New member here. I'm reading Charles Stross' Neptune's Brood and I can't wrap my mind around the slow money concept. I just don't understand how it works. From the description, it looks like a bond backed by the economy of the emitting star system. But bonds have a face value, a maturation date and an interest rate. Slow money doesn't have a maturation date as far as I can tell and the face value ins't clear. They're also referred as bitcoin-like, but it seems to be more for the cryptography and block-chain properties than an abstract nature. So, can anybody explain how slow money works and where the incredible value comes from?
Stross spoke about "slow money" on his blog.
Slow money is a digital currency backed by debt—the debt incurred by constructing a new interstellar colony. To exchange slow money tokens requires something like (but not identical to) David Chaum's Digicash; all transactions need to by cryptographically signed by a trusted third party. With slow money, rather than relying on a "banker", each party can operate as a banker—but bank A can't sent cash to bank B without getting the transaction irrevocably notarized by bank C. By putting the third party in another star system, both participants in the exchange can verify that they're not being scammed, because to get your digicash packet countersigned by your banker you need to literally aim your laser communicator at their home star system. And wait. And wait a bit longer, because this whole process takes ages—slow money (thanks to requiring notarization/acknowledgement) travels no faster than a third the speed of light.
Essentially, the cost of creating a colony world and any onward ships is so vast and prohibitively expensive that only an economy based on long terms bonds valued in thousands of years can possibly function. Unless there's a good reason why one colony world would choose to keep paying another one so far into the future, the galactic economy would collapse and future colonisation would become impossible.
It's possible the conceit doesn't really hold together (but still falls apart in very interesting ways).
1) One possible approach is to think of slow money as a currency ("cash" in the sense that that word would appear on a balance sheet, though not literally coins and notes). By this interpretation, slow money is not made up of bonds denominated in some other currency. Slow money is a currency. It is also a currency constituting a separate sphere of exchange. In other words, slow money is only really used for building spaceships and settling stars, although there additionally may be status and clout associated with holding a lot of slow money. Conversion from one sphere to another is an elaborate and costly procedure (and not just for cultural reasons. There is also the usual thing of waiting for a third party to verify the transaction). Unless you are somehow connected with building spaceships and settling stars, you don't have much reason for holding a lot of slow currency. If you build a diverse portfolio, you would perhaps hold some as a hedge: in itself it is an extremely safe asset class, even less risky than "cash" (fast money).
Of course, you can still make high-risk loans denominated in slow money. The riskiness of any particular loan depends on that loan's particular circumstances. But the high credit risk (the chance that everyone on the colony will become infected by extraterrestrial fast prions and die, for instance) is counterbalanced by the low market risk (the chance that slow money will depreciate rapidly). Loans are possible in slow money that wouldn't be possible in fast money.
So it's just a currency, and a fiat currency at that. Any talk about it being "backed" by stellar colonization debt is a bit metaphorical: you can't show up somewhere and redeem it for property rights in interstellar infrastructure, or anything. It is not really "more valuable" than fast money. In one sense, it's differently valuable: it can be used to buy only certain things (terraforming, starships), and if you use it to buy something it's not meant to buy (Wispas, hats) you won't get as much bang for you buck. (In another more trivial sense, it's more valuable only in the sense that one cent of slow money happens to exchange for hundreds or thousands or millions of cents of fast money. But it's just a convention that the word "cents" is used for both: actually they're completely different units).
2) Or perhaps slow money is made up of bonds, as you suggest, issued by fresh colonies. It could perhaps be a perpetual bond, or a bond with an extremely long maturity (1000 years, then it turns into fast money).
(You would imagine the face value would be very high in cent terms, but it's not too hard to explain that away by some arbitrary convention (perhaps the figures involved are so large, everybody always divides by a million. So by convention a cent of slow money means a bond, denominated in fast money, with a yield-to-maturity of a million cents)).
Perhaps there's a parallel with government bonds: just as they are "backed" by the government's tax raising power, slow money bonds are backed by the colony's capacity to send out new starships, saddled with massive debts, to create new colonies.
I'm not sure the bond version quite adds up though: as you point out, you'd really expect to hear a bit more about face value, maturity, etc. Besides, the way Stross depicts it, the colony needs slow money to buy things to establish itself. If it created a bond (which we're provisionally calling "slow money"), then what the colony would have to spend would be what the lenders paid for that bond: fast money.
3) Or perhaps a hybrid of (2) and (3): slow money is a currency that can be redeemed for bonds with maturities of 1000 years or so.
More of me trying to wrap my head around it here.