
Freicoin: bitcoin-like currency from the Occupy movement - maaku
http://www.indiegogo.com/freicoin
======
mindslight
Economically, this is utterly backwards. To those without access to the cheat-
code of newly created money, USD basically _is_ a demurrage currency through
inflation. In any environment where currency loses value, those with the most
assets (your "1%") can best manage their investing to avoid losing value,
while the people with modest amounts of savings get screwed either directly by
inflation or through encouraged patronizing of the fraudulent consumer-
financial industry. "Hoarding" assets by the middle class is what gives people
the freedom to _turn down_ specific jobs and hence puts them in a much better
bargaining position for favorable working terms. If you want to even the
wealth distribution, you have to empower the middle and lower classes to
become financially self-sufficient, not simply try to attack the upper class.

~~~
Aloisius
_those with the most assets (your "1%") can best manage their investing to
avoid losing value, while the people with modest amounts of savings get
screwed either directly by inflation or through encouraged patronizing of the
fraudulent consumer-financial industry_

Is there some reason why those with modest savings can't buy treasury bills?
TIPS will match inflation and other treasury notes will often perform better.
And you can buy them directly from the US government bypassing the "fraudulent
consumer-financial industry" altogether.

~~~
jcarreiro
Treasuries are not liquid assets for the average consumer -- they are held to
maturity. This means that those with "modest" savings can't afford to own
them, because of the liquidity risk.

edit: s/TIPS/Treasuries

~~~
hollerith
Are you sure about that? There is no market in these Treasuries where they can
be sold before the date of maturity?

------
ef4
Demurrage is a solution in search of a problem.

Where is all this alleged currency hoarding? Who's sitting on piles of cash?
The rich certainly aren't. Does anybody really think that rich people keep
vaults full of cash? They keep their money in stocks, bonds, and real estate.

The only people who _do_ hoard actual cash are the poor and unsophisticated,
who are often unable to take advantage of banking services.

The only other significant chunk of hoarding going on right now is actually
being perpetrated by The Fed itself. They created vast quantities of new money
in 2008 and gave it to the banks to patch up their balance sheets. The Fed is
paying good interest on that money so the banks will keep it on deposit with
The Fed instead of loaning it into the economy -- because that would obviously
spark a firestorm of inflation.

~~~
maaku
“Banks Promise Loans But Hoard Cash”

[http://www.forbes.com/2009/02/03/banking-federal-reserve-
bus...](http://www.forbes.com/2009/02/03/banking-federal-reserve-business-
wall-street-0203_loans.html)

“Firms' Cash Hoarding Stunts Europe”

[http://online.wsj.com/article/SB1000142405270230472440457729...](http://online.wsj.com/article/SB10001424052702304724404577297610717362138.html)

~~~
runeks
I think you are missing the positive sides of money-hoarding. Whenever someone
doesn't spend the money that person has earned, she saves resources for
someone else to use (because _she_ doesn't consume them). This increases the
availability of resources in an economy, arguably a good thing, right?

------
nix
How is demurrage different from inflation? Isn't the financial system already
set up to encourage savers to invest their assets rather than storing value as
bills under mattresses?

~~~
maaku
Demurrage drives the velocity of money up, and the interest rates down. These
have other beneficial effects, such as easy access to credit (as long as
you're creditworthy).

More noteworthy, demurrage is assessed immediately whereas inflation is
delayed. Under a demurrage system, this places an incentive to invest in
assets which lead to longer-term sustainable growth. Inflation can instead
incentise nearsighted short-term growth (and all the ramifications that has).

~~~
kiba
This is irrelevant if people don't want to use your currency. When you invent
a currency, you can't just think about monetary policies but also incentives
for using it.

~~~
maaku
One step at a time ;)

Some groups have had success in introducing local currencies with similar
features. One path we've looked at is getting communities of people (perhaps
starting with some #occupy groups and their supporters) to use it and convince
local businesses to accept it, hence the subtitle of being the worlds first
“global-community currency”.

