Steve Schear <azur@netcom.com> writes:

Not very different from how one might handle a gold-denominated and backed ecash coin. Real gold must be stored in a repository which charges a storage and handling fee. This can integrated with the coin value by applying a negative interest rate to the coin based on the epoch in which the coin is issued. So coins are redeemed at a lower than initial value (assuming no change in the gold value figured in whatever unit it is being exchanged).

I used to models of various commodities and the common wisdom is: the cost of carrying precious metals (gold, silver, platinum, palladium) is so negligible that they can be treated as foreigh currencies with interest rates. That's how most people treat them in practice. (There are more exotic metals with little carrying costs, like rubidium...) Commodities like oil, gas, lumber, as well as baser metals (aluminium, copper) have a cost of carry that must be figured in your model. I suggest that if you want to model internet bandwidth as a commodity, you must assume that it depreciates as it becomes less scare. --- Dr.Dimitri Vulis KOTM Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps