How would this be better than what we have now? If the answer is "cryptocurrency increases in value," I can assure you that's a terrible reason.
Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions. After all, what's the point of a cryptocurrency if the only people who can host the full blockchain (or even acquire the full blockchain) are large banks and the government? I.e., where do you even get an internet connection that can accept, in near realtime, a full record of every monetary transaction performed with such a currency? Unlike card networks, every member of the network needs to process every transaction eventually.
I don't think cryptocurrency is at the point where the scalability concerns can be addressed to be used as legal tender for an economy as large as the US.
If this is meant to replace bonds or other government issued securities, what problem is it solving? I can't think of one.
> Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions.
Cryptocurrency with a centralized authority is not subject to these issues. After all, if there is a trusted authority then what you really have is a database with some API layered on top. You don't need miners, you don't need a blockchain, etc. It's no more difficult to scale a currency like this than it is for Visa. Canada was looking at exactly this idea about 5 years ago, with the MintChip project.
Think of this as a bank account that you can interact with in a programmatic/scriptable fashion using a private key. Which is really a lot of what people find desirable about cryptocurrency.
The deflationary monetary policy ponzi-schemes, the waste of energy and data, etc can all go. And in turn, the government gets to eventually eliminate the cash economy and make sure that all of that gets taxed (this is the dark side of cryptocurrency - since everyone gets to see all transactions, it's quite easy to trace the flows of money, and it's only anonymous until you try to do something outside the network, like cash out or exchange it for real-world goods).
Not inherently. If you compare apples to apples, accepting a credit card transaction is equivalent to accepting a zero-confirmation cryptocurrency transaction, which is just as fast as a CC charge (instantaneous.) And it is technically safer for a merchant to accept a 0-conf crypto tx because a CC charge is trivial to reverse (via a fraudulent chargeback) while a tx in the mempool of thousands of nodes is typically (not always!) hard to make disappear.
«It's more expensive than practically any other way of sending money»
Far from true. Average remittance fees are around $7 per $100 sent. Meanwhile Ethereum has fees typically under $0.50 per tx: https://bitinfocharts.com/comparison/ethereum-transactionfee... Of course there are periods of fee surges (over $5 per tx!), but it's not common.
«a full record of every monetary transaction performed with such a currency»
That's technically not needed. There have been proposals to implement what we call UTXO commitment sets, which is basically a way to revamp a blockchain so that it can discard old transactions and just keep track of current balances. (This is different, but roughly the same principle as "pruning.")
a) Nano (formerly RaiBlocks) which achieves 7000 tps, compared to Visa's capacity of 25k-65k tps (but VISA rarely spikes over 4000 tps), its wallets and network is already live
b) Solana (still in dev stages), which claims to be able to achieve 710k tps without network partitioning. This actually knock centralized systems out of the water. Of course, the centralized systems can always mimic the behavior and achieve similar throughput.
But the main point is, because a lot of money is in blockchain, a lot of it is being spent on finding ways to make it faster (which is why, innovation for faster throughput is happening in the blockchain field).
I just had to pay $8 to convert USD to another currency. The fee is less than $1, and often less than $0.10 to make an exchange like this via cryptocurrency.
In order to move money out of my own bank account, digitally, into another account, it is impossible to do instantly. Many banks charge a substantial fee, even for a 3 day turnaround[1].
Looking only at card networks, while ignoring the greater banking system is an incomplete view of the potential here.
You've only scratched the surface of cryptocurrencies and come here to make bold, completely untrue statements about their properties.
Having a central actor, like a government, would solve a lot of scaling problem, as well as transaction history issues and also cost associated with making transactions.
there are new blockchain tech releasing this year that will scale to thousands of transaction per second and provides free transactions for end users. Companies like Consensys provides infrastructure so you don't have to run a full node but just connect to a full node with a light client. You need USDC to escape from volatility. The crypto market needs a stable currency with the assurance the peg doesn't break. Digital currency solves the problem with inbound/outbound wire fees in which cost me a few hundred last year...
You live in a bubble, your argument is not valid for millions of people that don’t have bank accounts, have you seen western union fees? Africa and Latin America will embrace cryptocurrencies because it will be faster and cheaper and will not require people to open a bank account, only a cell phone with data which most people already have
"Cryptocurrency is slower than card networks." - not really, on a per-transaction basis. If you buy something at a store with a credit card, it takes weeks to get the money. With Bitcoin, you can spend the money in an hour. For small transactions, there's generally no need to wait past the point that the transaction is broadcast; and for online transactions it's not inconvenient to wait an hour before providing the product.
(of course, overall throughput is still atrocious)
Amazing that someone so naive could be given such a platform. Oh, silicon valley :)
>> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
Being able to "arbitrarily inflate" the currency is one of the many tools governments use to stabilize the economy ("monetary policy"). In the US, this ability has been hard fought (removal of the gold standard) and regardless of how you may feel about this, control of the money supply is viewed as a necessary power of the government by the vast majority of macro economist across the political spectrum. So good luck getting the US or any government to adopt a cryptocurrency that removes this control.
It may be naivety, but perhaps it's just clever marketing. As pointed out, any government has a short term incentive to retain maximum control over its currency . But if its citizens think the currency is being mismanaged and increasing inequality unfairly, then there's an incentive to come out with an alternative currency on the FEDs terms rather than being blindsided by some clever currency hatched by a private group. Silicon Valley style first mover advantages sounds more positive than fear of alternative cryptocurrencies though.
There are two problems with this control (QE) that the citizens are concerned about:
1. It reduces their cash savings by the ratio of the amount of new money injected to the total supply
2. It is unfair, as the first receipients of this new money get free money. (Inflation increases as that money flows through to everyone, however, the first receipients of this money don't get to face the inflation).
The second issue is solvable. The money should be distributed equally to all citizens, via some tax break or something.
Or you just peg USDC to the dollar so traditional monetary controls still apply. I don't know how exactly you'd do that but I'm sure you could figure out something clever.
The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's a governments wet dream.
"The US government could decide to treat USDC as a second legal currency, which would be hugely powerful."
I'd love for Sam to dig deeply into The Federal Reserve System and write about this topic with that knowledge.
[EDIT]: The more I think about this the more surprised I find myself. Sam assumes that the United States just can spin up a competitive currency to the Federal Reserve Note. This completely misunderstands the nature of the matrix and its power structure. For any seekers out there, following this rabbit hole is a fun romp on the way to spiritual awakening.
