1) Bitcoins competitors doesn't need an obvious advantage, they just need an advantage. If it is not obvious, the currency will just wait more before taking off.
2) You say that a liquid market is needed for merchants that don't want the currency and that's true. recent forks had a market from day 1.
With merged mining and people thinking like you, there's definitely going to be enough sellers. With a few "believers" like me that buy them at a low bottom price (say 10 satoshis), there will be enough bids. So a think that a liquid market (even if it a btc/fcn market and not a fcn/usd) is easily achievable. Bitcoin is very liquid in my opinion, I can buy, for example JPYs with them, for me is the easiest way to convert one currency to another, it's like a currency glue.
With a liquid btc/fcn market, there's really no reason for not accepting freicoins as payment.
3) You say that freicoin won't be more stable than bitcoin but at the same time you say that nobody will hoard it. That seems a bit contradictory to me. You say "If the value of freicoins is increasing faster than the demurrage rate..." I thought you considered that impossible, but let's assume that happens. That may encourage some speculation for some time, but the situation will not go on forever and the speculators will eventually get out. I'm not saying is going to be perfectly stable, I'm just predicting that it's going to be comparatively (to the market cap) more stable than bitcoin.
4) "People accepting a currency don't give value to it, you need people hoarding it"
I strongly disagree here. In fact, I think that the value of "stores of value" like gold comes from the fact that they are (or can be) a medium of exchange. But anyway, if people accept it to sell them, they're holding it for some minutes. If they prefer to pay with it directly instead of converting them to bitcoins before spending, they can hold it even for days or months.
5) "The grace freicoins won't increase the freicoin base value"
So their only intent is to measure the basic interest from the premium. I think that would be rather complicated if even possible and I really don't like the non fungibility.
The question here is what happens if the basic interest is below the demurrage rate?
Say that basic interest moves between 3% and 4% and demurrage is always at 5%.
Why is so important to measure precisely the basic interest?
Topic: Freicoin (was Re: Deflation and Bitcoin, the last word on this forum) (Read 7205 times)
October 06, 2011, 03:09:05 AM
October 05, 2011, 01:05:51 PM
But according to your explanation this would give value to the grace freicoins not to all of them.
It would give a premium to the grace freicoins. It will not give them their base value.
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The only reasons why people could prefer to hold freicoins instead of bitcoins (or graced freicoins) is that they were more stable or more accepted. It's reasonable to think that they should be more stable, specially if you think their value is going to be very small.
Okay. A rational perspective. I'm not entirely in agreement, as I think that it's more complicated than that, but the above statement isn't wrong.
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But there's no reason for not accepting freicoins.
But this one is.
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You can exchange them for another currency if you don't want to hold them or better you can spend them. You can lend them (the easiest way, by selling them for freicoin denominated Ripple credits).
If there is an established, accessible and liquid market; then you can exchange them for another currency. But this is not an easy target. Again referring to Bitcoin, it took almost two years for the first market exchange to appear, and even now bitcoins aren't very liquid. As a vendor, I could now set up an account with MtGox to exchange bitcoins received immediately, and can generally expect that exchange to process within an hour if I price it right. However, if every vendor who accepted bitcoins were to do this, bitcoins would have no value. In order for anything to have value, someone must be willing to save something in it, even if that amount is relatively small and simply amounts to a spending account. Otherwise, the currency is simply a transfer mechanism and cannot rise above a nominal zero value, and thus never attract vendors willing to go to the trouble of accepting a new currency to begin with. It's a chicken and egg problem that bitcoin took more than two years to solve, even though there were hundreds of people willing to save in the currency during those first two years (at great risk of losing all investment if a flaw was discovered or it never took off).
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Merchants would accept them even if they don't want to touch them, like some merchants using bit-pay. And that is what gives them value: people accepting them.
Not true. Your credit cards are transfer mechanisms, but do not have any market value in themselves. The digits that represent currencies do. Same with bit-pay, it's not the transfer mechanism that holds value, it's the currency used by the mechanism. And the currency must be able to hold value at least as well as comparable methods. If (small) demurrage were part of the original design of bitcoin, then freicoin might stand a chance (although it would then be redundent) but because bitcoin is now the benchmark against which derivatives will be judged, vendors are not just going to accept freicoin because a few customers prefer it. It would require that a significant number of their customers prefer it, and since bitcoin exists, most of them aren't going to ever favor a currency that generally buys less in two weeks than one that generally does not.
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People will hold them only for liquidity purposes. Say I want to have always 100 fcn in cash, I will only pay 5 fcn a year for it.
But then you pay nothing for the same exact functionality with bitcoin. Again, you misunderstand that the market is now different that bitcoin exists and is established. The market always favors the first (functional) solution that reaches the market, and will remain hostile to new competitors unless they offer an obvious advantage to the customer. Unavoidable demurrage might be an advantage for the economy at large, but it's not an obvious advantage to the individual consumer. Quite the opposite.
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You say, why paying at all if you can hold bitcoins?
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.
Not really. If the value of freicoins is increasing faster than the demurrage rate, then some people (vendors who accept payments in freicoin, perhaps) will be hording it as a speculation play. Once that trend reverses, these same speculators will have no expectation that holding what they have will rally further latter, so most will dump. If anything, demurrage could make voltility greater percentage wise. There is no reason that it would reduce voltility.
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Also, the cost of freicoin transactions would be lower, since miners get already payed through demurrage (assuming both monetary bases are completely issued). The limit in transactions per block can be higher in freicoin because miners don't have to rely only on transaction fees.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.
But not advantages that they can enjoy with any certainty. The certainty is much higher with bitcoin, and that is why you will fail.
October 05, 2011, 09:56:36 AM
But according to your explanation this would give value to the grace freicoins not to all of them.
The only reasons why people could prefer to hold freicoins instead of bitcoins (or graced freicoins) is that they were more stable or more accepted. It's reasonable to think that they should be more stable, specially if you think their value is going to be very small.
