In that case, I have absolutely no idea what A-trust means and consequently see no value in the A-trust-coins. In what way would I benefit from having them? Why would I be willing to part with something else to get them?
I have reflected on the issue of scarcity of the reputation currency again. It really needs to be designed in a very specific way, otherwise it won’t be able to appropriately implement a reputation based economy.
To understand that, let’s examine a couple of different hypothetical cryptocurrencies.
InflaFlux are basically the same as GeoFlux, but without the demurrage, and with no way of removing InflaFlux out of the system, except for loss of InflaFlux access. InflaFlux would pretty much start out like GeoFlux. However, eventually there would be so many InflaFlux in circulation, that the value of newly generated InflaFlux becomes negligible.
If one wanted to try to compensate for that effect by increasing the generation rate of InflaFlux, this would create further inflation. The higher the generation rate, the higher the relative value of newly created InflaFlux. On the other hand, InflaFlux which were already in existence, would become quickly devalued. So, nobody would really want to hold InflaFlux. There would especially be little reason to buy any InflaFlux, which basically makes it a rather worthless currency.
Let’s start with Onecoin. Onecoin is 100% pre-mined by its creator, the One. It’s an incredibly scarce currency. There is only 1 Onecoin ever in existence, but you can trade arbitrary fractions of that 1 Onecoin. This turns it into the perfect storage of value, well, at least in theory. Its value cannot be diluted by new Onecoins being mined into existence.
Now the real question is: Why should anyone purchase Onecoins from the One? People would reward the One for creating a strange altcoin. If Onecoin ever got widely accepted, the One would become tremendously rich, unless the One was actually a nice person and gave almost all of them away. If the One wasn’t nice, people would probably simply avoid that currency, because it made One person tremendously rich for no good reason. Onecoin would have tremendous other benefits to justify investing into Onecoin, in that scenario at least.
What if the One was actually nice and gave away, say 95% of all Onecoins to charity or something? Now the situation might be different. Using Onecoins would then mostly mean supporting charities and getting an excellent storage of value. At least for a while, Onecoin might be a popular currency, because it’s tremendously scarce, and is seen as socially beneficial, because it supports charities. In theory, such a currency could replace Bitcoin, because it’s scarcer and more just at the same time.
Decaycoin is like Onecoin, in that it is 100% pre-mined by the One, and mostly given away to some “worthy causes” (as defined by the One, of course). The difference is that it is coupled to a reputation system like QP, not in the sense that reputation determined the creation rate of Decaycoin (because no new Decaycoins are generated), but for setting a reputation-dependent demurrage threshold for Decaycoin. Let’s say that Decaycoins decay at a very high demurrage rate of 50% per year. This turns it into an extremely unattractive currency to hold, if you are above the demurrage threshold. But: The fact that Decaycoin decays in that way, amplifies its scarcity, even above that one Onecoin. It’s the perfect storage of value for values below your personal demurrage threshold. If you can stay below the demurrage threshold, the value of Decaycoin will increase for various reasons in parallel:
- As acceptance of Decaycoin increases, the value of Decaycoin increases
- When the economy grows, the value of Decaycoin grows along with it. Decaycoin is naturally deflationary
- As more and more of the Decaycoins that you don’t hold decay, the scarcity of Decaycoin increases, thus making it more valuable
Decaycoin might be an even better reputation currency than GeoFlux. The ability to hold Decaycoin over extended periods of time requires a high reputation. People with high reputation can act as Decaycoin banks, at least up to a specific amount, because they are unaffected by the conditional demurrage. Those banks would charge fees for holding Decaycoins. Those fees would be lower than the demurrage rate, but larger than 0. Thus, people can basically make profit from storing Decaycoins in a decay-free way, if they have a high reputation. It would still be a good idea to store Decaycoins at “reputation banks”, because the expected value increase of Decaycoins would usually still exceed the amount of value loss from holding fees. Decaycoins would therefore be even more scarce than Onecoins. So, as storage-of-value currency, they might totally win the race.
T-Prestigecoins are a version of Decaycoins. Instead of being given away by the One at inception, there would be a different system for generating T-Prestigecoins. At a specific date T all T-Prestigecoins would be generated at once and distributed according to the Prestige scores of the users of the coupled QP network. This may be seen as fairer and more sensible version of bringing T-Prestigecoins into existence than the One deciding who gets how many coins first. But from the T onward, T-Prestigecoins would show pretty much the same dynamics as Decaycoins.
PrestigeFlux are pretty much the same as GeoFlux, but without the basic income component. PrestigeFlux are continously generated only by Prestige. In a certain way, PrestigeFlux would be similar to T-Prestigecoins, but with a continuos generation of new coins, instead of the total drop at an arbitrary point T in time. This might seem advantageous, because the choice of the arbitrary time T might be a politically disputed issue that might threaten the legitimacy of T-Prestigecoins.
BasicFlux is the same as GeoFlux, but without the reputation income component. All BasicFlux is generated as basic income. But there’s still the reputation-dependent demurrage. So, people can still act as “reputation banks”, if they have reputation. Those who have little reputation, would be strongly incentivized to sell their BasicFlux as quickly as possible.
In a BasicFlux system everyone would start out equally, but those who manage to get a lot of reputation would profit more from the system, because they would be able to make profit from their role as “reputation banks”. Still, inequality is pretty much limited by everyone getting a full basic income, and the currency being scarce from the reputation-dependent demurrage.
BasicFlux might be seen as socially fairer system, and as economically preferable one, because it keeps inequality at a pretty healthy level. That might increase the acceptance of BasicFlux above that of PrestigeFlux. Perhaps inequality would even become a bit too low with Basic Flux.
GeoFlux basically fixes the potential “too high equality” issue of BasicFlux.