Amen, and it's not some bullshit guru/conspiracy theorist talk. People have no idea how important the monetary system is for power, and how it really works.
As others have already commented, existing currencies are already "digital". On my most recent trip abroad (to Copenhagen) I took some physical currency, and didn't use it at all.
Every transaction was digital and instantaneous (I use a Monzo Mastercard). I got a smartphone notification within 5 seconds of having approved the transaction.
The original promise of "cryptocurrencies" appeared, to me, to be decentralization, not their digital nature. The idea that a currency could be free from the control of a given government or set of governments.
This premise doesn't seem to have held for most current cryptocurrencies, as the prevalence of exchanges as central points of control has just led to governments targeting them to get the information they need to apply things like taxation and money laundering controls.
Take the time to read the original Bitcoin paper. It discusses various other electronic currency systems and why they weren't good enough.
The short answer, though, is that if you have a trusted 3rd party managing the monetary system, there's really no need for cyptocurrency. (Edit) Cryptocurrency solves the trust problem.
Overall, we can trust our government, thus there's no need for cryptocurrency.
Having transaction data hidden from governments isn't the essential feature of decentralization in the original promise of cryptocurrencies. The essential feature is preventing a single party from tampering with transactions or account balances. This is still true for bitcoin and many others.
One of the key properties of a decentralized cryptocurrency is the absolute control of a private key holder over his/her wallet.
My question is this: in the proposed scheme if 80-year-old Uncle Jim forgets/misplaces his private key, will the US government really just sit back and say "tough, I guess you just irrevocably lost all your USDC"? Or will they put in some kind of appeal process/back door to allow Uncle Jim to regain access to his funds?
Because if that back door exists -- and I have trouble imagining the US (or any other pragmatic) government building a meaningful system without it -- then the currency isn't actually decentralized anymore, and you might as well drop the "crypto" overhead entirely.
The only question I have after reading is - What does cryptocurrency actually mean according to the post?
Is it a digital currency?
But, USD is already mostly digital.
Or is it like a real cryptocurrency?
But, the selling point of cryptocurrency is decentralization.
Even if we ignore the decentralization, cryptocurrency has a lot of unresolved issues to work at a massive scale.
PoW burns a lot of energy. And PoS works by making rich richer because of the staking mechanism.
Transaction times on a huge scale network is slow. Yes, there is Lighting/Raiden etc being released but let's wait for it to be proven before we jump the gun.
Before someone says what about centralized cryptocurrency?
That is same as the digital USD. How will cryptocurrency be any different?
>Ideally the initial coins would be evenly distributed to US citizens and taxpayers— [...] The government can likely create a lot of de novo wealth for its citizens in the process.
This USDC proposal seems to reiterate the same themes as a previous blog post "American Equity".[1]
>, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
I doubt the USA government or any other modern government with fiat money would agree to this. Inflating currency is a hidden way to spend money it doesn't have. E.g. since Social Security payments are denominated in US Dollars, the govt can _nominally_ keep its payment promises by printing more USD.
Sure, the buying power of each USD for each SS recipient is severely reduced in that scenario but most citizens don't understand nominal dollars vs real buying power and therefore, it's a win-win for the govt.
A cryptocurrency that doesn't allow government flexibility to spend money that it doesn't have will have monumental political hurdles.
> Inflating currency is a hidden way to spend money it doesn't have.
This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now:
* The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan.
* Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation.
These are two separate things. The government can run a deficit without the Federal Reserve printing money. The Fed can print money without the government borrowing anything. Inflation is emphatically not something the government does so it will have more money to spend.
When inflation is too low, we print money. When we want to spend more than we take in, we borrow. Two related but separate things.
you can build in inflation into any crypto if you want. It is just the parameters you set when you create it. Bitcoin has fixed supply, but there are plenty of other altcoins that have inflationary aspects to the coin. Until recently, I thought inflation was bad, but it can have positive aspects to re-distribute currency to spenders and non-hodlers. Its a way for people to get access to new money that otherwise is held by a few.
What is this... jotting down some notes? I guess this will generate discussion because Sam wrote it, but it is probably one of the most boring and banal ideas in the space. And the exposition is very... shallow to say the least.
"A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to)."
This is how the current monetary system works. The "government" can't "arbitrarily inflate the currency". I'm surprised at the lack of depth of this article, is this a brainfart? Haha.
"The "government" can't "arbitrarily inflate the currency"."
The US government can literally do this. They can print as much money as they feel like. It would be 'dumb' for sure, but the US treasury is indeed allowed to do this.
There was even talks of solving the national debt crisis by having Obama create a trillion dollar coin a couple years ago.
Well, it is just a few hundred words. If he were taking it seriously, the topic would need to be addressed in length with more justifications than a bunch of "I thinks." But it seems everything Sam writes outside of business are just the sorts of essays a smart 18 year old who's really high might write.
Yes, seems more like a discussion starter to me. And that’s OK and perfectly acceptable. Whereas, your comment comes off as an overly critical meaningful discussion diverter. Better not to say anything at all. Now, I’d better follow my own advice.
There are many _really_ naive statements in this post, and it honestly feels like it was written by someone who has no deep historical/economic knowledge. The most obvious :
"But I believe there exists a middle ground where the government can get a lot of what it wants, and cryptocurrency users can get a lot of what they want too."
The government wants a lot of control of a lot of things. It accepts giving some freedom to people, like the color of your hair, because there's no consequence (for now at least). However, on the list of the top 100 things it would NEVER, EVER, EVER give up control of, I think currency is in the top 3, probably n°2 after the military. Like I said in another comment, people generally vastly underestimate how powerful the control of currency is.
Crypto-enthusiats want 1 thing : getting rid of the government in the monetary system. Apart from the fact that it is, in itself, both a naive and dangerous dream, there's absolutely no way the government (more specifically the Fed) will ever give up even .1% of control over it.
Considering all of this, I have a REALLY hard time imagining a middle ground. Crypto-people will not get what they want.
Does Sam knows about Russian "privatization" when everyone in the country got some "tokens" of various nationalized entities like factories or farms. What's in the end?. People didn't know what to do with this and traded them for bunch of vodka or some amount of cash. Eventually everything became owned by a small group of the people.
Similar thing happened with the original US dollar. After the Revolutionary War, everyone thought that the paper currency issued by the Continental Congress was going to be worthless, so veterans sold their paper dollars for a fraction of face value. Speculators bought them up, and then got a windfall when the new Constitution was passed and the currency actually became valuable.