But there's no reason for not accepting freicoins. You can exchange them for another currency if you don't want to hold them or better you can spend them. You can lend them (the easiest way, by selling them for freicoin denominated Ripple credits).
Merchants would accept them even if they don't want to touch them, like some merchants using bit-pay. And that is what gives them value: people accepting them.
People will hold them only for liquidity purposes. Say I want to have always 100 fcn in cash, I will only pay 5 fcn a year for it.
You say, why paying at all if you can hold bitcoins?
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.
Also, the cost of freicoin transactions would be lower, since miners get already payed through demurrage (assuming both monetary bases are completely issued). The limit in transactions per block can be higher in freicoin because miners don't have to rely only on transaction fees.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.
The only reasons why people could prefer to hold freicoins instead of bitcoins (or graced freicoins) is that they were more stable or more accepted. It's reasonable to think that they should be more stable, specially if you think their value is going to be very small.
But there's no reason for not accepting freicoins. You can exchange them for another currency if you don't want to hold them or better you can spend them. You can lend them (the easiest way, by selling them for freicoin denominated Ripple credits).
Merchants would accept them even if they don't want to touch them, like some merchants using bit-pay. And that is what gives them value: people accepting them.
People will hold them only for liquidity purposes. Say I want to have always 100 fcn in cash, I will only pay 5 fcn a year for it.
You say, why paying at all if you can hold bitcoins?
What if someone suddenly drops 100,000 hoarded btc in the market?
How many speculators will be hoarding bitcoins and how many hoarding freicoins?
The cost of holding freicoins may be higher, but the risk is lower.
Also, the cost of freicoin transactions would be lower, since miners get already payed through demurrage (assuming both monetary bases are completely issued). The limit in transactions per block can be higher in freicoin because miners don't have to rely only on transaction fees.
Apart from the more important indirect advantages, freicoin has some advantages that the user can directly enjoy.
October 05, 2011, 08:56:48 AM
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Your point of deducing the basic interest from the premium on non-perishable coins is interesting. But the grace period will influence that premium, it is known that the non-perishable coins are going to be perishable in the future.
Apart from the technical difficulties, it makes the coins non-fungible, which I don't like.
The grace period will influence the premium, but in the same way that the period chosen influences the interest rate metric. If the grace were a full year, the premium should reflect the "basic interest" (assuming that it exists) as expressed as an APR. If the grace period is a month, a quarter or half a year; the premium should be adjustable. As for not being (quite) fungible, that's a temporary condition. Nothing at all needs to be done for those same coins to become completely fungible in time.
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Maybe it can be deduced by comparing the bitcoin premium within the decentralized cross-chain exchange, but more things would have to be taken into account.
Too many things.
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What I don't understand is why you consider the possibility of avoiding demurrage so important.
People can buy bitcoins (or gold, or goods and services, or ripple credits) to avoid paying demurrage.
Because some capacity for value storage is a market requirement for a currency not backed by the force of law. There will always be someone who is holding the coins, it's unavoidable. Taken to an extreme, your plan to increase velocity in this manner, if there is no alternative while holding the coins themselves, is likely to backfire. A high velocity is also a sign of a collapsing currency value. The velocity of the mark in the Reimar Republic was huge.
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For example, consider a business that has always 1000 fcn available for liquidity. They will pay 50 fcn a year for this liquidity. When they get more than 1000 fcn, they can sell the remaining freis for ripple credits. For example, Alice can't pay Bob with her ripple network and buys 100 fcn for 100 fcn ripple IOUs. She pays Bob with the freis and owes 100 fcn to one of her neighbors, who owes to another one, who owes to...who owes to the business 100 fcn. The business trusts this last party, possibly is one of their suppliers.
When they spend some of their freicoins, they can sell some ripple credits to buy freicoins and hold 1000 fcn again.
Again, there would always be someone holding the coin, it's unavoidable. If you were the business, would you prefer to hold your slush fund in a currency that automaticly dropped in value or one that did not, all things else equal? That is the difference between Bitcoin and Freicoin as it is presented. So given a choice, the business would prefer to hold the slush fund in bitcoin, and the value of those bitcoin would be higher (due, in part to the thousands of such vendors holding slush funds) and the business would prefer to accept payments in bitcoin, because they have some place to put it and won't have to seek out a buyer quickly. However, if it's possible to avoid the demurrage, than vendors might be willing to hold some of their slush fund in Freicoin, and thus be willing to accept payment in same. It's a vicious circle.
October 05, 2011, 02:58:02 AM
Your point of deducing the basic interest from the premium on non-perishable coins is interesting. But the grace period will influence that premium, it is known that the non-perishable coins are going to be perishable in the future.
Apart from the technical difficulties, it makes the coins non-fungible, which I don't like.
Maybe it can be deduced by comparing the bitcoin premium within the decentralized cross-chain exchange, but more things would have to be taken into account.
What I don't understand is why you consider the possibility of avoiding demurrage so important.
People can buy bitcoins (or gold, or goods and services, or ripple credits) to avoid paying demurrage.
For example, consider a business that has always 1000 fcn available for liquidity. They will pay 50 fcn a year for this liquidity. When they get more than 1000 fcn, they can sell the remaining freis for ripple credits. For example, Alice can't pay Bob with her ripple network and buys 100 fcn for 100 fcn ripple IOUs. She pays Bob with the freis and owes 100 fcn to one of her neighbors, who owes to another one, who owes to...who owes to the business 100 fcn. The business trusts this last party, possibly is one of their suppliers.
When they spend some of their freicoins, they can sell some ripple credits to buy freicoins and hold 1000 fcn again.
Apart from the technical difficulties, it makes the coins non-fungible, which I don't like.
Maybe it can be deduced by comparing the bitcoin premium within the decentralized cross-chain exchange, but more things would have to be taken into account.
What I don't understand is why you consider the possibility of avoiding demurrage so important.
