A demurrage-based money system is one in which currency steadily loses value if it is held — bearing a form of negative interest, a kind of user fee on money itself. The mechanism reverses a deep incentive: where conventional interest rewards hoarding, demurrage rewards circulation.
The idea was named by economist 📝Silvio Gesell, who called it "free money" — currency that, in his words, "rots like potatoes, rusts like iron." Subjecting 📝money to the same laws as natural commodities decouples its two roles, separating money as a medium of exchange from money as a store of value. Whereas interest tends to concentrate wealth, demurrage promotes its distribution: because no one can usefully hoard it, no one needs to.
Demurrage is ancient — used as far back as Ancient Egypt — but its best-known modern trial was Wörgl, Austria, in 1932, where a locally issued currency required a monthly stamp worth one percent of its face value. Accumulation became a burden, spending accelerated, and the town's unemployment fell even as the rest of the country sank deeper into depression — until a threatened central bank had the currency outlawed in 1933. 📝Charles Eisenstein cites demurrage in 📝The Ascent of Humanity as a core mechanism of a 📝Restorative Economy, and 📝One Inc likewise designed 📝One Economy to apply a demurrage component to its non-living assets.