[118328] in Cypherpunks
Re: A question about b-money... (fwd)
daemon@ATHENA.MIT.EDU (Jim Choate)
Sat Sep 25 00:02:46 1999
From: Jim Choate <ravage@einstein.ssz.com>
Message-Id: <199909250351.WAA24596@einstein.ssz.com>
To: cypherpunks@einstein.ssz.com
Date: Fri, 24 Sep 1999 22:51:10 -0500 (CDT)
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Reply-To: Jim Choate <ravage@einstein.ssz.com>
> Date: Sat, 25 Sep 1999 04:48:12 +0200 (CEST)
> From: Anonymous <nobody@replay.com>
> Subject: CDR: Re: A question about b-money... (fwd)
> Keep in mind that the cycle-burning is only used in b-money to add to the
> money supply. Normally this is not how you would get b-money. You would
> get it in exactly the way you get money today: you would earn it, and
> other people would give it to you.
So where does the initial quantity of b-money come from? It's specificaly
referenced to the complexity of a problem and the work that must be done to
solve it. Are you saying that to start the b-money market one has to spend
say $10M in W-s's and then not worry about paying the folks who supplied you
with the $10M of W-s's? What do you pay them with, the tokens you just
generated? The real value of a unit specie MUST be practicaly worthless in
and of itself, it's what it represents that gives it value. Unfortunately for
b-money to work it can represent at most the exact value of the W-s's used to
generate them. If the value of a b-money token is greater than the value of
the W-s's used to generate it you've injected inflation into your market at
the source and it will spiral out of control making the b-money token worthless
irrespective of how much W-s you happen to expend. Further, as currently
described b-money tokens don't take into account the cost of processing them
(even more W-s's expended). So either a b-token must lose some of it's
intial value each time it's processed (ie passed from a consumer to a
supplier) or else the perceived value at each exchange must go down (that's
inflation as well).
> In a mature b-money system, there is very little cycle burning going on
> and the money supply is stable. The system is set up so that if you need
> more money, you have a choice of going out and earning it in the market,
> or burning cycles. Either way you get the same amount of new money.
If I go out and earn it then I assume a priori that the amount of effort I
expend (including food, clothing, etc.) in order to play in the
services_for_sale market is less than the amount I get for that effort. Note
that there is no way as currently described for a worker to convert that
effort into b-money directly (unless you happen to want to calculate the W-s
equivalent of that work). Now if you burn cycles to generate new money
you're still right back in the hole - you've generated a token and then must
pay the electric company again for that energy - 200% inflation. You spend
$10 making your token. You spend the $10 token to buy a CD. You've still got
to pay for the original electricity expenditure (not to mention the further
W-s's that get expended in using the CD, just imagine what happens if you
pay for *that* with b-money as well) which means you've either got to
break out of the b-money market (which makes it worthless for real world
economics) or else you've got to generate yet another token to pay the
electric company. And then you've got to generate a token to pay for that
token, and so on.
> It is not true, as someone suggested, that burning cycles costs you as
> much b-money as you will make for them. You are credited with the cost
> of the burned cycles, but this is probably greater than the cost of the
> electricity. The value of a certain amount of computer time is generally
> greater than the cost of the electricity used to provide that computer
> time. Hence you do make a "profit" in burning cycles to make b-money.
So you're saying that I can spend $1 in effort and make $10 in b-money
tokens. In effect making money out of thin air and the generators best
intentions. That's mega inflation. If the cost of generating the token doesn't
exactly match it's market value then you've injected inflation into the
b-money supply. It ends up being worth less than the effort expended.
That's exactly what one doesn't want to happen in a money supply.
> However that profit is balanced by the loss associated with what you
> could have done with those cycles otherwise.
I do nothing but have my machine spend all day making $10 b-money tokens out
of $1 of electricty, to do anything else would be stupid in this model.
> You could have used them yourself, you could have rented them out.
And if I rent them out at say $10/hr and accept the b-money tokens the
person I rented it to spends $1 of my electricity to pay me back the $10 I
want. In the process they spend the other $9 of W-s access to make 9 more
$10 b-money tokens. Then they come back and rent another $10/hr period with
one of the 9 $10 b-money tokens and use it to generate 10 more....
That is just plain stupid, only an idiot would do anything but make b-money
tokens for themselves.
What do you think the electricity company is going to do to the price of
W-s's once they twig to what's going on in the b-money market? Raise the
price of W-s's that's what, further inflating the b-money market because the
$10 token you made before the price hike is now worth less than the $10 it
represents. That means you've got to generate yet another token to get the
perceived value back to $10 (and you've got to pay for that extra effort as
well). Spending $11 of effort to make $10 of market value is a losing
proposition and a perfect example of inflation.
> Those activities would also have brought you a profit (an economic profit if
> you rented them, perhaps an emotional profit if you had enjoyed those cycles
> by playing a game or surfing the net). Similar considerations arise in other
> profit-making activities; you must forego alternative uses of those
> resources which generate the profits.
Generating money CAN'T make a profit, otherwise the value of the money you
generate goes down, down, down (you're measuring your profit in the money
you're making after all). Eventualy they're worthless. 110% of zero is
zero. And if I play a game or surf the net I've still got to pay the electric
company for the W-s's. Assume I do that with b-money tokens...and so on.
> During a transitional period, you might pay for your electricity with
> ordinary dollars while generating b-money by burning cycles. This does
> not represent a losing proposition, nor is it inflationary.
Wrong, see above.
> As stated, the cost of the electricity is less than the value of the
> cycles. But even if this were not so, it would still be a reasonable
> exchange. At the end, you have paid $X in electricity and have X in
> b-money to buy your CD. You end up paying $X to the electricity company
> and receiving a CD in the mail, so you have in effect paid $X for the CD.
> There is no loss and the books balance.
What do you pay the $x to the electricity company with, thin air? The
original $X you paid for the CD is then spent again by the CD vendor (or
you're admitting implicitly that the token you gave the CD vendor is
worthless - the worst kind of inflation) to pay his electricity company,
emplyees, rent, etc. I can guess how long your electricity will stay connected
and the CD vendor will stay in business.
b-money is broken bad.
____________________________________________________________________
Man is the best computer we can put aboard a spacecraft - and
the only one that can be mass produced with unskilled labor.
Werner von Braun
The Armadillo Group ,::////;::-. James Choate
Austin, Tx /:'///// ``::>/|/ ravage@ssz.com
www.ssz.com .', |||| `/( e\ 512-451-7087
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