People can buy bitcoins (or gold, or goods and services, or ripple credits) to avoid paying demurrage.
For example, consider a business that has always 1000 fcn available for liquidity. They will pay 50 fcn a year for this liquidity. When they get more than 1000 fcn, they can sell the remaining freis for ripple credits. For example, Alice can't pay Bob with her ripple network and buys 100 fcn for 100 fcn ripple IOUs. She pays Bob with the freis and owes 100 fcn to one of her neighbors, who owes to another one, who owes to...who owes to the business 100 fcn. The business trusts this last party, possibly is one of their suppliers.
When they spend some of their freicoins, they can sell some ripple credits to buy freicoins and hold 1000 fcn again.
October 04, 2011, 11:02:19 AM
I've considered this more, and still think that a partially avoidable demurrage fee is ideal for your goals, even if that is more difficult to impliment. Perhaps there should be a grace period for recently mined Freicoins, but not one dependent upon the velocity, such as a grace period after a transaction like I proposed some months ago. Say that the freicoin blockchain can identify coins that are less than 6 months old, even after transactions mix and divide them. I don't even know if this could be done, at the scale that the blockchain would have to track them. But imagine that a miner gets a standard block reward plus demurrage reward. The demurrage reward isn't graced, but the standard block reward (as the currency is increasing) gets to avoid demurrage. Perhaps it would work like this...
The miner either provides two different addresses to keep the two rewards from mixing, or one with the intent of mixing those rewards. Once mixed with other coins inside of an address, the grace period is 'dilluted'. There are two ways that this could be done. One, by reducing the time period of the grace by a ratio directly relative to the percentage of graced coins to old coins within the address. Two by a similar ratio to the actual percentage of demurrage. I don't know which method would be easier to impliment, but the results would be similar. The graced coins would be preferred by savers, but not by those who simply desire to spend. Thus there would be a method for savers to partially avoid demurrage fees against their savings, by either personally operating a mining cluster or by contract arrangements with miners. There would likely be a small premium for graced coins on exchanges, and that premium (adjusted for the mixing of coins and their age) must (if I understand the logic correctly) represent the best market metric for "basic interest" that exists, thus informing all market players as to what that "basic interest" actuall is. Once the transactions of graced coins occur, the mixing of graced and ungraced coins then becomes complicated. If the addresses can, by default, be considered to send all ungraced coins first; it then becomes possible for address holders to keep graced coins "pure" and benefit from the market "base interest". I can't imagine how the grace period discount could be implimented in software, but then I'm not either a programmer nor a math expert.
The miner either provides two different addresses to keep the two rewards from mixing, or one with the intent of mixing those rewards. Once mixed with other coins inside of an address, the grace period is 'dilluted'. There are two ways that this could be done. One, by reducing the time period of the grace by a ratio directly relative to the percentage of graced coins to old coins within the address. Two by a similar ratio to the actual percentage of demurrage. I don't know which method would be easier to impliment, but the results would be similar. The graced coins would be preferred by savers, but not by those who simply desire to spend. Thus there would be a method for savers to partially avoid demurrage fees against their savings, by either personally operating a mining cluster or by contract arrangements with miners. There would likely be a small premium for graced coins on exchanges, and that premium (adjusted for the mixing of coins and their age) must (if I understand the logic correctly) represent the best market metric for "basic interest" that exists, thus informing all market players as to what that "basic interest" actuall is. Once the transactions of graced coins occur, the mixing of graced and ungraced coins then becomes complicated. If the addresses can, by default, be considered to send all ungraced coins first; it then becomes possible for address holders to keep graced coins "pure" and benefit from the market "base interest". I can't imagine how the grace period discount could be implimented in software, but then I'm not either a programmer nor a math expert.
October 04, 2011, 10:20:46 AM
The monetary reformists have many faces: there are gold standard advocates..
Bitcoiners clearly fit in this category: except bitcoins remove the many drawbacks of the gold standard (most notably, central bank issuance and deflationary spiral).If you're worried about "increase in hoarding" (or demand for savings) caused deflation, then freicoin pretty much solves it by discouraging hoarding.
If you're only concerned about growth caused deflation, freicoin can stand a price deflation as high as the demurrage rate (or lower) without favoring money-capital over real capital.
I think you just mean bitcoin solves the divisibility problems of gold.
Bitcoin by no means influence interest rates.
By giving money holders a privilege (the power hold money indefinitely for free), it allows them to charge the basic interest (without providing any service in exchange).You can't prevent lenders from charging interest.
No, but I can remove the superior position they have when negotiating. My means are totally different from those of Bernanke.
At least, with bitcoin you pull one of their argument out of the way, namely inflation of the monetary base.
This is very important. Not many of the monetary reformists understand this problem like Austrians do. In particular, the debt-free money advocates who want the government to issue money through spending, ignoring completely the problems with inflation as a way of taxation. They like Lincoln and the greenbacks. Yet we share with them the will to end the fed.But what's even more interesting from bitcoin is the way it solves the inflation problem.
It's the main strength of bitcoin: removing the central authority. Other monetary reformists don't have a tool for really decentralized money (or currency). Both LETS and freigeld-like local currencies need a central authority. Even if its run by people with good intentions now, people is corruptible.
Ripple solves this for LETS (and also its scalability problems) but LETS advocates claim that Ripple doesn't promote local exchange. That is false, because anyone will probably have more liquidity in your local area just for the trust relationships that exists there.
The only way to go for freigeld currencies is the block chain in my opinion.
The rate of demurrage in freicoin cannot be disconnected from macroeconomics indicators over time: without a governing body to maintain that rate, you run a serious risk that the demurrage rate will drift out of sync with the economy in real terms.
So if the demurrage rate is cast in concrete and cannot be adjusted, who in their right mind would adopt such a monetary system ?
So if the demurrage rate is cast in concrete and cannot be adjusted, who in their right mind would adopt such a monetary system ?
