13 ms·

Perhaps it is just my confusion... but given those free alternatives, how does Freicoin become anything more than a hot potato? Suppose for some reason I have

by fixxer 13y ago

Perhaps it is just my confusion... but given those free alternatives, how does Freicoin become anything more than a hot potato? Suppose for some reason I have to use Freicoin to make a purchase. Since it rots, I keep my wealth in something else (Bitcoin, for sake of example). I go into an exchange and sell some btc for Freicoin, and make my purchase. On the seller side, they've now got a bunch of rotting Freicoin. So, they go into the market and sell them for, say, bitcoin (or their preference for wealth). Why would either the buyer or seller go through the extra hop (commissions) of Freicoin when Bitcoin (or whatever non-rotting FX is liquid) serves as both a store of value and a medium-of-exchange. I challenge the claim that a medium-of-exchange is diametrically opposed to a store of wealth. You need wealth storage to maintain liquidity, do you not?

apw 13y ago
It's worth mentioning that the US dollar is also a "hot potato".
- fixxer 13y ago
  Sure, not saying it isn't. But that is one of the reasons why crypto-currencies are popular. $ is the devil we know.
- maaku 13y ago
  Perhaps, but inflation is less than the basic interest/liquidity premium, so you only need to lend out/invest some of your cash to stay ahead.
maaku 13y ago
> Perhaps it is just my confusion... but given those free alternatives, how does Freicoin become anything more than a hot potato? Nothing to be confused about - that's exactly what it is supposed to be: a high velocity ("hot potato") currency. > Why would either the buyer or seller go through the extra hop (commissions) of Freicoin when Bitcoin (or whatever non-rotting FX is liquid) serves as both a store of value and a medium-of-exchange. By your example you are a merchant and some customer just paid with freicoins. Now what do you do? Yes you could convert it into bitcons and take the instant 1% commission + spread loss. Or you can use parts of it to meet your current obligations and put the rest in freicoin investments. I fully expect services resembling money-market accounts to come into being fulfilling this niche. > I challenge the claim that a medium-of-exchange is diametrically opposed to a store of wealth. You need wealth storage to maintain liquidity, do you not? I'm not sure I understand your question here. Stored wealth is not on the market and therefore subtracts from liquidity. This is not a new phenomenon, rather it is exactly the situation community currencies find themselves in.
- fixxer 13y ago
  Stored wealth still implies participants, just on a different time scale with different utility curves. In a healthy market, you have agents with different preferences (hedgers, speculators, investors...), which creates order flow. Freicoin, by design, reduces heterogeneity among agents, reducing order flow. I see no rational reason to ever use it in the presence of an alternative like bitcoin. Thanks for responding, though. Good luck.
  - maaku 13y ago
    > Stored wealth still implies participants, just on a different time scale with different utility curves. Which is a way of saying that liquidity decreases at one point in time and then increases at a later point in time. If that were an entirely stochastic process it wouldn't be a concern, but it's not. Wealth tends to enter and leave the markets in a correlated fashion based on macroeconomic factors, coming and going en masse to detrimental effect (c.f. the credit crunch).
    - fixxer 13y ago
      What would you posit the value/dynamics of Freicoin would be in such an event? Immune? Explain how the exchange rate would evolve, in your mind, between Freicoin and a non-rotting bitcoin. The key concept that keeps getting avoided here is Freicoin's value in the face of alternatives. I think you're just as coupled.
      - maaku 13y ago
        Historical experience with demurrage currency shows that the entire monetary base changes hands very quickly. People do in fact keep on hand just what they need for day-to-day trade. This results in a relatively stable valuation with only long-term trends due to things like GDP increase/decrease. We got the credit crunch because of "liquidity spirals" causing lending channels (banks) to hoard cash out of uncertainty. This worked for them (although it brought the whole global economy down) because fiat cash is non-perishable. “Cash in the bank” never decreases -- so long as the bank doesn't go under and you don't live in Cyprus, but that's another story. Demurrage, on the other hand, would cause rational actors to seek other liquid investments to put their assets, thereby keeping the medium of exchange in circulation and available for lending.

by fixxer 13y ago

apw 13y ago

It's worth mentioning that the US dollar is also a "hot potato".

fixxer 13y ago
Sure, not saying it isn't. But that is one of the reasons why crypto-currencies are popular. $ is the devil we know.
maaku 13y ago
Perhaps, but inflation is less than the basic interest/liquidity premium, so you only need to lend out/invest some of your cash to stay ahead.

maaku 13y ago

> Perhaps it is just my confusion... but given those free alternatives, how does Freicoin become anything more than a hot potato? Nothing to be confused about - that's exactly what it is supposed to be: a high velocity ("hot potato") currency. > Why would either the buyer or seller go through the extra hop (commissions) of Freicoin when Bitcoin (or whatever non-rotting FX is liquid) serves as both a store of value and a medium-of-exchange. By your example you are a merchant and some customer just paid with freicoins. Now what do you do? Yes you could convert it into bitcons and take the instant 1% commission + spread loss. Or you can use parts of it to meet your current obligations and put the rest in freicoin investments. I fully expect services resembling money-market accounts to come into being fulfilling this niche. > I challenge the claim that a medium-of-exchange is diametrically opposed to a store of wealth. You need wealth storage to maintain liquidity, do you not? I'm not sure I understand your question here. Stored wealth is not on the market and therefore subtracts from liquidity. This is not a new phenomenon, rather it is exactly the situation community currencies find themselves in.

fixxer 13y ago
Stored wealth still implies participants, just on a different time scale with different utility curves. In a healthy market, you have agents with different preferences (hedgers, speculators, investors...), which creates order flow. Freicoin, by design, reduces heterogeneity among agents, reducing order flow. I see no rational reason to ever use it in the presence of an alternative like bitcoin. Thanks for responding, though. Good luck.
- maaku 13y ago
  > Stored wealth still implies participants, just on a different time scale with different utility curves. Which is a way of saying that liquidity decreases at one point in time and then increases at a later point in time. If that were an entirely stochastic process it wouldn't be a concern, but it's not. Wealth tends to enter and leave the markets in a correlated fashion based on macroeconomic factors, coming and going en masse to detrimental effect (c.f. the credit crunch).
  - fixxer 13y ago
    What would you posit the value/dynamics of Freicoin would be in such an event? Immune? Explain how the exchange rate would evolve, in your mind, between Freicoin and a non-rotting bitcoin. The key concept that keeps getting avoided here is Freicoin's value in the face of alternatives. I think you're just as coupled.
    - maaku 13y ago
      Historical experience with demurrage currency shows that the entire monetary base changes hands very quickly. People do in fact keep on hand just what they need for day-to-day trade. This results in a relatively stable valuation with only long-term trends due to things like GDP increase/decrease. We got the credit crunch because of "liquidity spirals" causing lending channels (banks) to hoard cash out of uncertainty. This worked for them (although it brought the whole global economy down) because fiat cash is non-perishable. “Cash in the bank” never decreases -- so long as the bank doesn't go under and you don't live in Cyprus, but that's another story. Demurrage, on the other hand, would cause rational actors to seek other liquid investments to put their assets, thereby keeping the medium of exchange in circulation and available for lending.