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Editor: DonovanBaarda
Time: 2019/01/25 12:52:31 GMT+11 |
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changed: -1. a measure of value. -2. a 1. a 2. a measure of value. removed: - changed: -b Wealth lifecycle ---------------- Wealth is created, transferred, and consumed. Note that transferring wealth is itself a form of wealth creation, since it moves an asset to where it has more value. We can assume each transaction represents both wealth transferred and created. Wealth is consumed both directly (food eaten) and through assets aging. We can assume that wealth (and thus the currency that reflects it) is consumed overall at a "depreciation rate". Demurrage taxes --------------- Demurrage rates reflect should correspond to asset depreciation rates, so that storing your wealth in currency is relatively effective as storing it in other assets. ATO depreciation rates are 37.5% for "low value assets", 30% for "simplified business assets". For most other assets they calculate the depreciation rate as `2/life`, where the effective life is between 3~30 years depending on the asset type. Note the "simplified business assets" depreciation rate corresponds with an effective life of 6.666 years. A 10 year rate corresponds to a 20% depreciation rate. Note increasing the demurrage rate increases the currency "burn" rate and encourages spending, acting as an economic stimulus. This suggests it should maybe be dynamic in response to economic indicators to try and stabilize economic activity. However, making it too volatile undermines the currency's predictability. So if this is made dynamic, it should change very slowly. Demurrage stimulus effects are implemented in most currencies using inflation rates. The Australian Reserve tries to peg inflation between 2~3% for predictability and to provide enough stimulus. This is significantly less than typical asset depreciation rates, which suggests that it's better to sit on currency than assets. However, this is complicated by banking, interest rates, and the returns for actually using assets. In practice "sitting on currency" actually involves putting it into a bank for interest, and the bank loans it to others who invest it in working assets. So this is equivalent to investing it in "bank assets". Perhaps a reasonable rate is somewhere between the 2~3% target inflation rate and a 20% asset depreciation rate, or around 10%? Transaction taxes ----------------- Transaction taxes implemented into the currency makes tax avoidance impossible, and discourages wash-trading attacks to create inflated transaction stats. Wealth being created is a profit. Since transactions represent both wealth being transferred and created, we can assume a percentage of each transaction is profit. If we assume every transaction represents a 10% profit, a 50% income tax rate would mean a 5% transaction tax rate. Transaction taxes should be taken out of the received value, so a sale for 100.00 hours should net the recipient 95.00 hours. Note increasing the transaction tax rate increases the currency "burn" rate and increases economic negative feedback. It could be made dynamic in response to economic indicators to try and stabilize wealth distribution. However any change in tax rate represents an immediate change in effective stored value (as prices will probably rise to account for the increased taxes), so its rate of change is effectively another demurrage effect. It can have economic stimulus effects, encouraging people to spend when it's low and save when it's high, but only if it's volatile. If it is too volatile it undermines the currencies predictability. If it is dynamic, it should change very slowly. It also acts as a kind of "backlash/damping against currency trading volatility. Since trading the currency costs, it's only worth trading if the value gained is greater than that cost. Transaction fees ---------------- A per transaction fee represents the cost of performing/recording the transaction and discourages transaction-spam attacks using a huge number of small value transactions. Note that these fees effectively limit how small micro-transactions can be, as transactions below a certain size become too costly. A transaction fee of 1 second means transactions for less than 1 second cost more than 50% in fees. Transaction fees should be paid by the source of the payment to discourage them from making payments using many small transactions. If arbitrary sized data can be stored with transactions (like receipt details, etc), then it probably makes sense to make the transaction fees a function of the transaction data size to better reflect the transaction cost. Basic Income ------------ New currency should be injected into circulation using a basic-income style distribution to all "people". This represents both a "tax rebate" to redistribute taxes paid, and a universal dividend based on the overall economy's growth. The amount distributed should be varied to ensure that currency in circulation reflects the available real wealth, and thus stabilizes the currency. It should be distributed per person as a rate over time, where the rate is dynamically adjusted in response to economic indicators to stabilize the currency. Note a high basic income rate increases the currency "spawn" rate and increases economic negative feedback. In a system where the net wealth is constant it should match this:: I = (D * C + T*v + F*t) / P Where:: I is income per year per person D is the demurrage rate C is the total currency in circulation T is the transaction tax rate F is the transaction fee v is the annual transaction volume t is the number of transactions P is the number of people If we assume people on average spend 12x their average wealth per year (spend whole monthly income each month, with 1/2 month in reserve) and that transaction fees are negligible, for D=10%, T=5%, that gives I=1.3x the average monthly salary per year. Currency stability ------------------ Rates/taxes/fees reduce the amount of currency in circulation. Basic Income increases the amount of currency in circulation. New currency needs to be created and distributed to reflect new wealth is being created and currency "burned" taxes/fees.
TLDR; Maybe, but probably none of the ones we currently have.
Note I'm going to focus on digital currencies as an alternative to fiat currencies, not any of the other applications of the related technologies like blockchains, distributed ledgers, smart contracts, etc.
