# Questions for a free local currency

Hello,

I have plans to set up a free currency from my living place, therefore first local but then intended to extend as much as possble, and I wonder how to initialize the system properly.

1. How much may be the money supply at start? On which parameters?

2. How much may be the money creation rate in the early years? On which parameters?

3. What would happen if some people sell things but find nothing to buy? They will feel ripped off, I guess… How to avoid this?

4. How many users for the system launching? And how many ressources (goods and services) involved?

You could read the Relative Theory of Money (RTM) first. Many of the concepts you use are refuted by the RTM. You have also a formula demonstrated at the end, used by uCoin, to know how can develop a free money from t=0.

— UD (0) = 100 UDC
— UD (n+1) = MAX { UD(n) ; Pud × M(n)/N(n) }

Please tell me if I understand the formula properly:

If Pud=10% and N(n)=10 for every month:
UD(0)=100 => M(0)=100×10=1000
UD(1)=MAX{100;10%×1000/10}=MAX{100;10}=100 => M(1)=1000+100×10=2000
UD(2)=MAX{100;10%×2000/10}=MAX{100;20}=100 => M(2)=2000+100×10=3000

UD(10)=MAX{100;10%×10000/10}=MAX{100;100}=100 => M(10)=10000+100×10=11000
UD(11)=MAX{100;10%×11000/10}=MAX{100;110}=110 => M(11)=11000+110×10=12100
UD(12)=MAX{110;10%×12100/10}=MAX{100;121}=121 => M(12)=12100+121×10=13310

Is that right?

Yes it is.

Thank you.

Now let’s imagine that amoung the 10 users of the system, only one of them sells something (food for example). The others just buy the food of the seller each month with their UD. The seller will earn much money, but it’s useless since nobody except him sells anything. He will feel ripped off, as if his work had no value.

I’m looking for a way to avoid this problem.
Is the answer in the RTM?

If I recall correctly, this is not in the RTM. In the following topic, Galuel explained a possibility in french for the beginning. création d'une crypto-monnaie locale à Montpellier dans le 34

Basically, each user will engage in proposing some services for one month worth of UD. As soon as the community is big enough, this is not needed anymore.

1 « J'aime »

The seller has no obligation to sell, neither to keep a same price(t) and price(t+dt) for his products(t) and products(t+dt). He can for instance sell just 1/1000 of his production the first “t” for 1 UD, and then if at “t+dt” he sees nothing ok for him to buy, he can sell 1/1000 of his production for 10 UD, then 100 UD etc. At some point, people won’t be able to buy it directly from their UD, only by waiting let’s say 40 years to recover all the necessary UD.

Or they can offer a product the seller would be ok to buy with let’s say 10 000 UD he stocks for only 3/1000 of the products he sold.

1 « J'aime »

I understand that the seller will raise his prices, but I still think that he will lose faith in the system if he finds nothing to buy with his money or if he sells only a lettuce every 40 years. I think it’s a good idea that at the begining, each user engages in proposing some things to sell.

__
About the UD formula, I wonder whether it’s a good idea that the UD is fixed on the first year: it makes the purchasing potential decrease, right? May it be better if the UD increases since the beginning? We could use a special additionnal initial UD that is not taken in account in the recursive part of the formula:

IUD=100
UD(0)=10
UD(n+1)=MAX{UD(n);c×M(n)/N(n)}

If c=10% and N(n)=10:
M(0)=(100+10)×10=1100
UD(1)=MAX{10;10%×1100/10}=11 => M(2)=1100+11×10=1210
UD(2)=MAX{11;10%×1210/10}=12.1 => M(3)=1210+12.1×10=1331

Oups, I just realized that the “IUD idea” will give too much power to the people who enter the system at the beginning

You mean the first 8 years it is not 10% per month, but 10% per year.

Have a look at meta_brouzouf init time: it took almost 14 years! (1 day = 1 year in this simulation currency). Because members regularly joined, so it made the init phase to be delayed several times.

For sure it is a good idea for people who want to create their money to engage some value they accept to “loose” if the money does not work. This simple act will give value to the money instantly.

Also you don’t need to fully switch to a new money at once, instead you will rather start using 1% of your trades, then later on maybe 5%, 10%, 30% of your trades depending on your confidence in the system and the resulting economy being able to fit your needs.

1 « J'aime »

to start a money system sellers could also give a discount if you give some of the new currency. the rest of the price could be still payed in the old currency. the seller can see it as a kind of advertisement for his shop.
for example i buy something worth 100 euro. the seller likes the idea behind your currency and gives 10% discount that can be given in the new currency. the more the currency is accepted the more percentage could be payed in the new currency.

i would also start with using the Universal Dividend per day as reference unit. for example give out 10 units per day. otherwise your money inflates very drastically with time
if you use paper money, you could limit the validity to lets say two years. after that they would have to exchange the paper money and pay the demurrage / inflation cost. later on you could make the paper money exchangeable to the digital money. In short, start with small projects. small beginning greater end. if you find one local shop that accepts some discounts in this new currency, than its a good beginning

1 « J'aime »