Apply HN: Gresham Dollar – Viral Currency for Basic Income - <AUTHOR> Gresham Dollar (GD) is a currency designed for the purpose of providing people a basic income (i.e. regular income independent of the labor market) without the need for government funding.
Gresham Dollar is backed by the United States Dollar (USD). It is pegged to USD at par (one-to-one) using a novel mechanism such that it requires far fewer USD reserves than a central bank would normally need in order to sustain a new USD-backed currency.
Gresham's Law is an economic principle describing the observation that "bad money drives out good." For example, when the United States discontinued minting silver quarters, people held onto their old silver quarters, preferring to spend the new less-valuable quarters. Thusly, the old silver quarters were quickly driven from circulation. Gresham Dollar's core mechanism uses a hack on Gresham's Law that causes people similarly to prefer to spend their GD and hoard their USD. In other words, as GD enters circulation, it drives other currencies out of circulation. Gresham Dollar is a viral currency.
Gresham Dollar is a digital cryptocurrency. Unlike pseudo-currencies such as Bitcoin, which are inherently unstable in value, Gresham Dollar is centrally managed and is capable of being used as a full-fledged currency.
I know it sounds crazy.  Ask me anything.  Don't worry too much about being nice.  But if you're not nice, at least start an interesting argument. <comment><USER2> A couple of questions:

1) Could you describe the problem you are trying to fix in more detail? Who needs GD and why can't they use USD instead? You mention basic income. Why is another currency needed for that? How will the basic income be provided, wouldn't you essentially have to fund it out of your own pocket. If you think someone else would fund it, how would you make sure GD are used? [untangle the currency from basic income for me]

2) Walk me through the process of opening an account, buying a shirt from WalMart, buying a USB stick from Amazon and buying an Apple at my local market.

3) What's the legal requirements for this? Would you need a banking license to operate the exchange and infrastructure? You say it's a cryptocurrency. How do you manage the monetary exchange in a crypto fashion? How would you think the US government would view GD (especially since it is supposed to help with a basic income)?

Edit: Removed Q4 since it's essentially covered by the 30 day conversion

<comment><AUTHOR> * 2) Walk me through the process of opening an account, buying a shirt from WalMart, buying a USB stick from Amazon and buying an Apple at my local market. *

Every Gresham Account has a balance in GD and a balance in USD (for when the GD auto-convert). There are a few different account levels:

"Basic accounts" receive a continuous income and we gradually roll them out to every individual until it becomes a universal basic income. In the mean time, anyone can sign up for a "starter account." Starter accounts allow you to accept and spend GD, but they don't provide the basic income. In the long run, every individual with a starter account will be upgraded to a basic account.

The initial basic accounts are going to be handed out at homeless shelters and soup kitchens etc. If you're you, you would sign up for a starter account online and you'd get your basic income at some day in the future. There are reasons why you might want to open a starter account even though it doesn't provide you a basic income. The process would look a lot like signing up for a PayPal account.

For the rest of your question, you can keep imagining that it works like PayPal. You can use PayPal at merchants that accept PayPal. There are numerous point of sale payment systems that we could potentially integrate with. We haven't worked out the details of which methods of payment we'd support (phone, QR code, debit card, etc.), but the bottom line is that the merchant has to accept GD.

Ideally, we'd like to set something up where you have something similar to a debit card that automatically draws from your GD balance if you have GD and you're transacting with a merchant who accepts GD, but that draws from your USD balance (or a linked bank account) otherwise. We'd like to make it as seemless as possible. If possible, we don't want anyone having to make the decision about whether to spend GD or USD.

* 3) What's the legal requirements for this? Would you need a banking license to operate the exchange and infrastructure? *

The legal stuff is extremely tricky. I spoke to a lawyer about this and I don't think we'd need a banking license at first, but regulations are a challenge to be sure, especially once we get big. Framing it as a kind of "store credit" or "gift card with renewing balance" system to start might be the easiest way to go.

Right now, digital currencies in the U.S. are regulated and taxed as commodities. So there's some precedent in place, but what we're planning to do goes well beyond the scope of Bitcoin.

* You say it's a cryptocurrency. How do you manage the monetary exchange in a crypto fashion? *

Each account will have a GD balance and a USD balance. Every time new GD is added to an account, it is tagged with an expiration time. If the GD is not spent, we adjust the respective balances in the accounts when it matures. Users' USD balances will amount to claims USD deposits in on our distributed network of US bank accounts that we will use to maintain our reserves.

* How would you think the US government would view GD (especially since it is supposed to help with a basic income)? *

It's hard to say. The U.S. government is pretty slow. Gresham Dollar is designed to take off pretty fast. My hope is that by the time we get noticed, we'll be too big to fail, or rather, too big for them to shut us down. They might have trouble taking away incomes from poor people. But they might nevertheless freak out about how we're affecting economic and monetary conditions. This is definitely a concern. The plan is to expand internationally, so eventually no one country would really be in a position to stop us.

</comment></comment><comment><USER3> Gresham's law applies when businesses are legally compelled to accept better and worse money at the same rate. In your example with silver quarters, the businesses were compelled by the government to accept the new, worse coins at the same rate as the old, and thus the switch was made.

However absent legal force, different currencies trade at different rates, which are set by people buying and selling them. Since you cannot compel sellers to accept GD, GD will not trade one for one USD.

Unless of course you are buying back GD at at least one for one with USD to force the market price to your desired price.

Given that GD will be less valuable to sellers than USD (inherently and by design) it seems to follow that the value of GD to sellers will crash the moment you stop injecting USD into the system.

Is there a way you can get a massive amount of sellers to accept a massive amount of a rapidly depreciating currency without discounting it once you can no longer keep up with the required cash injections?

<comment><AUTHOR> We will compel sellers to accept GD at par with USD through a legal contract. There's legal force, so Gresham's law can apply.

We're not going to be buying back GD at par.

 _Given that GD will be less valuable to sellers than USD (inherently and by design) it seems to follow that the value of GD to sellers will crash the moment you stop injecting USD into the system._

The plan is to continually inject USD into our reserves at a rate faster than the rate of GD attrition. The rate of GD attrition will decrease as the currency gains more and more traction.

By the time we removed the USD peg, Gresham Dollar would be a strong currency that can stand on its own.

If we don't end up making it that far, we enter into _Disruption_ and Gresham Dollar might depreciate. We have a plan for how that would work (see other comments).

 _Is there a way you can get a massive amount of sellers to accept a massive amount of a rapidly depreciating currency without discounting it once you can no longer keep up with the required cash injections?_

No. And we don't plan to.

<comment><USER3> I had missed the contract requirement for merchants to accept GD at 1-1 for USD. Thanks.

However, since you can't force a merchant to accept GD in payment for goods or services, it seems that as soon as the expected value of GD goes below a certain threshold, merchants would stop accepting it, and the currency would become valueless.

What am I missing here?

<comment><AUTHOR> We can't force merchants to accept GD payments, but they have a fairly strong incentive to. When we first launch, every GD in existence will be backed 100% by our USD reserves. It's free money. All of the GD the merchants receive, if they hold onto it, is guaranteed to convert into USD no matter what.

Once a currency is widely accepted as payment, there's a self-reinforcing network effect: "I value this currency because I know others will accept it as payment." The challenge lies in bootstrapping the currency to the point where the network effect can take over. We start by taking USD from our investors and handing it out to consumers who will spend it. But in the process, we package that USD inside GD.

So we start 100% backed by USD and then we ease up with time. As merchants come to rely on their GD revenue, they'll gradually be willing to accept slightly lower reserve requirements lest they lose all their Gresham Dollar business. And since the reserve requirements only come into play when our USD reserves get low, once merchants accept lower reserve requirements, they have skin in the game and an incentive to see Gresham Dollar succeed.

Note that any user can accept payment in GD. You don't have to have a merchant account. But non-merchant accounts are subject to the _Activation Cap_ which limits the pace at which GD can convert into USD (e.g. $20/day). We remove the cap for merchant accounts, but in exchange they must set the same price in GD and USD.

<comment><USER3> Yes, in the initial phase, as long as you are putting USD into the system for merchants to cash out, it seems like it would work.

However, once you and investors stop funding GD, and the expected value of GD goes down, a merchant would then be selling goods paid for in USD, and receiving GD worth less than their USD cost. This would be a negative profit per sale and no volume effect of sales in GD would make up for this.

It would seem like at least at this point, merchants would stop accepting GD payments?

<comment><USER4> Merchants typically have margins of at least 35%, so they may make smaller profits, but probably not negative. It may be a discount, though the value of GD is not measured solely in it's USD value.

<comment><USER3> I looked up the annual reports of the major grocery store chains operating in the US Southeast. Operating profits were Publix 8%, Food Lion 3%, Harris Teater 1-2%.

Grocery stores are high volume, low margin business. Even a 3% increase in the cost of getting paid would brutal.

</comment></comment></comment></comment></comment></comment></comment><comment><USER5> A pretty fundamental question: _why_ the Gresham Dollar and not regular dollars?

I mean, there's no _practical_ limitation on the monetary authority creating more real dollars to pump into the economy. The reason it doesn't (and the reason why it's fashionable to separate monetary authority from fiscal authority) is because of beliefs about pervasive inflation caused by large increases the supply of money, particularly if that comes in the form of handouts to those with a high marginal propensity to spend it.