If our assumption that the basic interest is almost constant through history is true, we can have a fixed demurrage rate. I still think it is hard to determine it even with lots of statistical and historical data.
Most freicoiners don't complain about a fixed demurrage rate but about a fixed monetary supply. They want something like stablecoin with no central authority but dynamic supply. I just don't think that is feasible.
While I discuss with bitcoiners the problems of deflation and interest, I discuss with freicoiners about the fixed monetary base. Is not something that many gesellians will accept. Gesell promised the stable prices the capital-money central bankers can't have.
I'm afraid most gesellians aren't as libertarian as he was. He needed the government (or a central bank) to issue his freigeld because there really wasn't another alternative back then. He didn't like government intervention much, he just thought that was the only way money could be agreed upon, he didn't knew the block chain.
I must say that Gesell's solution didn't look very well lately for me (in favor of LETS, that I was choosing as the better alternative for central money and interest). Then I discovered bitcoin and (almost at the same time) Ripple. I substituted LETS with Ripple instantly and freicoin really came from the necessary reward for miners in a proposed chain hosting decentralized ripple.
Other gesellians that get know bitcoin automatically think about freicoin (the concept, not that they hear my proposal).
But bitcoin is a complex (and for some people scary) concept that even technical people need time to assimilate.
October 04, 2011, 09:04:28 AM
I'm going to play the Devil's Advocate a bit here...
Central banking control of the monetary base, yes; deflationary spiral, no. Assuming that an imaginary construct that is commonly described as a "deflationary spiral" actually exists, that it is a real and significant threat to a major economy, and that it's not simply the aggregate effect of many market players changing their financial stragedies to fit the new economic conditions (and therefore in their own best interests and that of the economy at large); there remains no evidence that Bitcoin, nor it's many derivitives, are immune from such a deflationary spiral.
More specificly, there is no evidence that demurrage would insulate Freicoin from this aggregate effect, either.
The rate of demurrage in freicoin cannot be disconnected from macroeconomics indicators over time: without a governing body to maintain that rate, you run a serious risk that the demurrage rate will drift out of sync with the economy in real terms.
I have already brought this up, and he quite literally can make an educated guess as the best demurrage rate to set, and let it run. If it's impossible to change, the currency will either succeed or fail entirely on it's own.
So if the demurrage rate is cast in concrete and cannot be adjusted, who in their right mind would adopt such a monetary system ?
I tried to argue an internal ruleset that would allow the active saver to partially avoid the demurrage, which would have had similar effects as to what I believe you are arguing for. However, he is unconvienced of the value of an avoidable demurrage fee.
The monetary reformists have many faces: there are gold standard advocates..
Bitcoiners clearly fit in this category: except bitcoins remove the many drawbacks of the gold standard (most notably, central bank issuance and deflationary spiral).Central banking control of the monetary base, yes; deflationary spiral, no. Assuming that an imaginary construct that is commonly described as a "deflationary spiral" actually exists, that it is a real and significant threat to a major economy, and that it's not simply the aggregate effect of many market players changing their financial stragedies to fit the new economic conditions (and therefore in their own best interests and that of the economy at large); there remains no evidence that Bitcoin, nor it's many derivitives, are immune from such a deflationary spiral.
More specificly, there is no evidence that demurrage would insulate Freicoin from this aggregate effect, either.
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The rate of demurrage in freicoin cannot be disconnected from macroeconomics indicators over time: without a governing body to maintain that rate, you run a serious risk that the demurrage rate will drift out of sync with the economy in real terms.
I have already brought this up, and he quite literally can make an educated guess as the best demurrage rate to set, and let it run. If it's impossible to change, the currency will either succeed or fail entirely on it's own.
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So if the demurrage rate is cast in concrete and cannot be adjusted, who in their right mind would adopt such a monetary system ?
I tried to argue an internal ruleset that would allow the active saver to partially avoid the demurrage, which would have had similar effects as to what I believe you are arguing for. However, he is unconvienced of the value of an avoidable demurrage fee.
October 04, 2011, 08:24:35 AM
The monetary reformists have many faces: there are gold standard advocates..
Bitcoiners clearly fit in this category: except bitcoins remove the many drawbacks of the gold standard (most notably, central bank issuance and deflationary spiral).Bitcoin by no means influence interest rates.
You can't prevent lenders from charging interest.
At least, with bitcoin you pull one of their argument out of the way, namely inflation of the monetary base.
The rate of demurrage in freicoin cannot be disconnected from macroeconomics indicators over time: without a governing body to maintain that rate, you run a serious risk that the demurrage rate will drift out of sync with the economy in real terms.
So if the demurrage rate is cast in concrete and cannot be adjusted, who in their right mind would adopt such a monetary system ?
October 04, 2011, 04:27:45 AM
I also think that bitcoin is a beautiful construction of the human mind. The flaw in bitcoin is the same flaw that there is in gold and USDs, which is interest.
We need to have a consensus for freicoin only before it starts, after that, if someone wants a different rate he would have to fork again.
So no, it's not like a central bank. We only dictate our "monetary policy" once, like satoshi did choosing the generation curve and the maximum monetary base. And people is free to not join if they don't like the rate. It's definitely not like a central bank.
If you don't see any problem with capital-money, you probably won't join. Or maybe you accept freicoins but sell them for bitcoins or dollars as soon as you get them.
The monetary reformists have many faces: there are gold standard advocates, people who want the money to be issued directly by the government without debt (like "the money masters" producer), mutual credit advocates (they should all prefer Ripple over LETS, but they still don't know it), just advocates for local currencies (usually related with peak oil circles), advocates for freigeld-like local currencies, bitcoiners, barter advocates, and finally a hybrid between bitcoiners and gesellians (freicoiners).
It is clear for many people that the current monetary system is flawed, but we need to discuss together what are the flaws.
There's certain things that we all identify as flaws, but there's different views about other problems.
