Should we add some form of Demurrage? about circles-contracts HOT 6 CLOSED

I would assume it is too challenging for the pilot, as we agreed on last time we met.

It's super interesting however and I wish for us to explore this topic more.

Looking at the user experience I think it has very dramatic effects, both as advantages and disadvantages. It could make Circles a "worse" currency that you want to spend before your fiat, which is cool. It is also very alien, and I think users might have a hard time liking a currency that disappears.

Notably I don't think of this as stopping hoarding however, and instead, users will always be tempted to use their last bit of money which is about to disappear. They will buy things they don't need, things that last. They might even start buying and trading long-lasting products with eachother that they don't use, essentially creating a sub-currency of their own to counter-act the demurrage.

from circles-contracts.

I agree with all of what @innsmouthrain said, including that we shouldn't include it in a pilot. I have a few more reasons why I think it might be much more difficult to implement:

1. The start of a monetary system is like the big bang, it only happens once in the history of an economic universe; and the rules may be radically different at that early stage than when the system has stabilised. In fact, as long as Circles is growing, it will benefit our management of the currency as it will be a counter to inflation; e.g. the denominator of the following fraction will be increasing:
   amount of currency in use / amount of productive users
   Ideally (and this is certainly helped by Circles design) these would increase at the same rate. If there is more currency per user we will have inflation, if there are more users we would have deflation (with a ton of caveats, but we're simplifying here). I believe we want to err on the side of deflation.
   So getting these two to increase in tandem is basically the biggest challenge we face, and could thought of as perhaps the core proposition of Circles: How do you create value through scarcity of a currency that is free and available?
   Who could even know how Demurrage would interface with this?
   Remember that even a Money Pyramid works as long as it is still growing

2. As a corrolary to the above; we might as well throw out any idea of maintaining dollar parity with the introduction of a Demurrage fee. I can't see how that would be possible; although I think there is room for innovation on this, but ...

3. It's just too much, it reminds me of when you see those threads on reddit or whatever and people are (semi) jokingly adding in all the things they would have in an idealised political system:

And we'll have LVT
Yeah and we'll have a unified tax rate, fuck this capital gains BS
Yeah and don't forget FTT etc, to pay for a UBI
also Sortition, it's the coolest idea ever
Yeah and drawing political offices by lot, isn't that like sortition

It will take a huge leap of faith for your average Jane to feel comfortable with Circles, if we add too many radical ideas we will just put people off.

from circles-contracts.

So.. after a long and tiring discussion with Ed, I think demurrage could be added as a second installment of the system design and it could act as a potential counter to inflation, in case we face high levels of it. From a research perspective, if we add too many things at once, it will be hard to know what are the actual effects of the different aspects of the system. Demurrage is basically a way of installing degrowth into the system and it is the reason why people have a difficulty rapping their head around it. Our system falls on the logic of capital insofar as the money supply is constantly increasing. Now, for the sake of having conceptual clarity it would be useful to think of Circles as a mutual exchange credit system which can provide people with a basic livelihood once we have enough people in the network interacting with each other. It will not be a basic income until we reach those levels. Before that, our focus should be on getting the details and functioning of the system right. Demurrage can be used in a subset group of people or at a later stage if we face big inflationary problems (which we probably will). In this way, it makes more logical sense to add demurrage and then compare the effects before and after its implementation.
love and peace

Juliointhegithubbio

from circles-contracts.

Sounds like a "close as not doing" for now then!

from circles-contracts.

Based on @JuliointheStudio 's comments today, we should maybe leave this open for discussion.

from circles-contracts.

This has been decided. We will have system-wide demurrage from the start, but set the rate at a nominal level at the beginning.

from circles-contracts.