Revision as of 06:07, 24 December 2012

= an opt-in alternative currency to be used first by Occupy-supporting businesses and supply chains, then spread to the surrounding community across the globe. Based on Bitcoin software but with Demurrage fees included.

Status: in the process of being crowdfunded via [1]. This is only a project at this stage.

Description

"Freicoin is a decentralized, distributed electronic currency designed to address the grievances of the 99% movement and correct the excesses of the 1%. Whereas inflationary currency like the U.S. Dollar or Euro are controlled by central bankers under rules that benefit the establishment, Freicoin would be completely decentralized and self-regulating, with fees on stagnant or hoarded money (demurrage) paid in proportion to those community members who contribute work to secure the currency. It is an opt-in alternative currency to be used first by Occupy-supporting businesses and supply chains, then spread to the surrounding community across the globe. It includes a downloadable client for Mac OS X, Windows, and Linux, and an electronic network for transferring funds denominated in Freicoin world-wide." (http://www.indiegogo.com/freicoin)

Discussion

Based on Bitcoin

"You've based it on Bitcoin technology. Is this a competitor to Bitcoin?

Absolutely not! The two serve quite different purposes. The properties of Bitcoin make it analogous to precious commodities like gold or silver, and it will always function as a useful store of value. Freicoin, on the other hand, is meant to be used as a medium of exchange only, kept on hand just long enough to provide a cash-flow buffer. The demurrage fee encourages recipients of Freicoin to put their money to use as soon as possible in an exchange (even by buying bitcoins, for example), whereas the deflationary nature of Bitcoin rewards hoarding and serves a different purpose as a long-term store of value.

How is this different from that other Occupy currency?

There have been a couple of monetary reform ideas floated by members of the Occupy movement, but most likely you are referring to “OCCCU”, another demurrage currency created by students at the Vorarlberg University of Applied Sciences and presented to members of the Occupy movement at Davos in January, 2012.

OCCCU's provision of “basic income” and the assessing of demurrage fees is accomplished by means of centralized regulators, the currently faceless OCCCU “general assembly”. This is hardly an improvement over the current system of centralized banking; as the great poet Pete Townshend once said: “meet the new boss, same as the old boss”. It is our firm belief that real monetary reform will only come when the system does not require trust in any individual or organization, and when all operations are made transparent. Freicoin accomplishes these goals with distributed self-regulation and automatic distribution of the demurrage pool on a fair and proportional basis." (http://www.indiegogo.com/freicoin)

What is “Freicoin”, and how does it work, really?

"Freicoin--literally “free money” in German--is based on the principles of economist Silvio Gesell's Natural Economic Order. Freicoin is an electronic currency managed through a self-regulating, distributed electronic network based on Bitcoin technology. The network enforces a continuously assessed 4.4% APR fee on all account holders. This fee acts as a tax on stagnant money, driving up the rate at which money flows through the economy and acting as an economic stimulus, and discouraging unproductive hoarding by the 1%. The proceeds of the demurrage tax are repayed transparently and proportionally to the community members who donate computer time to running software that regulates and enforces the rules of the network.

Besides providing a virtuous cycle of rewarding positive long-term investments, demurrage currencies also reduce interest rates to near-zero (hence the “free money”), providing further job-creating stimulus and helping to reduce the magnitude of the boom-bust business cycle." (http://www.indiegogo.com/freicoin)

Why Demurrage

"Demurrage currencies like Freicoin align incentives of bankers and financiers with the priorities of working class, forcing the wealthy through their own self-interest to invest in growth, jobs, and ventures with long-term thinking. An economy based on demurrage currency would not fall victim to to the same greed, excess, and short-term thinking that led to the 2008 crisis and financial collapse. Freicoin would instead continuously stimulate global growth through reinvestment, and dis-incentivize the hoarding by the 1% that caused the “credit crunch”.

The current systems of money, including the U.S. Dollar or Euro, are and always have been used to store value--money seen from the point of view of the holders, the wealthy. Freicoin emphasizes instead the view to that of the producer, the proletariat, the 99%: money as a means of buying the goods and services necessary to sustain life. These are contrary purposes--money cannot function properly as, nor should it ever be both a means of saving and exchange; it cannot be both accelerator and brake at the same time. Indeed, this confusion and conflict over the purpose of money is what led to the financial collapse of 2008 and the extended recession that followed.