I've been reading alternatives for monetary system for years, and I can tell you that the ongoing crises have been very good for these movements since not many people were interested in the subject before 2008. All these movements have good intentions, but we need to make the effort to understand other movements to make our fight more coordinate and effective.
Freicoin is ideologically in the middle of two schools: the austrian and the gesell/Lietaer "school". Some people don't like freicoin because demurrage reminds them to inflationary national currencies. Other people don't like it because it is not local. Other people don't like the fixed supply and are trying to define a model to have a bitcoin-like currency with stable value. I don't think that last thing is possible after I've thought a lot about it. But if they find the solution we can have two freicoins. I've learned a lot of austrian economics during last year and now I don't think that the fixed supply must be a problem for cash-money anymore. Is not a problem if you have demurrage. Otherwise you can have economic cycles and catastrophic deflation.
But again, the main aim of demurrage is suppressing interest, which causes short-term thinking and also prevents us from building all the capital we demand. Capital yields don't follow the normal market dynamics because competition is limited by the money interest rates.
I really think a synthesis of the austrian school/anarcho-capitalist/libertarians and gesellians/transition towns/permaculture movements is needed.
We need to have a consensus for freicoin only before it starts, after that, if someone wants a different rate he would have to fork again.
So no, it's not like a central bank. We only dictate our "monetary policy" once, like satoshi did choosing the generation curve and the maximum monetary base. And people is free to not join if they don't like the rate. It's definitely not like a central bank.
If you don't see any problem with capital-money, you probably won't join. Or maybe you accept freicoins but sell them for bitcoins or dollars as soon as you get them.
The monetary reformists have many faces: there are gold standard advocates, people who want the money to be issued directly by the government without debt (like "the money masters" producer), mutual credit advocates (they should all prefer Ripple over LETS, but they still don't know it), just advocates for local currencies (usually related with peak oil circles), advocates for freigeld-like local currencies, bitcoiners, barter advocates, and finally a hybrid between bitcoiners and gesellians (freicoiners).
It is clear for many people that the current monetary system is flawed, but we need to discuss together what are the flaws.
There's certain things that we all identify as flaws, but there's different views about other problems.
I've been reading alternatives for monetary system for years, and I can tell you that the ongoing crises have been very good for these movements since not many people were interested in the subject before 2008. All these movements have good intentions, but we need to make the effort to understand other movements to make our fight more coordinate and effective.
Freicoin is ideologically in the middle of two schools: the austrian and the gesell/Lietaer "school". Some people don't like freicoin because demurrage reminds them to inflationary national currencies. Other people don't like it because it is not local. Other people don't like the fixed supply and are trying to define a model to have a bitcoin-like currency with stable value. I don't think that last thing is possible after I've thought a lot about it. But if they find the solution we can have two freicoins. I've learned a lot of austrian economics during last year and now I don't think that the fixed supply must be a problem for cash-money anymore. Is not a problem if you have demurrage. Otherwise you can have economic cycles and catastrophic deflation.
But again, the main aim of demurrage is suppressing interest, which causes short-term thinking and also prevents us from building all the capital we demand. Capital yields don't follow the normal market dynamics because competition is limited by the money interest rates.
I really think a synthesis of the austrian school/anarcho-capitalist/libertarians and gesellians/transition towns/permaculture movements is needed.
October 03, 2011, 05:44:10 PM
Since you stated in this thread that there were flaws in the design of bitcoin (what flaw ? I am not sure; personnally I have not found any: when I discovered bitcoin, I just thought it was a beautiful construction of the human mind. Just like the first time I visited the Louvre I thought it was a beautiful building) , I feel compelled to state very forcefully that there is a fundamental flaw in the design of freicoin: it's called demurrage.
Demurrage implies setting a rate.
To determine that rate, you need to build a consensus before the word go.
Worse than that, you need a governing body to harbour the interminable discussion that would need to happen to simply formulate a consensus.
This kind of govenring boby is called a central bank, is it not ?
Demurrage implies setting a rate.
To determine that rate, you need to build a consensus before the word go.
Worse than that, you need a governing body to harbour the interminable discussion that would need to happen to simply formulate a consensus.
This kind of govenring boby is called a central bank, is it not ?
October 03, 2011, 02:23:45 AM
I think that your belief that you can have a separate store of value and medium of exchange is not only correct, but the default condition under all fiat currencies. What I object to is the idea that, even if I agreed that you can guess what the proper demurrage rate should be to suppress market interest rates and built a currency around that assumption, the conditions would be different in ways that cannot be predicted in a relatively short period of time. Said another way, even if your general assumptions are correct, you cannot possiblely know how to arrive at the 'proper' rate. No one knows this stuff, that is the root of the errors of central banking in general.
I think that is not the only source of the errors of central banks. They never tried demurrage, that has different effects than inflation.But you're right, I don't know the proper demurrage rate. I say that the ideal rate would suppress the basic interest, but I don't know the exact rate for that. We suspect from historical data that it must be between 3% and 5%, but it's an open discussion in the freicoin forum.
He is arguing for the medium of exchange power of a fiat currency, backed by an implicit or explict threat of force. This is called 'legal tender' law in the US. It is not about money.
[/quote]Yes. He thought that money must be legal tender and I disagree with him there. But bitcoin is the living proof that you can make fiat without legal tender laws.
By fiat here I mean unbacked, not "intrisically valuable". Other people don't think a currency is fiat if it is not enforced by a state.
Only commodities can solve the final characteristic requirement to any degree, and neither Bitcoin nor the US $ can do so. Currencies are standard units, widely agreed upon by either convention or fiat. So a coin minted from a defined amount of silver, and so stated upon it's face, is both a currency and a money. A melted lump of an unassayed volume of pure gold is money, but it's not a currency. I don't like how this particular article explains "intrinsically valuable", because I think that it's flawed. I don't agree that gold or silver have any value "contained in the money itself" as such. Value is always subjective, but the value of gold is not rooted in what a person could trade for it, but in what it was useful for (beyond a trade medium), whether or not the person who held it actually intended to do so.
