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But the merchant pays for their merchandise in USD. why would a merchant choose to accept this "currency", considering it's not valuable to them?

by rnovak 11y ago

Suncho 11y ago
TL;DR: The currency is valuable to them. The core mechanism behind Gresham Dollar is that each unit of GD lives for a limited amount of time (e.g. 30 days) after which it expires and we replace it with an equal amount of USD from our reserves. Whenever someone spends GD, we reset that GD's lifetime (e.g. back to 30 days). So the merchants would be getting their USD. They'd just have to wait. When the first credit cards were introduced, American Express convinced merchants that it was worth a small transaction fee to accept a more convenient form of payment. It should be even easier to persuade merchants to accept money that customers otherwise wouldn't be spending at all. In either case, the merchants benefit by offering customers a new way to make purchases. When they accept credit cards, they have to pay a transaction fee. But when they accept GD payments, the fee they pay is time. Pretend you're a merchant. I come up to you and say, "Hey we're giving people this free money. Do you want these people as your customers?" What's your answer?
- rnovak 11y ago
  So you're co-opting them into a credit issuing agency? What if your company goes bankrupt in that 30 days?
  - Suncho 11y ago
    There will be provisions in the merchant contract for what happens if we run out of USD reserves. In the initial months after we launch, every Gresham Dollar will be 100% backed by USD reserves, so the merchants (and other users) will take no risk in holding GD. Later on, we will gradually leverage into a fractional reserve, but we will always be completely transparent about our USD reserve levels and how close we are to running out. Since we don't offer on-demand exchange between USD and GD, it's impossible for there to be a run on our USD reserves. If, at any point, a user doesn't trust that his GD will hold its value, the only way for him to get rid of it involves transferring it to someone else's account, which resets the maturity on the GD, and lessens the need for us to dip into our USD reserves. In this way, the less that people trust the currency, the stronger it gets. Does that answer your question?
    - rnovak 11y ago
      > Later on, we will gradually leverage into a fractional reserve, but we will always be completely transparent about our USD reserve levels and how close we are to running out. So again, you'll be co-opting merchants into a credit issuing agency. you haven't explained any benefit to the merchant, other than a brief marginal increase in sales, for which they're taking on risk. What happens if you fly afoul of banking regulations (since you seem to be acting as a bank in this situation), and get shut down by the government?
      - Suncho 11y ago
        Thanks for grilling me on this. It's very helpful. So again, you'll be co-opting merchants into a credit issuing agency. That's certainly one way to think about it. Things like store credit and gift cards are pretty standard. You could think of a Gresham Account as a continually replenishing gift card that's usable at multiple stores. Or maybe I don't understand your question. What do you mean, exactly, by "credit issuing agency"? you haven't explained any benefit to the merchant, other than a brief marginal increase in sales, for which they're taking on risk. Well, the increase in sales won't be brief. These new customers will be receiving income streams that they didn't have before. Those income streams are permanent as long as Gresham Dollar exists as a currency. Initially, there is absolutely zero risk to the merchant because Gresham Dollar will be backed 100% by USD. Any time we want to renegotiate reserve ratios with a merchant, that merchant can say no. Their existing GD will still convert. If you're an extremely conservative merchant and you just want free money, you'll sign up for the period during which we back your account with 100% USD reserves and then you'll part ways with us. You're free to do that. Maybe you won't want to though. Maybe you don't want to lose business to your competitor who IS still accepting Gresham Dollar at a 95% reserve ratio. What happens if you fly afoul of banking regulations (since you seem to be acting as a bank in this situation), and get shut down by the government? I hope this doesn't happen, and I have reasons to believe it's unlikely. But if it does, the way Gresham Dollar is set up, we will always have sufficient USD reserves to meet all of our promised GD-related obligations. A lot of people wouldn't be happy, including our investors, but it wouldn't be the end of the world. And if we get noticed, then we made a statement and raised awareness for basic income. And maybe we collected some useful data along the way.