But as far as I can see based on your outline, Gresham dollars are _at best_ functionally equivalent to regular dollars in their effects on demand in the economy. Demand increases when they're handed out, supply lags, ergo prices go up. But you can add in a [very] slight increase in cost of sale for merchants accepting GD, especially if they need to convert to regular dollars to pay _their_ suppliers.

So why Gresham dollars? Why not just hand out newly minted regular dollars? Or food stamps, if the aim is to socially engineer how they're spent?

As far as I can see, _all_ the differences are disadvantages (confusion, costly new infrastructure, discouraging saving behaviour amongst low income beneficiaries)

<comment><AUTHOR> Thank you for the very thoughtful questions.

 _A pretty fundamental question: why the Gresham Dollar and not regular dollars?_

Political reasons. The United States government could technically fund a basic income through deficit spending, but they won't. The Fed will inject money into the banks through TARP and QE etc, but there's no easy way for them to inject money at the consumer level, nor do they want to.

 _I mean, there 's no practical limitation on the monetary authority creating more real dollars to pump into the economy._

Exactly. But they're not going to do it, so I'll do it myself.

 _The reason it doesn 't (and the reason why it's fashionable to separate monetary authority from fiscal authority) is because of beliefs about pervasive inflation caused by large increases the supply of money, particularly if that comes in the form of handouts to those with a high marginal propensity to spend it._

Yes. That's exactly right. Last Spring, before I came up with the idea for Gresham Dollar, I realized that these inflationary concerns are unfounded. Obviously, if you dump $8 trillion into consumers' hands all at once, you'll have some kind of a problem, but an increase in spending is not inherently inflationary if we can scale our production to meet the new demand.

I could go on about this forever. But the bottom line is that printing money and handing people a basic income does not necessarily cause general price inflation and there are always ways to manage price levels.

 _But as far as I can see based on your outline, Gresham dollars are at best functionally equivalent to regular dollars in their effects on demand in the economy._

Yes. That's the idea.

 _Demand increases when they 're handed out, supply lags, ergo prices go up._

In the short term, prices for certain things can go up. But, thanks to technology, our collective means of production is getting ever more scalable. That means prices can even come down as we produce more. It's not entirely clear what will happen to prices, but I have a few different models for different types of goods. Another example is that a basic income will likely cause people to migrate away from big cities and could put downward pressure on real estate prices in places like Silicon Valley.

It's all very fascinating. Anyway, the government thinks this kind of thing will automatically cause inflation. I don't. So I'm doing it.

 _But you can add in a [very] slight increase in cost of sale for merchants accepting GD, especially if they need to convert to regular dollars to pay their suppliers._

I'm not sure we need to do that. At first, the GD business will only be a small part of the sales these merchants make, so they can still pay their suppliers in USD and wait for their GD to convert. Later on, more businesses, including possibly their suppliers, will be accepting GD.

 _So why Gresham dollars? Why not just hand out newly minted regular dollars?_

I wish they'd do that. Then I wouldn't have to work on this project.

 _Or food stamps, if the aim is to socially engineer how they 're spent?_

The idea isn't to socially engineer how they're spent. The idea is to subsidize consumer spending for the entire economy. I don't want to cause distortions in the markets. I receive food stamps myself and they are very economically inefficient.

 _As far as I can see, all the differences are disadvantages (confusion, costly new infrastructure, discouraging saving behaviour amongst low income beneficiaries)_

Confusion and costly new infrastructure are certainly disadvantages. I disagree that discouraging saving behavior is a disadvantage. Especially in today's economy, consumer spending could use a boost.

<comment><USER5> Thanks for the detailed clarification: that certainly helps understand where you're coming from.

The trouble is that, as you've pointed out, the government firmly believes that putting newly minted money into consumers hands is a leading cause inflation. So they're not exactly going to be wildly keen on what you plan to do.

And the government has a very strong and very legitimate interest in regulating financial instruments. Particularly financial instruments which promise to pay people dollars at some time in future but are under- collateralized and don't appear to be attached to any [significant] independent revenue stream.

So the biggest question anyone considering involving themselves with your startup would have to ask is: why would regulators permit your service to exist?

<comment><AUTHOR> _The trouble is that, as you 've pointed out, the government firmly believes that putting newly minted money into consumers hands is a leading cause inflation. So they're not exactly going to be wildly keen on what you plan to do._

Perhaps. But if the government even notices what I'm trying to do, I feel like that's almost a victory in itself. And if they try to stop me after I've already started, they'll have to justify taking incomes away from a lot of poor people.

 _And the government has a very strong and very legitimate interest in regulating financial instruments. Particularly financial instruments which promise to pay people dollars at some time in future but are under- collateralized and don 't appear to be attached to any [significant] independent revenue stream._

Well, initially, they won't be under-collateralized. For the first few months or so, we'll be backing GD up 100%. My hope is that, as a digital currency, Gresham Dollar would be regulated as a commodity similarly to Bitcoin. You could certainly think of Gresham Dollar as a financial instrument, but in the actual operation of the currency, we're actually never going to promise to pay USD that we don't already have.

 _So the biggest question anyone considering involving themselves with your startup would have to ask is: why would regulators permit your service to exist?_

Yes. I agree. So the answer to that question is that, as far as I can tell, the regulations to stop us don't exist yet and the government is going to have trouble regulating us away once we've planted our roots in the economy. The economy needs Gresham Dollar, and once we get started, that will become increasingly apparent to anyone (including regulators) who's paying attention.

Ultimately, we would become an international operation and Gresham Dollar will become resistant to any one country's regulation.

But yeah. None of what I just said makes this issue any less scary. We'll need to be very careful about the legal and political implications of how we structure what we're doing. It won't be easy.

</comment></comment></comment></comment><comment><USER6> 1\. Where does the money come from to fund the conversion into USD? i.e. is this self-funding somehow or is it a government program? 2\. Why 30 days to mature (why not 0, 3, 15, 45, 3650)? 3\. "Far fewer USD reserves than a central bank would normally need..." OK. So I'm missing a bigger point of the mechanics. (see #4...) 4\. Is there a Ponzi-Scheme danger as more people are trading their Viral Currency?

PS- 1\. The premise of the hack is interesting--bad money gets spent first, good gets saved; though ironically the bad is less valuable if you spend it today (discount)-- 2\. I like the goals of basic income. Thanks for experimenting with it and starting a conversation.

<comment><AUTHOR> Good questions!

 _1\. Where does the money come from to fund the conversion into USD? i.e. is this self-funding somehow or is it a government program?_

It's not a government program. The primary way in which we build our USD reserves is through the sale of "Future Gresham Dollars," which are tokens that automatically convert into GD at a pre-determined future date, after which Gresham Dollar no longer automatically converts into USD. An early investor might pay, say, $5 million USD in exchange for $50 million FGD. Anyone can buy FGD, so you can think of it as a form of crowd funding or crowd investment.

 _2\. Why 30 days to mature (why not 0, 3, 15, 45, 3650)?_

30 is an arbitrary number. I picked 30 days because it sounded reasonable and then I did some calculations based on that number.

For example, let's say we choose Boston as our starting city. We would sign several merchants, probably mostly grocery stores, to 90 day merchant contracts with a 100% reserve ratio requirement. There are roughly 10,000 homeless people in Boston. We'd need about $5 million in FGD investment to run a 3-month experiment during which we distribute basic accounts with a $10 daily basic income and a 30-day GD lifetime. This assumes that we're handing out the same number of accounts every day; on the last day, the 10,000th account will be activated.

In a worst-case scenario assuming we don't get any further USD reserves and everybody sits on their GD without spending it, we run out of money and shut the whole thing down after 90 days. But that's a worst-case scenario.

We can do similar calculations with other GD lifetimes. And, in fact, the plan is to gradually lengthen the lifetime of Gresham Dollar until the day when it no longer converts to USD at all anymore.

 _3. "Far fewer USD reserves than a central bank would normally need..." OK. So I'm missing a bigger point of the mechanics._

Hmm. Well, we don't offer on-demand par exchange for GD. The only way for GD to convert back into USD is for its lifetime to expire and its lifetime gets reset every time it changes hands. The less people trust it, the more they will get rid of it, and the less we have to dip into our USD reserves. That being said, we will initially have 100% reserves, but not forever.

 _4\. Is there a Ponzi-Scheme danger as more people are trading their Viral Currency?_

There's always the risk that we run out of USD reserves. But we will continually maintain worst-case estimates of when that will happen that are visible users when they log into their accounts, so it won't hit anyone out of nowhere. Furthemore, you'll always be able to see how much of your GD is guaranteed to convert even in the scenario where everybody just suddenly decides to sit on their GD one day. Even so, if you're an ordinary user not holding large balances of GD, you'll be okay even if we run out of reserves.

Unless you're a merchant partner, there's a cap on the amount of GD that will convert to USD in a given period of time. So if, for whatever reason, you're holding $2 billion in your Gresham Account and we run out of USD reserves, you're not going to get most of your USD back. I wrote more about the activation cap in one of the other comments here.

Merchant partners take on risk as defined in their contract. If you're a merchant partner whose contract says you get 90% of your USD back in the event that we fail, you'll get 90% of your USD back.

