Quote from: fresno on August 20, 2010, 01:19:58 PM

I like the tally system analogy. I think this is the closest description so far of what we are trying to do with Bitcoin.

I'm afraid that I don't get the GETS system.

You claim that a tally system is the best analogy while in the same post admit that you don't understand the LETS/GETS analogy. You invalidate yourself, as your statement that a tally system is the best cannot be considered authoritiative in any sense because you don't understand at least one alternative.

The tally system is basicly a system of national debt, closer to US Treasury Bonds than even a currency. The king would need gold & silver to fund an army, but experience tells him that soldiers don't take kindly to paper promises, so he would need to get that gold and silver somewhere. The treasury almost never had enough, so ultimately he would take a loan from the goldsmiths of the country. The accounting would involve the etching of the sum of the debt on two ends of a stick, and then the stick would be broken in half. Traditionally, the goldsmith would keep whichever end was shorter in his vault as proof that a debt had incurred, and the treasury would keep the other end as proof of the debt. The debt could be claimed, eventually, by anyone who had the proper stick that fit with the end that the treasury held. It was a bearer bond.

Here's the problem. As you mentioned, kings sometimes lost, and when they didn't they were often to broke to repay. So, being the soverign, he would just declare 'ursury' illegal and the debts void. There was nothing that the goldsmiths could do about it, and they would be bankrupted because they probably lent gold that was being held for others, not just his own. This is literally where we, in or modern English speaking world, get the phrase "he got the short end of the stick".

In a LETS system, credit is created between two parties with a set value in a local or familiar unit, and that credit can be thus traded away in the same way as a tally system could, with or without a physical symbol of that debt. However, it is also possible that someone could fail to repay the LETS debt. This is not realisticly possible in the basic design of Bitcoin, since a good or service must be provided first. The only way for a default is if the Bitcoin system itself were to fail, and thus all positive account holders would see their value drop to zero. Any banking or debt system imposed upon the system would be a third party add-on.