So, it seems like there is a chain of currencies:
InflaFlux -> Onecoin -> Decaycoin -> T-Prestigecoin -> PrestigeFlux -> BasicFlux -> GeoFlux
Each successor seems to fix some issues of the previous currency. So, if each successor is better in at least one way, and not worse in any other way, then the conclusion would be that GeoFlux should be the best currency of those presented. Of course, the assumption that no “successor currency” didn’t add any additional flaws is highly questionable. Still, considering all that I’ve written, GeoFlux should be a really good currency – at least if people were clever enough to understand the reasons why it would be so good!
What’s especially interesting in this chain is that the first currency, InflaFlux, and the last one, GeoFlux, only differ in the latter having reputation-dependent demurrage! So, the reputation-dependent demurrage system seems to be an exceedingly powerful aspect of the currency, because it changes its status from being the “worst” currency to being the “best” currency.
I think an important conclusion from this Gedankenexperiment is that the scarcity of a currency is not the only factor that gives it value. What also needs to be considered is the social legitimacy, which is an important factor for its acceptance, and thus for its (long term) market value. Legitimacy of fiat currencies is created by the (possibly flawed) democratic consensus of using such a currency as legal tender. Legitimacy of cryptocurrencies would need to be created in a different way. It should be based on its overall benefit for society at large. May the best currency win!
Actually, InflaFlux would eventually end up being more desirable to hold than GeoFlux because it has a decreasing inflation rate, when measured in percentages. GeoFlux has a pretty stable 5% loss of value per year after the amount of currency in circulation stabilizes. If you had defined InflaFlux to issue 5% of the current supply every year as basic and reputation incomes, it’d not differ from GeoFlux in practise. The main difference would perhaps be that people who don’t think too much might think they’re getting more each year, so for those people, it might seem to be better.
Also, GeoFlux doesn’t differ from InflaFlux (as you defined it) in any way before the demurrage begins. In other words, the inflation will be high.
an altcoin named Onecoin actually existed but as far as I know, it didn’t last too long, it had the peculiarity that there would only ever be one of them. Divisible, of course, though.
Scarcer than Bitcoin? More? You’re not making sense here.
Let’s assume there was an altcoin with only 0.001 coins created. Would that be scarcer than the onecoin you described? No it wouldn’t. In practise, the only difference to onecoin would be that you’d have to type extra zeroes in front of the amounts. Being divisible to arbitrary fractions means that any amount of coins is equally large because you can always divide the coins into equivalent parts.
With digital currency, it doesn’t really matter how many units there are. It’s entirely arbitrary. What matters is how much they’re worth in terms of something with an actual use value.
I’d go so far as to say that social legitimacy is the main factor. A non-scarce currency will lose it’s value too quickly and will lose any legitimacy it had as fast as it got it. A scarce currency, however, tends to collect more legitimacy as time passes and it demonstrates it’s ability to keep it’s value.
Hi, You’ve summoned Backfeed, now here we are
Thanks for your comments, here are some of ours -
First of all it seems that there’re really some similarities between BF and QP in the overall thinking, although some differences should be noted:
First and foremost - Backfeed doesn’t envision a global backfeed-currency, but rather an ecosystem of currencies which refer to each other. Both reputation and currency (tokens) are Network specific and not global. This might answer to some of the concerns you’ve mentioned regarding groupthink, reputation inflation and the feedback of feedback concern:
The Backfeed protocol is a consensus discovering engine. It’s purpose is to create a multitude of meritocratic hierarchies in a decentralized network of peers. If you’re not aligned with the consensus of a network, the system encourages you to fork into a new one or drift towards other, more like-minded individuals. The idea here is to allow a decentralized crowd to perform complex tasks, without having a centralized organisation. That’s why we have what you’ve called a “feedback on feedback” loop.
You’re right, every network has some sort of dynamic “group-think”, the crowd intelligence emerges out of the dynamics that arise between those different networks. In that sense, BF doesn’t encourage conformity, but alignment around values. If you differ from those values you’re not punished by the system, but rather naturally drift towards networks in which your values are more dominant, this way each participant can maximize their influence in the global network of networks.
Reputation can’t be inflated - In every network exists a fixed total of 100% reputation, which is reallocated to the peers in the network according to the Proof-of-value protocol. Reputation is not measured nominally but rather relative. Furthermore, reputation corespondents with influence in the system, not income: Reputation is not transferable and represents the weight your evaluations of others have, and not the amount of tokens you’ll receive.
token, however, are issued whenever a valuable contribution is made. How is “valuable” determined? Thorough mutual evaluations corresponding to reputation and the Proof-of-value protocol
Reputation is attached to certain actions, and not persons because that’s the way the system determines the value of contributions to a system, in a way that might remind one of Bitcoins Proof of Work protocol (just regarding human contribution, and not machine contribution).
To sum it up:
Backfeed’s aim is to enable massive open source collaboration without central administration, e.g - enabling the bootstrapping and emergence of decentralized organisations, while providing a fair and efficient compensation mechanism. In that regard, Backfeed and QP could be complimentary and there is no need to prefer one over the other. We could imagine a world in which both coexist and complement each other.
Maybe our economic model could shed some more light on this:
If you have any further questions or remarks, feel free to contact us at firstname.lastname@example.org
You can also send us your email address so we can add you to our public slack channel where you can join the discussion.
We’ll be happy to hear from you.
If you ignore the conditionality of the demurrage, you are right (except for scaling factors with a 5% inflation InflaFlux). But the reputation-dependence of the demurrage is exactly what makes GeoFlux interesting. Anyway, let’s start with a simple observation: It’s not rational to store value in large amounts of a currency that systemically loses value over time. Whether that loss of value is imposed due to inflation or demurrage doesn’t matter very much. If you are affected by either, it’s more rational to switch to a store of value that doesn’t lose value as quickly.
The point is that GeoFlux behaves very differently, depending on whether you are affected by demurrage or not. As long as you are able to avoid demurrage costs, it’s a pretty good currency. And you are able to avoid them by increasing your reputation or by using new users as “reputation banks”. The situation of course changes, when there are no new users with blank accounts left. I call this the “saturation stage”.
GeoFlux saturation stage
It feels hard to wrap my head around the saturation stage of GeoFlux. Before the saturation stage GeoFlux has spread by expanding to new users. But now that most normal users are affected by demurrage, the situation becomes unpleasant. GeoFlux becomes hard to sell, because it has lost a large fraction of its worth as store of value. But: It’s still pretty decent for moving around value quickly. Investors can purchase large amounts of GeoFlux relatively cheaply. They can then purchase their investments with GeoFlux. If they are really quick, the loss from demurrage becomes pretty negligible. GeoFlux would stimulate quick investment and consumption. Basing an economy on a currency that people want to hold in large amounts is not a good idea, because it creates incentives to hoard that currency, instead of spending it. The resulting economy would be rather sluggish. You really need some kind of currency that people don’t really want to hold so much, but that still has some stable value.
Anyway, why is GeoFlux better than InflaFlux? Because GeoFlux reflects a reputation economy better than InflaFlux! In GeoFlux your effective demurrage rate depends on your reputation. If your reputation becomes high enough, your demurrage rate is 0. The more GeoFlux you accumulate above your demurrage threshold, the higher your effective demurrage rate becomes, up to the asymptotic 5% per year. If your effective demurrage rate is low, not only do you lose little money, but you can act as “reputation bank” for those who would suffer from a higher effective demurrage rate. In an effective market, at the saturation stage, this would mean that the effective demurrage rate becomes about the same for everyone, but that holding fees for GeoFlux flow from people with low reputation to people with high reputation. Having a high reputation means a double income, first from a direct reputation income in GeoFlux, and second from storing the GeoFlux of others for an income in holding fees. A high reputation is a double advantage in a GeoFlux economy. Is that a good thing? Well, it’s at least a very reputation economy-ish thing.
But of course you can argue that once GeoFlux reaches its saturation stage, people would want to switch to a different currency, since they are free to do that, as GeoFlux is not backed by governments or something like that. Well, if anything, currencies are backed by their acceptance as currencies. Any competing currency would struggle to reach the same level of acceptance as GeoFlux, even if it actually loses value slower than GeoFlux. You can see the same playing out with dollars and bitcoins. People still mostly use dollars, even though bitcoins should in theory increase in value over time. At the saturation stage, GeoFlux should mainly derive its value from its social acceptance. And that social acceptance should come from the fact that it’s a currency that enables an efficient reputation based economy.
Fun point: Once you give away all your GeoFlux in favour of an alternative currency, GeoFlux should become pretty valuable again for you, since you are unaffected by the demurrage! It should actually become so valuable that competing currencies lose their perceived advantage. At least, until you reach the demurrage threshold again.
So, what about investing all the GeoFlux above your demurrage threshold into a new competing currency called GeoFlux2? That kinda feels like a logical conclusion of this system. Every time a reputation currency reaches its saturation stage, new reputation currencies should spring up to compete as complementary currencies. In the end, people will end up holding a whole stack of different reputation currencies. The complexity of that system would be rather high. Perhaps the saving grace is that by then most people would live pretty much in a post-scarcity situation and usually not bother about holding large amounts of money. And those who still care, have a fun game of monetary economics to play.
Sorry, that was badly worded. I basically meant “more in alignment with socially perceived justice”.
Hi @Backfeed_cc, thank you very much for your reply!
Yes, that is an important distinction between BF and QP. QP was designed to enable a global reputation currency. The simplicity of having a global universal currency makes it worth to have a system QP, even if BF was superior to QP in most other respects.
Quantified Prestige networks can be local or global; specific or universal. The question is when a network should use QP, or when it should use BF, or whether it would make sense to develop some kind of synthetic system that takes the best parts of both systems to create an even better one. Anyway, I think that both QP and BF will need to go through long stages of empirical testing to find out what systems are really best suited for certain networks.
I really like that term. It perfectly encapsulates the (micro)political use of BF. QP has much more of an economic focus than a political one.
I think that aligns very nicely with my idea of a fractal society, which was the basis for giving Fractal Future its name (it was called Social Future Metanet at first). People should be as free as possible to self-organize into groups of like-minded peers. Of course, the issue exists that like-minded peers are relatively scarce. Finding them seems to be a hard problem. Dating platforms seem to try solving that problem, but of course there’s the disadvantage that they are too narrowly focused on dating, and not on bringing generally like-minded people together.
Decentralized governance seems to be a seriously hard problem. I’m glad that you are working on that.
Wow, that sounds like a very clever way of putting it! I really love that way of expressing that idea. I think you’re on to something big. This may tie in to my IEET article Solving Problems with Collective Intelligence.
This means that as the number of members and actions in a network increases, the relative reputation weight of each member and each action decreases. But since total value might be roughly proportional to both members and their actions, this doesn’t seem to be a real problem. You only need to ensure that the distribution of reputation remains roughly appropriate.
The feedback on feedback mechanism seems to work for that purpose. The QP approach for making reputation distribution appropriate is by limiting reputation-giving power to a fixed amount, so that people need to think well about how to distribute their reputation-giving power. Both approaches seem to have their strengths and weaknesses. Perhaps it might be worth considering combining both. The resulting system might be quite complex, but at least it may evade certain failure modes of each single approach.
Ok, so there are several (potential) differences between QP and BF here:
- Reputation does not (directly) create an income in BF – but it does in QP.
- Reputation corresponds with influence in BF. In QP, this would require tying in reputation scores with decision mechanisms. I’ve considered reputation-dependent polls as one such mechanism. But I haven’t spend a lot of thought on network governance in general, yet.