It's actually more involved than (and not quite as bad as) that. We have a whole plan for what happens if we run out of USD reserves. It's called the Disruption event, and it's something we can technically come back from. But during Disruption, GD will obviously not be converted to USD as normal and we will allow merchants to set separate prices in GD and USD. But if Gresham Dollar is already somewhat established by then, it doesn't necessarily mean the end of the currency and we can always recover from Disruption by bringing our USD reserve levels back up.

 _PS- 1. The premise of the hack is interesting--bad money gets spent first, good gets saved; though ironically the bad is less valuable if you spend it today (discount)_

Thanks!

If you spend at a merchant partner, who's required to accept GD at par with USD, then you don't actually get less value from your GD for spending it early. And if you're selling your GD on the market, you'll still get more value for your "younger" GD because all GD is the same to the person receiving it, so you'll get the same price no matter what.

 _2\. I like the goals of basic income. Thanks for experimenting with it and starting a conversation._

=)

</comment></comment><comment><USER7> I have a question about bootstrapping. You want GD to be circulating. It seems to me, initially, most merchants will hold on to their GD until they convert to USD. This will cause you to burn through your reserves. How do you incentivize merchants to spend their GD and get the currency to keep circulating instead of having, Basic Income -> merchants -> USD?

<comment><AUTHOR> You're right. Especially at the beginning, merchants won't find many other businesses who will take their GD, so even if they wanted to spend it, their options would be limited. But they do have a few options, including:

1\. Merchants can use their GD to pay their employees bonuses. Those employees, who also have a limited number of places to spend it may then turn around and spend their GD back at their employer again. It would be a way for merchants to lock in business.

2\. It's easy to frame Gresham Dollar as part of a social cause. Merchants can use their participation in Gresham Dollar as a way to market themselves to socially-conscious customers. Maybe they even donate some of their GD proceeds back to the community. The community is then likely to spend some of that GD right back at the merchant who donated it.

I'm open to other ideas. Does anyone have any suggestions?

In any event, my assumption is that, to start, the Gresham Dollar market will look mostly like Basic Income -> merchants -> USD, and that in order for us to survive this initial bootstrapping phase, we'd require sufficient USD reserves to offset the attrition of GD.

Ideally, we would bootstrap fairly quickly. We would want to take in USD reserves faster than the rate of GD attrition. Then, as Gresham Dollar achieved wider adoption, that attrition rate, as a percentage of total GD in circulation, would decline.

I imagine that some of our initial investors will be expecting us to fail, but they would have invested anyway because the worst case scenario is that they paid for a bunch of poor people to get some free money for a few months. And the best case scenario is that they contributed to an economic revolution and made a profit in the process.

<comment><USER7> I really like the goal of this project.

I don't have many ideas that would help get it circulating. Maybe look for smaller communities that source a lot of supplies locally and launch pilot programs there. You could get the whole community on-board since you could be injecting a significant amount of money into a small economy.

Convenience and lack of transaction fees could be an incentive to spend. Sending USD to friends and family typically involve waiting periods, transaction fees and inconvenient processes (cheques, email money transfers). Of course, Venmo and Paypal have improved this in recent years.

Combining the above two ideas, you can launch in communities outside the U.S. where financial inclusion is limited. There are many places where the majority of people don't have bank accounts. They already lack the advantages of credit/debit cards, paypal, etc. They may not have enough assets to make opening a bank account worthwhile. Granting people there basic income and GD accounts could solve both these problems. Plus, by choosing a location with a smaller economy and lower cost of living, you could have a more pronounced effect with the same amount of investment. You could team up with a charity that already gives money to these communities.

Maybe create a service for merchants where they could spend their GD. Some kind of customer loyalty program that pays out rewards in GD, or an advertising service that lets merchants advertise to people with GD accounts.

Honestly, getting a new currency into regular circulation seems like a really hard problem.

Good luck!

<comment><AUTHOR> _I don 't have many ideas that would help get it circulating. Maybe look for smaller communities that source a lot of supplies locally and launch pilot programs there. You could get the whole community on-board since you could be injecting a significant amount of money into a small economy._

That's an interesting thought. Money can circulate more in smaller local economies where everyone contributes.

PayPal broke into the scene by going onto eBay, creating a bunch of auctions and saying, "We accept PayPal." Then people asked what PayPal was. We could do something similar.

Another commenter, Kinnard, suggested that poor communities whose members all have Gresham Accounts might naturally exchange GD amongst themselves. We'd have to figure out a way to make that easy to do. Not every low-income person is going to have access to phone apps, etc.

We're targeting lower-income people because they may not often have a choice about whether to spend USD or GD. They spend whatever money they happen to have. They need no incentive to spend GD over USD when GD is their only choice.

 _Convenience and lack of transaction fees could be an incentive to spend. Sending USD to friends and family typically involve waiting periods, transaction fees and inconvenient processes (cheques, email money transfers). Of course, Venmo and Paypal have improved this in recent years._

Yes. We would want to provide the basic functionality of PayPal/Venmo, but for both USD and GD.

 _Combining the above two ideas, you can launch in communities outside the U.S. where financial inclusion is limited. There are many places where the majority of people don 't have bank accounts. They already lack the advantages of credit/debit cards, paypal, etc. They may not have enough assets to make opening a bank account worthwhile. Granting people there basic income and GD accounts could solve both these problems. Plus, by choosing a location with a smaller economy and lower cost of living, you could have a more pronounced effect with the same amount of investment. You could team up with a charity that already gives money to these communities._

Once GD is accepted at some big online retailers, we can provide poor international communities with GD basic incomes that they can spend at e.g. Amazon or trade among themselves. That's basically my plan for international expansion. Before the GD arrives in the U.S., it's unclear whether we'd want or need it to have the ability to automatically convert to USD. And if we don't, perhaps we could issue paper GD internationally, which would be useful for communities who don't have as much access to digital technology. It's illegal to print any kind of currency in the U.S., so we wouldn't do anything similar here.

 _Maybe create a service for merchants where they could spend their GD. Some kind of customer loyalty program that pays out rewards in GD, or an advertising service that lets merchants advertise to people with GD accounts._

Anyone can use their GD to buy FGD, but I'm not sure it would make sense for merchants to want to do that. I like your idea of selling advertising. The ads will give users ideas about where they can spend their GD (and their USD).

 _Honestly, getting a new currency into regular circulation seems like a really hard problem._

Yeah. And it would probably be near impossible if the U.S. government were already paying its citizens a basic income. There needs to be something fundamentally broken about the way a currency is being managed in order for it to be susceptible to disruption. I believe USD fits the bill.

 _Good luck!_

Thanks for your thoughts!

</comment></comment></comment></comment><comment><USER8> If it's centralized, why bother with "cryptocurrency" (blockchain stuff), vs. a centralized (blinded?) token system (or even just a database ledger system, to start)

<comment><AUTHOR> Good question. I'm not entirely sure that we will. My is that certain aspects of the system will be distributed for efficiency and security purposes, but we'd need a central authority in charge of the currency, so we don't run into the problem of getting stuck when the economics of the situation would require a hard fork.

I've been learning about cryptocurrencies and the blockchain, but I'm far from an expert. As far as I understand, there are a few big problems with bitcoin that can only be fixed via a hard fork, not the least of which is that there's a cap on the supply of bitcoin, so if you tried to use it as an actual currency, it would be deflationary in nature, much like gold.

I'll look into the alternatives. If you have any links you'd recommend me researching, I'll check them out.

<comment><USER8> I would just prototype with a centralized database-backed system, if you don't need anonymity (and for this, non-anonymity might actually be an advantage).

This isn't an interesting technical idea, it's interesting because of the social/economic/etc. behaviors, so I'd try to do the cheapest/easiest/oldest technology possible.

More like a PayPal-style system...which ironically actually started out as a "digital currency" system on handheld terminals before they rolled it back to an email/website thing.

<comment><AUTHOR> Yes. The innovation here doesn't lie the technology itself, so I've decidedly been putting less effort into that aspect of things up to this point.

Thanks for the advice. I want to do what's cheap and efficient and secure.

</comment></comment></comment></comment><comment><USER9> Having had some time to consider this, questions and observations.

(Some duplication of HN discussion -- it unfortunately pretty much dies after a day or so, G+ has the advantage of keeping those interested in a discussion looped in.)

 _1\. How do you make money doing this?_

 _2\. Where does the investment for USD come from?_ How is this renewed? How are loans and/or investors paid back? What risks do they face?

 _3\. What are the barriers to entry?_ Why doesn't _everyone_ start such a service? An "I'm creating my own money, care to join" venture is fine and dandy, but one thing a currency sovereign enjoys is, well, currency sovereignity. And in particular, legal tender status.

 _4\. Who 's left holding the bag?_ If this collapses, who loses out? Presumably, merchants. Is there any provision made for this possibility?

 _5\. How do you plan to crack this market?_ The existing consumer revolving credit market is pretty resistant to entry. The two biggest players, Visa and MasterCard, both originated as large bank-based credit cards (BankAmericard => Visa and InterBank Master Charge => MasterCard). Other contenders include American Express (financial services, origins related to Wells Fargo in the 19th century), Discover (3rd largest card, though distantly, also acquired Diners Club which I was going to list separately), but they've failed to make major inroads against the two giants.

 _6\. The "Gresham's Law" bit seems to apply to holders._ The key being that people will spend the currency faster if they lose faith in it. But this assumes that the _sellers_ will accept the currency. A loss of _seller_ acceptance will in fact torpedo the currency. I strongly recommend William Stanley Jevons, _Money and the Mechanism of Exchange_, which still serves as the foundation of much thinking on money (~1880).