Why the hell is it a foregone conclusion that government-blessed money would need to surveillance built in ("USDC could require that certain [all] transaction can only happen with wallets with known owners")? I know that's clearly what the totalitarian pervs in power desire, but why would someone out in the free world just accept and advocate such a thing?!
USG could have started issuing simple Chaumian-blinded tokens ages ago, and even still could - keeping the monetary policy under its control. They could even adopt one of the many proposed systems that's rigged with identity-escrow, leaving average users free from their surveillance. It's not too late to compete but to do so they have to compete, not just keep pushing the same busted-ass paradigm of non-fungibility that spurred Bitcoin adoption in the first place.
Chaum blind-signed tokens are vulnerable to double-spends. As far as I understand it, this is unfixable without appealing to the issuer and keeping revocations lists.
There are some things about Silicon Valley startup culture I don't think I'll ever understand until I go there, and the obsession with Basic Income is one of them.
Maybe I don't have enough imagination, but what are the realistic benefits of this compared to USD or existing cryptocurrencies? It seems like this would combine some of the worst features of each to make something that no one is happy with.
The amount of sweeping reform the US Gov would need to overcome in order to take action on this is pretty massive. Seems like it would not happen unless they felt their currency was threatened by digital currencies. Then they might move faster.
If they did do this tomorrow, it would instantly become the top market cap cryptocurrency in the world.
The hardest part about cryptocurrency is that the coin is only as good as the community around it including the holders. Fair distribution is the one feature that has been thus far unachievable and it would really require usage of a mandated government ID database. That would be the US Gov coin advantage beyond branding and enforcement weapons.
You have to decide if you want inflation or a fixed supply? Even with a fixed supply, transaction fees eat away at the available supply (aside from hodlers) which means the value could potentially rise from scarcity. That's not good for commerce if you need a currency that needs a stable value.
If there is a government backed currency, I think there should be no transaction fees.
A USDC could also mean tax jurisdictions could be paid immediately when there is a sale. If sales tax is 10%, the state might get 7%, county gets 2%, and city gets 1%... the distribution is immediate so you have daily cash flow.
The transaction fees would end up going to someone (e.g. miners but some implementations might have some other system in place) and eventually they would end up spending them. At least that is how current cryptocurrencies work.
> the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to
Author doesn't really understand how international monetary systems work. His own country is "printing" money all the time and then using its global position to divide the cost of inflation on other countries. USA can do that because most of resources exchange (with oil included) is done in US dollar. They also do clever accounting trick using FED so theoretically they are not printing any money, they are just "lending" them.
Which problem US digital coin would solve? Privacy? This would be nightmare for AML/KYC policies, tax evasion etc.
If you consider all the rogue system players then you need to think about reverting transactions, you need to think about money laundering etc.
This coin would need to have some value, trust is not enough or this would be very volatile instrument. You could ride this new US digital coin and influence USD, so government would need to have tools to intervene and control this coin, which invalidates author point about making coin more independent from government.
There are so many problems with coins backed by countries without giving governments tools to control those coins, but if you add all those tools then what's the point? It will be so similar to current monetary system.
> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
This is a partially direct democracy (for monetary policy) using digital voting with no paper trail! Unless there are crap load of formal methods backing this, it sounds like a recipe for disaster.
(Also, if this is the problem to be solved, why don't we just pass a constitutional amendment requiring a referendum for certain changes to monetary policy...)
> The government can likely create a lot of de novo wealth for its citizens in the process.
The thing that always confuses me: where is the fundamental value creation? I don't see much other than maybe saving on some inefficiencies in the current monetary/financial system. But that's not "de novo wealth"; that's "financial engineering".
How does a state-backed cryptocurrency generate "de novo wealth"?
I think it could make sense for the US government to provide a way to hold existing dollars in digital form, directly with the government. So I could go to a bank (or specially designated federal institution), deposit cash, and have that cash turned into a balance of 100% reserve digital cash held on the government's books. I could then make cost-free, instant transfers to other people or other accounts. The government could support people outside the US holding accounts. It could have API's that allow people to build transaction systems on top of the digital currency system.
What I don't understand is:
1) Why the US government would make a brand new currency rather than just support holding existing US dollars in digital form.
2) Why crypto-currency is needed. The crypto aspects of bitcoin are needed to support the fully decentralized processing. If you the currency is centrally controlled anyways, might as well just use an ordinary database with good transaction logging.
You can already hold US dollars in digital form. You're describing exactly how banks work. The reasons that transfers cost money or people outside the US can't hold accounts are not technical.
I think we'll get viable cryptocurrencies when the people designing them understand the basic and well-known economics of how money works; AND, when basic scalability problems are solved.
It's well-known that deflationary currencies do not work. That is a severe problem that must be solved before cryptocurrency is viable. Limiting the total number of coins means that the currency is deflationary. Furthermore, our current system of loans is based on printing money and requiring payback with interest. That won't work with a limited number of coins.
It's also well-known that blockchain can't scale to handle the volume of transactions that the Visa network handles.
Most of the USD is already electronic. Could we get something cryptocurrency-like with minor improvements? Probably. Will the "crypto" community like it? Probably not, because the "crypto" community knows nothing about how real economics work.
> It's well-known that deflationary currencies do not work.
Deflationary currencies have worked out fine for literally thousand of years.
Inflationary currencies are a modern concept, with their own advantages AND disadvantages.
I'm surprised this is such a sticking point for people, and that they think the system will literally collapse, when we have centuries of history proving otherwise.
> It's also well-known that blockchain can't scale to handle the volume of transactions that the Visa network handles
Visa level only requires gigabyte level blocks. And that is well within the realm of what many cryptocurrencies are trying to accomplish.
Not Bitcoin core, though, obviously.
Blockchains can scale arbitrarily. They come with some disadvantages, for sure. But at visa levels, they are disadvantages of a certain scale, that matter to people who care about decentralization, to an insanely high degree.
For the vast majority of people, who are willing so compromise very slightly on matters of trust and decentralization, visa scale blockchains work fine.
1. Not all cryptocurrencies are deflationary. Some have inflation built in.
2. Scalability will be much improved over the next year (see: lightning network, plasma, raiden, sharding, alternate consensus systems like dPOS, etc.; for a deep dive, this is a good place to start: https://multicoin.capital/2018/02/23/models-scaling-trustles...).
