Demurrage can't work in a bitcoin-like cryptocurrency without breaking something. I've looked pretty deep into this before, and wish I were proven wrong.
Does this means that you would be ok with a government issued currency with a fixed monetary base and demurrage? What could be the problems?
For the bitcoin like currency...please, tell me what would be broken.
So far, it just adds too much complexity or it fails to encourage the desirable activities such as deliberate consolidation of inputs.
I think it adds little complexity. It just replaces the generation equation with a constant and changes the way balances are interpreted.
How is worse than bitcoin consolidating inputs?
With a minimum absolute demurrage fee per account you're in fact penalizing people who hold their money in many addresses.
Also demurrage destroys old accounts. I think it is better than bitcoin at consolidating inputs unless you mean something else.
By consolidating inputs you mean basically saving miner's storage in their database, right?
One thing that could be done is to add a new rule to the minimum fee structure that adds a relative increase in the minimum fee after a year or so, in such a way that long term savings accounts end up paying for their past security eventually; but that's not really demurrage and doesn't contribute much to consolidation of the blockchain nor does in contribute anything to the running security.
I think demurrage + constant reward for miners solves the "transaction fees tragedy of the commons" potential problem.
But besides those technical byproduct advantages what's more relevant to this thread is that demurrage enables a free savings market with lower interest rates and paying no manipulation/inflationary costs. I want to preserve that credit = debit equation that keynesians and fractional reserve banking destroy through the creation of fictional savings. But I also think interest could be lower if hoarding the medium of exchange was discouraged. And if the time preference interest rate is allowed to drop to 0% (which would mean society doesn't value more the present than the future), hopefully the cycles will disappear (also removing central and commercial banks counterfeiting privileges, of course).
Please, anyone tell me how demurrage could affect the financial market negatively.
Is there any paper on the subject?