- Reputation increases the weight of your evaluation of others in BF, but not in QP. At first, I also considered doing the same in QP, but then settled for a more egalitarian and “linear” approach for QP, mostly because it makes the mathematics of the system much easier. That might not be the best motivation, but I guess settling for simplicity is preferable to complexity, unless you really need that complexity.
That looks like a valid approach. I don’t see obvious overall advantages or disadvantages of this over the reputation income approach. The only big issue might be token inflation, which I’ve tried solving by reputation-dependent demurrage. But as this thread shows, this opens another whole can of worms.
Yes, there are good reasons for this approach. With QP I’ve settled for a more open way of determining value. People can esteem the contributions of others for any reason in QP, even if they can’t actually pinpoint how, or what specific action has been especially valuable. QP allows capturing subtle and diffuse value, which might get ignored when value has to be attached to specific actions. On the other hand, QP opens itself up to a larger variety of biases by following that approach.
Thank you very much for your invitation! I’ll get back to you!
Yes, in practise it doesn’t matter a lot which of these effects is causing the loss of value. There’s however a key difference. Inflation creeps in imperceptibly, it’s very difficult to tell it apart from other things affecting prices. With demurrage you can literally watch the amount of money you have going down. So, with inflation you’re not constantly reminded in a concrete way that it’s happening. However with demurrage, you’ll be reminded every so often. It’s like taxes, it’s in your face all the time that you’re losing the money.
Are you considering smooth, constant decrease in the amount of money in accounts that are over the limit? You might want to ponder on that in light of what I said above.
Anyway, I’m not quite following the logic here. This would only make sense if the investor can purchase GeoFlux for under the market prices and someone is willing to take GeoFlux at the market price or higher. In a properly functioning market, this isn’t a chance that can be had easily. Do note that to take GeoFlux as a payment doesn’t differ from buying GeoFlux in any important way.
If you just mean to refer to the normal market activity of speculators trying to buy low and sell high, sure, that’s what causes the wave like movement of the exchange rates and doesn’t become easier just because the exchange rate is falling.
The stimulation effect only happens if people have a reason to want to hold the currency despite the loss of value. It certainly can happen, as evidenced with the popularity of current Fiat currencies. However, I suspect that’s because credible alternatives haven’t been around for very long and the ones that popped up in the past were quickly and decisively cut down by governments. Now we have alternatives with no center. They’re not quite that simple to cut down.
You know, I’m starting to get the feeling that GeoFlux might be stacked too much in favor of those with high reputation. I mean, even today it tends to be that those with good reputation are also rich and that those who’re relatively unknown are poor (at least by comparison). Of course, there are those with what you could say bad reputation who’re also rich but… do you think they could really keep those riches if that was the whole story?
So, what I want to ask is, are you sure you’re not merely recreating the current system in a slightly new guise? (well, granted, it’s got the basic income, so at least that’s different, but…)
I suspect that by the time that GeoFlux reaches saturation, we’ll have many different digital currencies to choose from. So, the competitors would already be there and have wide acceptance.
I think you really should think about how to convince people that reputation based economy is actually a good idea. It sounds good on paper but when it comes to money, that’s not enough to convince people.
So, who’ll be the bagholder who buys all the GeoFlux from the hands of those who want to buy GeoFlux2? If everyone tried that at the same time, it’d be a total market crash for GeoFlux and a super rally for GeoFlux2. a completely unrealistic scenario but …
I wonder how you’re imagining the account balances looking like in the saturation stage. It might start out with only a small percentage of each account being above the limit. However, as it progresses, the average amount NOT affected by demurrage will close in on 5% of the total balance (well, something close to 5% anyway, not feeling like doing the math to figure out the exact figure right now).
I hope that by that time we’ll have distributed systems that pretty much take care of resource allocation in a way that everyone can consider fair. Who knows, perhaps we’ll have delegated the process of resource allocation mostly to the results of the Backfeed networks or something similar that’s not directly controlled by people’s opinions but rather their valuations of each other’s work. The valuation data in the individual backfeed networks is a treasure trove as far as data mining is concerned.
That inflation creeps in imperceptibly is what makes inflation so deceptive. People don’t realize that they are losing value with inflation. Which is why it is harder to get people to act against the loss of value in an inflationary currency. Inflation is like a stealth transfer of value from those who hold inflationary currency (mostly the middle class) to those who hold non-inflationary assets instead (mostly the rich). The more this value transfer is made obvious (for example by switching from inflation to demurrage), the more can people react to it, because it becomes really “in your face”.
Yes, the amount of money over the demurrage threshold decays exponentially.
Anyway, what has been written so far in this thread tells me that it would be a good idea to find a way to avoid ever reaching a saturation stage. And I think that can best be done by introducing an attractive way to burn GeoFlux, for example:
- You could pay for decentralized computation in GeoFlux
- You could participate in an auction for a good ranking on a network news platform (attention economy!)
- You could pay for a specific class of asset (for example (virtual) real estate)
Once people are affected by demurrage, they are incentivised to do one of the following things:
- Sell GeoFlux
- Give GeoFlux away to someone as loan or charity
- Increase their own reputation (which is of course not trivial)
- Burn GeoFlux in exchange for (potential) rewards
The more GeoFlux in the system is affected by demurrage, the harder it becomes to sell GeoFlux. Also, giving money away as charity might not be seen as extremely attactive. With high demurrage fees loans might even have negative interest rates, so that’s not terribly attractive either. So, burning GeoFlux for getting something in exchange will look like an increasingly attractive option that should be able to stave off the arrival of a saturation stage.
Yes, that’s how GeoFlux is intentionally designed! You need a currency that is very much coupled to reputation in order to make a true reputation based economy possible. Otherwise the normal monetary economy will eat up the reputation economy!
