From: nelson@crynwr.com (Russell Nelson)
Date: Mon, 23 May 94 04:13:21 PDT
To: cypherpunks@toad.com
Subject: Zero-balance money supply
Message-ID: <m0q5R4g-000IA9C@crynwr>
MIME-Version: 1.0
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I wonder how well a zero-balance money supply would work (having
positive and negative money)?  Positive and negative money is created
simultaneously by a single transfer of wealth.  The only problem I see
is the possibility of reneging on negative money.  Of course, when
that happens nowadays, we call it bankruptcy.  So I guess we deal one
way or another.  The banking system would have to constantly take a
percentage of all transfers to pay its costs, one of which is
bankruptcies.

I *think* it would be impossible to inflate or deflate such a currency.
Inflation might occur if people lost faith in it, but it would also
have a negative feedback effect.  Inflation increases people's ability
to pay off their negative money, which puts a cap on the amount of
inflation that could occur.  As soon as the money inflated a little,
people who could pay off their negative balances would do so at the
newly inflated value.

I also think it would be impossible to run such a currency
anonymously, because a negative balance is essentially a loan, and how
could you loan money to someone who could be anyone?  Only if they had
established a reputation with their public key...

Hmmm...  Interesting, then.  You could only effectively work
anonymously if you had created a reputation for your anonym.  And that
reputation would have to be established in some way *before* anyone
would loan you money, otherwise such a loan would end up being a gift.

One way to establish such a reputation would be to write some free
software, or answer Usenet questions, or were otherwise seen to be
knowledgable and responsible.  I haven't seen anyone try it yet,
though.  Does anyone know of such an attempt?

-russ <nelson@crynwr.com>      ftp.msen.com:pub/vendor/crynwr/crynwr.wav
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