P2P Energy Economy: critical feedback requested

[Evolving Trends]

As you may know, I've been developing a sustainable model for an abundance-based P2P economy where the value of money is derived from renewable energy, and where "the more you share the more you have" is the principle for wealth creation.

I've had a lot of discussions that helped me evolve the model to the stage where it's ready for serious debate.

The following are the main propositions of the model:

1. Direct the flow of money towards socially, ecologically and environmentally intelligent producers of goods and services.

2. Enable a model of money creation where the value of money is derived from energy (i.e. allows the conversion of energy surplus in the system to new money which is then converted to more goods and services, i.e., more productivity, and higher economic growth) and where the process for money creation is both simple (in that it's driven mainly by the economy's capacity to grow, based on increase in available energy) as well as transparent (in that everyone can verify the process.)

3. Enable a model of the economy that promotes sustainable, abundant and cheap energy, which should in turn enable higher productivity and drive economic growth.

4. Enable a model of the economy where in order for peers to grow their wealth (comparatively speaking) they have to share it (by lending their money to others.) In other words, "the more you share, the more you have."
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This is a request for feedback (please use the comments section of this blog post)

The model description R0.47.0 is at http://p2pfoundation.net/P2P_Social_Currency_Model

Thank you.

Marc

[Evolving Trends]

Dear all,

Thanks to everyone who debated the ideas in the 'P2P Social Currency' model, I have been able to upgrade both my understanding of a hypothetical P2P Energy Economy as well as the particular currency model I've been working on for such an economy.

The previous versions of the model leading up to this one had defined money as a carrier/tokenizer of potential energy (i.e. stored energy) and given that the value of potential energy depends on its use it led to having the concept of the "price of energy" which had to be kept above cost of energy production to enable sustainable abundance of energy.

I've realized after working with mental simulations that it works much better when money is defined as a tokenizer of energy flows (i.e. energy that is used, not energy that is stored) which enables giving the currency an absolute value (in energy e.g. 10,000 joules per token, which is roughly 3Wh) as opposed to a potential value that varries subject to supply and demand of energy.

The updated propositions of the model:

1. Convert surplus energy, generated by peers and stored in a common grid, to a new type currency (defined under this model as a tokenizer of potential energy and information flows) with an absolute value in energy per token, that does not increase or decrease over time.

2. Direct the flow of money, using the aforementioned new kind of currency, towards socially, ecologically and environmentally intelligent producers of goods and services.

3. Enable a model of the economy where in order for peers to grow their wealth (comparatively speaking) they have to share it (by lending their money to others.) In other words, "the more you share, the more you have."

4. Enable a model of the economy that promotes sustainable abundance in P2P energy production and enables P2P energy distribution and re-distribution (from peers with surplus to peers with deficit) which in turn enables higher productivity and efficiency and drives economic growth.

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The latest full model (0.75.0), which has benefited from tons of discussions with everyone here and on other lists, and even more discussions within the P2P Foundation ecosystem, is available at:

http://p2pfoundation.net/P2P_Social_Currency_Model

Minor (semantic) changes:

1. Peer Bank is now known as Common Bank (its function did not change except it does not regulate price of energy now since there is no such thing as "price" of energy anymore since energy flow is tokenized as currency with an absolute value in energy)

2. Peer Grid is now Common Grid (its function did not change)

3. There is no such thing as Peer Dollars or Peer Money. Money is now just tokens representing energy and information flows (i.e. energy used, as opposed to potential energy.) The tokens have absolute numerical value in Joules, e.g. each token is 10,000 joules (~= 3Wh)... the use of Juoles instead of 'Watt Hour' is simply because it's a self-contained unit... and sounds closer to "dollars" than "Watt hour"

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The model making enough sense now for me to go ahead and come up with an addictive (yet educating/refreshing) game that implements this model.

Happy holidays and thanks again for all the debates.

Marc
p.s. version on my blog has yet to reflect these changes.