> It's well-known that deflationary currencies do not work.
This is laughable. Your definition of "work" includes a presumption that we all want the government to control and manipulate the economy without regard for the interests of the individual.
Ask any individual citizen whether they would prefer that their savings increased in value or decreased in value, and I suspect they'll have a different answer as to whether a deflationary currency "works" for their purposes.
I've been thinking about the idea of USG moving to BitDollars for a while here. I think Sam touches on some of the smaller potential benefits here, particularly the potential to have built in tax system. But is completely missing some of the bigger benefits, instead tying most of it back to UBI. Which I don't think gets particularly easier or more likely with BitDollars, and also IMO provides no benefit to society. Here's what I think are some of the truly revolutionary things about BitDollars:
1. It may allow us to get rid of banks. Now this is a pie in the sky vision here, banks do a lot of things. But the most basic thing they do for individuals, storing your money for you so you can spend it later in a more convenient way, is completely obviated by Bit$s. Some of what banks do isn't going to be obviated by Bit$s, I still think there will be a market for loaning money, but it will probably looks quite different.
2. It may allow USG to tax the entire world. US dollars are already among, if not the, de facto international currency. Although this position may be waning. But if Bit$s were the first ever government backed cryptocurrency that people trusted they could wind up being the world's currency. Right now, when people use dollars outside the US, there's no way for USG to levy taxes on them. That changes if you control the entire stack including the mechanism of exchange, you could bake taxes right into the currency. It would be a new form of colonization, cryptocolonization. Now, I suspect the HN crowd pales at the idea of tech being used as a method of colonization, but consider: if this is a risk, then if USG doesn't do it someone else will. Would you rather be paying Russia taxes on your BitRubles?
The biggest political question with respect to BitDollars is whether or not USG will maintain their right of seigniorage? It seems unlikely that such a right would be given up willingly, but on the other hand it's very antithetical to what cryptocurrencies are, at least today.
Why is pseudonymity a problem? Is it a problem with cash? Should we get rid of all the cash because it can't be tracked and profiled and subject to disapproval or punishment? Were we not able to tax cash? All the nonsensical hand-wringing about cryptocurrency enabling crime is ludicrous. It is exactly identical to cash except for the fact that no one has to cut in a payment processor dealer when wanting to transact with someone not physically present.
I do think a nationally-backed cryptocurrency would be a great idea, and have been saying so for a couple years. There are 2 major problems it would solve. First, we have turned payment processors into de-facto taxation bodies. Payment processors have more control over the US economy than the Federal Reserve does. If the Federal Reserve decided to increase/decrease monetary supply and the payment processors disagreed, they could very easily override the Federal Reserve with raising or lowering their bogus "service fees" (bogus primarily because they use a percentage of the transaction amount - as if moving a bigger number across a wire cost more). That is dangerous, and should be avoided.
Second, how long is it until a large scale IT problem destroys all credibility of the US banking system? How long until we wake up one day and find out that Walmart hired some coders to whip up some malware that infected their banks in order to cover up losses and to massage the numbers to make them look like they had more capital than they ever actually earned? How long until other countries refuse a payment of $1 billion on a debt because they don't believe the money is 'real' and want proof it wasn't just some funny accounting on the back of swiss-cheese no-standards 'IT is a cost center' garbage systems? A cryptocurrency wouldn't have this problem. It can be proven 'real' with trivial ease. Fiat currency can never be proven 'real'. And since it's all just bits in computers now, eventually someone is going to realize the computers aren't trustworthy.
> The current practices seem to be for governments to mostly ignore cryptocurrency and cryptocurrency enthusiasts to mostly ignore government
To me this is the biggest falsehood about cryptocurrency. There is virtually no anonymity in cryptocurrency. You can't do anything with cryptocurrency without verifying your ID. It is now ubiquitous to provide your driver license and social security on every reputable exchange.
I honestly find it more restrictive to use cryptocurrency than the few dollars I have in my pocket. I can take it outside and buy some candy in the alley without anyone having a record of it. Can't do that with cryptocurrency.
The only way to get around this is to mine your own coins. However, mining is impossible for individuals because of the mining farms.
That's not correct. You are talking about fiat ramps (to get "old" money in or out). If you mine or stake and get awarded and just use it within the ecosystem there's no need for "id verification". So saying "You cannot do anything with cryptocurrency without verifying your ID" is an overgeneralisation of "You cannot exchange other fiat money for cryptocurrency or visa versa without verifying your id".
> The current practices seem to be for governments to mostly ignore cryptocurrency and cryptocurrency enthusiasts to mostly ignore government, which seems to me to be unsustainable in both directions.
Completely untrue. To state this expresses a deep misunderstanding, or a desire to obscure the truth. Governments can damn well keep ignoring crypto, because Governments are the one with actual power here. Governments do not need crypto, crypto needs the government.
Russia is planning something like this, although the coin is far from reality. Venezuela has already put the coin out there, and it is called El Petro. From the above we can see that some countries are working on this already.
However, as ErikAugust noticed, the thought is cringe worthy to the Bitcoin/crypto loyalists.
What I don't see in this article is any indication of why such a system is desirable or beneficial for the government or for the users. For cryptocurrency fans, maybe it's self-evident. But I'm not sure what benefits cryptocurrency provides for those groups that they can't find better elsewhere.
For cryptocurrency fans, it is quite obvious that such a system would not be desirable or beneficial at all. The entire purpose of cryptocurrency is to remove governmental control of money.
Idea: If you made every government paycheck and contractor payment made with this currency it would be enough to become a standard of payment, and if you required taxes to be paid with it you'd always have demand.
Aren't they already? Government paychecks and contractor payments are typically direct deposit or electronic funds transfer. My paycheck was deposited directly in my bank account. My contractor payments were, as well. As long as the USDC and USD are the same, it doesn't make a difference.
China is already on its way of doing this. WeChat (built by Tencent, a government supported company) is the payment platform between businesses and customers nowadays. As soon as China gets reliable internet and power into its western parts, everything will become digital.
The Fed generates ~$90 BN of revenue for the US government every year.
And it does it by printing physical cash. I think the first step to traction would be convincing Congress that they can get by without $90 BN every year. (Edit: if they haven't already been convinced).
The US federal government and its partner banks would not be interested in a currency they did not absolutely control. Superpowers are simply not in the business of giving up power and it's not clear that the surrender of such power would lead to a stable system.