 _7\. How is this not a Ponzi scheme?_ [https://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29](https://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29)

(Questions also posted to G+.)

<comment><AUTHOR> _4\. Who 's left holding the bag? If this collapses, who loses out? Presumably, merchants. Is there any provision made for this possibility?_

The investors are left holding most of the bag. In the end it will look like what we did amounted to the equivalent of taking money from investors and handing it out to people.

We have a provision for what happens when our USD reserves fall to the level at which we can only meet our present obligations. It's called the _Disruption_ event (see other comments).

If Disruption hits, merchants are still guaranteed to get a certain percentage of their GD converted into USD, as specified by the reserve requirements stipulated in the contract they signed. We also have a single required USD reserve level to back the non-merchant accounts. Initially, our reserve requirements for everyone will be 100%, then we'll gradually lower them.

At any given time, users will be able to see how much of their GD balance is guaranteed to convert to USD. The GD balance is divided into three parts denoted in three different colors:

GREEN: GD that is guaranteed to convert to USD even if Disruption occurs at the soonest possible date given current USD reserve levels.

YELLOW: GD that is guaranteed to convert to USD even if everyone stops spending their money immediately and allows their GD to sit idle.

RED: GD that would be suspended (not convert to USD) if everyone stops spending their GD immediately.

Users will be encouraged by seeing their red and yellow balances shrink with time as the potential Disruption date moves further into the future.

</comment></comment><comment><USER4> You incentivize merchants with new customers that will shop exclusively at GD accepting merchants. After you have these merchant agreements in place, it will then be easier to incentivize the merchant suppliers to accept GD in order to stay competitive in their market.

The model, as I see it here so far, does not take into account the administrative costs of doing business. I'm talking about human resources, database servers, credit cards for BI recipients, transaction fees over credit networks... how do anticipate meeting these overhead costs?

Also, in regards to BI, I am also curious about the mechanism. One of the arguments for BI is that it eliminates the overhead costs associated with various agencies of social welfare and passes that savings on the public. Nevertheless, GD is a transition currency that will not originally be available to everyone as BI, which means that there will need to be some sort of selection mechanism (which is hopefully not as costly or beauracratic as current US welfare systems).

As the currency gains popularity, more FGD is sold and the USD reserve goes up. How do you quantitatively measure the popularity of GD? Will you be collecting data on transactions that feed into this analysis? What metrics are used to calculate the acceptable reserve level? Is this what will influence the production and distribution of new GDBI?

<comment><AUTHOR> _You incentivize merchants with new customers that will shop exclusively at GD accepting merchants. After you have these merchant agreements in place, it will then be easier to incentivize the merchant suppliers to accept GD in order to stay competitive in their market._

Yes. Gresham Dollar would creep up the supply chain.

 _The model, as I see it here so far, does not take into account the administrative costs of doing business. I 'm talking about human resources, database servers, credit cards for BI recipients, transaction fees over credit networks... how do anticipate meeting these overhead costs?_

We'll take a small portion of the investments we receive and put it toward paying operation/capital expenses. The rest of it goes toward boosting our USD reserves. I won't get into specifics because I don't have the specifics worked out. Even if I did, they'd be boring.

 _One of the arguments for BI is that it eliminates the overhead costs associated with various agencies of social welfare and passes that savings on the public._

Basic income is more than just "efficient welfare." Consumer spending is the bedrock of any economy and basic income enables that. The labor market does not exist for the purpose of distributing consumer income, so naturally does a poor job of it. We, as a society, have devised all sorts of rules and regulations to try to force the labor market to be our economy's primary income distribution system, but it's an uphill battle.

 _Nevertheless, GD is a transition currency that will not originally be available to everyone as BI, which means that there will need to be some sort of selection mechanism._

Initially, there will be two selection mechanisms and they're both very simple:

1\. We'll pick a city to start in, we'll sign up some merchant partners in that city, and we'll hand out a certain number of basic accounts every day to poor people in the city. These accounts receive the "basic income." We'll repeat this process from city to city.

We'll partner with local social services organizations, such as homeless shelters and soup kitchens, in finding people to give these accounts to. What we'll physically hand out will be tokens (e.g. something like debit cards) representing accounts in our system. Merchants will use the tokens to receive payments from the appropriate accounts.

2\. On the other end of the spectrum, anyone can sign up for a _starter account_ online. A starter account doesn't receive the basic income. Starter accounts allow you to:

1\. Hold a GD balance. 2\. Accept payments in GD 3\. Buy Future Gresham Dollars

In the long run, we will upgrade all starter counts belonging to individuals into basic accounts. In the short run, individual starter accounts participate in the _Gresham Points_ system, which is the other selection mechanism for determining who receives a basic income.

When an individual starter account user converts USD to GD (e.g. by transferring money from a linked bank account), that starter account earns a corresponding number of Gresham Points. Periodically, the individual starter account with the highest number of accumulated Gresham Points will be upgraded to a basic account. Although most new basic accounts will be handed to low income people, a small number (orders of magnitude smaller) will be created, in this way, as a part of the Gresham Points game. In addition to motivating people to use Gresham Dollar, the Gresham Points competition helps build our reserve of USD.

Users can monitor the high scores to determine how many additional points they need to win a basic account.

 _How do you quantitatively measure the popularity of GD?_

There are a bunch of different variables we can track including:

1\. Number of users 2\. Number of merchants 3\. Size of USD reserves 4\. Velocity of GD (how often it gets spent) 5\. Number of transactions.

 _Will you be collecting data on transactions that feed into this analysis?_

We will record every transaction in a ledger.

 _What metrics are used to calculate the acceptable reserve level? Is this what will influence the production and distribution of new GDBI?_

Good question. If our USD reserves dip to the level where we can only fulfill our existing promises and nothing more, then the system goes into _Disruption_ (explained in another comment). We probably would not expand to a new city without first securing enough USD reserves to provide USD-backed basic incomes to its poorest citizens for at least a couple of months.

But we don't want to expand too slowly, because, as you said, popularity helps us build our USD reserves. We would want to bootstrap ourselves while riding as much hype as possible.

Lots of details still to be worked out.

<comment><USER4> We'll take a small portion of the investments we receive and put it toward paying operation/capital expenses. The rest of it goes toward boosting our USD reserves. I won't get into specifics because I don't have the specifics worked out. Even if I did, they'd be boring.

OK, but this could get problematic. The costs of operation and infrastructure will not be trivial, especially as the project grows beyond the bootstrapping phase. Have you considered the option of a dedicated trust fund to maintain the project's infrastructure that is supported by a not-for-profit organization?

As I understand it, the principle behind this currency is that it decays, and thus people will prefer to spend it first, otherwise it will expire and convert into USD at the account's reserve rate. So say I have $100GD at an 80% reserve rate, when it expires I will then have $80 USD. But, I may also have a basic income of GD trickling into my account and I can buy GD with USD at the pegged 1 to 1 ratio, or buy FGD at the speculative market rate.

<comment><AUTHOR> _The costs of operation and infrastructure will not be trivial, especially as the project grows beyond the bootstrapping phase._

Hmm. These costs would be trivial compared to the total amount of USD we have in our reserves and the total amount of GD in circulation. I'd like the infrastructure to be as distributed as possible. As the central authority, we'd only be paying to operate the small part of the infrastructure at the top of the heirarchy.

 _Have you considered the option of a dedicated trust fund to maintain the project 's infrastructure that is supported by a not-for-profit organization?_

Interesting idea. I hadn't considered that, no. What would it look like?

 _As I understand it, the principle behind this currency is that it decays, and thus people will prefer to spend it first, otherwise it will expire and convert into USD at the account 's reserve rate._

That's not quite right. The currency does not decay. In normal times, 100% of GD converts to USD. The reserve rate only comes into play when our total USD reserves fall to our required reserve level. When that happens, we have _Disruption_ (see other comments), during which GD _does_ convert only at the reserve rate. But the portion that doesn't convert to USD gets rolled over (its lifetime is reset) and remains in your account.

We _never_ destroy GD without converting it into the exact same amount of USD.

When given the choice, people spend GD first, not because it decays (it doesn't), but because Gresham Dollar is the inferior currency:

1\. USD is more widely accepted and therefore versatile.

2\. USD is backed by the full faith and credit of the U.S. government.

3\. Gresham Dollar is this new thing that people don't exactly trust.

I guess what it boils down to is this: Would you rather spend your real USD, or something that will only turn into USD after 30 days? If a merchant happens to be accepting the thing that isn't even USD yet, you'd spend that.

 _But, I may also have a basic income of GD trickling into my account and I can buy GD with USD at the pegged 1 to 1 ratio, or buy FGD at the speculative market rate._

Yes.

<comment><USER4> Oh OK, this clears it up for me, thank you.

</comment></comment></comment></comment></comment><comment><USER10> I want to explore another angle of this point I brought up (i mentioned this below for a different point):

"What's the point of basic income then if eventually tens of thousands of GD is required to buy bread and basic income is only several thousand (point is, not enough to make a difference)?

This happens in a sort of way in real life already... Because govt meddle in education loans and subsidies for college, the result isn't just that there are more availability of education only, there's also an ever increasing climb , almost unhooked from reality, of tuition costs. And some people simply stop paying back, which in a way results in a kind of wealth transfer effect like your GD.

