Demurrage is our method of controlling inflation and deflation. Our goal is for there to always be enough money to buy all the things that are being produced. As production tends to vary and sometimes degrade, it may be necessary to increase and/or remove money as needed.
Demurrage is our way to 'remove money' from the supply and to 'accelerate' the flow of money through the system.
Demurrage was initially fleshed out by Silvio Gesell in the last century. The concept was to require that a price be paid to keep money 'current'. This was called stamped money and it had some limited success in times of economic upheaval. It did not last though. It is a very cumbersome thing to implement with physical money. Demurrage 'naturalizes' money in the sense that now money can 'die'. If you hold onto it for too long, it will disappear.
Traditionally inflation does this as well, but inflation is erratic and hard to predict. Demurrage can be planned for and controlled.
The digital age gives us a chance to try demurrage again.
I have modified traditional demurrage with the idea of prefs. As a result, not all demurrage cash goes to taxes. We are going to use the public ledger to pass some cash back to the people that helped us make the cash in the first place.
Money will demurrage at a set rate. Instead of requiring everyone to 'stamp' their money once a month we will require an account that wants to spend money, receive money, or process pref payments to 'catch up' and pay the portion of the yearly percentage since the last catch up. Since money moves between accounts instantly, our money will be constantly decaying.
A high rate will lead to people looking to spend their money more quickly so that others bear the cost of demurrage.