give what they get.  Most users will likely use such lighter clients in everyday life, and the majority of the network will be supported almost entirely by the generating clients and other full clients whose owners have their own reasons to participate in the network as a full node, such as bitcoin 'banks' like Mybitcoin.com and verification services for the 'ultra-light' clients.

The transaction fees will trend downward, which will drive down the hash/s, which will drive down the difficulty, until they are in balance. It will all take care of itself.

If the demurrage rate was small enough, then it might work, but it would be no different in practice than the fees system.  Either way, the over-parity bitcoins end up in the possession of the miner who found the block hash.  Without looking into it further, one possible problem that I can see is that demurrage rates would be detached from actual block creation, so it's possible that they could occur at significantly different rates, resulting in an unbounded monetary base.  Also, demurrage would also make free transactions impossible, and that would be bad for shifting funds around personal wallets, donations and such.

In a highly competitive market, transaction fees, and more worryingly, the network's hash/s, will converge towards zero. 

This is because a miner who discovers a new block only has to pay for the cost of proof-of-work, not for the cost of bandwidth and storage associated with that block. 

That cost is carried collectively by the rest of the network. Including transactions with zero or near-zero fees incurs practically no additional cost to the individual miner. 

So far, I don't think anyone has come up with a solution for this tragedy of the commons. 

Of course this is only true once generation of new coins reaches zero. This won't happen before next century so we've got plenty of time to fix this.

How do you get people to do this? If I'm getting this right, either you have to find a way to force them to do it, or they have to voluntarily choose to take part in this system on ideological grounds. I'm sceptical of solutions that rely on ideology - they lose out to more pragmatic approaches in the end. Maybe I don't understand what you're proposing to actually do?