If you don't accept these mediums of exchange as money, you must accept that other things that aren't money can have monetary value, which seems a contradiction to me.The dollar has monetary value (that comes from the fact that the dollar is a monetary instrument) but it's not money according to your definition.
According to this definition, a public transit ticket (or a bag full of oranges) doesn't have monetary value.
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But assuming commodity money is the only money, what I question is that we should use commodity money as the medium of exchange. I'll accept that definition of money for this conversation, but if I accepted it forever I should agree with "resource based economy" advocates when they say we don't need money, and I prefer to disagree with them there.
It's a provable statement that money isn't necessary, but it's also proven that mediums of exchange are more efficient forms of trade over barter, and thus will always arise in some form.
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I don't pretend to design an economy, only fix a technology/agreement that I call medium of exchange when talking to you and others commodity-money believers and money when talking to the rest of the people.
What I was asking is how demurrage will cause those many tears.
You say that it won't ever acquire any value, it can't cause any sorrow.
What I was asking is how demurrage will cause those many tears.
You say that it won't ever acquire any value, it can't cause any sorrow.
Those tears might be yours.
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But it will have some value even if it is very small. If the maximum base of freicoin is 1 billion, I can put a bid to buy all the supply for 10 btc at a 1 fcn = 1 satoshi.
Now bitcoin miners can sell the freicoins they merge-mine to me. Bit-pay can also accept freicoins and sell them automatically for bitcoins or USDs.
We have merchants accepting them and more people can accept the currency. 1 satoshi will be their minimum price. If bitcoins become too expensive, I will buy them for USDs or EURs at a similar small price until its monetary value starts to rise.
Now bitcoin miners can sell the freicoins they merge-mine to me. Bit-pay can also accept freicoins and sell them automatically for bitcoins or USDs.
We have merchants accepting them and more people can accept the currency. 1 satoshi will be their minimum price. If bitcoins become too expensive, I will buy them for USDs or EURs at a similar small price until its monetary value starts to rise.
By saying that it will never rise about zero value, I mean that it can never rise above a nominal zero. A condition that Bitcoin suffered under for over two years, and only got up to half a cent due to the large fanbase that was willing to lose all of their investements on a very risky idea. My point is that you don't have that dedicated fanbase, and I can't see how you can attract it. I actually might be wiling to mine your freicoin, just to see how it can work out, but I'm not willing to risk any of my own. I do wish you better luck than Bitcoin has had, though.
Yes, the value of the currency depends on its user base that, being voluntary, is not something sure.
My point is that even if its user base is small for some time, if the user base exists, the currency has some value. And some value is the only prerequisite for new users to join.
Like bitcoin, it has a long way to walk, but it's not doomed from start for having demurrage. On the contrary, it will encourage its users to transact.
September 30, 2011, 02:57:20 PM
I was referring to your expectation that I was trying to prove time preferences. You jsut lost a little more respect.
Sorry, I though I had said acid-proof or something and you were rebating that. My fault, I misunderstood you.But I think I've showed respect, even when I've tried to make you understand ripple in a wider sense and you sighed.
With your gold example you weren't trying to prove time-preference but that durability is a necessary requirement for the medium of exchange.
•Durable: Money must stand the test of time and the elements. It must not fade, corrode, or change through time;
If money must, the medium of exchange doesn't have to be time-resistant. I guess you also disagree here.Actually I don't. I think that your belief that you can have a separate store of value and medium of exchange is not only correct, but the default condition under all fiat currencies. What I object to is the idea that, even if I agreed that you can guess what the proper demurrage rate should be to suppress market interest rates and built a currency around that assumption, the conditions would be different in ways that cannot be predicted in a relatively short period of time. Said another way, even if your general assumptions are correct, you cannot possiblely know how to arrive at the 'proper' rate. No one knows this stuff, that is the root of the errors of central banking in general.
•Portable: Good money needs to hold a high amount of 'worth' relative to its weight and size;
That has a lot to do with rarity. But more or less we agree that a certain quantity is needed for commodity to become money. If very too rare or too common, doesn't serve.We agree.
•Intrinsically Valuable: This value of money should be independent of any other object and contained in the money itself, starting with rarity."
He's specially funny here:
Only commodities can solve the final characteristic requirement to any degree, and neither Bitcoin nor the US $ can do so. Currencies are standard units, widely agreed upon by either convention or fiat. So a coin minted from a defined amount of silver, and so stated upon it's face, is both a currency and a money. A melted lump of an unassayed volume of pure gold is money, but it's not a currency. I don't like how this particular article explains "intrinsically valuable", because I think that it's flawed. I don't agree that gold or silver have any value "contained in the money itself" as such. Value is always subjective, but the value of gold is not rooted in what a person could trade for it, but in what it was useful for (beyond a trade medium), whether or not the person who held it actually intended to do so.
If you don't accept these mediums of exchange as money, you must accept that other things that aren't money can have monetary value, which seems a contradiction to me.Why is that a contradiction? A public transit ticket has monetary value, but isn't money or even currency.
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I don't contest the above paragraph, but so what? By what logic do you conclude that short term thinking is contrary to the best needs of the market, or of the market players? How do you determine what kind of 'thinking' is ideal? We're back into 'fatal conceit' territory again.
Many people today, including me, claims that short-term thinking can destroy our society, even make or species disappear.That's not een a good dodge. I ask again, by what reason (logic) to you make such a claim? Because you think so, because someone you listen to thinks so? Do you even have a reason, or is it just anouther form of religious belief?
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Anyway, what I claim here is that the medium of exchange should not influence our time preference, it should let us decide. For that interest rates should be zero.
Why? Why should they be zero?
Why should htey be any particular number?
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And I also claim that time preference (like interest) is a consequence of the structure of money the medium of exchange and therefore cannot be an explanation of interest.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
I don't agree, but it's still illrelevant. Why is suppressing the interestes rate or the time preference ideal? Why isn't natrual money ideal? Why wouldn't establishment of a cryptocurrency that mimics natural money be ideal? You ahve no support.