But the lethal point is that no force stops the inertia from becoming ridiculous. We already see that colleges no longer have incentive to adhere to reality and prices go to the moon. To remain effective, GD BI have to climb, and off we go to the races.

Applied to entire economy, you get hyper inflation. Your GD can't distribute fast enough when mass psychology sets in."

Another effect is that not only would GD be viral, BI inside this system itself would become viral.

Like the college tuition example, over time, this will disintegrate to the point that people who really make a living and earn USD (or any other way to measure real money, not the BI allocation) will be eclipsed. Everything will become like college. There will be nobody left will be able to afford it in full without some kind of help.

Either that, or the BI effect and influence Will diminish and we're back to square one.

In this sense, I'm back to what I said above. The BI powered by GD is going to become viral on viral. It will destroy the real economy completely, until nothing is left. The structure it's such that they cannot both coexist.

<comment><AUTHOR> _Another effect is that not only would GD be viral, BI inside this system itself would become viral._

By "viral," do you mean "inflationary"?

I'm not sure how useful it is to compare student loans to basic income. Student loans have to be paid back. And they can only go toward college, so they cause market distortions that a basic income wouldn't cause.

Many of the products and services we use benefit from economy of scale. The more we produce of a particular product, the cheaper it becomes to produce each individual unit. If we give people money to buy more goods, we will scale up to produce more goods to sell to them, which in no way pushes prices higher. A basic income won't, on its own, lead to general price inflation.

<comment><USER10> _By "viral," do you mean "inflationary"?_

Not just inflationary. I mean that the Basic Income inside this system, will seek out and destroy "actual income". It weakens actual income to the point of irrelevance over time, just like what is happening in any govt subsidized fields.

Simple inflation driven by growth is arguably a "good thing". But instead we get inflation driven by "free-money" driving out "earned-money", this is almost the worst kind.

People who don't need or qualify for BI, who makes money the hard way, will now need to compete with money from BI, or worse, this BI that is in this viral currency.

Yes, inflation is the symptom but not the result. Because people spending BI GS don't feel pain (they get it again next cycle, for free), it's the people who actually do the hard work to make non-BI USD that will find that there's less they can buy.

 _I 'm not sure how useful it is to compare student loans to basic income...And they can only go toward college, so they cause market distortions that a basic income wouldn't cause._

That's a overly bold statement. Not all production can benefit from economy of scale unless we're willing to "factory-ize" everything -- and sometimes we're just.not.willing.to for qualitative reasons. This is the difference between things you can buy in dollar stores vs things that are hard to make cheaper.

Try making Child Care more "economy of scale" like; or surgery; or education; Or nursing.

If GD can only be used to buy food, or bread. These I can believe these could be made to benefit from economy of scale, but to solve "basic income needs" esp for service intensive things that tends to be "bid up in price" when there's more demand rather than just scale? I think we're back tot he BI vs earned-income competition problem.

 _Student loans have to be paid back._

Not entirely true. Between grants, govt loans, and govt-guaranteed loans. There are people who will not be able to pay back the loan+inflation rate (The fact that they might take their whole lives to pay the remaining amount isn't relevant). The delta essentially means the govt have given "free money" into the system. Although it won't be the full amount.

In that effect, it acts like a BI.

Even if you take into account govt debt... If you stretch out maturity to something really long, like 30 years. Inside the window of this 30 years, before govt debt matures, it still acts like free-money into the system, much like BI is.

And we can study the effects, which is no really just inflation. Back to my point above, colleges have shown that:

Simple inflation driven by growth of earnings and demand is arguably a "good thing". But instead we get inflation driven by "free-money" driving out "earned-money", this is almost the worst kind.

<comment><AUTHOR> Basic income will certainly affect price levels in uneven and unpredictable ways. I can understand why you're concerned. The same is true of free trade. There are always going to be winners and losers. But, as far as the macroeconomy is concerned, it's the most efficient way of doing things.

I could make some very compelling arguments about why basic income wouldn't make child care, surgery, education, or nursing more expensive. Perhaps, though, we'd see inflation in the price of luxury goods in rural villages in India, where the amount of the basic income would be relatively huge. But by getting into specific examples, we'd be losing the forest for the trees.

Your distinction between "free money" and "earned money" is failing to resonate with me. Once the money is in a consumer's hand, does it matter how it got there?

 _People who don 't need or qualify for BI, who makes money the hard way, will now need to compete with money from BI_

This is an important point. Not everyone will receive the basic income at first. As we roll out the basic income, we should be careful about mitigating any resentment toward those who receive it. The basic income would eventually be something that everyone gets, but before then, this is a real concern.

Clearly, you feel very strongly about all of this. If you have any additional questions about Gresham Dollar, I'll be happy to address them.

</comment></comment></comment></comment><comment><USER11> How would you handle the market that emerges between the two currencies? If Gresham Money is deemed less valuable, and some market exists between the two currencies, it seems that GD would just weaken relative to USD. I'm not sure how you could stop merchants from then just inflating GD prices, neutralizing the viral effect.

<comment><AUTHOR> I fully expect (and hope for) such a market to emerge.

One key thing, which I mentioned in another comment, is that GD "matures" into USD after a certain period of time (e.g. 30 days). But some people might not want to wait for their GD to mature, so they'd be willing to sell their GD at a discount of face value. But the price gets too low, people will prefer more to keep their GD.

Our merchant partners are required to set prices equally in both USD and GD, but there's nothing preventing other users from dealing in USD/GD in this way. And by participating in this market ourselves, we can help build our USD reserves.

</comment></comment><comment><USER12> Where would people get Gresham Dollars, who would be the first to accept Gresham dollars and what would they sell for them?

<comment><AUTHOR> Great questions!

Where would people would get Gresham Dollars:

We build our initial consumer user base by choosing an American city and handing new money (that is, GD) to the people in that city who are most likely to spend it – i.e. low income people who have a higher marginal propensity to consume (what money they get, they're more likely to spend). This money comes in the form of a regular GD income – essentially a basic income for each individual. We will gradually move on to other cities and countries and to more general populations.

Who would accept GD first:

Initially, when introducing Gresham Dollar, we tell merchants that we're handing people new money in the form of GD and it's up to those merchants whether they want to compete for those customers and that money.

We'd go around to grocery stores, convenience stores, and other places where poor people are likely to shop.

I'm sure that my answers to your questions will lead to more questions.

<comment><USER13> But the merchant pays for _their_ merchandise in USD.

 _why_ would a merchant choose to accept this "currency", considering it's not valuable to them?

<comment><AUTHOR> TL;DR: The currency _is_ valuable to them.

The core mechanism behind Gresham Dollar is that each unit of GD lives for a limited amount of time (e.g. 30 days) after which it expires and we replace it with an equal amount of USD from our reserves. Whenever someone spends GD, we reset that GD's lifetime (e.g. back to 30 days).

So the merchants would be getting their USD. They'd just have to wait.

When the first credit cards were introduced, American Express convinced merchants that it was worth a small transaction fee to accept a more convenient form of payment. It should be even easier to persuade merchants to accept money that customers otherwise wouldn't be spending at all. In either case, the merchants benefit by offering customers a new way to make purchases. When they accept credit cards, they have to pay a transaction fee. But when they accept GD payments, the fee they pay is time.

Pretend you're a merchant. I come up to you and say, "Hey we're giving people this free money. Do you want these people as your customers?" What's your answer?

<comment><USER13> So you're co-opting them into a credit issuing agency?

What if your company goes bankrupt in that 30 days?

<comment><AUTHOR> There will be provisions in the merchant contract for what happens if we run out of USD reserves. In the initial months after we launch, every Gresham Dollar will be 100% backed by USD reserves, so the merchants (and other users) will take no risk in holding GD.

Later on, we will gradually leverage into a fractional reserve, but we will always be completely transparent about our USD reserve levels and how close we are to running out.

Since we don't offer on-demand exchange between USD and GD, it's impossible for there to be a run on our USD reserves. If, at any point, a user doesn't trust that his GD will hold its value, the only way for him to get rid of it involves transferring it to someone else's account, which resets the maturity on the GD, and lessens the need for us to dip into our USD reserves.

In this way, the less that people trust the currency, the stronger it gets.

Does that answer your question?

<comment><USER5> OK, so if the maturity resets you are at least in a position to be able to issue nominal assets faster than people can claim your liabilities in real dollars, but that doesn't mean you're legally solvent.

I mean, a fractional reserve bank's deposits _are_ fully backed, just mostly not with reserve dollars but with a bonds and loans which are creditors' obligations to repay the bank _more_ than the face value of its deposits.

Your startup has a lot of obligations to pay people dollars. Who has an obligation to pay you?

<comment><AUTHOR> _OK, so if the maturity resets you are at least in a position to be able to issue nominal assets faster than people can claim your liabilities in real dollars, but that doesn 't mean you're legally solvent._

Hmm. I don't know if this helps, but because of how the Gresham Dollar system works, GD can actually be divided into two categories:

1\. _Active GD_. This GD's lifetime is counting down and will always convert into some amount USD when it expires. These are proper liabilities and they will always be guaranteed to be funded by USD reserves at a pre-determined level (e.g. 70%).

2\. _Suspended GD_. This GD's lifetime never started counting down and we don't promise that it will ever convert to USD. We only ever take on the liability of activating GD when we have the USD reserves to do so. All GD held back by the _Activation Cap_ (described in another comment) is suspended.

