"In our design users interact with a central transaction processor using digital wallets storing cryptographic keys. ... Despite using ideas from blockchain technology, we found that a distributed ledger operating under the jurisdiction of different actors was not needed to achieve our goals. Specifically, a distributed ledger does not match the trust assumptions in Project Hamilton's approach, which assumes that the platform would be administered by a central actor."
Reading Matt Levine's latest column on this CBDC was sort of mind blowing. With a truly centralized digital currency the Fed would basically monopolize all bank deposits (why store money in the bank at all when your digital wallet is perfectly safe) and destroy the entire banking sector.
So they are forced to decentralize the currency to some extent, so that banks are the ones to actually issue the currency (after borrowing it from the fed).
To see how tyranny can be instituted by combining a non anonymous transaction system with vaccine passport look at the promo video for Bill Gates funded wallet Thales
- Seems to be implemented in C++
- Looks like they reused bits and pieces from the Bitcoin code base (bech32, secp256k1, sha256)
- Claim of being able to handle 1.7M TPS
- Experimented with UTXO-style (Bitcoin-like) but seem to have bet on something called "unspent hashes" instead.
- I found very little on things that matter (policy-related):
- How is the "central authority" implemented
- How is the coin supply managed
Central bank digital currency efforts seem interesting.
1. They make it possible to deliver helicopter money directly to the consumers. Now central banks can only work trough banks or financial markets. Digital currency where everyone has access to central bank money can correct the errors in current systems.
2. Currency would be anchored in real economy with sound monetary policy. Nobody in their right mind takes Bitcoin denominated 10 year mortgage.
Helicopter money has always been theoretically possible to deliver direct to [most] consumers, with a bit of help from authorities responsible for tax/benefits/pensions, albeit somewhat inefficiently. But half the problem of monetary policy (the more relevant half in the immediate future) is reducing the money in the system when inflationary pressure is high. That's where channelling monetary policy through changes in the interest rate starts to make sense (the reduction is a natural one as people and corporations borrow less, which is a lot less politically painful than withdrawing a direct subsidy or even debiting people's accounts)
I wasn’t aware they would make this open. It’s a great way to play around with toy digital currency implementation. There goes my plans for rest of weekend.
Many people on HN claim that the rise of crypto-currencies is a social catastrophe.
Maybe so (I disagree), but wait until central-bank issued digital currencies become a reality, you'll very quickly learn the real meaning of social catastrophe.
Spending 10 seconds thinking about it, I can come up with the following scenarios:
- complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
- total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys.
- security nightmare : how do you guarantee the soundness of such a system when it is centralized. Just ask Sony how long they manage to keep their private keys secret on average.
- security nightmare : preventing the leakage of citizen's private financial information. If the chain is public, there is none. If it is kept under lock and key by the govt: 1) no way to check what the actual supply is 2) subject to hackage and publishing the data publicly. Knowing the track records of governmental institutions when it comes to IT security, this is basically a guaranteed fuck-up within the first 5 years of such a system existing.
- economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs, without leaving any decision-making power to the citizens.
I don't think we will avoid the implementation of such an abomination, but I do believe that - like in everything political - if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt. economic jail.
We already have all of this. The government can tell your bank to do something, and your bank will do it. What a government digital currency would do is end the subsidy of banks as the only "safe" place to park money. If I have a government account with my money, banks don't get to gamble with it for their own benefit. If I want to do that, I could withdraw the cash from where it is safe and consciously put it at risk, rather than the government backstopping the finance industry.
If government bits are just the beginning of a banning of cash, that's the real problem; but there's no reason they can't ban cash now.
The benefit to some sort of government semi-distributed ledger would be that independent people could set up ATMs. Otherwise, I'd just be happy with postal checking/savings. We already have a bunch of post offices.
Most points could already apply in current payments and banking systems with only a few big players (basically security, privacy).
The economic nightmare is maybe a degree up, but not really more. Generally speaking, it also tends not to be just "the government" doing stuff that no-one wants - there will be people liking whatever the policy is.
The only real new point is that CDBCs with any kind of programming would effectively be vouchers, not money (ie your first point).
