

Freicoin - easy-to-use demurrage currency - edwtjo
http://freico.in

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runn1ng
Q: What is the Freicoin Foundation? A: The Freicoin Foundation is a non-profit
organization, aiming to support sustainability and biodiversity by integrating
Freicoin into economical relations.

Q: You said that Freicoin is decentralized. But the Foundation makes it
centralized! A: You are right. But we have no other solution. Initial coins
should be distributed to the society.

Q: Why can't you just give these coins to miners (as in Bitcoin). Why do we
need a bureaucracy? A: The mining community consists mostly of enthusiasts,
not ordinary people who use computers to browse the Internet.

Q: How many coins does the Foundation have? A: The Freicoin Foundation
distributes 80% of the total Freicoin money supply through grants. The
remaining 20% is a reward for miners, who support the network with their
computing power.

Hahaha... no.

~~~
n1c
My gut tells me that somehow there is room for a "everyone gets N" style ~~
_virtual currency_ ~~. Like you prove your identity and get the same amount
that everyone else gets (scrubbed on transfer) because the whole early-
adopters-win thing is sucky.

But this doesn't look like the answer.

~~~
smithzvk
So, like a virtual allowance?

Is the "whole early adopters win" thing only sucky because you are not an
early adopter? Note that I'm not an early adopter either, but it seems a bit
nonsense.

Also, BTC is still pretty young, you could still be a relatively early
adopter. You could spend a few months researching, and a few tens of thousands
of USD to purchase a competitive mining rig, and you could still make a
fortune, or you could lose it all. It isn't the same "anybody can do it" world
that it used to be, but it certainly is still low barrier to entry. Is this
really a dislike of systems that reward personal risk taking?

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kiba
One does not simply invent a currency to solve a percevied problem in our
economic system. A currency must also provide compelling economic reasons to
actors for adoption. That is, what is in it for me to use freicoin?

I don't see any reason to give money, buy, or sell, or do anything with
freicoin. To me, the fact that freicoin decays when not used is a bug, not
feature.

~~~
nodata
Encouraging currency to be used/passed around more is not a bug for me.

Might interest you: <http://www.lietaer.com/2010/03/the-worgl-experiment/>

~~~
aethertap
I can't speak for others, but in my case, if I came to possess some of this
currency I would immediately seek a way to convert it into something that
would not decay as I kept it.

I think that saving money for both unexpected problems and future investments
is an important part of social responsibility, and I would not adopt a
currency that was deliberately designed to make saving difficult unless it was
forced on me. Even then, I'd probably try to turn it into some kind of
commodity that I could sell again later in order to dodge the losses.

There are a few assertions on the main page that I find interesting, in
particular the one about money value vs goods value being "the underlying
cause of the boom/bust cycle." I don't have time to read the linked book about
it, is there a quick version of the explanation?

~~~
khuey
Yes, the point is to get you to convert the currency into something that
doesn't decay. That keeps the money supply flowing and encourages you to
invest in productive assets, both of which are good for society. A
deflationary currency encourages you to stuff all your coins under your
mattress.

~~~
aethertap
How does it improve the situation if I'm just buying something else to stuff
under my mattress (e.g. silver)? I guess my issue is that it seems like even
with a system like this implemented at a national scale, over the long run
you'd end up with people rushing to convert the currency into "real" money,
that being whatever commodity people land on as being most easily
traded/stored/etc. At that point it seems like the commodity becomes the
currency.

~~~
maaku
Because the assets you're holding under your mattress aren't affecting
macroeconomic factors derived from the supply and demand of the currency of
trade. More simply, you are conflating money as store-of-value and money as
medium-of-exchange.

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h2s
Does anybody else feel that the current proliferation of P2P cryptocurrencies
looks symptomatic of a pyramid scheme that has proven its viability (in the
form of BTC) and is now being repeated by unscrupulous copycats who smell a
quick buck?

I'm not calling the concept of BTC-style cryptocurrency a deliberate,
malicious pyramid scheme in itself. I think this is an unintended side-effect.

~~~
patio11
Yes. Well, qualified yes: I don't believe that the new cryptocurrencies are
_more_ of a pump-and-dump than Bitcoin is. The pump-and-dump model is
intrinsic to why Bitcoin is popular: creating lots of widely distributed coins
early, then making them increasingly dear, creates a built-in base of... let
me be charitable and call them "cryptocurrency evangelists", who have high
incentive to go to their local online watering holes and claim that Bitcoin is
the next big thing.

The equilibrium is predictable:

<http://news.ycombinator.com/item?id=2608891>

 _[Y]ou can create an arbitrarily high number of bitcoin-like electronic
currency units. [These new varieties will have] guaranteed scarcity,
anonymity, and a new goldrush phase -- so if you got dumped rather than
pumped, you have a new opportunity to start at the top of the pyramid scheme
this time.