But the merchant pays for their merchandise in USD. why would a merchant choose to accept this "currency", considering it's not valuable to them?

by rnovak 11y ago

But the merchant pays for their merchandise in USD. why would a merchant choose to accept this "currency", considering it's not valuable to them?

Suncho 11y ago

TL;DR: The currency is valuable to them. The core mechanism behind Gresham Dollar is that each unit of GD lives for a limited amount of time (e.g. 30 days) after which it expires and we replace it with an equal amount of USD from our reserves. Whenever someone spends GD, we reset that GD's lifetime (e.g. back to 30 days). So the merchants would be getting their USD. They'd just have to wait. When the first credit cards were introduced, American Express convinced merchants that it was worth a small transaction fee to accept a more convenient form of payment. It should be even easier to persuade merchants to accept money that customers otherwise wouldn't be spending at all. In either case, the merchants benefit by offering customers a new way to make purchases. When they accept credit cards, they have to pay a transaction fee. But when they accept GD payments, the fee they pay is time. Pretend you're a merchant. I come up to you and say, "Hey we're giving people this free money. Do you want these people as your customers?" What's your answer?

rnovak 11y ago
So you're co-opting them into a credit issuing agency? What if your company goes bankrupt in that 30 days?
- Suncho 11y ago
  There will be provisions in the merchant contract for what happens if we run out of USD reserves. In the initial months after we launch, every Gresham Dollar will be 100% backed by USD reserves, so the merchants (and other users) will take no risk in holding GD. Later on, we will gradually leverage into a fractional reserve, but we will always be completely transparent about our USD reserve levels and how close we are to running out. Since we don't offer on-demand exchange between USD and GD, it's impossible for there to be a run on our USD reserves. If, at any point, a user doesn't trust that his GD will hold its value, the only way for him to get rid of it involves transferring it to someone else's account, which resets the maturity on the GD, and lessens the need for us to dip into our USD reserves. In this way, the less that people trust the currency, the stronger it gets. Does that answer your question?
  - rnovak 11y ago
    > Later on, we will gradually leverage into a fractional reserve, but we will always be completely transparent about our USD reserve levels and how close we are to running out. So again, you'll be co-opting merchants into a credit issuing agency. you haven't explained any benefit to the merchant, other than a brief marginal increase in sales, for which they're taking on risk. What happens if you fly afoul of banking regulations (since you seem to be acting as a bank in this situation), and get shut down by the government?
    - Suncho 11y ago
      Thanks for grilling me on this. It's very helpful. So again, you'll be co-opting merchants into a credit issuing agency. That's certainly one way to think about it. Things like store credit and gift cards are pretty standard. You could think of a Gresham Account as a continually replenishing gift card that's usable at multiple stores. Or maybe I don't understand your question. What do you mean, exactly, by "credit issuing agency"? you haven't explained any benefit to the merchant, other than a brief marginal increase in sales, for which they're taking on risk. Well, the increase in sales won't be brief. These new customers will be receiving income streams that they didn't have before. Those income streams are permanent as long as Gresham Dollar exists as a currency. Initially, there is absolutely zero risk to the merchant because Gresham Dollar will be backed 100% by USD. Any time we want to renegotiate reserve ratios with a merchant, that merchant can say no. Their existing GD will still convert. If you're an extremely conservative merchant and you just want free money, you'll sign up for the period during which we back your account with 100% USD reserves and then you'll part ways with us. You're free to do that. Maybe you won't want to though. Maybe you don't want to lose business to your competitor who IS still accepting Gresham Dollar at a 95% reserve ratio. What happens if you fly afoul of banking regulations (since you seem to be acting as a bank in this situation), and get shut down by the government? I hope this doesn't happen, and I have reasons to believe it's unlikely. But if it does, the way Gresham Dollar is set up, we will always have sufficient USD reserves to meet all of our promised GD-related obligations. A lot of people wouldn't be happy, including our investors, but it wouldn't be the end of the world. And if we get noticed, then we made a statement and raised awareness for basic income. And maybe we collected some useful data along the way.