Right. The point of a reputation based economy is that it makes appropriate allocation of value easier. More specifically, it can enable digital abundance by making it much easier to get money from giving away digital goods (or even other goods and services) for free. In our current market based system, it’s not trivially easy to get money for giving stuff away for free – on the contrary: It sounds paradoxical at first. In a reputation economy gaining value from giving away stuff for free becomes much more natural and uncomplicated. People need to “sell” less – though of course they may still need to advertise their goods and services to a large audience.
- A reputation based economy is good for consumers: They get stuff much cheaper or for free
- It’s also good for producers: They are freed from spending time and energy on using complicated monetization schemes
The system I want to create is an evolution of our current system, not something absolutely revolutionary new. As evolution of our current system, it will certainly retain some of its flaws. I’m not saying that everything will be great in a reputation based economy. But some things will definitely be better.
The thing I wanted to point your attention toward is the fact that it’s an uphill battle to get people to understand demurrage is actually better than inflation due to the fact that demurrage is “in your face” and inflation is mostly invisible. (That being said, a system without any inflation or deflation would be even better but that doesn’t seem like a goal that’s attainable in practice.)
This basically condenses to the question “How can I convince people to pay taxes happily and willingly?”. I suspect an ideal method for that would be to have something that only QP network can give and give that only for burning GeoFlux. Of course, that something needs to be very useful for the people doing the burning.
At least the plan you’ve expressed in this thread can’t be expressed as free. Initially it’s funded with inflation and later with demurrage. If you can eliminate the demurrage somehow, that still leaves the initial inflation stage but if it’s guaranteed to stop eventually, it’s not a showstopper. Also, you haven’t mentioned how you intend to make sure the same person doesn’t create several accounts for him/herself. If that can’t be reliably prevented, it’ll result in uncontrollable inflation. That could well be the hardest problem to solve since you’d want to allow everyone that one account but prevent anyone from getting more than one.
I hope I’m not discouraging you too much by piling up a problem after problem here
Ok, you are right. It’s often worth repeating that it’s an uphill battle to expect people to make rational decisions. Point duly noted.
I think you are going overboard with your comparison of demurrage and burning GeoFlux with “paying taxes”. That’s almost as bad as referring to buying bread, or giving gifts, or making donations, or trading on the stock market as “paying taxes”. It frames the situation is an entirely unhelpful way, I think. If you use this comparison, could you please explain why you make it, and what purpose it has?
In the case that a decentralized organisation (the same that helped bring GeoFlux into existence) became the next big thing and everyone wanted to be featured on their website, allocating advertisement spaces or content slots for those who burn the most GeoFlux would seem to be pretty effective.
-> Increase attention given from others to you
-> Increase your reputation
-> Increase your GeoFlux income
Basically, burning GeoFlux could be seen as long term investment into the GeoFlux economy (weird, isn’t it?)!
[quote=“Elriel, post:55, topic:924”]
At least the plan you’ve expressed in this thread can’t be expressed as free. Initially it’s funded with inflation and later with demurrage.[/quote]
Burning of GeoFlux should take the majority of the function of getting money out of the system. Reputation-dependent demurrage is still a very good idea to make burning more attractive, and increase the value of reputation.
If people burn enough GeoFlux, there won’t be inflation, and demurrage could be mostly avoided. Demurrage would turn into a punishment for low reputation, or not releasing GeoFlux into the wild.
The basic idea is that people need to collect enough “authenticity” to activate the accounts they create. “Authenticity” is a measure of being a unique person. A tentative system for allocating “authenticity” would be connected to the amount of reputation that a specific account gets. Users can try to make up different personas which collect reputation independently, but they bear the risk that both of their accounts would completely lose authenticity, if it became apparent that they are actually the same person. It’s not a perfect system, but perhaps it’s good enough. If not, it needs to be improved.
No, you’re helping me to get rid of the remaining problems.
The difference between “paying taxes” vs “buying bread”, “giving gifts” and “making donations” is that “paying taxes” is something you can’t choose not to do. It’s not a choice. All the others are voluntary actions. In this respect, the built-in demurrage is like a tax. Burning GeoFlux, in itself, is a choice. However, it’s a fine line as it’s purpose is identical with the demurrage. Depending on the exact details, it might go either way.
You could, of course, argue that using GeoFlux is in itself a choice to pay that tax and it’s thus not involuntary. This is true, as long as the choice of whether to use GeoFlux or not is voluntary. However, if GeoFlux became the sole currency used in the world, it’d stop being choice. So, to have a chance of that, you need to be able to answer someone who insists on thinking about them as taxes that it’s a tax worth paying.
This makes sense in the sense that when you burn GeoFlux, you’re essentially paying everyone who currently holds any GeoFlux in proportion to their holdings. It’d probably work better if there was a special “fund” in GeoFlux that was used to pay the basic income and reputation income. That way the distribution would be more in line with the design principles. Except that… somehow these two seem like they’re the exact same thing but also seem to be different…
This is what I mean with the fine line in the first part of the reply. If the demurrage is there to make burning more attractive, it erodes the freely chosen aspect of the act. Free choice is pretty important to many people.
Just bear in mind that this is the most vulnerable part of the whole system. Everything else is meaningless if this part has bad flaws. There’s also the potential problem that our ideas of identity might change, rendering the whole system obsolete. For example, if we become able to duplicate minds… or merge them. It could be challenging to make this future proof as well as fraud proof.
I don’t currently have any suggestions for this part. It’s at the same time the most crucial as well as the most difficult part of this system to get right. Backfeed doesn’t have this problem since it bases things on it’s Proof of Value concept. In Backfeed you don’t really benefit from creating several virtual identities for yourself since the sum value of the individual virtual identities is unlikely to exceed what you could get with just one.
If GeoFlux had just the reputation income component and no basic income, it might actually share this property.
If GeoFlux was the sole currency used in the world then everyone would have chose to use it instead of any other currency, or instead of setting up any alternative currency, which would be a perfectly fine thing to do.