I think of it more of a feedback loop, but I think I see your point.
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I don't pretend to design an economy, only fix a technology/agreement that I call medium of exchange when talking to you and others commodity-money believers and money when talking to the rest of the people.
What I was asking is how demurrage will cause those many tears.
You say that it won't ever acquire any value, it can't cause any sorrow.
What I was asking is how demurrage will cause those many tears.
You say that it won't ever acquire any value, it can't cause any sorrow.
Those tears might be yours.
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But it will have some value even if it is very small. If the maximum base of freicoin is 1 billion, I can put a bid to buy all the supply for 10 btc at a 1 fcn = 1 satoshi.
Now bitcoin miners can sell the freicoins they merge-mine to me. Bit-pay can also accept freicoins and sell them automatically for bitcoins or USDs.
We have merchants accepting them and more people can accept the currency. 1 satoshi will be their minimum price. If bitcoins become too expensive, I will buy them for USDs or EURs at a similar small price until its monetary value starts to rise.
By saying that it will never rise about zero value, I mean that it can never rise above a nominal zero. A condition that Bitcoin suffered under for over two years, and only got up to half a cent due to the large fanbase that was willing to lose all of their investements on a very risky idea. My point is that you don't have that dedicated fanbase, and I can't see how you can attract it. I actually might be wiling to mine your freicoin, just to see how it can work out, but I'm not willing to risk any of my own. I do wish you better luck than Bitcoin has had, though.
September 30, 2011, 07:59:48 AM
I was referring to your expectation that I was trying to prove time preferences. You jsut lost a little more respect.
Sorry, I though I had said acid-proof or something and you were rebating that. My fault, I misunderstood you.But I think I've showed respect, even when I've tried to make you understand ripple in a wider sense and you sighed.
With your gold example you weren't trying to prove time-preference but that durability is a necessary requirement for the medium of exchange.
•Durable: Money must stand the test of time and the elements. It must not fade, corrode, or change through time;
If money must, the medium of exchange doesn't have to be time-resistant. I guess you also disagree here.•Portable: Good money needs to hold a high amount of 'worth' relative to its weight and size;
That has a lot to do with rarity. But more or less we agree that a certain quantity is needed for commodity to become money. If very too rare or too common, doesn't serve.•Intrinsically Valuable: This value of money should be independent of any other object and contained in the money itself, starting with rarity."
I'll assume that you know that value is never intrinsic. Then your requirement to money would be to have value apart from the monetary value gained when the commodity.I disagree there too.
In my opinion, Gesell proves this here:
So called "value"
Why money can be made of paper
I must say that I disagree with him when he says "The choice is, therefore, either State money or no money", but maybe his concept of "state" is so wide that it includes a LETS and the block chain.
Only commodities can solve the final characteristic requirement to any degree, and neither Bitcoin nor the US $ can do so. Currencies are standard units, widely agreed upon by either convention or fiat. So a coin minted from a defined amount of silver, and so stated upon it's face, is both a currency and a money. A melted lump of an unassayed volume of pure gold is money, but it's not a currency. I don't like how this particular article explains "intrinsically valuable", because I think that it's flawed. I don't agree that gold or silver have any value "contained in the money itself" as such. Value is always subjective, but the value of gold is not rooted in what a person could trade for it, but in what it was useful for (beyond a trade medium), whether or not the person who held it actually intended to do so.
If you don't accept these mediums of exchange as money, you must accept that other things that aren't money can have monetary value, which seems a contradiction to me.But assuming commodity money is the only money, what I question is that we should use commodity money as the medium of exchange. I'll accept that definition of money for this conversation, but if I accepted it forever I should agree with "resource based economy" advocates when they say we don't need money, and I prefer to disagree with them there.
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I can accept that currencies by definition are units of account.
Okay.
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I don't contest the above paragraph, but so what? By what logic do you conclude that short term thinking is contrary to the best needs of the market, or of the market players? How do you determine what kind of 'thinking' is ideal? We're back into 'fatal conceit' territory again.
Many people today, including me, claims that short-term thinking can destroy our society, even make or species disappear.That's not een a good dodge. I ask again, by what reason (logic) to you make such a claim? Because you think so, because someone you listen to thinks so? Do you even have a reason, or is it just anouther form of religious belief?
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Anyway, what I claim here is that the medium of exchange should not influence our time preference, it should let us decide. For that interest rates should be zero.
Why? Why should they be zero?
Why should htey be any particular number?
Quote
And I also claim that time preference (like interest) is a consequence of the structure of money the medium of exchange and therefore cannot be an explanation of interest.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
I don't agree, but it's still illrelevant. Why is suppressing the interestes rate or the time preference ideal? Why isn't natrual money ideal? Why wouldn't establishment of a cryptocurrency that mimics natural money be ideal? You ahve no support.
If there's
Also, why commodity-money is more "natural" than so called "virtual" money?
Is not even the first form of money:
http://www.nakedcapitalism.com/2011/08/what-is-debt-–-an-interview-with-economic-anthropologist-david-graeber.html
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Good to hear that last part.
So if worgl (or any other city administration today) had decided to store the "cover" national currency instead of lending it, how would have the stamp script destroyed the local economy?
Would it have made people pay taxes in advance and would had it be as good for employment?
Why not?
So if worgl (or any other city administration today) had decided to store the "cover" national currency instead of lending it, how would have the stamp script destroyed the local economy?
Would it have made people pay taxes in advance and would had it be as good for employment?
Why not?
Honestly I don't know. And neither do you, and that is my point here. It is a fatal conceit to believe that you can design an economy. You might just luck into a partial success, but I think that your errors of though are predictable, and will lead to a great many tears.
I don't pretend to design an economy, only fix a technology/agreement that I call medium of exchange when talking to you and others commodity-money believers and money when talking to the rest of the people.