The entities that could reap enormous benefits from cryptocurrencies are precisely those entities which today for various reasons have tax power but do not have currency power. But tax power is currency power. This means those states with truly dynamic (high tax, high growth) economies -- California, Massachusetts, New York -- could issue transferable tax credits [1] which would be, fundamentally, money. There would be widespread and deep demand for such credits. The problem is that today the trading, control and verification of such credits is very difficult and costly [2][3]. A distributed public ledger could dramatically decrease the trading and operational costs.
Monetizing state credits with a block chain could reap enormous efficiencies. The immediate big win would be in welfare. Today California has extraordinarily vast, complicated, and inefficient welfare system [4]. All of this could be replaced with a highly efficient system where credit-money is issued directly to those who most need it. There's a lot of literature that such direct cash grants are the most efficient mechanism to fight poverty and this is why modern welfare is so inefficient [5]. Imagine the effect of a system where the hundreds of billions of California welfare money could be efficiently and securely distributed directly to those who truly need it with the press of a button with zero cost. The recipients of these credits wouldn't have to wait until one magical date nor would they have to file complicated returns to claim and monetize these credits they could go out and spend them immediately.
Note that here the advantages of a distributed public ledger would work particularly well for California Credits. The transparency of the scheme means it is always immediately clear how many credits are outstanding and who owns them. There would never be any doubt about whether a credit is transferable or valid. The big problem with tax credits -- fraud[6] and "double spends" [7] -- would be eliminated over night. A distributed public ledger for all this public money would allow true, real-time public accountability.
On inflation, pretty much no one here actually knows the truth.
Look up the federal discount window And then treasury bonds.
Typically a bank can get interest free money and plow that into interest baring bonds backed by the government. They then get is free profit off the spread, this was a common back door method of 'liquidty injection' during the financial crisis. Liquidity injection, literally a euphemism for giving away money, and who gets the money? Those closest to the federal spigot, and what happens when you have more money chasing fewer resources? Inflation. Let's not even get into the bizarro world of inflation measurements, ( food and energy aren't even included ), most 'inflation' is seen in asset inflation, rich people can only eat so much cavier and blue fin tuna, the vast majority of their money goes into assets, so they take free money and put it into real estate and stocks and bonds, meanwhile the poor suckers trading their labor for cash see their real income lose purchasing power as the real assets they want like homes and a retirement fund, become increasingly difficult pipe dreams.
I'm truly sick of people who think they have economic knowledge try to explain away the real experience of the vast majority of people, such people and such experts are really just the well paid propagandists of the rich and powerful.
> Typically a bank can get interest free money and plow that into interest baring bonds backed by the government. They then get is free profit off the spread, this was a common back door method of 'liquidty injection' during the financial crisis. Liquidity injection, literally a euphemism for giving away money, and who gets the money? Those closest to the federal spigot, and what happens when you have more money chasing fewer resources? Inflation.
Right, we noticed how high inflation was in 2008-9.
Wait...
> I'm truly sick of people who think they have economic knowledge try to explain away the real experience of the vast majority of people, such people and such experts are really just the well paid propagandists of the rich and powerful.
Sorry, not paid at all. I just think your interpretation of events does not conform to reality, and I happily say so for free.
bastawhiz|7 years ago
Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions. After all, what's the point of a cryptocurrency if the only people who can host the full blockchain (or even acquire the full blockchain) are large banks and the government? I.e., where do you even get an internet connection that can accept, in near realtime, a full record of every monetary transaction performed with such a currency? Unlike card networks, every member of the network needs to process every transaction eventually.
I don't think cryptocurrency is at the point where the scalability concerns can be addressed to be used as legal tender for an economy as large as the US.
If this is meant to replace bonds or other government issued securities, what problem is it solving? I can't think of one.
paulmd|7 years ago
Cryptocurrency with a centralized authority is not subject to these issues. After all, if there is a trusted authority then what you really have is a database with some API layered on top. You don't need miners, you don't need a blockchain, etc. It's no more difficult to scale a currency like this than it is for Visa. Canada was looking at exactly this idea about 5 years ago, with the MintChip project.
http://business.financialpost.com/news/fp-street/canadian-mi...
Think of this as a bank account that you can interact with in a programmatic/scriptable fashion using a private key. Which is really a lot of what people find desirable about cryptocurrency.
The deflationary monetary policy ponzi-schemes, the waste of energy and data, etc can all go. And in turn, the government gets to eventually eliminate the cash economy and make sure that all of that gets taxed (this is the dark side of cryptocurrency - since everyone gets to see all transactions, it's quite easy to trace the flows of money, and it's only anonymous until you try to do something outside the network, like cash out or exchange it for real-world goods).
mrb|7 years ago
Not inherently. If you compare apples to apples, accepting a credit card transaction is equivalent to accepting a zero-confirmation cryptocurrency transaction, which is just as fast as a CC charge (instantaneous.) And it is technically safer for a merchant to accept a 0-conf crypto tx because a CC charge is trivial to reverse (via a fraudulent chargeback) while a tx in the mempool of thousands of nodes is typically (not always!) hard to make disappear.
«It's more expensive than practically any other way of sending money»
Far from true. Average remittance fees are around $7 per $100 sent. Meanwhile Ethereum has fees typically under $0.50 per tx: https://bitinfocharts.com/comparison/ethereum-transactionfee... Of course there are periods of fee surges (over $5 per tx!), but it's not common.
«a full record of every monetary transaction performed with such a currency»
That's technically not needed. There have been proposals to implement what we call UTXO commitment sets, which is basically a way to revamp a blockchain so that it can discard old transactions and just keep track of current balances. (This is different, but roughly the same principle as "pruning.")
splintercell|7 years ago
Two cryptocurrencies come to mind:
a) Nano (formerly RaiBlocks) which achieves 7000 tps, compared to Visa's capacity of 25k-65k tps (but VISA rarely spikes over 4000 tps), its wallets and network is already live
b) Solana (still in dev stages), which claims to be able to achieve 710k tps without network partitioning. This actually knock centralized systems out of the water. Of course, the centralized systems can always mimic the behavior and achieve similar throughput.
But the main point is, because a lot of money is in blockchain, a lot of it is being spent on finding ways to make it faster (which is why, innovation for faster throughput is happening in the blockchain field).
vinniejames|7 years ago
In order to move money out of my own bank account, digitally, into another account, it is impossible to do instantly. Many banks charge a substantial fee, even for a 3 day turnaround[1].