We're open to other ideas as well.

~~~
debacle
Is the local pizza shop going to be able to purchase sauce, cheese, flour, and
pepperoni with it?

Unlikely.

------
enoch_r
You need to ask yourselves why anyone would choose to use this currency. Why
would I request payment in Freicoin instead of USD or Bitcoin? Why would I
choose to be paid in a currency that is specifically designed to not "store
value"?

------
maaku
I'm the primary person behind this, and will answer questions here.

Since it's a donation campaign I wasn't sure if it was kosher to self-post it
to HN, but raising funds isn't why I did it. I know there are a lot of people
here with finance experience, and I'd be interested in engaging with you if
you have something to say.

~~~
eupharis
The first question that comes to mind: why not just use bitcoin? Have you
explored adding the features you want to see to the (open-source) bitcoin
project?

~~~
maaku
That's exactly what I have done (for the prototype) and will do (for the
actual client). However adding demurrage is a protocol-level change and would
represent a hard-fork.

It's better for everyone involved to simply start a fresh block chain.

EDIT: But yes, the client would be an open source fork of bitcoin.

~~~
eupharis
Interesting. I guess I was mostly just focused on the bittorrent integration
and block-chain pruning elements, both of which sound great for bitcoin.

Just did a very quick skimming trying to understand demurrage currency. Sounds
very, very different from normal currency.

From a practical standpoint, would a two-step process make more sense: 1)
Widespread adoption of peer-to-peer commodity currency (bitcoin). 2) The
implementation of a second peer-to-peer currency on a different basis
(demurrage).

Both of these seem like very difficult undertakings. And doing both at the
same time seems like it would compound the difficulty.

Apart from Woergi, has there ever been a real-life implementation of a
demurrage currency?

Excepting of course the natural cost of storing gold (vaults, guards, etc.).
Which is easy for people to accept on a wide scale because its necessity is
self-evident.

------
DiabloD3
This doesn't make any sense, many members of the #occupy movement already use
Bitcoin because the cops often try to hold the money for "evidence in an
investigation".

~~~
maaku
I'm not sure how that's relevant--the situation would be the same with
Freicoin, which would run over the same bitcoin network and protocol.

~~~
DiabloD3
But it doesn't run over the Bitcoin network or use the same protocol. Its not
an implementation of Bitcoin.

~~~
maaku
Yes, it does and it is (I wrote it, I should know).

~~~
DiabloD3
Then you're just admitting you're bloating the Bitcoin chain with useless non-
Bitcoin information. Please stop that.

------
vlasta2
Interesting, but I am still waiting for something that would be positioned
between Bitcoin and Freicoin with inflation controlled democratically, not set
by an authority (developers behind respective currencies). Every user would
choose how fast coin mining should be, making the inflation/deflation react to
the people using the system.

~~~
maaku
There were people on the Bitcoin forums that proposed such schemes, but not
one has been found to be free of exploitable attacks.

In the end, I decided the security of a fixed rate was better than the
uncertainty that someone might come along and figure out how to game the
system.

~~~
vlasta2
Sorry to hear that it is so hard to come with a balanced reliable solution in
this area. But it is a good thing that you are trying to address the bitcoin's
problems.

If there were such solution, it would attract different kind of sellers and
buyers than bitcoin attracts now.

------
sp332
If real money becomes a "hot potato" how does that encourage long-term
investment? And if the wealthy transfer their stagnant wealth to something
other than currency, like gold or real estate, their dollar value will
skyrocket over time as the value of the dollar plummets.

~~~
maaku
> If real money becomes a "hot potato" how does that encourage long-term
> investment?

Because, for example, building a business that achieves steady positive cash
flow would be better than a short-term one-off opportunity, since that one-off
would only delay the issue of demurrage.

> And if the wealthy transfer their stagnant wealth to something other than
> currency, like gold or real estate, their dollar value will skyrocket over
> time as the value of the dollar plummets.

There's nothing in that argument unique to a demurrage currency. That same is
true for inflationary currencies like the dollar. You've taken a rather
extreme case of a bank-run, which is disastrous no matter the circumstances,
but doesn't prove anything.