Don’t like demurrage? Create your own InflaFlux! Nobody will stop you from doing that.
So, comparing reputation-dependent demurrage in GeoFlux to taxes is really a totally inappropriate comparison.
I’ve considered the fund solution as early concept in QP. The point about flux currencies is that you don’t need a centralised fund. It becomes unnecessary, because everyone automatically generates their own money. What would be better about having a fund as intermediary? I can tell you what would be worse about a centralised fund:
- It would be a single point of failure
- It would create a huge number of unnecessary transactions
- It could be abused by those who have control over that fund
Anyway, it’s true that it makes a difference whether you do
- pay into a fund that pays everyone a basic income
- pay into a fund that pays everyone a reputation income
- burn GeoFlux
Let’s see how those cases actually differ from one another:
- In this case, everyone gets the same share. It’s a totally egalitarian approach.
- Here, those with a lot of reputation get more GeoFlux. It’s a reputation based meritocratic approach.
- Finally, burning GeoFlux rewards all holders of GeoFlux, except the one who burns the GeoFlux, of course. This could be seen as some version of “proof of stake”.
Anyway, it may be worth considering creating funds that allocate GeoFlux like in 1. and 2. That would create new possibilities for people to give back to the system. Anyway, it’s important to note that 1. and 2. don’t solve the inflation problem. Only getting money out of the system can do that.
Ah, I see. This relates to my thread
Anyway, it’s a weak point against a currency which requires voluntary adoption to work in the first place. If people hate demurrage so much that they can’t stand it, they will create something like InflaFlux.
Yes, the “authenticity” system is the most “critical” part of the system. If it can’t be made to work, the conclusion might be that allocating value to agents is a fundamentally flawed concept – which would be a really crucial insight, if it was true.
Hmm, that makes me think about an interesting approach: What about designing some kind of “proof of difference”? Every new user of the system has to prove that they are different from all the other already existing users of the system. This will most likely become increasingly difficult as the number of users in the system increases.
I am aware that QP is based on a strong notion of “identity”. The future might become weird indeed with minds merging and splitting, or just connecting with one another in very deep ways. It’s not only reputation systems like QP which are threatened by such “fluid” notions of identity. Any (formal) (economic) exchange between two parties becomes problematic, if it’s not clear who those parties are, or where their boundaries lie. However, there is a system which can deal with a really huge amount of uncertainty: The human brain. I suspect that future social systems will have to resemble increasingly the operation principles of the human brain itself.
But doesn’t Proof of Value need to be tied to a specific identity? Every system that is based on identities is at the very least prone to identity theft, and to confusion from future identity mindfuck. Nevertheless, you are right: Backfeed seems much more resistant against Sybil attacks than QP. The main reason for that seems to be that your influence in the Backfeed system is porportional to your reputation. In QP influence is distributed pretty equally, in contrast.
You are talking about PrestigeFlux here. It would be quite possible to have different versions of GeoFlux running at the same time. In the end, the people decide which currency becomes widely accepted.
Something to ponder for the technical implementation of GeoFlux:
I was a bit hesitant about using a situation that seems impossible as an example… I’ll try harder to avoid that in the future. It seems to have distracted you from my point.
As for why it seems impossible… Well, there are lots of people who are going to view demurrage as a tax. It wouldn’t surprise me if that was a large majority of people. Trying to call it something else won’t help convince them. That’s pretty much the point I was trying to make.
Most people are not able to grasp large systems as a complete whole and understand the operation at scale. They will focus on what they can understand. One very easy thing to understand is numbers. Especially numbers that go up or down. If the account balance is going down without explicit consent, the reaction is “who’s taking my money?”. People are pretty conditioned to the idea that a number going down in such a case is bad.
Allright, I won’t mention it anymore. You’ll hear it often enough later when you get this off the drawing board and actually start getting users.
Who said it’d be centralized?
The funds only make sense if they actually affect the basic income or reputation income. One option is to forget the burning and instead start the system with all the monetary base assigned to two pools, which are special “addresses” in the system. individual basic and reputation incomes would then be defined by balances of the pools. The pools only grow if someone voluntarily puts money in and will shrink as income is paid out.
This would avoid making important economical parameters hardcoded to the system and allow the system to live according to user choices. This would crowdsource the problem of figuring out how to convince people to part with their fortunes.
This is an option that’s well in line with voluntaryism. I think that if this won’t work, then demurrage won’t either.
I don’t think that’s all that unlikely. Considering we already have examples of similar cryptocurrencies. There are (well, at least there have been, not sure if they’re still alive) cryptocurrencies with demurrage, but none of them have ever seen much adoption.
Strictly speaking, yes. However, the system is fluid and can adapt to changes in behauviour fast, so it’s self-healing in this respect. The system doesn’t rely on the idea that identities don’t change. The identities are in an assistive role and the system will work fine as long as the identities are not completely unstable.
Yes, and they are justified in thinking that this is bad. But it’s a negative feedback system that’s supposed to be there to strongly incentivize people to either increase their reputation, or reduce the number of GeoFlux in their accounts. Without such a feedback mechanism you could just buy into the GeoFlux economy with lots of dirty money, and turn the reputation economy into a farce.
That’s an interesting idea. But it wouldn’t be enough to only have two pools for that, since the speed and mode (linearly, exponentially) of bringing money into the system are also free parameters. So, ideally, there would be a whole family of special “system distribution accounts” with different properties.
Yeah, that would make a single QP network extremely flexible and self-regulating. System parameters won’t have to be fixed globally, but people would act freely, and average global parameters would emerge out of individual actions. Such a system might even be used on a “conventional” cryptocurrency basis like bitcoin. This could even become the basis for a “voluntary taxation” system that actually works. Paying “voluntary taxes” could be rewarded with reputation, or with the ability to boost your content on a community platform.