Looking only at card networks, while ignoring the greater banking system is an incomplete view of the potential here.
1. https://www.nerdwallet.com/blog/banking/ach-transfers-costs-... M
mavdi|7 years ago
Having a central actor, like a government, would solve a lot of scaling problem, as well as transaction history issues and also cost associated with making transactions.
gwbas1c|7 years ago
It's a legal pump and dump scheme!
snissn|7 years ago
How long does it take you to set up a merchant account? With cryptocurrency, it's practically instant.
ojr|7 years ago
rbreve|7 years ago
powera|7 years ago
(of course, overall throughput is still atrocious)
joejohnson|7 years ago
>> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
Being able to "arbitrarily inflate" the currency is one of the many tools governments use to stabilize the economy ("monetary policy"). In the US, this ability has been hard fought (removal of the gold standard) and regardless of how you may feel about this, control of the money supply is viewed as a necessary power of the government by the vast majority of macro economist across the political spectrum. So good luck getting the US or any government to adopt a cryptocurrency that removes this control.
_5ysi|7 years ago
Thoughts are my own, not my employers.
nobrains|7 years ago
1. It reduces their cash savings by the ratio of the amount of new money injected to the total supply
2. It is unfair, as the first receipients of this new money get free money. (Inflation increases as that money flows through to everyone, however, the first receipients of this money don't get to face the inflation).
The second issue is solvable. The money should be distributed equally to all citizens, via some tax break or something.
searine|7 years ago
The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's a governments wet dream.
jerkstate|7 years ago
davebryand|7 years ago
I'd love for Sam to dig deeply into The Federal Reserve System and write about this topic with that knowledge.
[EDIT]: The more I think about this the more surprised I find myself. Sam assumes that the United States just can spin up a competitive currency to the Federal Reserve Note. This completely misunderstands the nature of the matrix and its power structure. For any seekers out there, following this rabbit hole is a fun romp on the way to spiritual awakening.
Toine|7 years ago
raesene9|7 years ago
Every transaction was digital and instantaneous (I use a Monzo Mastercard). I got a smartphone notification within 5 seconds of having approved the transaction.
The original promise of "cryptocurrencies" appeared, to me, to be decentralization, not their digital nature. The idea that a currency could be free from the control of a given government or set of governments.
This premise doesn't seem to have held for most current cryptocurrencies, as the prevalence of exchanges as central points of control has just led to governments targeting them to get the information they need to apply things like taxation and money laundering controls.
gwbas1c|7 years ago
The short answer, though, is that if you have a trusted 3rd party managing the monetary system, there's really no need for cyptocurrency. (Edit) Cryptocurrency solves the trust problem.
Overall, we can trust our government, thus there's no need for cryptocurrency.
drewrobb|7 years ago
kcorbitt|7 years ago
My question is this: in the proposed scheme if 80-year-old Uncle Jim forgets/misplaces his private key, will the US government really just sit back and say "tough, I guess you just irrevocably lost all your USDC"? Or will they put in some kind of appeal process/back door to allow Uncle Jim to regain access to his funds?
Because if that back door exists -- and I have trouble imagining the US (or any other pragmatic) government building a meaningful system without it -- then the currency isn't actually decentralized anymore, and you might as well drop the "crypto" overhead entirely.
thisisit|7 years ago
Is it a digital currency?
But, USD is already mostly digital.
Or is it like a real cryptocurrency?
But, the selling point of cryptocurrency is decentralization.
Even if we ignore the decentralization, cryptocurrency has a lot of unresolved issues to work at a massive scale.
PoW burns a lot of energy. And PoS works by making rich richer because of the staking mechanism.
Transaction times on a huge scale network is slow. Yes, there is Lighting/Raiden etc being released but let's wait for it to be proven before we jump the gun.
Before someone says what about centralized cryptocurrency?
That is same as the digital USD. How will cryptocurrency be any different?
jasode|7 years ago
This USDC proposal seems to reiterate the same themes as a previous blog post "American Equity".[1]
>, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).
I doubt the USA government or any other modern government with fiat money would agree to this. Inflating currency is a hidden way to spend money it doesn't have. E.g. since Social Security payments are denominated in US Dollars, the govt can _nominally_ keep its payment promises by printing more USD.
Sure, the buying power of each USD for each SS recipient is severely reduced in that scenario but most citizens don't understand nominal dollars vs real buying power and therefore, it's a win-win for the govt.
A cryptocurrency that doesn't allow government flexibility to spend money that it doesn't have will have monumental political hurdles.
[1] http://blog.samaltman.com/american-equity
mundo|7 years ago
This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now:
* The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan.
* Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation.
These are two separate things. The government can run a deficit without the Federal Reserve printing money. The Fed can print money without the government borrowing anything. Inflation is emphatically not something the government does so it will have more money to spend.
When inflation is too low, we print money. When we want to spend more than we take in, we borrow. Two related but separate things.
WhiteOwlLion|7 years ago
whitepoplar|7 years ago
lsc|7 years ago
tpfour|7 years ago
"A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to)."
This is how the current monetary system works. The "government" can't "arbitrarily inflate the currency". I'm surprised at the lack of depth of this article, is this a brainfart? Haha.
stale2002|7 years ago
The US government can literally do this. They can print as much money as they feel like. It would be 'dumb' for sure, but the US treasury is indeed allowed to do this.
There was even talks of solving the national debt crisis by having Obama create a trillion dollar coin a couple years ago.
kolbe|7 years ago
bobjordan|7 years ago
Toine|7 years ago
"But I believe there exists a middle ground where the government can get a lot of what it wants, and cryptocurrency users can get a lot of what they want too."
The government wants a lot of control of a lot of things. It accepts giving some freedom to people, like the color of your hair, because there's no consequence (for now at least). However, on the list of the top 100 things it would NEVER, EVER, EVER give up control of, I think currency is in the top 3, probably n°2 after the military. Like I said in another comment, people generally vastly underestimate how powerful the control of currency is.
Crypto-enthusiats want 1 thing : getting rid of the government in the monetary system. Apart from the fact that it is, in itself, both a naive and dangerous dream, there's absolutely no way the government (more specifically the Fed) will ever give up even .1% of control over it.