When Gresham Dollar first launches, we will have sufficient USD reserves to convert into USD all GD in existence. We could even afford to activate any _Suspended GD_ held back by the activation cap and and take them on as liabilities, but we choose not to.

As Gresham Dollar progresses into being backed only by a fractional reserve of USD, we will keep less USD in reserve than the total amount of GD in existence. But we will not keep less USD in reserve than the total amount required to fund the _Active GD_ in existence at their required reserve level.

Each Gresham Account is subject to a minimum reserve ratio, which constitutes a promise that we will earmark an amount of USD in our reserves to back the _Active GD_ in that account. All non-merchant (starter, basic) accounts share the same minimum reserve ratio, but each merchant account has its own associated minimum reserve ratio negotiated in its merchant contract. For example, consider an account holding $1,000 in _Active GD_ with a 60% minimum reserve ratio. This account requires that we hold $600 USD in our reserves to back it.

We can easily calculate the minimum total of USD reserves we require to back all Gresham Accounts. We do this by taking the sum of _Active GD_ in each account multiplied by that account's minimum reserve ratio.

For example, if we have three merchant accounts each holding $1 million with minimum reserve ratios of 60%, 70%, and 80%, and there is a total of $3 million _Active GD_ in non-merchant accounts with a non-merchant minimum reserve ratio of 90%, then our total required USD reserves are:

60% * $1m + 70% * $1m + 80% * $1m + 90% * $3m = $4.8 million

This calculation is agnostic to the amount of _Suspended GD_ due to the activation cap. For example, assuming an activation cap of $20/day, if a user opens a starter account and adds $2 billion GD to it by converting it from USD, it increases our reserves by $2 billion USD, but it doesn't do much to affect the amount of USD reserves we require because only a tiny portion of that $2 billion GD activates per day. If that user then spends the $2 billion at a merchant who has a 50% reserve ratio, our reserve requirement does then increase by $1 billion USD. But because of the $2 billion USD he just provided us, we already have the USD reserves to meet that requirement.

What I call _Disruption_ occurs when our USD reserves become insufficient to back additional _Active GD_. In other words, the total amount of our actual USD reserves drops exactly to the total level of our required USD reserves. During normal times, when a user spends _Active GD_ , it helps stave off _Disruption_.

During _Disruption_ , the Gresham Dollar system will continue to function normally in most ways. GD can continue to circulate and people will continue to receive their basic incomes. However, any new GD added to an account will remain suspended until there are enough USD reserves to back it. We will not require merchants to set equal GD and USD prices during _Disruption_ because the value of GD relative to USD will be more difficult to maintain.

 _Active GD_ will continue to count down and expire. When it expires, it converts into an amount of USD based on the account's minimum reserve ratio. The GD that doesn't convert to USD gets its lifetime rolled over. For example, during _Disruption_ , if an account has an 80% reserve requirement, each _Active GD_ that expires will convert into 80 cents of USD and 20 of cents new (full lifetime) _Suspended GD_.

As our USD reserves replenish, we will activate more GD. Whenever _Active GD_ is spent, it becomes _Suspended GD_ in the new account. This frees up USD reserves and allows us to activate _Suspended GD_ elsewhere in the system. When our total USD reserves again become sufficient to back all GD that would normally be backed, _Disruption_ ends. At that point, we reinstate merchant price requirements, and resume converting GD to USD at 100% using our excess reserves.

Reaching _Disruption_ depends both on our total USD/GD ratio and the distribution of GD. _Disruption_ will theoretically arrive at the soonest possible date if the following happens:

1\. All GD becomes distributed in such a way that it active (i.e. is not subject to the activation cap).

2\. Everybody sits on their GD and lets it expire.

3\. All GD is backed by the highest possible minimum reserve ratio.

Given #1 and #2 above, our USD reserves will drain at the fastest possible rate. And given #3, our total USD reserve requirement is at its maximum. _Disruption_ will occur as soon as our total USD/GD ratio decreases to be equal to that minimum reserve ratio. For example, if the non-merchant general minimum reserve ratio is 70% and it is higher than any specific merchant's minimum reserve ratio, _Disruption_ occurs when the total USD/GD ratio decreases to 70%.

We can use this information to predict the soonest possible (worst case) date of _Disruption_. Whenever the total reserve ratio is less than the highest minimum, _Disruption_ could theoretically occur at any moment depending on the changing distribution of GD. For example, if our present total USD/GD reserve ratio is 60% and there's a merchant account out there with a minimum reserve ratio of 70%, attempting to transfer all the GD in the world into that merchant account will trigger _Disruption_.

A slightly less conservative -- but still very conservative and improbable -- _Disruption_ date estimate comes from taking the current distribution of GD and assuming that all of it is allowed to expire where it sits (i.e. everybody stops spending at once). Users will be able to view both of these pessimistic _Disruption_ date estimates through the online interface and will feel encouraged to see both dates continually moving further into the future.

Furthermore, they'll be able to track exactly how much of their GD is guaranteed to convert to USD in the event that either of these two pessimistic scenarios starts immediately.

Okay. That was a lot. Anyway, you could think of _Suspended GD_ as a commodity that's not backed by anything, just like Bitcoin. And if we have sufficient USD reserves, we take it on as our liability by activating it. And you could think of _Active GD_ as a liability for the amount determined by its corresponding reserve requirement.

Maybe? =)

 _I mean, a fractional reserve bank 's deposits are fully backed, just mostly not with reserve dollars but with a bonds and loans which are creditors' obligations to repay the bank more than the face value of its deposits._

Right. From the perspective of any individual bank, it can appear solvent if you just add up the nominal values of assets and liabilities. I prefer to think more in terms of liquidity rather than solvency. But I digress.

Maybe a better analogy than fractional reserve banking is a central bank maintaining reserves of foreign currencies. They don't need to maintain an amount of each foreign currency that's equivalent to the total amount of their own currency in circulation. That would be absurd.

 _Your startup has a lot of obligations to pay people dollars. Who has an obligation to pay you?_

Nobody. But they have various incentives to help us build our USD reserves.

</comment></comment></comment></comment></comment></comment></comment></comment><comment><USER14> What happens if there's a "bank run" where everyone waits for their GD to mature rather than spending it?

<comment><USER15> And in general, where does the money come from? You're proposing to start your own private central bank.

<comment><AUTHOR> Yes. Our own private central bank.

<comment><USER5> If it's fully private and not Fed-linked, where's all the money to meet the convertibility obligations coming from?

<comment><AUTHOR> It will be distributed in deposits across banks that do have deposits at the Fed. We'd try to do it in such a way as much of our reserves as possible are FDIC insured.

Have you heard of CDARS? It would be similar to that.

[http://www.cdars.com](http://www.cdars.com)

<comment><USER5> That's where you _store_ it. Where does it come from?

I understand initially you'd need investment. I understand that in future, a secondary market could come into existence which would allow Gresham dollars to be exchanged for real dollars, at slightly _below_ par value. But in order to actually have a profitable business, you need to obtain _more_ dollars than the GD you're giving out over a given period of time. How does that happen?

<comment><AUTHOR> There are a few different ways we can build our USD reserves, but the primary one is through a crowd investment system that I've devised.

Investors will be purchasing, at a pre-negotiated discount, GD to be delivered at a future date. I call them "Future Gresham Dollars." Investors can sell their FGD to other investors in a secondary market to profit early or they can hold them until we succeed and reap their exact pre-negotiated returns.

We actually don't need to obtain more USD than the GD we're handing out. The phase during which we're backed by USD is only temporary. If we succeed, then GD is the coin of the realm and USD has become obsolete. The profits we generate (and the returns to our investors) will be in GD.

If we fail, the investors get nothing, which is normal.

Of course, we'd need measures in place to ensure that we don't abuse our power as the world's monetary authority. We shouldn't be allowed to create new money just to make ourselves and our friends rich.

<comment><USER4> I think these sort of measures could be built into the algorithms behind the management of the currency. The entire infrastructure could be run by bots. Cyber security will need to be tight, though probably not initially.

As I understand it, this is about social justice, ie, leveling the playing field. Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis. Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large.

Ultimately, the system also prevents hoarding of currency and incentivizes exchanges.

<comment><AUTHOR> _I think these sort of measures could be built into the algorithms behind the management of the currency._

That's the idea. I'd like to set it up so that everyone can see that we couldn't abuse the system even if we wanted to.

 _As I understand it, this is about social justice, ie, leveling the playing field._

It's primarily about economic stability. Social justice is a side effect.

 _Post-transition for GD would mean that all accounts are activated to receive basic income, and they would do so on an equal basis._

Yes. In fact, the plan is for all accounts owned by individuals to be receiving a basic income _well before_ the transition date. Obviously, businesses do not receive a basic income.

 _Initially, the currency is seeded in communities that need BI the most, and then becomes contagious to the world at large._

Yes, but only because those who need it the most have the highest marginal propensity to consume. This maximizes the initial circulation of GD. If you give it to a rich person, they're far less likely to spend it.

 _Ultimately, the system also prevents hoarding of currency and incentivizes exchanges._

Hmm. I'm not sure what you mean. For Gresham Dollar to work, it assumes some level of "monetary entropy," (I just made that term up). In other words, money starts at a higher velocity but ends up accumulating in hoards. Basic income provides a steady supply of fresh money to counterbalance monetary entropy.