Still, in such a system rich people could buy lots of currency without putting it into any of those funds, because they don’t care about the reputation system, but the scarcity and value of the currency. They might grab the majority of the currency and use it as long term value storage. By doing that, they would increase the scarcity of the rest of the currency making it even more valuable to hold. This would end the effective circulation of the currency, and make it much less economically useful for everyday activities. Also, it would probably make it a very volatile currency, because it would be used as object of speculation.
Therefore, I think it would still make sense to have reputation-dependent demurrage in the system. The money that got deleted could simply reappear in the basic income and reputation income distribution pools. Of course, the system would then need to have mechanisms that determined how much and in which pools the money would reappear.
Alternatively, one might introduce negative reputation and make the amounts of money in all accounts transparent. Those who held “too much money” could be punished by negative reputation, which would induce a negative flow from their accounts into the reputation income distribution pool. Of course, such a system would be extremely inviting to various forms of abuse. But it would be kinda funny and self-regulating.
You know, markets don’t destabilize easily. The bigger they are, the harder it’s to increase their volatility. Rich people buying into GeoFlux to hold it wouldn’t destabilize it. they’d stabilize it further. It’d need to be pretty stable to begin with for them to even consider buying into it.
Gold is a commodity with a very stable market value. Most gold in the world is not being traded. It’s just held. It’s not a good idea to try to design an economic system without knowing basic facts about how markets work.
Also, it’s not a problem for a cryptocurrency if the majority of it is being held and not circulated. The value will increase and people will just use smaller amounts. With regular currency, the problem is that the smallest unit becomes too valuable. That’s not really a problem with any digital currency. You can always add more divisibility without anyone losing anything.
I suspect this feature would be disliked even more than demurrage.
The example of gold is kinda interesting. It seems that the value of gold has been historically extremely stable up to about 45 years ago, which is when the Bretton Woods system ended:
But of course comparing gold to $US is not a fair measure of the value of gold, since the $US has been a fiat currency since the end of Bretton Woods. Let’s consider some inflation-adjusted charts for gold and silver values:
I think it’s clear that the gold and silver prices have shown at least a somewhat higher volatility after Bretton Woods. Perhaps the best explanation for this is that volatility decreases with market size. Conversely, the end of Bretton Woods reduced the effective market size for gold, since the price of gold became decoupled from the price of the $US, so a higher volatility for the gold market should be expected.
Yet, this correlation can’t be the whole truth, since there were historical price bubbles for many different commodities. If market size inherently stabilized markets, such bubbles should not happen – but they did. And of course, bubbles increase that market capitalization and market size of the commodities that are affected by such bubbles. How does economics try to explain bubbles? I’ve found the following Wikipedia article quite interesting:
The asset flow equations have been used to study the formation of bubbles from a different standpoint in  where it was shown that a stable equilibrium could become unstable with the influx of additional cash or the change to a shorter time scale on the part of the momentum investors. Thus a stable equilibrium could be pushed into an unstable one, leading to a trajectory in price that exhibits a large “excursion” from either the initial stable point or the final stable point. This phenomenon on a short time scale may be the explanation for flash crashes.
The emphasis is by me. The claim in the citation above contradicts the notion that putting more money into a market always makes it more stable.
Well, it’s an even worse idea to try to design an economic system based on basic facts about markets that turn out to be wrong.
Yes, they will use smaller amounts. But that reduces the relative amount of money that is effectively used for productive economic activity. Ideally, the rate of circulation would be very high and all money would circulate, so that the total amount of economic transactions is maximized. That doesn’t happen with assets that are hoarded. An efficient economy would run on a currency that people really don’t want to hold for that long. For storing value, they should actually use other assets. The big problem is maintaining a reasonably high value for those currencies that are not supposed to be used for long-term storage. I think that reputation-based demurrage is one of the best solutions for this problem. Of course, in theory, you could run an economy on the digital equivalent of gold, but such an economy wouldn’t run very efficiently!
Yes, cryptocurrencies like bitcoin effectively solved the “divisibility problem” of gold, but that still doesn’t mean that infinitely divisible digital gold would be the best means of economic exchange. A currency that is primarily used as long term storage of value is mostly of interest for those who are actually interested in long term storage of value, and not so much for average consumers. I think that’s an important reason for the limited success of bitcoin as publicly accepted currency. Gold-like currencies are mainly used for long term value storage and speculation, not so much for productive economic exchange.
Most likely, yes. So, I gather that reputation-dependent demurrage is not so bad, after all, right?
Yes, up until 45 years ago, gold was basically the primary currency. Even if it was proxied by pieces of paper. After that the graphs look pretty volatile. However, how much of that is dollar being volatile and how much is gold being volatile? I think you might find it interesting to look at different economical graphs and looking at how they’ve progressed since 1970. Inflation is not the whole story. If you really want to get a good picture, you’d need to find similar graphs for a many different things and compare their prices to gold.
Economics is far from simple, unfortunately.
You’re trying to read a more extreme meaning to “market size inherently stabilizing markets” than it has. It doesn’t mean no bubbles. It means they’re less likely. There’s nothing that can shield markets from mass delusion… Well, unless you find a way to prevent or alleviate mass delusion.
This is also based on an extreme interpretation. Of course it contradicts. It just isn’t what I was trying to say.
What I was trying to convey is that the bigger the market, the less it will be moved with a specific amount of money. That is what it means that a market is more stable.
That’s not what’s limiting bitcoin. The real limiting factor is that data security is hard for the average person. Proper data hygiene is not very widespread and it takes time to come up with solutions that can work despite that. Even more time to get them to widespread use. Also, you are aware, I hope, that dollar took close to a century to become the main currency of U.S.? Bitcoin is only 7 years old. People are wary of new things. Especially when it comes to trusting them with value.