The equilibrium is that sooner or later expected returns on starting a new
distributed pump-and-dump dwarf expected returns of getting in late on
bitcoins. And then poof._

Bitcoin is a wonderful engineering achievement: a spontaneously organized,
decentralized, peer-to-peer boiler room from which arises a mediocre
transaction processing network.

~~~
amalag
I like some of the concepts behind this freicon, it disincentives pump and
dump and pyramid schemes. I personally will never put money in bit coins
because it is like a pyramid scheme. Again what we really need is probably
frictionless digital payments, not another currency.

~~~
maaku
You should never put money in freicoins either. Rather you should use it for
buying and selling things, and just keep enough at hand for cash-flow
purposes. What we want is a frictionless medium for digital payments, with
good economic properties. Bitcoin doesn't offer that.

* Disclaimer: I'm one of the creators of Freicoin.

~~~
amalag
I appreciated the thoughts behind it, the relation between interest rates and
incentives for investment is not something I thought about. It makes a lot
more sense to me than bitcoins.

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terhechte
Funny, just this morning I decided to write a blog post about Gesell and the
'Schwundgeld' and his short usage in the city of Wörgl almost a century ago.
The real question, of course, is wether inflation isn't a much more natural
way of depriving currency of it's value.

~~~
maaku
What benefit does inflation have over demurrage?

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jstanley
Who does the demurrage fee go to? I couldn't find any information about this
on their site. If it is just recirculated through re-mining or something,
great (though I don't know how that would work). If it goes to the creators of
freicoin then it is a blatant scam. I don't suppose it does, but it's
suspicious that they don't mention where the money goes.

~~~
Ygg2
I don't think it goes anywhere. In theory Freigeld should simply decay into
nothing (i.e. tax is collected by government who would depending on financial
situation either print more or destroy existing). However I'm unsure where
would in Freicoin decay go.

Also what makes me really suspect of it is the fact that Freicoin foundation
centralizes the whole thing, so it's a bit pointless. I mean, why have an
centralized P2P network? Another worrying thing is that under Silvio Gessel's
original idea Freigeld is a local currency NOT a global one.

~~~
mistercow
It's not centralized (according to their site). The value of held money just
decays. The money doesn't go anywhere; it just disappears.

~~~
Ygg2

        >  Q: You said that Freicoin is decentralized. But the   Foundation makes it centralized!
        > A: You are right. But we have no other solution. Initial coins should be distributed to the society.
    

From FAQ, they say its centralized.

~~~
maaku
No. There is a one-time issuance of currency to get the money out there. Of
that, 20% goes to the miners over the next 3 years, and 80% is distributed
through community-vetted grant and prize proposals.

Of the demurrage however, it is perpetually destroyed and recycled through the
miners.

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jdotjdot
Some of the comments in the FAQ don't make any sense.

    
    
      Q: Why does Freicoin use demurrage? I'm worried that my coins will just fade away.
      A: Worried? It's a good thing. If the amount of money was stable, people would prefer saving it as opposed to spending it. This would decrease the quantity of money circulated, which in turn would act against the main purpose of money - a medium of exchange. With demurrage in place, you should think about money as it's meant to be, not as a storage medium of wealth.
    

This is quite an assertion--generally, money is taught to be both a store of
value and a medium of exchange. What are you exchanging if there's no value in
it?

There are also some really odd grammatical errors:

    
    
      Q: With a zero interest rate, investments will be impossible!
      A: It's already possible, for example, in Islam banking...
    

"Islam banking"?

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smnrchrds
He means Islamic bank, which is basically a bank without riba. If you are
interested you should look at wikipedia articles [1] and [2].

Funny thing is in Iran, which considers itself an Islamic country and says it
follows Islamic laws in banking, interest rates are as high as 20%.

[1] <http://en.wikipedia.org/wiki/Islamic_bank> [2]
<http://en.wikipedia.org/wiki/Riba>

~~~
rmc
Fun fact: Charging interest used to be against Christian principles aswell.
Instead people would borrow from Jews (who did charge interest). The Magna
Carta (in England) has sections on what exactly happens if someone ones money
to Jews and dies (for example).

~~~
jdotjdot
That's why usury was traditionally a Jewish profession in the Middle Ages--
they were the only ones allowed to do it (and sometimes it was the only thing
they were allowed to do).

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JumpCrisscross
What tickles me is that the people who criticise Wall Street for the value-
less financial engineering of real estate, equities, commodities, etc., i.e.
productive assets, turn around and start trying to create value out of thin
air in fiat/social financial engineering schemes. I'm not commenting on the
value of either activity directly as much as the asymmetry in holding both
views simultaneously.

~~~
jimktrains2
I think if you drilled a lot of people you'd end up with them being OK with
all the financial engineering stuff, but _not_ OK with Wall Street risking
_other_ people's money, not their own.

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jstalin
In other words, saving money is completely disincentivized in favor of
constant spending? Why would anyone adopt this?