Considering all of this, I have a REALLY hard time imagining a middle ground. Crypto-people will not get what they want.
ex3ndr|7 years ago
Exactly what happens with bitcoin thought.
devinhelton|7 years ago
mindslight|7 years ago
USG could have started issuing simple Chaumian-blinded tokens ages ago, and even still could - keeping the monetary policy under its control. They could even adopt one of the many proposed systems that's rigged with identity-escrow, leaving average users free from their surveillance. It's not too late to compete but to do so they have to compete, not just keep pushing the same busted-ass paradigm of non-fungibility that spurred Bitcoin adoption in the first place.
andrewla|7 years ago
tboyd47|7 years ago
slg|7 years ago
dangero|7 years ago
If they did do this tomorrow, it would instantly become the top market cap cryptocurrency in the world.
The hardest part about cryptocurrency is that the coin is only as good as the community around it including the holders. Fair distribution is the one feature that has been thus far unachievable and it would really require usage of a mandated government ID database. That would be the US Gov coin advantage beyond branding and enforcement weapons.
WhiteOwlLion|7 years ago
If there is a government backed currency, I think there should be no transaction fees.
A USDC could also mean tax jurisdictions could be paid immediately when there is a sale. If sales tax is 10%, the state might get 7%, county gets 2%, and city gets 1%... the distribution is immediate so you have daily cash flow.
kekeblom|7 years ago
ErikAugust|7 years ago
lossolo|7 years ago
Author doesn't really understand how international monetary systems work. His own country is "printing" money all the time and then using its global position to divide the cost of inflation on other countries. USA can do that because most of resources exchange (with oil included) is done in US dollar. They also do clever accounting trick using FED so theoretically they are not printing any money, they are just "lending" them.
Which problem US digital coin would solve? Privacy? This would be nightmare for AML/KYC policies, tax evasion etc.
If you consider all the rogue system players then you need to think about reverting transactions, you need to think about money laundering etc.
This coin would need to have some value, trust is not enough or this would be very volatile instrument. You could ride this new US digital coin and influence USD, so government would need to have tools to intervene and control this coin, which invalidates author point about making coin more independent from government.
There are so many problems with coins backed by countries without giving governments tools to control those coins, but if you add all those tools then what's the point? It will be so similar to current monetary system.
throwawayjava|7 years ago
This is a partially direct democracy (for monetary policy) using digital voting with no paper trail! Unless there are crap load of formal methods backing this, it sounds like a recipe for disaster.
(Also, if this is the problem to be solved, why don't we just pass a constitutional amendment requiring a referendum for certain changes to monetary policy...)
> The government can likely create a lot of de novo wealth for its citizens in the process.
The thing that always confuses me: where is the fundamental value creation? I don't see much other than maybe saving on some inefficiencies in the current monetary/financial system. But that's not "de novo wealth"; that's "financial engineering".
How does a state-backed cryptocurrency generate "de novo wealth"?
devinhelton|7 years ago
What I don't understand is:
1) Why the US government would make a brand new currency rather than just support holding existing US dollars in digital form.
2) Why crypto-currency is needed. The crypto aspects of bitcoin are needed to support the fully decentralized processing. If you the currency is centrally controlled anyways, might as well just use an ordinary database with good transaction logging.
freeone3000|7 years ago
gwbas1c|7 years ago
It's well-known that deflationary currencies do not work. That is a severe problem that must be solved before cryptocurrency is viable. Limiting the total number of coins means that the currency is deflationary. Furthermore, our current system of loans is based on printing money and requiring payback with interest. That won't work with a limited number of coins.
It's also well-known that blockchain can't scale to handle the volume of transactions that the Visa network handles.
Most of the USD is already electronic. Could we get something cryptocurrency-like with minor improvements? Probably. Will the "crypto" community like it? Probably not, because the "crypto" community knows nothing about how real economics work.
stale2002|7 years ago
Deflationary currencies have worked out fine for literally thousand of years.
Inflationary currencies are a modern concept, with their own advantages AND disadvantages.
I'm surprised this is such a sticking point for people, and that they think the system will literally collapse, when we have centuries of history proving otherwise.
> It's also well-known that blockchain can't scale to handle the volume of transactions that the Visa network handles
Visa level only requires gigabyte level blocks. And that is well within the realm of what many cryptocurrencies are trying to accomplish.
Not Bitcoin core, though, obviously.
Blockchains can scale arbitrarily. They come with some disadvantages, for sure. But at visa levels, they are disadvantages of a certain scale, that matter to people who care about decentralization, to an insanely high degree.
For the vast majority of people, who are willing so compromise very slightly on matters of trust and decentralization, visa scale blockchains work fine.
berberous|7 years ago
2. Scalability will be much improved over the next year (see: lightning network, plasma, raiden, sharding, alternate consensus systems like dPOS, etc.; for a deep dive, this is a good place to start: https://multicoin.capital/2018/02/23/models-scaling-trustles...).
kenpomeroy|7 years ago
This is laughable. Your definition of "work" includes a presumption that we all want the government to control and manipulate the economy without regard for the interests of the individual.
Ask any individual citizen whether they would prefer that their savings increased in value or decreased in value, and I suspect they'll have a different answer as to whether a deflationary currency "works" for their purposes.
jdoliner|7 years ago
1. It may allow us to get rid of banks. Now this is a pie in the sky vision here, banks do a lot of things. But the most basic thing they do for individuals, storing your money for you so you can spend it later in a more convenient way, is completely obviated by Bit$s. Some of what banks do isn't going to be obviated by Bit$s, I still think there will be a market for loaning money, but it will probably looks quite different.
2. It may allow USG to tax the entire world. US dollars are already among, if not the, de facto international currency. Although this position may be waning. But if Bit$s were the first ever government backed cryptocurrency that people trusted they could wind up being the world's currency. Right now, when people use dollars outside the US, there's no way for USG to levy taxes on them. That changes if you control the entire stack including the mechanism of exchange, you could bake taxes right into the currency. It would be a new form of colonization, cryptocolonization. Now, I suspect the HN crowd pales at the idea of tech being used as a method of colonization, but consider: if this is a risk, then if USG doesn't do it someone else will. Would you rather be paying Russia taxes on your BitRubles?