There’s no practical reason to use separate things for store of value and currency of exchange once the divisibility problem is solved. However, Bitcoin’s benefits are less apparent to people who aren’t planning to hold, so there’s less incentive to switch. I mean, why would you care about inflation if you aren’t going to hold the money long enough to see much of an effect? Especially since holding bitcoin on the short term is pretty much a coin toss on if you gain or lose.
Still, there are interesting developments on the horizon. For example, when I was researching payment channels, I bumped into the idea that they could be used to create bitcoin wallets denominated in any currency you want without a need for a centralized company on the other end. When you pay from such a wallet, it’ll send bitcoins, but the amount of value you have can be locked to whatever asset you want. Provided you can find someone else who wants to take the other end of the deal. That means someone who is willing to take the risk of bitcoin losing value in exchange for getting all the profit if the opposite happens. These are often called insurance contracts.
This is not directly related to the subject, but contains all kinds of information that should give a good idea of the complexities inherent in markets: http://www.bothsidesofthetable.com/2016/02/14/what-most-people-dont-understand-about-how-startup-companies-are-valued/
I never said it’s the worst possible thing to have in a currency design
However, I still think it’ll prove to be more than people can stomach. Feel free to prove me wrong, though
Do you have any specific suggestions? Perhaps something like oil, energy, food, basic services, electronics, real estate, financial products?
Are you claiming that your use of the attribute “stable” for a market does not include the aspect of the market not being volatile? If yes, I find that at least slightly misleading.
Sure, the data security problem and the young age of bitcoin might be the most dominant reasons for its lack of ubiquitous acceptance, for now. In the long run, however, I think that the factors I’ve written about will gain in relative importance and determine the rate of acceptance of new cryptocurrencies, once crypto has been generally accepted and the security issues have been dealt with to a sufficient degree. Perhaps GeoFlux might be seen as preferable currency in 20 years or so.
Is that so? I think this is a key question. Having your preferred store of value and currency of exchange being one and the same thing initially sounds like a preferred solution, and pretty simple. But if the ideal store of value and the ideal currency of exchange differ from one another, it would make sense to have them as separate entities which can be optimized for their respective function independently.
While thinking about this issue, I am realizing that people want more than a “store” of value. They want their value to increase, ideally reliably, quickly, and without effort. So, perhaps we also need to think about what the best safe automatic investment could be. If we aimed for really good safety, we might want to have something like “world economic growth dividend shares”, which might be approximated by a portfolio of government bonds. Still, that doesn’t seem better than having some amount in a universally accepted, non-inflationary currency. The value of that currency would increase with economic growth anyway, if the amount of currency in circulation doesn’t increase. If the amount of circulation decreases (non-uniformly), there is the risk that you are the one who is losing some of that currency, so the safety requirement is violated here. My guess is that bitcoin will be pretty close to being an ideal store of value, if the safety issues are addressed, and if fluctuations of the value of bitcoin become minimal.
I’m not trying to beat bitcoin as long-term storage of value here. But I’m trying to create a better currency of exchange. What’s most important for a currency is its universal acceptance. A good currency needs to be easy to handle, and everyone should accept economic transactions in that currency. Let’s assume that bitcoin became trivially easy to handle. If cryptocurrencies also became nearly universally accepted, would there be a reason to reject any particular cryptocurrency? I think there are three classes of such reasons:
- Technological capabilities: Some cryptocurrencies have useful features that others don’t have. Flux currencies support continuous value transfer, for example (well, at least in theory).
- Design features: How is the currency created? What mechanisms affect the currency? Inflationary currencies, and currencies with unconditional demurrage wouldn’t seem preferable, everything else being the same. Proof of work can be considered as waste of energy.
- Social considerations: By using a specific currency, I am buying into the value network of the users of that currency, thus validating the value that is held by the members of that value network. People can have preferences which value networks they might want to support. If they have strong dislikes about certain value networks, they might reject its preferred currency.
Social considerations might feel week as an overall factor, but they are present. Some people prefer to use local currencies for such reasons, for example. Also, there are ethical banks, whose existence at least points to social reasons having a real economic impact. Currently, people usually strongly support the early investors when buying into a cryptocurrency. That can be seen as justified, or as necessary evil, or as inherently unfair – depending on your preferred point of view.
At the very least, a reputation-based currency would at least have stronger social validation within the reputation network that uses that currency. If there is a global reputation network, the question whether people accept a currency coupled to that network breaks down to whether they like the idea of a reputation based economy or not. It’s not trivial why people should value a reputation based economy over a conventional economy, but the argument that a first encourages digital abundance, and generally reduced costs, should at least convince the majority that it’s a really good idea to prefer reputation currencies.
Could that possible preference for a currency that is in line with the idea of a reputation based economy be strong enough for people to reject bitcoin or other currencies? I guess so. Is that likely to become a mainstream attitude? Probably not. Still, the relative currency preferences of people could come with price differences amongst those currencies. Merchants can provide discounts on certain network specific currencies, for example (perhaps in the hope to increase their reputation when they give discounts for a specific reputation currency).
Maybe the strongest arguments in favour of using reputation currencies are that they are futuristic and social and drive the movement towards digital abundance. Those might not be reasons that are based on simple rationality as economic actors, but they are rooted in the real social and psychological nature of human beings. Empirically, humans are not homo oeconomicus, and neither do I think that they should be – at the very least because homo oeconomicus is too much of a simplification. Still, the point about digital abundance can be seen as argument from individual long-term economic rationality, or altruistic economic (super)rationality. In any case, I see sufficient reasons for people to prefer GeoFlux over bitcoin in many circumstances.
The proof is in the future.
I’ll try to find some time to reply to your latest message later, but for the moment, here’s something I thought you’d find interesting:
Thanks. I’ve actually started reading Piketty’s book last year, but stopped reading relatively quickly. Not because I found the content disagreeable, or uninteresting, but because there were more urgent, interesting, and important things on my plate. Also I got the impression that you get the gist from having read the 50 pages. Have you been able to read the whole book?