<comment><USER4> What I understood was that, if GD is allowed to sit in an account, it will eventually convert to USD at the reserve rate for that account, thus losing value (assuming GD=USD in terms of purchasing power). Wouldn't this discourage people from keeping large sums of GD in their accounts?

<comment><USER4> OK, your other comment clarified the point for me. I thought that you would lose GD after the 30days because only a percentage of it would convert. I guess I assumed that the rest would be lost instead of resetting or rolling over.

<comment><AUTHOR> In normal times, 100% of GD (subject to the _Activation Cap_ ) converts to USD and none of it rolls over. Only during _Disruption_ is some of the GD held back from converting. And other weird stuff is going on during _Disruption_ too.

</comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER10> Wow, crazy idea.

However, no matter how good or plausible this idea is, it's extremely vulnerable to itself...

Central banks have power not only because they can issue currency, but also because they are a monopoly (in their sphere of influence).

Nothing stops someone else, including the govt or someone trying to destroy the system, from replicating this and give out Another Dollar (AD). In fact, if there's even a hint this is popular, I expect to see this co opted by big corporations or entities with far more resources. Wal-Mart Dollars, Amazon Dollars, might all show up, which actually destroys the trust of this kind of system.

This is the killer of almost all innovations, the innovator's dilemma. How could you guarantee it's only you?

<comment><AUTHOR> The glib answer I usually give people is that it would be great if someone stole my idea because then the world's economy would fix itself without my help. I'd just go back to having fun and doing my own thing.

I've long assumed that basic income was inevitable. I didn't know how we'd get there, but I was optimistic about the future. I still believe that basic income is inevitable, but now I have a way to help it happen sooner and more smoothly.

But I'm sure my investors won't be entirely happy with that answer. I actually do feel it's important for Gresham Dollar to succeed. If someone else tries to do it, they might do it wrong. If someone else tries to execute on this idea, but they don't get it quite right, it'll be a rough road for our economy.

 _How could you guarantee it 's only you?_

The answer is that I can't guarantee that it's only me, but because of the network effect inherent in money, it has to be only _someone_. Money is a natural monopoly. So if we're the first to disrupt money in this way, it's going to take a lot of resources to dislodge us.

The more popular Gresham Dollar gets, the more someone else will want to copy it, but the harder it gets for them to be able to succeed in doing so.

 _In fact, if there 's even a hint this is popular, I expect to see this co opted by big corporations or entities with far more resources. Wal-Mart Dollars, Amazon Dollars, might all show up, which actually destroys the trust of this kind of system._

I don't know. The less people trust Gresham Dollar, or any Gresham Dollar-Type (GDT) currency, the more likely they are to spend it. Lack of trust, in some ways, actually boosts a GDT. What's critical is that we make the whole thing user-friendly. It should be seemless to switch between spending GD, USD, other GDTs, and any other currencies that are in the mix.

It's always been the plan for Gresham Dollar to integrate well with other currencies besides USD. This should include other GDTs. I can imagine a scenario in which the various GDTs work synergistically together. You could have multiple big corporations each with their own USD reserves backing their own GDT and providing their own basic income and we'd have a system for exchanging between the GDTs.

For example, let's say Walmart has Walmart Bucks as their GDT. If you can only spend Walmart Bucks at Walmart, Walmart Bucks aren't going to take over the world, but they could be an important part of the overall GDT eco-system. We would hold a reserve of Walmart Bucks and provide a facility for people to exchange their Walmart Bucks for GD at slightly less than par. If a GD user wants to shop at Walmart, he can save money by first converting his GD to Walmart bucks. Ideally, this process would be automatic.

 _Wow, crazy idea._

Thanks!

<comment><USER10> I'm thinking bigger than Wal-Mart. I'm thinking the world's largest foreign reserve owners, China and Japan.

In fact, in China's attempt to weaken their yuan, do capital controls, provide growth and jobs to they're lowest populace so the central govt doesn't face revolt -- You see the shadow of GD and BI

China even went so far to implement economically irrational activities like state owned enterprises, whose primary goal is to keep people employed and have some income, so there's no revolt. (For those that don't know, China govt is especially sensitive to revolt, much more than U.S. Because it happened so many times in history and the prior government members are all killed in a major way when it happens).

Thus, economic rationality be damned even if these SEOs are bleeding gobs of money or blowing a debt bubble.

Taken together, a lot of your Gresham dollars / basic income properties are already in place. In spirit at least.

And we see the flaws/limits.

Even with China's massive reserve, recently there have been coordinated attack by hedges including Soros, draining its reserves. And internal rich people are engaged with massive capital flight (despite the controls).

And the basic incompatibility of long term BI sapping productive parts of the country, all show up. At this point, either SEO(which is really like China's BI) goes away for good, or China will blow a debt bubble so big, that it explodes and kills everything, SEO included. Or USA included unfortunately.

<comment><AUTHOR> China and Japan each have their own currencies. If they wanted to provide a basic income right now, they could pay for it by issuing new Yuan or Yen. The Gresham's Law hack is for bootstrapping a new currency, so they don't need it.

But so long as they forgo basic income, their currencies are vulnerable to disruption by a currency like Gresham Dollar.

China is inventing fake jobs and facilitating a massive credit bubble in an effort to prop up economic growth.

 _Taken together, a lot of your Gresham dollars / basic income properties are already in place. In spirit at least._

In what sense? Basic income is continually replenishes the economy with fresh money, lessening the role of unstable credit. That's not what's happening in China.

 _And we see the flaws /limits._

Do you believe that Gresham Dollar would lead to a credit bubble?

 _And the basic incompatibility of long term BI sapping productive parts of the country, all show up._

I'm not convinced that China's state-owned enterprises are a useful proxy for basic income.

Do you believe that basic income would sap productive parts of the economy?

<comment><USER10> _I 'm not convinced that China's state-owned enterprises are a useful proxy for basic income._

Why not? The people employed by these SEO get income (for doing nothing of value to the country). These people arguably are not being able to be productive otherwise because they're stuck in an old industry and their skills are obsolete as such. If left to their own devices, without SEO income, they're likely on the streets and massive unemployment. It's not far off to say that the SEO employees are in a "special kind" of unemployment benefit.

Exactly the kinds of people BI are supposed to help.

So why won't it be a proxy?

 _In what sense? Basic income is continually replenishes the economy with fresh money, lessening the role of unstable credit. That 's not what's happening in China._

Until it explodes (which hasn't yet and may not for another 60 years!), China is continuously replenishing SEO loans. It's fresh money to the economy if they are spent. The retail vendor accepting SEO earned yuan couldn't tell the different between that and the non-SEO yuan. So it's effect in the economy is approximately what your BI/GD seeks out to do.

Yes on the surface, the difference may appear that in a debt driven approach, China may have a credit event in the future, and GD driven approach doesn't -- but I think it does, in a different way.

The essence of what I'm about to say is highlighted by finance professor Michael Pettis blog entry "Thin air money isn't created out of thin air" "[http://blog.mpettis.com/2015/10/how-to-spend-thin-airs- endog...](http://blog.mpettis.com/2015/10/how-to-spend-thin-airs-endogenous- money/")

Jumping to the most relevant parts, I quote:

 _In the second case, assume the other extreme, in which the economy has a tremendous amount of slack – there are plenty of unemployed workers who have all the skills we might need and can get to work at no cost, factories are operating at well below capacity and they can be mobilized at a flick of the switch, and there is enough unutilized infrastructure to satisfy any increase in economic activity. In this case when loan creation or deficit spending creates demand "out of thin air", in other words, it also creates its own supply. When Thin Air spends money to buy certain goods or services, those goods and services are automatically created by switching on the factory equipment and putting unemployed workers to work.

There is also a multiplier at work here. Assume that Thin Air's spending is for investment, and that it plans to acquire $100 of goods and services for investment purposes. Because it has no need to build capacity or acquire inventory, the full expenditures will go towards paying wages. Let us further assume that the newly hired workers save one-quarter of their income.

As Thin Air pays wages, the workers will spend 75% of those wages on their own consumption, and they will save 25%. Their own consumption will require the production of additional goods and services, which will require hiring more workers. In order that Thin Air acquire $100 of goods and services, it can easily be shown that the total expenditures of Thin Air and of consuming workers will be the original $100 divided by the 25% savings rate,

(This is the important part) so that in the end GDP will rise by $400, consisting of $300 additional consumption and $100 additional investment. Because the increase in GDP exceeds the increase in consumption by $100, total savings will have risen by $100.

In an economy with enough slack to absorb Thin Air's investment fully, in other words, the investment creates enough of a boost in the total production of goods and services that it becomes self-financing – it increases savings by the same amount as it increases investment. Notice then, once again, that at no point is the identity between savings and investment ever violated._

(And the point that addresses the core:)

 _In reality no economy will ever have zero slack, as in the first case, or full slack, as in the second, but instead will exist in some combination of the two. In that case Thin Air's demand created "out of thin air" will partly be met by suppressing demand or investment elsewhere within the economy, and partly by creating the larger amount of goods and services needed to satisfy the increased demand._

If you study the rest, it basically means that GD/BI will invariably compete with traditional investment, savings and demand. It _MUST_.

With a economic effect multiplier of 300%, any slack will be absorbed so quickly, that unless GD/BI stops, it will start eating into productive- economy's GDP. If there is a BI, it cannot be allowed to get very big, certainly cannot be viral.