The biggest political question with respect to BitDollars is whether or not USG will maintain their right of seigniorage? It seems unlikely that such a right would be given up willingly, but on the other hand it's very antithetical to what cryptocurrencies are, at least today.
otakucode|7 years ago
I do think a nationally-backed cryptocurrency would be a great idea, and have been saying so for a couple years. There are 2 major problems it would solve. First, we have turned payment processors into de-facto taxation bodies. Payment processors have more control over the US economy than the Federal Reserve does. If the Federal Reserve decided to increase/decrease monetary supply and the payment processors disagreed, they could very easily override the Federal Reserve with raising or lowering their bogus "service fees" (bogus primarily because they use a percentage of the transaction amount - as if moving a bigger number across a wire cost more). That is dangerous, and should be avoided.
Second, how long is it until a large scale IT problem destroys all credibility of the US banking system? How long until we wake up one day and find out that Walmart hired some coders to whip up some malware that infected their banks in order to cover up losses and to massage the numbers to make them look like they had more capital than they ever actually earned? How long until other countries refuse a payment of $1 billion on a debt because they don't believe the money is 'real' and want proof it wasn't just some funny accounting on the back of swiss-cheese no-standards 'IT is a cost center' garbage systems? A cryptocurrency wouldn't have this problem. It can be proven 'real' with trivial ease. Fiat currency can never be proven 'real'. And since it's all just bits in computers now, eventually someone is going to realize the computers aren't trustworthy.
vinhboy|7 years ago
To me this is the biggest falsehood about cryptocurrency. There is virtually no anonymity in cryptocurrency. You can't do anything with cryptocurrency without verifying your ID. It is now ubiquitous to provide your driver license and social security on every reputable exchange.
I honestly find it more restrictive to use cryptocurrency than the few dollars I have in my pocket. I can take it outside and buy some candy in the alley without anyone having a record of it. Can't do that with cryptocurrency.
The only way to get around this is to mine your own coins. However, mining is impossible for individuals because of the mining farms.
thiscatis|7 years ago
unknown|7 years ago
[deleted]
dnautics|7 years ago
Then why would the government bother to implement this? If anything it's disincentivized to set things up in this fashion.
urda|7 years ago
Completely untrue. To state this expresses a deep misunderstanding, or a desire to obscure the truth. Governments can damn well keep ignoring crypto, because Governments are the one with actual power here. Governments do not need crypto, crypto needs the government.
berberous|7 years ago
https://www.nytimes.com/2018/05/04/upshot/should-the-fed-cre...
skorbenko|7 years ago
skywhopper|7 years ago
kenpomeroy|7 years ago
d--b|7 years ago
unknown|7 years ago
[deleted]
unknown|7 years ago
[deleted]
mikeyanderson|7 years ago
5555624|7 years ago
booleandilemma|7 years ago
https://en.wikipedia.org/wiki/Petro_(cryptocurrency)
moeadham|7 years ago
https://explorecatena.com
starshadowx2|7 years ago
foepys|7 years ago
thebooglebooski|7 years ago
The Fed generates ~$90 BN of revenue for the US government every year.
And it does it by printing physical cash. I think the first step to traction would be convincing Congress that they can get by without $90 BN every year. (Edit: if they haven't already been convinced).
dnomad|7 years ago
The entities that could reap enormous benefits from cryptocurrencies are precisely those entities which today for various reasons have tax power but do not have currency power. But tax power is currency power. This means those states with truly dynamic (high tax, high growth) economies -- California, Massachusetts, New York -- could issue transferable tax credits [1] which would be, fundamentally, money. There would be widespread and deep demand for such credits. The problem is that today the trading, control and verification of such credits is very difficult and costly [2][3]. A distributed public ledger could dramatically decrease the trading and operational costs.
Monetizing state credits with a block chain could reap enormous efficiencies. The immediate big win would be in welfare. Today California has extraordinarily vast, complicated, and inefficient welfare system [4]. All of this could be replaced with a highly efficient system where credit-money is issued directly to those who most need it. There's a lot of literature that such direct cash grants are the most efficient mechanism to fight poverty and this is why modern welfare is so inefficient [5]. Imagine the effect of a system where the hundreds of billions of California welfare money could be efficiently and securely distributed directly to those who truly need it with the press of a button with zero cost. The recipients of these credits wouldn't have to wait until one magical date nor would they have to file complicated returns to claim and monetize these credits they could go out and spend them immediately.
Note that here the advantages of a distributed public ledger would work particularly well for California Credits. The transparency of the scheme means it is always immediately clear how many credits are outstanding and who owns them. There would never be any doubt about whether a credit is transferable or valid. The big problem with tax credits -- fraud[6] and "double spends" [7] -- would be eliminated over night. A distributed public ledger for all this public money would allow true, real-time public accountability.
[1] http://www.pewtrusts.org/en/research-and-analysis/blogs/stat...
[2] http://www.hmblaw.com/media/97814/the_transferability_and_mo...
[3] https://www.bna.com/incentives-watch-monetizing-b17179870903...
[4] https://www.quora.com/Does-California-really-have-30-of-the-...
[5] https://fivethirtyeight.com/features/most-welfare-dollars-do...
[6] https://www.nevadabusiness.com/2016/12/transferable-tax-cred...
[7] https://www.bna.com/incentives-watch-transferable-b579820651...
returnnan|7 years ago
Look up the federal discount window And then treasury bonds.
Typically a bank can get interest free money and plow that into interest baring bonds backed by the government. They then get is free profit off the spread, this was a common back door method of 'liquidty injection' during the financial crisis. Liquidity injection, literally a euphemism for giving away money, and who gets the money? Those closest to the federal spigot, and what happens when you have more money chasing fewer resources? Inflation. Let's not even get into the bizarro world of inflation measurements, ( food and energy aren't even included ), most 'inflation' is seen in asset inflation, rich people can only eat so much cavier and blue fin tuna, the vast majority of their money goes into assets, so they take free money and put it into real estate and stocks and bonds, meanwhile the poor suckers trading their labor for cash see their real income lose purchasing power as the real assets they want like homes and a retirement fund, become increasingly difficult pipe dreams.
I'm truly sick of people who think they have economic knowledge try to explain away the real experience of the vast majority of people, such people and such experts are really just the well paid propagandists of the rich and powerful.
swiss_beatz|7 years ago
simonpaul|7 years ago
[deleted]
AnimalMuppet|7 years ago
Right, we noticed how high inflation was in 2008-9.
Wait...
> I'm truly sick of people who think they have economic knowledge try to explain away the real experience of the vast majority of people, such people and such experts are really just the well paid propagandists of the rich and powerful.
Sorry, not paid at all. I just think your interpretation of events does not conform to reality, and I happily say so for free.