[Evolving Trends]

Here is the updated Value Creation Model

The Value Creation Model

When the peers have more capacity to produce energy than is consumed directly by other peers, i.e. when there is a surplus of energy in the grid, Peer Bank (the open, automated, distributed process) converts that surplus energy to new money (e.g. 1 peer dollar for 1kW), which is then converted by the peers to goods and services, loans and appreciable assets (including revenue generating ones), all of which lead to an increase economic activity, which then uses up the surplus energy, in a continuous cycle. The money invested in appreciable assets (including revenue generating ones, e.g. farm land) grows with the growth of the economy, which has the effect of expanding the value basis for the economy, which is not derived from energy directly but from land mass, which grows with the growth in population, which in turn requires more energy (to utilize the land and support the growing population.) So as the value basis for the economy expands (i.e. as the land increase in usage density and volume), in correspondence with the growth of the population, the economy should continue its steady growth.

When we say that land mass is the value basis for the economy (under this model) we mean the following:

As population of people grows the land mass (density of usage and volume) has to grow, too, and so land even unused is guaranteed to provide an increasing value basis.

So land mass provides a stable, always-increasing value basis.

By contrast, the value basis for energy is tied to its use, so as usage goes up and down in times of high and low economic productivity its value (and price) goes up and down, and that's why land mass (the usage density and volume of land encompassed by the economy not the value of land), which increases with growth in population, not energy, is used as the value basis for the economy.

This value basis for an economy should not to be confused with the "value of an economy," which is defined per the given valuation model.

The need to reduce the currency in circulation is not present in this model because the value basis for the economy is not derived directly from energy itself, which can overflow beyond all possible use in the short term, leading to overflow of currency in circulation beyond what's usable in the short term, and is not derived from interest, which can go up and down also overflow beyond society's ability to pay it in the short term, creating a vacuum of cash (see: global credit crisis 2008), and is not derived from the level of economic activity, which can go up and down, but from the land mass (mass = usage density * volume) encompassed by the economy, which grows as the population grows, requiring more energy and enabling higher output, ad infinitum (or till the available land mass is fully utilized.)

[Evolving Trends]

Model Update:

1. Re-introduced Model's Scope (time again to center the discussion w.r.t. Dante)

2. Updated "Original Idea" by removing reference to where money gets its value today. A whole section called "Existing Model" would have to be added that details the model of the economy in use today... I would consider that once the game/simulation proves the merits of the model I'm developing.

3. Under "Peer Credits" I gave a definition for "peer production value of money", which I believe is a new phrase.

4. Clarified wording under Anti-Dumping and Anti-Monopoly Caps for Energy Production, with emphasis on why a cap on energy production per peer, which is calculated based on demand, is needed to sustain the abundance model (and removed mention of price setting since it's explained under Energy Price Regulation)

5. Clarified wording under: Energy Price Regulation, with emphasis on the 2-variable price regulation function

6. Added a note re: affinity matrix and current applicability (at end of Clarification to Affinity Matrix)

7. Improved explanation under Value Creation Model (fka Value Creation Process)

8. Introduced the concept of investing in marketing vs investing in production as a model for lending (accumlating credit points) vs investing in goods and services

9. Updated "Why Demurrage Is Bad"

R 0.58.0 which incorporates the above is at

http://p2pfoundation.net/P2P_Social_Currency_Model

Merry xmas and happy holidays everyone!

[Evolving Trends]

Of course energy and economy go together, what I specifically challenge is the idea that energy production (and in this case only de-centralized production from renewable sources) should be the determining factor for regulating the amount of currency available in your economic model.
>>

It depends on your definition of money. If money is a carrier of energy and information then as more energy is created, more money is created.

Part of the laws of thermodynamics that drive our physical reality and any economic model that conforms to this physical reality (as opposed to go against it) is that Energy cannot be destroyed.

Removing currency from circulation, where currency is the carrier of energy + information, amounts to going against the laws of physics, and with my model being based in large part on thermodynamic theory it does not attempt to destroy energy (in the form of money) as that would be going against the laws that govern physical reality which also govern any economy involving people and physical resources.