~~~
shawabawa3
People are complaining about bitcoin's deflation meaning people are too
incentivised to save rather than spend/invest

The fee is really no different from inflation in fiat currencies. Why would
anyone save dollars when they are worth 1-2% less every year?

~~~
jstalin
True, but in normal economic times, one can usually earn interest that
outpaces inflation. Right now we have the federal reserve purposely punishing
savers, just as freicoin would do.

I think the issue with bitcoin is that it's very very new. My guess is that it
will eventually stabilize. On top of that, I hold the Rothbardian view that
competing currencies are a good thing. Freicoin would only work if it had a
monopoly on currency adoption.

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JonnyB
Not the solution yet, but closer than anything we have

<http://en.wikipedia.org/wiki/Silvio_Gesell>

<http://geokey.de/literatur/doc/nwo.pdf> (German)

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DennisP
Doesn't seem to have a technical paper, or any real details on how it
implements its goals. Anyone know if it's out there somewhere?

Edit: I found this: <https://bitcointalk.org/index.php?topic=35705>

Looks like demurrage is implemented simply by a rule for block validation:
transaction outputs have to subtract from inputs based on the age of the
coins. Don't know how they calculate age unambiguously.

There seems to be a lot of centralization in this particular
implementation...eg., 80% of new coins go to the foundation for the first
three years, which says it will distribute based on ideological motivations.

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plaxis
These are similar to concepts North Korea still cannot prove... I'm concerned
that in the FAQ the creators think that private banks control money supply.
While inflation and deflation are often painful, they're also the reason why
cyclic growth is possible. Once upon a time, cycles enabled an American middle
class. I'm optimistic we can revive that with historically effective method.

We all agree central banks stink in a recession, they are somewhat limited in
what they can do, but during growth they double the fun.

I see the creator is intending income equality, and I think that's definitely
just and purposeful. More research required.

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diffraction
How is this technically implemented -- is the demurrage subtracted once a
year, or when you send a transaction?

Where do the coins taken for this fee go?

How can I apply for a grant from the foundation?

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amalag
Good try at separating transactions from holding currency. The 'killer app' is
not a government-less currency. The killer app is frictionless digital
transactions. A previous article expanded on it.

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rrrrtttt
I'd like to hijack the daily Bitcoin thread for a tangential discussion. My
dad used to have a stamp collection. Back in the day most people would give
you a funny look if you told them you collect stamps, but it was pretty cool
to browse the collection and see all those stamps from all over the world. And
the really rare stamps could cost quite a lot of money. So here's the
question: is Bitcoin more valuable than stamps?

~~~
jstalin
Value is subjective. Water is very valuable in the desert, but not so valuable
in the middle of the Pacific. Diamonds are valuable in downtown Chicago, not
so much to someone surviving in a lifeboat. During the hyperinflation of
Germany in the 20's, people were trading furs and antiques for food. It's all
subjective.

~~~
rrrrtttt
Saying that value is subjective is tautological, it's like saying pretty girls
are pretty. What's the base case of the recursion? With stock certificates,
you have expectations of future dividends. With stamps, they're nice to look
at. What do you have with Bitcoin?

~~~
jstalin
Nice to look at, for some people. Many couldn't care less. Of course, it's
subjective. Bitcoins have value for some because those people value bitcoins
over other things, like US dollars. It's a subjective value judgment why
anyone trades one thing (dollars) for anything else (stamps, bitcoins,
diamonds).

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smurph
So why would a reasonable actor choose to store money in this currency when
there are easier to get, easier to use, demurrage free currencies available? I
get the economic idea (I think) but it seems like something that would need a
near monopoly to succeed. Otherwise it will just be a money pit for idealistic
enthusiasts.

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mikecane
>>>Every Freicoin client is capable of performing these tasks, but in practice
mining is the domain of computer enthusiasts and IT professionals with tuned
top-level hardware

Given that my PC is obsolete crap, should I even bother getting the client?

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darthhao
The IndieGoGo campaign - [http://www.indiegogo.com/projects/freicoin-global-
community-...](http://www.indiegogo.com/projects/freicoin-global-community-
currency-from-the-occupy-movement)

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ionwake
complete and utter scam

~~~
kiba
Why do you think it is a complete and utter scam rather than just something
that won't work?

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Ygg2
One most of money generated goes to the central reserve to use as they see
fit.

Two; Freigeld was advised as local and not global currency. The more its
spread over the world the easier it is to manipulate.

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josephagoss
If anyone is interested in a alternative bitcoin clone that actually tries new
things have a look into ppcoin.

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wiradikusuma
Being conditioned like this, wouldn't that deter early adopters? I mean, what
would incentivize them?

~~~
DennisP
The incentive is to mine and spend, instead of buy and hold.

