P2P Social Currency (Money 2.0)

[Evolving Trends]

Hi there,

I would like to present the ideas in this article below for discussion with folks on this forum.

The article itself is something I put together over night but I have been sitting with the ideas for a couple years now.

I could be a lot more elaborate in my presentation of these ideas, but I thought I'd run it by other curiously minded folks, to have some critical feedback points, prior to putting significant energy into it...

With that said, please enjoy and comment as appropriate.

Original URL: http://evolvingtrends.wordpress.com/2008/10/21/p2p-social-currency-...

P2P Social Currency (Money 2.0)

October 21, 2008 at 7:18 pm

Premise:

One of the foundational elements of society is the definition of money.

Changing how money is defined will change society.

Dialog:

If we had a networked, programmable currency then I could tell my money to exchange itself only for goods/services that are made by vendors who care about the planet AND who have donated to my chosen candidate for President.

I can be as particular as I want and my money should do the figuring out of whom to pay itself to, based on rules I supply, and based on information it can access about the parties I’m trading with.

Another example for networked, programmable currency is to enforce rules on the spending of money that I give to my kids (luckily no kids yet) so they don’t buy food that contains unhealthy ingredients.

The new networked, programmable money should abandon the idea of paying interest on borrowed money. There is so much debt in the system that it would take decades to get rid of it and return the economy to normal functioning. The interest on debt is like bad cholesterol. While it fattens the economy, it ultimately clogs the global economic arteries and can lead to economic failure, as it has done (see: global economic meltdown 2008.)

In my opinion, the concept of “credit” and “credit rating” is good but the concept of interest is not. What I mean is that people and businesses should have a credit rating but it should be tied to something other than their ability to pay interest on money borrowed.

If you lend money to someone, where that someone is chosen per the particular criteria you’ve programmed into your money, you should be able to get your money back and get “good will” points that would replace today’s “hamster wheel” concept of credit rating, which was designed to encourage people to buy money with money, which is not only retarded but gives value to money from nowhere. Instead of being rated on your timeliness in paying back money borrowed + interest, you should be rated by how much you’ve lent others and how much time you’ve given people to pay you back, and this rating, e.g. your “good will” points, becomes your credit rating. This way people can dictate that their money is to be exchanged for goods/services only from providers with N “good will” points or more.

Maybe a good place to try this P2P Social Currency (or “Money 2.0″) would be in an online virtual world?

[Evolving Trends]

Unlike gold, the value of energy increases with its abundance (more can be done) but price is controlled so it doesn't go up on its own. This way the extra margin (in value) is converted to higher productivity as energy is converted to work, e.g. powering cars, powering factories, etc

If there was too much gold out there the price of gold would fall drastically to pennies but because it has utility in the manufacture of goods etc its price won't go to zero.. like any other regular metal

With energy it's the same but energy has hugely more utility than gold, so the more energy you have the lower the price (up to a point after which the production of energy becomes economically unfeasible, and that is bound to happen, which is why price needs to be regulated above that threshold but continuously going down as the means of production get cheaper relative to the starting point) AND the more energy you have the more productivity you have in the economy as that energy is convertable into work. Gold can't be converted into work. It can be used as a metal but that's about it. Energy is convertable into work so the more exists of it the more productivity you have.

[Evolving Trends]

Clarification:


the value of energy increases with its abundance (more can be done) but price is controlled so it doesn't go up on its own. This way the extra margin (in value) is converted to higher productivity as energy is converted to work, e.g. powering cars, powering factories, etc
>>

Should read:

The value of energy increases with its abundance (more can be done with more energy) but its price is regulated dynamically with respect to demand (so it does not go up or down on its own, i.e. no speculative boom and bust) and kept above the threshold below which the financial gain from producing and selling excess energy is less than the cost, i.e. not economically feasible.

[Evolving Trends]

Hi Sepp,

In Summary:

1. Demurrage is good for preventing/regulating excessive savings (i.e. savings beyond the psychological buffer)

2. Wealth creation happens through accumulation of appreciable assets. No other way. You can have potential wealth, too, by accumulating credit points.

3. The value of energy increases with its abundance (more can be done with more energy) but its price is regulated dynamically with respect to demand (so it does not go up or down on its own, i.e. no speculative boom and bust) and kept above the threshold below which the financial gain from producing and selling excess energy is less than the cost, i.e. not economically feasible.

4. New money is only created by Peer Bank when Peer Gird needs to refill the buffer it keeps for future energy demand/spikes. Otherwise, Peer Bank simply acts as a financial hub for the p2p exchange of peer produced energy for Peer Dollars and Peer Dollars for peer produced energy.