- Efficiency: much of the legacy financial institutions are no longer needed in current form (going as far as the Fed and IRS). Opportunity to reform finance as a whole and remove legacy waste.
- Fraud detection: money laundering and financial crime becomes very difficult to hide
- Observability: much better data & insight into economic trends
- Security: Infra being controlled by a public org that can be held more accountable than a decentralized mess of private corporations (see endless Equifax leaks, etc)
- Responsiveness: can rapidly implement policy changes in response to crises
Agree on the privacy points, disagree completely on the security aspect. A centralized, government issued digital currency is FAR more secure than a decentralized one. The best security is deterrence: there is no better deterrence than having your security guaranteed by the FBI and the US Army (in the case of international hackers, messing with government systems is an act of war). Also, mistakes and hacks can be reversed -- it's just a central database, so it can be reset.
Good list, and I'd add something crazy sounding to the long list of potential nightmare problems with some kind of future centralized digital currency: forced spending through expiring money.
Keynesian economists that dominate a lot of official politics have a hard-on for viewing consumption as the root of all goodness and prosperity. In the midst of a future economic crisis with a central digital currency, it would be trivial for the politicians to start blaming a lack of spending for the problems and to force people to spend received money within X amount of time or it disappears from your digital wallet and thereby incentivize desired behavior. No real saving for the future possible: citizens would be turned into a cattle-like consumption class.
Your comment ignores the fact that we already have centralized digital transactions and they're all run by private, for-profit entities. I'm just some random dude with no other qualifications than I read the article, but here are my thoughts on your worries.
> complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
This problem has nothing to do with having a digital currency, if the government wanted to punish people "if you don't behave as a citizen", it has plenty of tools to do that already. Something like this would be huge government overreach and frankly a violation of the first amendment, I doubt if any law suggested this it would even make it to the supreme court.
Also the current centralized currencies such as PayPal and Banks already do this, if anything this gives deplatformed people more freedom as they have a viable digital alternative to purchase.
> total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys
Banks already know this information and the government could audit the banks if it wants to. What's stopping a banker from publishing your purchase history? Many Decentralized currencies would also publicly show this. That said I think it's a totally valid point.
> security nightmare : preventing the leakage of citizen's private financial information.
This is true, hence why JP thinks "It's more important to do this right than to do it fast". As I said before though, banks and private companies already leak this kind of information.
> economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs
I don't see how this changes anything. The Fed can already run the money printer to whatever throughput it needs. This doesn't change that. Only thing this changes is that it would be easier to give direct aid to citizens, especially the lowest 5% who don't own bank accounts.
>if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt
Yeah that's why I kind of think this is a good idea. We already have private versions of this and we could always... Just use those if we don't want to use whatever Powell coin turns out to be. It only gives us more options. Also it would be great to have digital transactions without the $.35 fees
i was wondering ... what if we circulate coin infinitely to harass central system? like keep exchanging coin between A and B.
Can we halt entire system down?
Any system is vulnerable to exploits. One advantage to having the government run the system is they have the power of law, law enforcement, and enormous resources to stop attackers. The financial system isn't dependent on someone's technical defenses.
There are probably scores of abuse vectors waiting to be exposed. Getting caught exposing or exercising them might land you in a place where you can never have money again or worse.
Well, if this monstrosity ever come about, just run an experiment: try to do it and see how long they let you do it before deplatforming you from the entire economy.
CDBCs are going to be a goldmine for hackers. If implemented as centralized systems, some hackers and insiders are going to have access to unlimited free money. The fact is that nobody, no group of people on this planet is trustworthy enough to implement such an important system. Such people don't exist. Such centralized system is guaranteed to be corrupted.
This is why such important financial systems MUST be decentralized, at least to the extent that anyone should be able to verify the correctness of the system's state independently.
I have been cashless for pretty much a decade, I'm more interested in what smart money that can be programmed can do.
Like can i get paid instantly for every KWH i deliver back to the grid via solar panels. Can my salary or hourly contract be streamed to my bank account. These sort of things are all possible in crypto.
