What is demurrage ?

Demurrage is money quantity diminishing with time. It was introduced by the economist Silvio Gesell in its book The natural economic order - Owen London (1958).

For example suppose a demurrage rate of 10% per day, then if Alice has 100 units today, she’ll have only 90 tomorrow, then 81 the day after, etc.

Diminishing money over time is an incentive for people to spend it and prevent accumulating it.

Same as economy with inflation, where money loses value over time, money that gains value over time, or even stagnates is considered as negative. Demurrage is different since it does not care about the coin value, the coin is simply destroyed and removed from the chain.

Demurrage implementation

The demurrage is applied at each new block and the balances udpated accordingly.

A desired demurrage percent per day is provided as a chain specification. We derive from this percent, and the average mining time desired, the demurrage to apply to accounts, every block. For example, we desire a demurrage rate of 10% / day, and we want a block every 10 minutes. A block every 10 minutes is 144 blocks / day. The demurrage to apply will be the 144th root of 1.1