[Sepp Hasslberger]

1. Demurrage is much more than a tool to punish excessive saving. Actually to use it in the way you propose seems to me a misuse of a perfectly good regulation valve in a monetary system. (A bit like using the electronics in a regulating circuit to administer electroshocks rather than doing its regulating function.)

2. Physical wealth creation happens every time a producer produces and the economic system allows the exchange of that product for something valuable the producer may desire. Ideal (virtual?) wealth creation could be the accumulation of either money or of credit points.

3. I like your reasoning on increase of the value of energy with abundance. But I shudder at the prospect of the price of energy being kept artificially high. Energy price is basically self regulating by the interplay of two factors: production and consumption. In my view, neither production nor consumption should be interfered with (by capping the price). Speculative boom and bust won't happen if energy production is widely distributed.

Question: What kind of a police state would be needed to prevent people selling their excess energy production to their neighbors (without going through the energy bank) or even to prevent them from producing that energy in the first place? I say regulation of price (even with good intent) is fraught with dangers and will lead to all kinds of unintended consequences.

4. You need a better mechanism in the system to respond to both the too much and the too little of money in circulation. That is the bane of today's money system. They have no regulating mechanism except for monkeying with interest rates (so banks will lend more or less money). You know where that led eventually - breakdown of the system. Can't get a loan these days to save your soul, even with US Congress injecting hundreds of billions into the banks...

[Evolving Trends]

Demurrage is much more than a tool to punish excessive saving. Actually to use it in the way you propose seems to me a misuse of a perfectly good regulation valve in a monetary system. (A bit like using the electronics in a regulating circuit to administer electroshocks rather than doing its regulating function.)
>>

That's exactly why I thought it was 'punishing' ... electroshock.

BUt I'm against taking something from someone and giving to another. That's forcing one person to give something to another person without that person reciprocating right then, i.e. "trade" not "give"

But taking away something (a percentage of savings) from someone and holding it then giving it to someone else in return for something (energy) which is to make them recirpocate is sort of OK, even if not completely OK because you're making them reciprocate.


3. I like your reasoning on increase of the value of energy with abundance. But I shudder at the prospect of the price of energy being kept artificially high.
>>

It's not about keeping the price artificially high. It's about keeping it just above the threshold below which energy production costs more than the price of energy (which can happen if someone invests in building massive energy production facility that operates in the negative, to drive prices down on purpose, also called "dumping"


Speculative boom and bust won't happen if energy production is widely distributed.
>>

I'm interested in the logic.



Question: What kind of a police state would be needed to prevent people selling their excess energy production to their neighbors (without going through the energy bank) or even to prevent them from producing that energy in the first place? I say regulation of price (even with good intent) is fraught with dangers and will lead to all kinds of unintended consequences.


>>


I am interested in two things: 1) how do you prevent someone from "dumping" energy and driving the price down on purpose to stave off competition, without having a cap, and 2) how do you prevent speculative boom and bust?


You need a better mechanism in the system to respond to both the too much and the too little of money in circulation. That is the bane of today's money system. They have no regulating mechanism except for monkeying with interest rates (so banks will lend more or less money). You know where that led eventually - breakdown of the system. Can't get a loan these days to save your soul, even with US Congress injecting hundreds of billions into the banks...
>>

By tying money creation to energy creation which is tied to higher productivity, it's possible to end up with too much money if productivity drops not due to energy but due to laziness or some other factor. So what do you do with the excess money? If money is never saved and instead is put into appreciable assets, those assets depreciate and that's that.

The key problem, and the reason I like demurrage without re-dsitribution (even as electroshock) is because together with credit points it helps reduce savings.

If energy growth does not lead to productivity growth then the society is failing, not the money system. :)

I'm prepared to stick to that for the simulation.. and see how it goes.

Can't solve ALL of society's ills by redefining money. You can solve some. And you don't need to add to the problems by forcing non-reciprocal giving, i.e demurrage with re-distribution which amounts to taking money from one guy and giving it to everyone without every giving back something as part of that singular transaction. I'm OK with demurrage without re-dsitribution where you take money from one guy and give it to Peer Bank and peer bank uses that money instead of printing more new money to pay for more energy, which equates to trading money for energy, not giving away money for nothing.

[Evolving Trends]

The latest draft is is located at:

http://p2pfoundation.net/P2P_Social_Currency_Model

Comments can be made under this seriously messy/long thread :) or under the original blog post here