P2P energy production, as desirable as it is, would seem to me to be a bad regulating mechanism for the availability of tokens. You yourself acknowledge that by introducing an arbitrary mechanism that limits how cheap energy can become.
>>

The logic of sustainable abundance, while counter-intuitive, is not arbitrary.

If energy price falls below the cost of producing energy then you don't have sustainable abundance.


People putting savings (hoarding) in gold or some other commodity actually has no influence on your currency as such. Since they have to spend the currency to get the gold, the currency is now free to circulate again, doing what it is supposed to do, i.e. mediate actions of exchange between people.
>>

If I put my money into gold and everyone puts their money into gold because we're afraid of it losing value through demurrage then the biggest gold supplier will have all the currency and they'd have to smuggle it out of the community in order for it not to be demurred. It's like driving people with fear and punishment rather than reward so people run away from punishment. And then you go back to trading with gold coins and all the limitations of that model.

The key thing is: people run away from punishment and they run towards reward. Demurrage is punishment. Peer credit is reward.


Here we are coming to an important point. For one, an energy surplus is not storable to be used tomorrow. Electric utilities have great troubles just because the energy that is abundant at some times during the day cannot be stored to be used later. So there really is no physical mechanism by which the Peer Bank could keep that energy, or could reasonably pay for its production. If it's a surplus, it simply won't be used. Money issuance should not be based on it either. You have got to think over what you physically want to do with surplus energy, as storing it will be an extremely expensive process, at least with currently available technologies.
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There is no fundamental law in physics against the storage of energy. Energy can be stored today as oil. It's only a matter of time before we figure out how to store all types of energy.


The value in any economy is in its production and the subsequent exchange and consumption of what was produced, not in the assets the participants hold. The only reason for holding, for instance, a piece of farmland, is to produce food for one's family and some surplus to sell so as to acquire other things that the person can't produce. Without someone working the farm, that land has no value to the economy.
>>

I have to clarify that I'm talking about "value basis of an economy" not the "value of an economy." They are two different things.

As population of people grows the land mass (density of usage and volume) has to grow, too, and so land even unused is guaranteed to provide an ever increasing value basis.

So land mass provides a stable, always-increasing value basis.

By contrast, the value of energy is tied to its use, so as usage goes up and down in times of high and low economic productivity its value (and price) goes up and down, and that's why land mass, not energy, is used as the value basis for the economy.



As such there is a necessity for a mechanism to both increase and decrease the amount of tokens in circulation.
>>

If we're talking about money as a carrier of energy and information I highly suggest reading up on the laws of thermodynamics, even a simple summary would help you see the basic constraints that exist in physical reality and that exist in any model of the economy that involves people and physical resources.

Energy cannot be destroyed.

Money that is a carrier of energy/information cannot be destroyed either, or else you're designing your own reality with your own laws, but that doesn't work when your reality has to work within physical reality which is governed by those laws.

"... in order to maximize the use of available energy it must be interchangeable in all its different forms, including but not limited to physical work, virtual work (computing), creative work, emotional work, mental work, biological work (e.g. food synthesis), and other forms of work. That is to say that tokenizing the energy is necessary for its flow in an economy."

Here you acknowledge that energy comes in many forms, and that it needs to be stored (tokenized) to be useful. Yet, your model attempts to base itself on tokenizing only one type of energy, electricity. What about all the others?

[Sepp Hasslberger]

Hi Marc,

some more observations:


"Any economy is driven by energy. The energy to do work can be food, oil, solar, wind, emotional energy, creative energy, etc. In other words, to me, separating energy from economy is like separating the world from energy. The world runs on energy, in all its forms."

Of course energy and economy go together, what I specifically challenge is the idea that energy production (and in this case only de-centralized production from renewable sources) should be the determining factor for regulating the amount of currency available in your economic model. P2P energy production, as desirable as it is, would seem to me to be a bad regulating mechanism for the availability of tokens. You yourself acknowledge that by introducing an arbitrary mechanism that limits how cheap energy can become. So energy producton is good, but energy production as a regulating mechanism for the availability of a currency is not optimal.



