Rules for a Self Regulating Alternative Currency

[david clifton]

How to self-regulate money-supply, zero balances, and excess balances.

[Sepp]

Hi -

the rules you propose here could work, although I do see a problem with defining a system-wide "maximum practical account balance". Unless that maximum balance is linked to actual traffic of payments made and payments received, it will turn out to be a limiting factor for high-volume users of the currency.

My idea of a linkage would be to have a "standard" or "minimal" maximum balance, that would be ok in the majority of use-cases. With high-volume users, the fact that they use the system more than others should not be penalized with a relatively narrow (for them) limit of a "maximum practical account balance". The limit should be increased in proportion to their volume of (monthly) traffic of payments.

Imagine the difference between a single user of the currency and a company with a high volume of sales - they should not be subject to the same limits but still, both should be able to use the currency for all their exchange needs.

[david clifton]

Yeah, I've been wondering how to give corporations bigger limits than individuals.

But maybe these rules are just for individuals, and corporations go on using federal reserve money.

[Sepp]

Well, individuals do business with shops. Shops have a need for higher limits.

Quite apart from corporations...

And then - if the currency is only for individuals, it's going to go the way of most of the alt currencies ... very limited and eventually it peters out. The reason is, that there isn't enough use value in a currency that doesn't let you buy all the necessities of life.

[matabele]

Came to much the same conclusions when designing a stable community currency - one difference - the use of demurrage.

A flat rate demurrage is periodically charged on all balances exceeding the starting balance, and applied as a flat rate top up to all balances below the starting balance. The total demurrage will always equal the total top up, as the sum of all balances is always zero.

This avoids the necessity of a having a maximum.

[Sepp]

Interesting concept and good thinking ... to use a flat rate on balances exceeding the starting figure.

Some people may not like this but it would indeed tend to keep things in balance :)

[matslats]

5) If a person decides not to work to earn more currency, his account will nonetheless replenish itself over time to the level of the initial balance.

7) If a person chooses to earn so much money that his balance goes over the practical maximum, his account will dimish over time, until it reaches the practical maximum.

people in credit therefore finance the people in debt - an interesting role reversal, but wouldn't that encourage abuse?
What is the status of these rules?
Have they been tested?
Or endorsed by any authority?

[david clifton]

It looks to me like so-called liberals will not blink an eye at the self-replenishing low balances, and self-limiting high balances; and so-called conservatives would certainly object to both.

The rules were intended to help regulate the amount of money available to assist with price stability.

But there must be other ways to do that, right?

I just made up these rules, because I'm interested in algorithms for computerizing alternative currencies, and I'm trying to explore alternatives. They haven't been tested.

The establishment authorities on money are all crooks, and the alternative authorities are all kooks.

So I'm not too worried what authorities might think.

[matslats]

Ok but what are we supposed to do with these rules? Whose problem do they address? Who is going to
I think there is a very weak link between this group and actual trading communities, and so academic discussions here have little or no bearing on real projects. I get the impression most people are here because they're only CC geek in their community and they need company.

The problems we, as geographically isolated enthusiasts, need to be addressing are, IMHO, all about communication. Our energies would be better spent collaborating on videos and web sites and media stunts, than discussing nuances of fiscal policy.

Collaboration is rare in this field. The subject seems to attract the headstrong loners (myself included) who do their own thing and stay on the sidelines of the real projects.

Sorry to be a downer, it's not you I'm raving at.

Nobody I know on the ground is asking about liquidity or taxation. The schemes asking me about software are not that advanced. They ask me about:
- balance limits
- balance limits that can be set for individuals
- balance limits that can be set automatically according to turnover
Many existing schemes have abused their accounts for years and the only problem comes when I say my software requires a zero sum balance.

I think we should be addressing the larger problems.

[Sepp]

Agreed.

To really get somewhere on this we should find a place to meet that's friendly in the way of being easy to find and easy to follow, and I believe we should have a "master of ceremonies" which I mean to be someone who facilitates those interested getting together, exchanging ideas, and who keeps the place lively by reporting on things that we might not easily find.

Someone like Michel Bauwens for the field of p2p, who doesn't think they know it all or they have to control everything that's happening. Someone to lovingly take charge and facilitate the exchange of information. Things could grow out of that.

I don't have an idea though who could do it.

[david clifton]

I could see somthing like a hackers convention for currency hackers.

[david clifton]

Sepp,

I wasn't aware you were ranting.

I'm glad somebody is thinking about the broader context.

But it appears financial chaos is coming sooner rather than later.

Alternative currencies will not need media stunts when that happens.

The will require swift and competent implementation.

That's why I would like to discover the simplest possible set of implementable requirements for a set of workable local currencies.

[Sepp]

David,

you might find interest in the work done by Marc Gauvin of

http://bibocurrency.org/

who is running a mailing list for the discussion of how to best make a stable alternative currency. His goal is to elaborate a standard to which alt currencies should adhere to guarantee stability and workability.

There are some PDFs on the page of bibocurrency.org that document some of the work done, and an additional document (being worked on, now in revision 7) that gives the rationale for currency stability and how it is proposed to be achieved, is available at:

http://bibocurrency.org/stability%20video%20v%207.0.pdf