What I was asking is how demurrage will cause those many tears.
You say that it won't ever acquire any value, it can't cause any sorrow.
But it will have some value even if it is very small. If the maximum base of freicoin is 1 billion, I can put a bid to buy all the supply for 10 btc at a 1 fcn = 1 satoshi.
Now bitcoin miners can sell the freicoins they merge-mine to me. Bit-pay can also accept freicoins and sell them automatically for bitcoins or USDs.
We have merchants accepting them and more people can accept the currency. 1 satoshi will be their minimum price. If bitcoins become too expensive, I will buy them for USDs or EURs at a similar small price until its monetary value starts to rise.
September 28, 2011, 04:24:01 PM
Wait, your definition of money is not what I expected. Why bitcoin is not money? Are USDs money according to your own definition?
No.Who? I don't know, is his definition of money the same as Aristotle's?
"The Greek philosopher Aristotle (384-322 BC) was a student of Plato and teacher of Alexander the Great. He discovered, formulated, and analyzed the problem of "commensurability", or how different things can be measured in the same units. He wondered how ratios for a fair exchange of different things could be set. He searched for a principle that makes it possible to equate what is apparently unequal and non-comparable.
Aristotle found that money, as a common measure of everything, makes things commensurable and makes it possible to equalize them. In the form of money, he says, a substance has a telos, a purpose, and that in creating money individuals have devised a unit of measure on whose basis fair and just exchange can take place. Aristotle thus maintains that everything can be expressed in the universal equivalent of money, and argues that money was introduced to satisfy the requirement that all items exchanged must be comparable in some way.
Within such a frame work, Aristotle defined the characteristics of a good form of money – which must be:
•Durable: Money must stand the test of time and the elements. It must not fade, corrode, or change through time;
•Portable: Good money needs to hold a high amount of 'worth' relative to its weight and size;
•Divisible: Money should be relatively easy to separate and re-combine without affecting its fundamental characteristics. An extension of this idea is that the item should be "fungible", defined as "being freely exchangeable or replaceable, in whole or in part, for another of like nature or kind."
•Intrinsically Valuable: This value of money should be independent of any other object and contained in the money itself, starting with rarity."
http://goldnews.bullionvault.com/money_aristotle_050120092
Only commodities can solve the final characteristic requirement to any degree, and neither Bitcoin nor the US $ can do so. Currencies are standard units, widely agreed upon by either convention or fiat. So a coin minted from a defined amount of silver, and so stated upon it's face, is both a currency and a money. A melted lump of an unassayed volume of pure gold is money, but it's not a currency. I don't like how this particular article explains "intrinsically valuable", because I think that it's flawed. I don't agree that gold or silver have any value "contained in the money itself" as such. Value is always subjective, but the value of gold is not rooted in what a person could trade for it, but in what it was useful for (beyond a trade medium), whether or not the person who held it actually intended to do so.
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2) About the emergence of gold as money.
Gold emerged as a form of money far before option markets and futures. If you had say pork meat...well, the extremely fast way in which pork deteriorates (not comparable with 5% a year) invalidates it as money. It is not easy to transport and, most important, it is not fungible.
Imagine that gold had a magic property that makes 5% of it evaporate and return to the river or the mine. It would still have been better than say salt as money because it is more scarce and therefore can store value in a more dense fashion (better for transport).
It would not have been better than salt, if 5% were to vanish from the monetary base by it's nature. In such a case, silver would have been the dominate form of money in human history.Gold emerged as a form of money far before option markets and futures. If you had say pork meat...well, the extremely fast way in which pork deteriorates (not comparable with 5% a year) invalidates it as money. It is not easy to transport and, most important, it is not fungible.
Imagine that gold had a magic property that makes 5% of it evaporate and return to the river or the mine. It would still have been better than say salt as money because it is more scarce and therefore can store value in a more dense fashion (better for transport).
Your assumptions are destroyed by actual human history. In some markets, salt was nearly as valuable as gold by weight, and was oftentimes traded as a medium of exchange independently of gold or silver. You trade in salt exacltly the same way that you would have traded in gold, by weight.
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Gold is not only time-resistant, is also resistant to the elements (for example, water or acids).
It has so many qualities that it cannot constitute a proof that time-resistance is a necessary quality of money.
There is no 'proof' of anything, as such. It has so many qualities that it cannot constitute a proof that time-resistance is a necessary quality of money.
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I don't contest the above paragraph, but so what? By what logic do you conclude that short term thinking is contrary to the best needs of the market, or of the market players? How do you determine what kind of 'thinking' is ideal? We're back into 'fatal conceit' territory again.
Many people today, including me, claims that short-term thinking can destroy our society, even make or species disappear.That's not een a good dodge. I ask again, by what reason (logic) to you make such a claim? Because you think so, because someone you listen to thinks so? Do you even have a reason, or is it just anouther form of religious belief?
Quote
Anyway, what I claim here is that the medium of exchange should not influence our time preference, it should let us decide. For that interest rates should be zero.
Why? Why should they be zero?
Why should htey be any particular number?
Quote
And I also claim that time preference (like interest) is a consequence of the structure of money the medium of exchange and therefore cannot be an explanation of interest.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
Time preference and interest are both consequences of the same cause, not one the cause of the other.
I don't agree, but it's still illrelevant. Why is suppressing the interestes rate or the time preference ideal? Why isn't natrual money ideal? Why wouldn't establishment of a cryptocurrency that mimics natural money be ideal? You ahve no support.
Quote
Good to hear that last part.
So if worgl (or any other city administration today) had decided to store the "cover" national currency instead of lending it, how would have the stamp script destroyed the local economy?
Would it have made people pay taxes in advance and would had it be as good for employment?
Why not?
Honestly I don't know. And neither do you, and that is my point here. It is a fatal conceit to believe that you can design an economy. You might just luck into a partial success, but I think that your errors of though are predictable, and will lead to a great many tears.