"with Demurrage, people can always hoard money in the form of gold or some other precious scarce commodity. In this sense, Demurrage does not enable "the more you share, the more you have." It enables "the more you have, the less others have" and that is because people will put their money in gold that is not known to the demurrage authority and cannot be demurred."

Demurrage enables "the more you have, the more you share", by forcing a contribution from those that have (possess, at any given time) the greatest amount of tokens or currency units. As such, it makes the hoarding of those currency units less convenient than - say - investing in some property that keeps its value. All you want is for the currency to efficiently circulate. Demurrage ensures that in a quite natural way.

People putting savings (hoarding) in gold or some other commodity actually has no influence on your currency as such. Since they have to spend the currency to get the gold, the currency is now free to circulate again, doing what it is supposed to do, i.e. mediate actions of exchange between people. So really gold and other precious metals would be neutral in your economy.

"New money is only created by Peer Bank when the P2P energy production capacity becomes larger than the existing monetary mass (i.e. more energy than there is money.) This surplus energy is stored by Peer Bank and new money is issued to the peers in return for the energy..."

Here we are coming to an important point. For one, an energy surplus is not storable to be used tomorrow. Electric utilities have great troubles just because the energy that is abundant at some times during the day cannot be stored to be used later. So there really is no physical mechanism by which the Peer Bank could keep that energy, or could reasonably pay for its production. If it's a surplus, it simply won't be used. Money issuance should not be based on it either. You have got to think over what you physically want to do with surplus energy, as storing it will be an extremely expensive process, at least with currently available technologies.


"The money invested in appreciable assets (including revenue generating ones, e.g. farm land) grows with the growth of the economy, which has the effect of expanding the value basis for the economy, which is not derived from energy directly but from land, real estate and things that appreciate as the economy grows. So as the value basis for the economy expands (i.e. as land and other appreciable assets increase in relative value), in correspondence with the growth of the economy, the economy should continue its growth."

My view differs radically from yours on this point. The value in any economy is in its production and the subsequent exchange and consumption of what was produced, not in the assets the participants hold. The only reason for holding, for instance, a piece of farmland, is to produce food for one's family and some surplus to sell so as to acquire other things that the person can't produce. Without someone working the farm, that land has no value to the economy.

It's not the value of the land as such that gives the economy value, but the production it enables. Many people do not hold land but they can still produce by transforming some physical good to increase its value or by performing a service others want. An economy is not an agglomeration of "appreciable assets" but a living organism where the participants all contribute to the production and exchange of goods and services which, in the end, lifts the standard of living of all participants much higher than it could be if everyone was just fending for themselves.


"Demurrage does not reduce currency if money is locked up in gold sitting in people's homes or in Swiss bank safes."

Demurrage is a charge on (possession and use of) money and by definition it reduces the total amount of that money in circulation. It can be made neutral with regard to the amount of money (tokens) in circulation, if the proceeds from the demurrage charge are immediately re-distributed. Gold sitting in people's homes or in Swiss bank accounts is not money in your economic model. It is merely a way to "store away" some of the personal energy that has been produced, for future use. In order to buy the gold, the person has to spend the tokens, so the tokens remain available in the economy. The gold takes nothing away. It only permits someone to save up for a rainy day, and I believe that to be a quite legitimate desire in any economic setting.

"The need to reduce the currency in circulation is not present in the model I'm working with because the value basis for the economy is not derived directly from energy itself (which can overflow beyond all potential use) or from interest (which can also overflow beyond the society's ability to pay it) but from appreciable assets (e.g. land, real estate) that continue to grow in value and expand in size."

Marc, as stated above, the value of an economy is the production of goods and services by its participants, not the assets they own. Money is needed to mediate the exchange of these products. Assets don't come into this equation, except where they may be necessary as a means to enable production. But it is still the aggregate production by all peers that determines the value of the economy, not the assets some of them may be holding.