</comment></comment></comment></comment></comment><comment><USER16> What is the difference between a gresham dollar and a debit card?

<comment><AUTHOR> I'm not sure I understand your question. Basically, Gresham Dollar is a currency that's backed by USD reserves. A debit card is a card you carry around that lets you directly spend your bank deposits.

One of the initial Gresham Dollar payment methods may end up looking very much like a debit card. To start, we will be handing out Gresham Dollar accounts to poor people. We want to make it as simple as possible for them to use.

</comment></comment><comment><USER17> (1) Where are people going to go to learn how obtain GDs, or is the plan to have other adapters reify GD first and then have it move on to others?

(2) I can't imagine some of the poor in, say, Harvard Square maintaining their GD wallets, be they physical, hardware or otherwise. This isn't the problem you're trying to solve, but just a thought.

<comment><AUTHOR> _(1) Where are people going to go to learn how obtain GDs, or is the plan to have other adapters reify GD first and then have it move on to others?_

Depends on the people.

GD comes into existence through the basic incomes that _basic account_ holders receive. Initially, we'll hand these _basic accounts_ out to poor people. What we'll literally hand them is a physical card that participating merchants can process at the point of sale. So these initial users will not really have to learn how to obtain GD. We actively give it to them.

We'll actively set up some merchants to be able to process GD payments. The sales pitch to merchants is, "We're giving people free money. Do you want their business?" Additional merchants would be able to sign up for merchant accounts through our website.

At first, we won't be able to give basic incomes to every individual. But anyone will be free to sign up online for _starter accounts_ that allow them to receive and make payments in GD, participate in the crowd investment of GD (Future Gresham Dollars), and compete for _Gresham Points_ (described in another comment).

The initial _basic account_ users and merchants will help reify GD. Ideally, our project would generate some hype leading others to sign up for _starter accounts_.

 _(2) I can 't imagine some of the poor in, say, Harvard Square maintaining their GD wallets, be they physical, hardware or otherwise. This isn't the problem you're trying to solve, but just a thought._

There's not much managing they have to do.

The plan is to make the Gresham Card as simple to use as an EBT (food stamps) card. You use your Gresham Card to spend at merchants who accept GD. The GD balance is tapped first, followed by the USD balance.

There's an online interface through which users can link bank accounts, make online payments, change settings, and do other fancy things. But users who completely ignore the online interface, for whatever reason, will still be able to receive and spend their basic incomes.

</comment></comment><comment><USER18> I'm intrigued, I live in Boston and am a software engineer, shoot me an email if you'd like to get coffee. firstname.lastname@example.com

<comment><USER18> Follow up - I met with Alex (suncho) and he is a rational, reasonable person with a strong passion and belief in his idea. The idea fascinates me, I will be thinking about it for some time, and personally investing when it is released. Alex - I recommend you get a website and white paper out, and a forum to discuss this with like minded people.

</comment></comment><comment><USER19> I really like the concept behind this idea. I hope to be able to follow the development of this idea. Hope that you can start a site or blog of sorts. In fact, most of your answers here would serve as good content to begin with.

</comment><comment><USER9> How do you make money?

<comment><AUTHOR> If we succeed, we'll control the world's money supply. Along the way, we'll likely use a small, publicly-disclosed portion of the investments we receive for salaries and other expenses. We'd switch over to spending only GD as soon as is reasonable.

Our investors earn pre-determined returns on their Future Gresham Dollars (see other comments), so they make money no problem.

</comment></comment><comment><USER20> How does this become basic income?

<comment><AUTHOR> I'm sure this is controversial for me to say, but we can pay for a basic income by printing money and handing it out. The government likely won't even think to do this because it's so counter-intuitive.

By creating our own currency, we can be the ones to "print" the money and hand it out.

<comment><USER20> That doesn't really answer my question. Let me rephrase that: Let's assume you successfully created a new currency and let's assume it does not result in hyperinflation. What mechanism will be used to give everyone a cut? Have you even crunched the numbers on how much money you will need to give everyone a cut?

How many dollars per month are you planning to distribute to "everyone" and by what mechanism do you intend to distribute it?

Thank you.

<comment><AUTHOR> _Let 's assume you successfully created a new currency and let's assume it does not result in hyperinflation._

What do you mean by "success"? For Gresham Dollar to have truly succeeded, it will have ultimately become be a single world currency that basically everyone on the planet uses.

 _What mechanism will be used to give everyone a cut?_

Gresham Dollar is a purely digital currency. Everyone would have an online PayPal-like account and we would simply add the basic income to people's accounts as a continuous stream. So, if the income were, for example, $10/day, you'd get 1 cent every 86.4 seconds. The basic income is always going to be new money that didn't exist before. We don't take it from anywhere.

 _Have you even crunched the numbers on how much money you will need to give everyone a cut?_

I'm not sure what you mean by "how much money." The basic income is a continuous stream of newly-created money for every person on the planet. We don't need the money. We _are_ the money.

Assuming a basic income of $10/day, and 7 billion people on the planet, we'd be creating 70 billion new dollars (GD) every day. Prices will equilibrate to a level that depends on whatever the basic income happens to be. If we had a basic income of $20/day, prices would equilibrate to double the $10/day price level.

It might sound weird to you that prices could remain stable if we're constantly pumping new money into the economy, but it's actually true.

To illustrate, let's imagine what would happen if we _weren 't_ constantly pumping new money into the economy. Let's say that the supply of money is fixed. There are a certain number of dollars in our economy and there will only ever be that number of dollars. Furthermore, let's imagine that the only thing humanity produces is bananas and our level of banana production is also fixed. Over time, more and more of that money will accumulate in people's savings accounts, leaving less money actively circulating and therefore less money to chase each banana. The price of bananas drops and you have deflation.

So even in an economy where the amount of wealth we're producing and trading is fixed, we need to continually inject new money to keep prices stable. The simplest and most elegant way to inject money into an economy is through a basic income. A basic income, because it's evenly distributed throughout the economy, results in the minimum possible amount of market distortion.

But in the real world, we humans are always improving our technology and figuring out ways to produce more bananas. This means that even if we have found the appropriate basic income to keep fixed the amount of money circulating, that same amount of money will be chasing more and more bananas and we'll _still_ see price deflation.

The answer to this problem is a continually increasing basic income. If we want to keep prices stable, we want to scale the amount of the basic income to keep pace with the amount of additional real wealth that humanity is trading.

 _How many dollars per month are you planning to distribute to "everyone"?_

The number of dollars doesn't really matter in the long term. What matters is that the amount is continually increasing as the amount of wealth we trade increases.

I chose $10/day as an example because 10 is a nice round number. $10/day is also an income level that will make a difference for poor people in America while still being low enough that we only need a few million USD to back a basic income for thousands of people for a few months.

But as nice as $10/day is for an American, it would be really huge for someone living in India or Mexico today.

Unifying the world economy under a single currency removes a barrier preventing regional price alignment. Providing everyone with a basic income in that currency actively pushes price differences to even out to some degree. Since people receive their basic incomes regardless of where they live, they'll have incentive to migrate to locations where the cost of living is lower. Prices in cheaper locations will rise while prices in more expensive locations will fall. This migration will stabilize once regional prices reach levels such that people are, on average, indifferent to location.

I wonder if some of the initial Gresham Dollar basic income recipients will take their basic income and flee to Mexico so they can be rich off their $10/day. =)

Even though the overall effect of a basic income is unlikely to be inflationary, there will necessarily be pockets of inflation and deflation around the world. This is not a bad thing because the net effect is progress toward more consistent and reliable prices across and between regions.

 _Thank you._

You're welcome. Thanks for asking these questions!</comment></comment></comment></comment>


Show HN: KAISER – Project Management App focusing on user-specific queues - <AUTHOR> Hi HN,
KAISER is at MVP stage right now and it's available here: https://www.kaiser-web.io
I've been working on this for a while now and I thought it would a good test to share it with HN and hopefully receive some valuable feedback in the process.
I'm focusing on making a Project Management app for software teams that developers and project managers can get on with and I like the idea of building it around individual user-specific task queues.
It's early days and the direction of the app isn't finalised yet, so any feedback you provide could help shape the future direction of the project.  Even if you don't like the concept of KAISER, I would love to hear why, and more generally, about your current problems/thoughts/ideas regarding project management.
Thanks, Paul. <comment><AUTHOR> Clickable link: [https://www.kaiser-web.io](https://www.kaiser-web.io)</comment>


San Francisco UI not showing up on Xcode - <AUTHOR> I followed instructions at https://github.com/supermarin/YosemiteSanFranciscoFont to install SF UI on my Mac, but the font is still not showing up as an option in Xcode. Help! <comment><USER2> I have never used the described methods, so take this with a grain of salt.

Where do you expect San Francisco to appear in Xcode? In the Fonts & Colors Preferences? I looked at Xcode 8.1 in OS X El Capitan, and the only San Francisco variant I saw was SF Mono, which also happens to be the default.

It looks like this monospace font is inside the Xcode bundle. Here's a page that tells about it: [https://vox.vg/get-sf-mono-in- xcode-7-46828b49f49d#.hsbaqn9j...](https://vox.vg/get-sf-mono-in- xcode-7-46828b49f49d#.hsbaqn9jk)</comment>