~~~
Frozenlock
1\. A short term one-off opportunity is as important as a long term one. Want
to take your truck and go sale a hundred generators? Could work, but it would
work way better after a hurricane.

2\. A bank-run is a good thing. It permits to see which banks have
overextended themselves and, ultimately, punishes them (unless you have a
government giving them cash through the backdoor...). It's like going to the
dentist. Not necessary pleasant on the spot, but it can save you a lot of pain
later.

------
runeks
Interesting experiment. I do think that people are not interested in money
that does not work as a store of value (to the best of its abilities at
least). But in the end the market will decide, and maybe my expectations will
be proven wrong.

~~~
maaku
It has been an uphill battle for me in trying to explain this that there
really are two uses for money: store-of-value and medium-of-exchange, and that
it is possible to cleanly separate the two. It's even been done successfully
before, most famously in the town of Wörgl between 1932 and 1934.

Keynes centered his attention on the macroeconomy and used inflation to grease
its wheels. Hayek focused on the individual and the value of a deflationary
currency at that scale. Gesell showed that these are not, in fact, competing
visions and by separating store-of-value from medium-of-exchange you could
have your cake and eat it too.

~~~
aidenn0
I agree there are two uses for money. If I have a choice between being paid in
a form of currency that can do both, why would I voluntarily accept a form of
currency that can only do one?

That is why would anyone voluntarily accept Freicoin over any other currency?

------
gojomo
In 2009, N. Gregory Mankiw (Harvard economist, advisor in the GWBush
administration) passed along for consideration an demurrage-like stimulus idea
from one of his students. Namely, that the Fed could declare that one year
forward, some percentage of existing currency, randomly chosen by serial
number, would expire worthless:

[http://www.nytimes.com/2009/04/19/business/economy/19view.ht...](http://www.nytimes.com/2009/04/19/business/economy/19view.html)

I've also seen the idea that a stimulus tax rebate could be offered in the
form of expiring debit cards to have a similar macroeconomic effect.

------
daenz
I think the first step to a new currency is to create the groundwork to
experiment with a new currency. In other words, if you can create a network of
independent people and organizations who are willing to do some of their not-
so-important transactions with currency X, then you stand a much better chance
of discovering and vetting the best currency X.

Find individuals, artists, independent businesses, etc, etc and get them
registered into a database so that this network can internally experiment with
currencies.

------
nhaehnle
Besides the somewhat strange economics, the greatest problem of any scheme
like Bitcoin is that it is a gigantic waste of resources. Mining, which is
needed to operate the system, basically amounts to an arms race between
miners. If Bitcoin were actually used as a global currency, it seems realistic
to suspect that a significant fraction of _all_ global computing power would
be used just for mining.

Does that seem right to you?

------
debacle
On paper, it sounds like a great idea, but the issues of adoption (why would
anyone use this?) and liquidity (why would you keep a balance of freicoins any
larger than you had to?) really defeat it before it even gets out the door.

This is something that needs to come from the top - governments need to stop
taxing liquidity (sales and income taxes) and start taxing net worth.

------
hogu
how does one prevent someone from trading in their demurrage currency for
something that holds its value when they do want to store value?

~~~
maaku
Nothing, in fact that is encouraged. I could imagine having a “checking
account” in demurrage currency that my paycheck is deposited into, but at the
end of the week or month I sweep excess funds (my savings) into a “savings
account” backed by treasury bonds, gold, bitcoin, or similar.

The point is to keep cash itself in circulation, regardless of economic
circumstances. Had we a demurrage currency in 2008, we might not have had as
severe a “credit crunch” as we did--people would still want to loan or invest
even in bad times. Demurrage removes, through negative incentive, the “sinks”
where money can end up in unproductive storage on the ledger of some company
or individual somewhere, and instead keeps it flowing through the economy.

~~~
debacle
That's not how economics works. We had a 'credit crunch' because billions of
dollars in market value was disappearing, sometimes overnight, devaluing
securities. A new currency that no one wants to hold for longer than they have
to isn't going to change that.