As such there is a necessity for a mechanism to both increase and decrease the amount of tokens in circulation. If you do not have such a mechanism, linked to the aggregate production of all peers, inflation and deflation will disturb economic activity.

"... in order to maximize the use of available energy it must be interchangeable in all its different forms, including but not limited to physical work, virtual work (computing), creative work, emotional work, mental work, biological work (e.g. food synthesis), and other forms of work. That is to say that tokenizing the energy is necessary for its flow in an economy."

Here you acknowledge that energy comes in many forms, and that it needs to be stored (tokenized) to be useful. Yet, your model attempts to base itself on tokenizing only one type of energy, electricity. What about all the others?

[Evolving Trends]

Hi Sepp,

I've added a new expanded section on Value Creation and a paragraph on the "tokenization of energy" to enable a fuller picture of the model. I also eliminated use of the word "backing" and "backed" to align our semantics in this area.

Here you go (they are better worded here than in my previous reply:

The Value Creation Process

When the peers have more capacity to produce energy than is consumed directly by other peers, i.e. when there is a surplus of energy in the grid, Peer Bank (the open, automated, distributed process) converts that surplus energy to new money, which is then converted by the peers to goods and services, loans and appreciable assets (including revenue generating ones), all of which lead to an increase economic activity, which then uses up the surplus energy, in a continuous cycle. The money invested in appreciable assets (including revenue generating ones, e.g. farm land) grows with the growth of the economy, which has the effect of expanding the value basis for the economy, which is not derived from energy directly but from land, real estate and things that appreciate as the economy grows. So as the value basis for the economy expands (i.e. as land and other appreciable assets increase in value and size), in correspondence with the growth of the economy, the economy should continue its growth.

The need to reduce the currency in circulation is not present in this model because the value basis for the economy (i.e. what creates wealth in the economy) is not derived directly from energy itself, which can overflow beyond all possible use in the short term, leading to overflow of currency in circulation beyond what's utilizable short term, and is not derived from interest, which can also overflow beyond society's ability to pay it in the short term, creating a vacuum of cash (see: global credit crisis 2008), but from the increase in the mass of appreciable assets (i.e. the usage density and volume of land, real estate), which cannot overflow as there is always a need and desire to acquire (invest money in) more land, which is the basis for more appreciable assets, which grow in value in sync with increase in economic activity, thus enabling the economy to continue its growth.

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And re: tokenization of energy as currency

Unlike gold, which derives most of its value from its scarcity not from its utility, energy, which derives its value from its utility, increases in value (not price) as it becomes more abundant and cheaper. Having said that, the immediate value of unused energy is zero, so in order to maximize the use of available energy it must be interchangeable in all its different forms, including but not limited to physical work, virtual work (computing), creative work, emotional work, mental work, biological work (e.g. food synthesis), and other forms of work. That is to say that tokenizing the energy is necessary for its flow in an economy. Hence, the use of money in this model as a carrier(or tokenizer) of energy as well as a carrier (or tokenizer) of the information that is associated with each exchange.

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With respect to "distributing money to everyone on equal basis even those who do not produce ..." I had given a Psychology-based response using the context of Parent:Child vs Adult:Adult. I still stick by it but I am looking for a more abstract/rational way of describing the flaw I see in that model.

[Evolving Trends]

Hi Sepp,

Thanks for putting in the time to indicate your points.

Here are my replies:


I would tend to separate P2P energy from a P2P economy.
>>

Any economy is driven by energy. The energy to do work can be food, oil, solar, wind, emotional energy, creative energy, etc. In other words, to me, separating energy from economy is like separating the world from energy. The world runs on energy, in all its forms.

The model of the economy I'm working with is in the realm of Thermoeconmics. In other words, energy is very central to how it works, as it is in reality. Every action requires some form of energy, and what the model does is to tokenize this energy and allow it to manifest in different forms, using money (aka tokens) as the universal interchange for the various forms of energy, e.g.: I pay someone $1000 in Peer Dollars and they produce some work for me that might involve growing food, making art, running a marathon, baby sitting, writing software, producing some metal work, etc, all of which involve some form of energy and all of which are interchangeable through a tokenized exchange.

