Re: [ANN] Freicoin: demurrage crypto-currency from the Occupy movement (crowdfund)

@herzmeister, first let me quote jtimon from his post introducing the idea of Freicoin over a year ago. He did a good job listing the advantages of a demurrage currency, and more importantly included links to the relevant economic theories:

Quote from: jtimon on February 24, 2011, 11:56:03 AM

Freicoins can be created forever as an incentive and still have a fixed monetary base if the amount of newly created reward for miners is equal the amount of destroyed freicoins.
How can freicoins be removed from circulation?
Each time a transaction is done a percentage of the freicoins in the transaction are destroyed depending on how much time the freicoins have been hold since the last transaction. This is called demurrage.

It reduces interest rates. Concretely, it attacks the basic interest or liquidity premium. Defined as
gross interest = basic interest + risk premium + inflation premium
Demurrage has other benefits. For example, money with demurrage is crisis resistant: it will continue to circulate even with deflation. Deflation discourages real capital accumulation and demurrage can solve it.
Also, interest makes the financial market "think" in the short term.

For more information about demurrage you can read Silvio Gesell's main book on the web or in pdf.
I think the main flaw of Gesell's proposal is that he wanted the government to issue his freigeld, but there wasn't the block chain back then.

With merged mining, freicoin can co-exist with bitcoin.

One can say that demurrage is worse than inflation for savers, but I think that's not true.
Others claim that demurrage and inflation have the same effect. Inflation is worse at all lights.
Other common criticism is that no merchant would accept a money with demurrage, but there's many local currencies with demurrage operating today.

Do I think a global demurrage currency is a good thing? Yes, for the same reason that any global currency that is free of control from central bankers is a good thing. I feel that the local currency movement is misguided in trying to fight globalism, and the lack of similar restrictions on Freicoin is a good thing. Of course it is an opt-in proposal, so anyone can use it (or not use it) as they see fit.

Demurrage does not do anything specifically to fuel consumption--one could just as easily buy bonds, equities, bitcoins to get rid of unwanted freicoins. It does however incentivise long-term thinking and the acquisition of real capital when compared with high-interest currencies like deflationary Bitcoin or inflationary fiat. Here's a classic example:

Quote from: Charles Eistenstein

Whereas interest promotes the discounting of future cash flows, demurrage encourages long-term thinking. In present-day accounting, a forest that has the capacity to generate one million dollars a year every year into the foreseeable future is considered more valuable if immediately cut down for a profit of 50 million dollars. (The net present value of the sustainable forest calculated at a discount rate of 5% is only $20 million.) This state of affairs results in the infamously short-sighted behavior of corporations that sacrifice (even their own) long-term well-being for the short-term results of the fiscal quarter. Such behavior is perfectly rational in an interest-based economy, but in a demurrage system, pure self-interest would dictate that the forest be preserved. No longer would greed motivate the robbing of the future for the benefit of the present. The exponential discounting of future cash flows implies the "cashing in" of the entire earth as opposed to an immediate wholesale liquidation of our remaining resources.

So one could say that the type of consumerism encouraged by demurrage currencies (investment in real capital for increased production) is actually beneficial.