The point of money is it helps human cooperation to expand beyond our monkeysphere limits. It is one of the technological innovations that allowed trade to expand beyond our normal trust limits, and trade is cooperation.
Money does this by providing the following functions;
Money is not real wealth, it is just a symbolic token for real wealth. Any currency is actually collateralized by everything you can buy with it.
current cryptocurrencies focus on "how" currencies work, and brag about how their cryptocoin is a better implementation of the attributes of money than fiat money.
They ignore "what" functions currencies serve, and even more important, the "why" we even need this.
Wealth is created, transferred, and consumed. Note that transferring wealth is itself a form of wealth creation, since it moves an asset to where it has more value. We can assume each transaction represents both wealth transferred and created. Wealth is consumed both directly (food eaten) and through assets aging. We can assume that wealth (and thus the currency that reflects it) is consumed overall at a "depreciation rate".
Demurrage rates reflect should correspond to asset depreciation rates, so that storing your wealth in currency is relatively effective as storing it in other assets.
ATO depreciation rates are 37.5% for "low value assets", 30% for "simplified business assets". For most other assets they calculate the depreciation rate as 2/life, where the effective life is between 3~30 years depending on the asset type. Note the "simplified business assets" depreciation rate corresponds with an effective life of 6.666 years. A 10 year rate corresponds to a 20% depreciation rate.
Note increasing the demurrage rate increases the currency "burn" rate and encourages spending, acting as an economic stimulus. This suggests it should maybe be dynamic in response to economic indicators to try and stabilize economic activity. However, making it too volatile undermines the currency's predictability. So if this is made dynamic, it should change very slowly.
Demurrage stimulus effects are implemented in most currencies using inflation rates. The Australian Reserve tries to peg inflation between 2~3% for predictability and to provide enough stimulus. This is significantly less than typical asset depreciation rates, which suggests that it's better to sit on currency than assets. However, this is complicated by banking, interest rates, and the returns for actually using assets. In practice "sitting on currency" actually involves putting it into a bank for interest, and the bank loans it to others who invest it in working assets. So this is equivalent to investing it in "bank assets".
Perhaps a reasonable rate is somewhere between the 2~3% target inflation rate and a 20% asset depreciation rate, or around 10%?
Transaction taxes implemented into the currency makes tax avoidance impossible, and discourages wash-trading attacks to create inflated transaction stats.
Wealth being created is a profit. Since transactions represent both wealth being transferred and created, we can assume a percentage of each transaction is profit.
If we assume every transaction represents a 10% profit, a 50% income tax rate would mean a 5% transaction tax rate. Transaction taxes should be taken out of the received value, so a sale for 100.00 hours should net the recipient 95.00 hours.
Note increasing the transaction tax rate increases the currency "burn" rate and increases economic negative feedback. It could be made dynamic in response to economic indicators to try and stabilize wealth distribution. However any change in tax rate represents an immediate change in effective stored value (as prices will probably rise to account for the increased taxes), so its rate of change is effectively another demurrage effect. It can have economic stimulus effects, encouraging people to spend when it's low and save when it's high, but only if it's volatile. If it is too volatile it undermines the currencies predictability. If it is dynamic, it should change very slowly.
It also acts as a kind of "backlash/damping against currency trading volatility. Since trading the currency costs, it's only worth trading if the value gained is greater than that cost.
A per transaction fee represents the cost of performing/recording the transaction and discourages transaction-spam attacks using a huge number of small value transactions. Note that these fees effectively limit how small micro-transactions can be, as transactions below a certain size become too costly. A transaction fee of 1 second means transactions for less than 1 second cost more than 50% in fees. Transaction fees should be paid by the source of the payment to discourage them from making payments using many small transactions.
If arbitrary sized data can be stored with transactions (like receipt details, etc), then it probably makes sense to make the transaction fees a function of the transaction data size to better reflect the transaction cost.
New currency should be injected into circulation using a basic-income style distribution to all "people". This represents both a "tax rebate" to redistribute taxes paid, and a universal dividend based on the overall economy's growth.
The amount distributed should be varied to ensure that currency in circulation reflects the available real wealth, and thus stabilizes the currency. It should be distributed per person as a rate over time, where the rate is dynamically adjusted in response to economic indicators to stabilize the currency.
Note a high basic income rate increases the currency "spawn" rate and increases economic negative feedback. In a system where the net wealth is constant it should match this:
I = (D * C + T*v + F*t) / P
Where:
I is income per year per person D is the demurrage rate C is the total currency in circulation T is the transaction tax rate F is the transaction fee v is the annual transaction volume t is the number of transactions P is the number of people
If we assume people on average spend 12x their average wealth per year (spend whole monthly income each month, with 1/2 month in reserve) and that transaction fees are negligible, for D=10%, T=5%, that gives I=1.3x the average monthly salary per year.
Rates/taxes/fees reduce the amount of currency in circulation. Basic Income increases the amount of currency in circulation.
New currency needs to be created and distributed to reflect new wealth is being created and currency "burned" taxes/fees.