So P2P Energy and P2P Economy make the perfect union. They are in fact one and the same, and this sameness can be ignored or it can be embraced, and, to me, embracing it means that the economy needs to be built on the laws of physics (specifically, thermodynamics), so that it models how energy exchanges happen in the real world, using whatever design template/rules necessary to mimic the behavior growing systems in nature, because the economy behaves is a real physical system (made of people, assets, resources and energy exchanges.)


Energy production should be de-centralized as much as possible, and linked up in a ubiquitous P2P grid that starts out from today's energy providers and includes progressively more and more peer production of energy.
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Yes, completely agree re: decentralization, except that the logic of "sustainable abundance" can be counter intuitive to some.

he logic of "sustainable abundance" is counter-intuitive to those who are used to thinking that an abundant resource (e.g. solar energy) is abundant as long as we can produce it for "free" and on renewable basis (the sun always burns)

In a P2P Energy SmartGrid like the Peer Grid concept in the model I'm developing, which enables the exchange of energy as currency, there is a cost to the production of an abundant and renewable resource like solar energy and if someone or some group of people decide to dump energy into the market at below cost of production then they will drive out other producers, especially the smaller ones. There is also the speculative bets on energy prices that can drive prices too high or too low, which throttles economic growth and can culminate in the failure of the renewable-energy-backed currency.


For a p2p currency that is non-interest based, two things would be important.

- One is a mechanism that supplants interest. Your proposal is to give points or credits to people who loan money to others without asking interest. A historical example of a different approach is Silvio Gesell's "rusting money", i.e. money that is subject to a periodic charge called demurrage. My feeling is that Gesell's approch will prove to be more effective in supplanting interest as an incentive.
>>

I disagree because with Demurrage, people can always hoard money in the form of gold or some other precious scarce commodity. In this sense, Demurrage does not enable "the more you share, the more you have." It enables "the more you have, the less others have" and that is because people will put their money in gold that is not known to the demurrage authority and cannot be demurred.


- The second thing is that the currency should be created and 'given' to those who need to use it, not loaned to them to be re-paid at a future date.
>>

Yes, currency is given to people by those they sell to. Also, at the start of the economy (as a process), Peer Bank would create new money in return for energy supplied by the participating peers, so it creates new currency that it gives to those peers. Then peers start trading using that currency, and when new energy surplus exist then new money will be produced.

Here is the full section, so the above is taken in context of a more complete explanation:

Peer Bank

New money is only created by Peer Bank when the P2P energy production capacity becomes larger than the existing monetary mass (i.e. more energy than there is money.) This surplus energy is stored by Peer Bank and new money is issued to the peers in return for the energy, who then use the money to purchase goods and services, invest in appreciable assets, or lend to others. The stored energy is used to meet the new increased demand for energy created by the resultant growth in economic activity. In other words, energy surplus in the system is converted to money which is then converted to economic growth which then consumes the surplus energy, and so on.

Peer Bank does not have power over how newly created money is distributed. The distribution of new money is orchestrated by the collective process of peers selling their excess locally generated energy to Peer Bank, i.e. on first come first served basis, during the times when there is an energy surplus in the system. Peer Bank stores that surplus energy and pays the peers with using newly created money.

At the start of the economy (as a process), Peer Bank would create new money in return for energy supplied by the participating peers, so it creates new currency that it gives to those peers. Then peers start trading using that currency, and when new energy surplus exist then new money will be produced.

In addition to creating new money to match surplus in energy supply and enable higher productivity, Peer Bank also acts as a financial hub for peers selling and buying peer-produced energy from each other.

Peer Bank does not have power over when to create new money or how much to create. Under this model, the decision to print new money is automatically triggered when measurements from Peer Grid indicate a surplus in the energy production capacity within the system.