Demurrage forces the entire stock of money to circulate irrespective of the desire of the wealthy to accumulate and store; banks, financiers, and corporations can no longer hoard money waiting for higher interest rates or a more favorable investment climate as the demurrage acts as a tax on stagnant money. Money is eternally losing value, so the incentive is to spend it as quickly as possible on the necessities of life or to invest in longer-term ventures that also provide stimulus for a growing economy, typically creating real jobs in the process. Real money becomes a sort of “hot potato” that is passed around as quickly as possible, in a virtuous cycle of investment. No longer are there incentives for financiers to withhold credit from those in need simply to what for fairer economic winds.

For the 99% who live paycheck-to-paycheck, the loss from demurrage is minimal and would be compensated for in wages and pricing. For those who manage to accumulate some savings and for the 1% who receive much more income than they reasonably spend, they can either save real wealth (gold, silver, Bitcoins, real estate, artwork and fine wine, for example) and accept the obvious limitations of wealth saving (loss, storage, rot, fire, etc.), or they can loan it out to borrowers at what ends up being near-zero basic interest. With sustainable near-0% interest loans the order of the day, businesses will boom and the economy will grow in a virtuous cycle. How

For the past year we have been working in our free time to produce a proof-of-concept prototype based on improved and expanded Bitcoin technology. The prototype is a re-implementation of a generalized form of the Bitcoin protocol which makes possible advanced features like demurrage, multiple currencies existing side-by-side (Bitcoin and Freicoin), and other improvements for future scalability. Extensive unit tests demonstrate the validity of this core component." (http://www.indiegogo.com/freicoin)

Interview

Interview conducted by BENSON SAMUEL:

"JT: Apart from being involved in the ripple project and helping to spread the word, I proposed freicoin (not much technical value, but an economic improvement compared to bitcoin IMO). Mark is making most of the development for now, but I hope to help soon.

Here’s a summary of my near future plans I’ll reuse (after Jeff Garzik’s quote “if people are interested”): https://bitcointalk.org/index.php?topic=117800.msg1293663#msg1293663

Ben: What projects are you currently undertaking with your participation in Bitcoin & Ripple?

JTimon: Only discussion (design) for now and proposing many crazy ideas. But I’ll finish university this Friday and I hope to contribute with something soon. Maybe find a less time consuming job too (and more interesting, hopefully related with some of this).

A lot of diffusion too. I gave a virtual conference for the 5th spanish conference on complementary currencies.

Ben: What are a few ways that Bitcoin & Ripple can integrate?

JTimon:

Two-phase distributed Ripple can make commits atomic using a blockchain: http://ripple-project.org/Protocol/BlockChainCommitMethod Implementing ripple through coloured coins (discussion with Jeff Garzik) There’s more discussions on coloured coins on bitcointalk. I make some examples of ripple transaction using coloured coins here: https://bitcointalk.org/index.php?topic=92421.msg1217467#msg1217467

Modify the Bitcoin protocol to enable ripple without the need of underlying Satoshi is (1 Satoshi is the smallest denomination in Bitcoin, is 0.00000001 btc). I call this one RippleCoin. https://bitcointalk.org/index.php?topic=3557.0

Ryan Fugger’s commit blockchain which only acts as a timestamping system without making the payments public. http://ripple-project.org/Protocol/CommitBlockChain

That conversation with Jeff is pretty technical, but the basic concept is to use Satoshis to represent ripple IOUs. We must agree outside the chain that those Satoshis represent credit and not only Bitcoins

Ben: What is your Vision on the future of money?

JTimon: Ideally, everyone would issue his own credit money (through an implementation of Ripple). Probably local and/or specialized communities will have their own LETS-like currencies too. Cash monies will be digital, like Bitcoin and Freicoin. Hopefully gold will be demonetized (because people has chosen not to use it anymore, not by decree). Ideally all cash monies will have demurrage and interest rates will be near zero without any authority manipulating it, just the free market with demurrage cash and abundant credit (anyone can issue money through credit instead of only the banks).

Probably the various levels of the state will issue cash too. They will create it directly by spending it and it will be “backed” by nothing but taxes. Ideally the state will stop borrowing and the peoples will suffer the excesses of politicians fast trough taxes increases and inflation. We won’t be as vulnerable to inflation as we are today anyway.

Credit won’t be denominated in cash units, but in indexes defined as non-existent basket of commodities (see Bernard Lieater’s Terra) or CPI’s. After all, debts are contracts.

Take into account that this is a very personal view." (http://bensonsamuel.com/2012/10/27/jorge-timon-an-interesting-involved-bitcoiner/)

More Information

More resources on freicoin:

Freicoin: Difference between revisions