Topic: Freicoin (was Re: Deflation and Bitcoin, the last word on this forum) - page 4. (Read 7188 times)

1) The meaning you attribute to fiat depends on the translation I guess.
But I can say non-backed if you prefer it.

2) I'll answer you to the "cause of business cycles" question with more time.

3) Capital-money needs to be everlasting and scarce. Freicoin is perishable and ripple is abundant. Demurrage directly attacks the inflation premium, the profit you can do by using money to "move wares" better than barter. With abundant-money that profits tends to zero by competition, everybody can issue money. The payer can pay without cash. That's why capital money will have always a minimum sustained profit that Gesell called basic interest (gross interest = basic interest + risk premium + inflation premium).

4) The implementation is quite simple in my opinion. All accounts are charged with demurrage automatically each block (without writing anything in the block chain). When the monetary base is stable, miners will be rewarded with the same amount that is charged in concept of demurrage. It is charged through the protocol. For a transaction (and therefore the block that contains it) to be valid the following condition must be true:
 Sum(output) >= Sum( input * ( (1 - demurrage_rate_per_block) ^ (current_block - input_block_number) ) ) )


Are you saying that freicoin is equivalent to expocoin (with exponential monetary growth, constant monetary inflation rate)?
For miners, yes. But...
constant monetary inflation rate:
1) Rises the nominal interest rates but does nothing against real interest rates.
2) Creates price inflation

demurrage with stable base:
1) Lowers real interest rates
2) Makes V (in the equation of exchange) more stable
3) Recovers lost coins making M really stable (this is good for storage too, since old blocks can be forgotten)

@miscreanity
1) As said, demurrage doesn't add much complexity.

2) Yes, people could trade in freicoins and save in bitcoins.

3) If you just have a constant reward, the monetary inflation rate would be comparatively lower and lower with time.
To achieve a constant inflation rate, you need a monetary base that grows exponentially, what I call expocoin.
But expocoin is not equivalent to freicoin.

A single currency that provides all of the major functions of money is nearly impossible to implement. Demurrage might be close to that, but why introduce excessive complexity?

There is a concept involving a dual-currency system. Bitcoin is the deflationary side, similar to gold. It appreciates in value over time. The other side would be purely inflationary, but not a targeted method such as central banks use and politicians promote. Instead, use the same code as Bitcoin - only remove the hard ~21mm unit limit. That allows for price stability as the currency can expand to the needs of the aggregate economy.

Other technical issues exist, but the general idea is very similar to the existing financial system; the major distinction being decentralized control with auto-regulation.

Save in gold; spend in EUR/USD/etc.

Save in Bitcoins; spend in Altcoin/Aucoin/Mote/etc.

No need to mangle an existing and elegant solution. Only two modifications for the inflationary side: remove the hard limit and optionally limit the initial unit expansion rate.

I looked up Freicoin, and I'm not impressed.  How did you impliment demurrage into the codebase that manages the blockchain?  By what method do you actually impose the demurrage fees upon the addresses with a positive balance without also introducing security issues into the blockchain?  10% per year is way too high, 1% is probably too high.  And is that percentage applied to the individual balances, or only to the total monetary base?  If the former, how?  If the latter, what are the details of applying demurrage to transactions buried deep into the blockchain?  A demurrage system that is rigid is not likely to achieve the social goals, if the users can take no other actions for reducing their loss other than leave the currency in favor of another method of storage of value.  In this respect, a rigid demurrage fee system isn't much better than a rigid/predictable inflation target.

Logic is logic.  Logic involves proofs, but that doesn't make it math.  Praxeology involves logic and reason and math, but it's still a social science.  The core concept of praxeology, and thus all included disiplines, is the study of human actions.  Thus, there is no way to separate the social aspect of the science without significant flaws.


I can see how you might consider Bitcoin to be similar to fiat currencies, lacking any obvious non-monetary use value; but how could you rationally consider it fiat?  The very term requires the imposition of a government agency, since it literally means "by decree".


I'm sorry to tell you this, but this is wrong.  The business cycle's root cause is malinvestment.  The social aspect is that, during the boom, investors are as upbeat as everyone else and are more likely to investing borderline projects.  Artificially low interest rates, manipulated by central banks, make this pattern of malinvestment worse but are not themselves the cause.  The root cause of the boom is a form of collective sentiment, what Keynes called "animal spirits".  Keynes was not wrong about the role of the mood of the collective in the business cycle, he was wrong in his belief that it could be forced via monetary policy.  The malinvestment of the boom cycle is what then makes the correction inevitable, but there is always a trigger event that draws the attention of the collective towards the developing cracks in the system.  Once the first true crack is identified to the collective, it starts looking for more, and it finds them; and then the mood changes.  And this continues until the correction resolves the cracks, and the recovery begins.  After a time of no cracks, the sentiment slowly turns to a 'feeling' that there are no more cracks to worry about, and the boom starts again.  In the past, both a gold standard and the more local regionality of the credit & productive markets tended to limit the scope of the boom, and thus the severity of the bust.  The boom from 1992 to 2001 was the longest national (worldwide?) boom period in the history of the US, thus we can expect the most severe correction in the history of the US.  But only once those with the power to manipulate monetary and fiscal policies finally resign to allow the correction to occur, or simply fail to continue to prevent it.


Neither gold nor Bitcoin have interest by their design (or nature).  Interest exists only because two parties are willing to engage in contract.  Do you believe that there is some mechanism inherent to either Freicoin or Ripple that prohibits interest?  Ripple is a web-of-trust credit system, and not a currency at all, so there is certainly not any means to prevent interest contracts from forming in whatever currencies that Ripple users ultimately settle upon using.  I admit I'm not terriblely familiar with Freicoin, care to enlighten me?


You would have lost that bet in whole.  People invest in stupid things because of interest, or more precisely in the pursuit of improbable interest.  And I am aware that demurrage is not equal to inflation.  Inflation is rot, udderly unavoidable while value is stored in the currency.  Demurrage is a security or storage fee, which can usually be reduced under certain situations, which players will then tend to favor.  I've started an older thread on this subject, stating my concerns about the lack of an artificail equivialnt to demurrage in Bitcoin, but the thread died because there doesn't seem to be any way to do that in the blockchain security model without also breaking the cash-like features of Bitcoin.  It also might not matter, as I'm concerned but not actually convienced that demurrage is neccessary for a cryptocurrency.

I thought you claimed "there's nothing wrong with deflation" too. Sorry, my fault.

By "undeniable truths" I mean premises that are obvious to anyone and that no one will discuss. Logic is part of math, is not a social science.

I agree, I prefer gold over USD. But national inflationary (I prefer this term over fiat because I don't think fiat is bad per se, in fact I consider bitcoin fiat) currencies are not the only alternative.

I think business cycles are avoidable because I think their root cause is interest.

I consider gold and bitcoin flawed because they have interest. I advocate for ripple and freigeld (freicoin if you want to keep the state out of its issuance) and ripple instead. Well, I advocate for bitcoin (it's enough hard to explain it without the demurrage, one step at a time) and I recommend people to buy gold and silver (to protect themselves against what I see as the "unavoidable global fiat system collapse"), but I think they won't be the "money of the future" because of their flaw.

I bet you're going to answer with one of these two:

-Without interest people invest in stupid things.
-Demurrage is isomorphic with inflation.

But those questions are not about deflation. If you want, we can discuss those points here: https://bitcointalksearch.org/topic/freicoin-bitcoin-with-demurrage-3816
Probably I will start a new thread "Why demurrage is not equivalent to inflation".