Therefore, the power to drive the economy rests with the edge (the peers), not with the center. Peer Bank is an open, process that follows the edge, not the center, which is why it is referred to as "Peer" Bank rather than Central Bank.

To reiterate this key point, Peer Bank is an open, peer-informed, distributed process, not a central bank.

The "Bank" part of the "Peer Bank" name refers to the storage of energy, not the currency itself.

An appropriate full name for Peer Bank would be Peer Energy Bank, where Peer is somehow stressed, but people would reduce the phrase to "Peer Bank" for brevity and effect. Hence, the current choice for the name.

The Value Creation Process

When the peers have more capacity to produce energy than is consumed directly by other peers, i.e. when there is a surplus of energy in the grid, Peer Bank (the open, automated, distributed process) converts that surplus energy to new money, which is then converted by the peers to goods and services, loans and appreciable assets (including revenue generating ones), all of which lead to an increase economic activity, which then uses up the surplus energy, in a continuous cycle. The money invested in appreciable assets (including revenue generating ones, e.g. farm land) grows with the growth of the economy, which has the effect of expanding the value basis for the economy, which is not derived from energy directly but from land, real estate and things that appreciate as the economy grows. So as the value basis for the economy expands (i.e. as land and other appreciable assets increase in relative value), in correspondence with the growth of the economy, the economy should continue its growth.


It should be distributed in equal parts to all participants in the p2p economy, not only to producers of energy.
>>

The idea of people being supported by a central actor that prints money arbitrarily and gives it to people is a parent-child paradigm, where the children are dependent on a parent. The P2P paradigm is an adult-to-adult model where adults can take any one of four roles: buyer/consumer, seller/producer, lender, borrower. They cannot, however, be children in the sense of them being in a nest waiting for Mommy (some central actor) to feed them.
New entrants are given peer credits in return for investing in P2P energy generators. After that they can generate income by selling excess energy to others (which is a collective process) as well as from selling goods and services they produce with their own produced energy.


There is a need to balance the currency (i.e. the amount of currency units in circulation) with the use to be made of it. To mediate the exchange of a certain amount of economic activity, we will need a certain amount of currency. There should thus be a possibility to agilely increase or decrease the amount of currency in circulation.
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Yes, but that "use" is defined in my model based on the following: when there is more energy available in the system beyond the current consumption, i.e energy surplus, new money will be created (see Peer Bank section above) and given to the energy peers (per a collective, first come, first served process) in return for energy which is then consumed by the increased economic activity resulting from the bigger monetary mass. This cycle should continue as long as the value basis for the economy (e.g. land, real estate, farm land, and all appreciable assets) continues to expand.


The increase of currency should be no problem as it can be issued as needed.

The need for a mechanism of decreasing currency in circulation suggests that demurrage has a definite use.
>>

Demurrage does not reduce currency if money is locked up in gold sitting in people's homes or in Swiss bank safes.

The need to reduce the currency in circulation is not present in the model I'm working with because the value basis for the economy is not derived directly from energy itself (which can overflow beyond all potential use) or from interest (which can also overflow beyond the society's ability to pay it) but from appreciable assets (e.g. land, real estate) that continue to grow in value and expand in size.

So there is no need, in theory, to reduce monetary mass. But we'll test this algorithm during the simulation to find the limit (i.e. why it would stop growing, e.g. no more land to acquire or the per ft usage density is reached or the idea of moon colonies doesn't work out)


I know that you have said "demurrage does not work" but I do not know what you base that statement on.
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If people put there money into gold and keep it in safes then how would demurrage work to redistribute or reduce that money?



In times of contraction, demurrage offers an effective way of removing any excess of currency units in circulation.
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It's not effective because most people would put their money into gold and lock it up in safes.

And in times of contraction, the value basis of the economy, which is appreciable assets, would not go down. The only reason it goes down today is because it's tied to people's ability to pay interest (mortgage) which also drives up prices of appreciable assets too fast. Interest (or the ability to pay interest) is the reason appreciable assets appreciate really fast and depreciate really quickly. If you take interest out then the price of appreciable assets will behave in a stable way as long as more land is available. So the growth in the value and size of appreciable assets act as anchors for the zero-interest economy and as long as economic activity can be enabled from the bottom up (people generating their own energy) the economy should not have any prolonged periods of contraction, but, again, assuming the geographic mass (i.e. land, which is the basis for appreciable assets) continues to grow (which means extra money would be invested in an every-increasing land mass, so there is no reason to reduce monetary mass)

It's not a closed system.


In terms of stability of the system, demurrage offers a negative feedback mechanism that counters the accumulation of currency in a few hands. This is an "automatic" effect of demurrage and broad based re-issue of units.
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But what if people put their money into gold and lock it up in safes?


Backing a currency

A currency does not need material backing. It is already "backed" by the combined value output of the p2p economy it serves. Any physical backing of currency, be it with precious metals or with energy, will act as a distraction from the real purpose of the currency, which is to serve to mediate exchange in the economy served. Backing will also impede agile adjustment of the amount of currency in circulation to the needs of the economy.
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I actually took this hint and I understand the confusion I and others had as a result of using the word "backing" ... What money is, in the model I'm working with, is simply a tokenizer (or carrier) of energy and information. Neither energy nor information actually "back" the money.

In addition, money, in the model I'm working with, is defined as a token (not an object) ... A token is a unit of something, and in this case a unit of energy and information. An object is something with properties, actions, events. The money in the model I'm working with is just a token, not an object.

[Sepp Hasslberger]

I would tend to separate P2P energy from a P2P economy.

Energy production should be de-centralized as much as possible, and linked up in a ubiquitous P2P grid that starts out from today's energy providers and includes progressively more and more peer production of energy.

Grid point (http://www.gridpoint.com/) might be a good start for achieving this aim.

A P2P economy, on the other hand, necessitates a new type of currency that is not interest-based and is not issued as a property of private interests (banks) and as a debt for the users, as our current one.

For a p2p currency that is non-interest based, two things would be important.

- One is a mechanism that supplants interest. Your proposal is to give points or credits to people who loan money to others without asking interest. A historical example of a different approach is Silvio Gesell's "rusting money", i.e. money that is subject to a periodic charge called demurrage. My feeling is that Gesell's approch will prove to be more effective in supplanting interest as an incentive.

- The second thing is that the currency should be created and 'given' to those who need to use it, not loaned to them to be re-paid at a future date. It should be distributed in equal parts to all participants in the p2p economy, not only to producers of energy.

There is a need to balance the currency (i.e. the amount of currency units in circulation) with the use to be made of it. To mediate the exchange of a certain amount of economic activity, we will need a certain amount of currency. There should thus be a possibility to agilely increase or decrease the amount of currency in circulation.

The increase of currency should be no problem as it can be issued as needed.

The need for a mechanism of decreasing currency in circulation suggests that demurrage has a definite use.

I know that you have said "demurrage does not work" but I do not know what you base that statement on.

In 'normal' times, demurrage is neutral, i.e. it does not change the amount of currency in circulation, since currency can be re-issued to all in the same amount as demurrage decreases the total.

In times of contraction, demurrage offers an effective way of removing any excess of currency units in circulation.

In terms of stability of the system, demurrage offers a negative feedback mechanism that counters the accumulation of currency in a few hands. This is an "automatic" effect of demurrage and broad based re-issue of units.

Demurrage also tends to make the taking of interest unnecessary, as money becomes available to others automatically. Everyone in the p2p economy served by a demurrage-carrying currency will tend to spend it (or loan it out without interest) rather than sit on it. So no prohibition of interest is necessary. Demurrage simply makes interest naturally tend to zero.

Backing a currency

A currency does not need material backing. It is already "backed" by the combined value output of the p2p economy it serves. Any physical backing of currency, be it with precious metals or with energy, will act as a distraction from the real purpose of the currency, which is to serve to mediate exchange in the economy served. Backing will also impede agile adjustment of the amount of currency in circulation to the needs of the economy.

My 2 cents -

Sepp