Its clear that current implementations of decentralized finance are also deregulated. There is a reason that we have some regulation, every single financial scam that is regulated in centralized systems is currently active in decentralized systems. Your concept of decentralization has been corrupted from the start.
Has anyone ever hacked normal central bank vs bank pipes and injected new balances, for example? Or wholesale siphoned off stuff from payment systems? Why would a decentralized system be stronger? Would really more people care to actively monitor it?
Should name it PowellCoin— This is what happens when the Fed governors won’t let him print USD any more.
I jest, it actually is kind of interesting and could allow an even closer look at the day to day operations of banks if the ledger was in fact published.
It’s ironic that they named it project Hamilton. He is probably rolling in his grave now thinking that Jefferson would be finally proven right with CBDC and the insane ever increasing Public debt.
"banking institutions are more dangerous to our liberties than standing armies,"
Thomas Jefferson
The mention of blockchain in the summary worries me. We have real world data that shows us this only leads to wasted electricity and fabricated silicon shortages/outrageously expensive computer hardware.
The idea of a public ledger and distributed witness signatures is sound though, and that should be the basis of a government approved system of inter-reserve asset tracking.
There are different classes of blockchains. For example, the data structure managed by `git` is a blockchain. So, in and of themselves, blockchains are not problematic. When you raise those criticisms you probably meant to address the security function of the consensus mechanism for distributed decentralized ledgers. The security function there is crazy not because the people are evil scammers and con artists, but because Byzantine Fault Tolerance [1] is a hard CS problem, like AI.
Tiered systems for central bank digital currencies that allow complete tracking of all transactions are an active area of interest by central banks. For instance, the PBoC has filed over 80 patents on the subject. You can be sure that these systems don't attempt to solve BFT, don't use as much electricity, and don't protect the peasants from the abuses of the rulers.
I think you may be confusing "blockchain" with "bitcoin".
A blockchain is just blocks of data linked together using hash functions to guarantee the authenticity of previous blocks. There's no mining, and only a tiny amount of electricity used.
> We have real world data that shows us this only leads to wasted electricity
You are either ill-informed and should educate yourself on the subject (blockchain != proof of work-based consensus) or willingly creating confusion by mixing up concepts.
[+] [-] beefman|4 years ago|reply
[+] [-] DennisP|4 years ago|reply
[+] [-] tylersmith|4 years ago|reply
[+] [-] triangleman|4 years ago|reply
So they are forced to decentralize the currency to some extent, so that banks are the ones to actually issue the currency (after borrowing it from the fed).
[+] [-] asabjorn|4 years ago|reply
https://youtu.be/PxvNzzgoJX8
All across the world a China style social credit score called ESG is now being adopted by banks.
https://youtu.be/8f1Z57hwbWY
What happens when they decide you used up your quota? No flight, no meat or no car ride for you because they won’t let you spend your money.
[+] [-] lvl100|4 years ago|reply
[+] [-] ur-whale|4 years ago|reply
https://github.com/mit-dci/opencbdc-tx
Detailed architecture:
https://github.com/mit-dci/opencbdc-tx/blob/trunk/docs/archi...
Some remarks:
[+] [-] nabla9|4 years ago|reply
1. They make it possible to deliver helicopter money directly to the consumers. Now central banks can only work trough banks or financial markets. Digital currency where everyone has access to central bank money can correct the errors in current systems.
2. Currency would be anchored in real economy with sound monetary policy. Nobody in their right mind takes Bitcoin denominated 10 year mortgage.
[+] [-] notahacker|4 years ago|reply
[+] [-] nikanj|4 years ago|reply
[+] [-] anm89|4 years ago|reply
if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary policy?
[+] [-] lvl100|4 years ago|reply
[+] [-] ur-whale|4 years ago|reply
Maybe so (I disagree), but wait until central-bank issued digital currencies become a reality, you'll very quickly learn the real meaning of social catastrophe.
Spending 10 seconds thinking about it, I can come up with the following scenarios:
I don't think we will avoid the implementation of such an abomination, but I do believe that - like in everything political - if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt. economic jail.[+] [-] pessimizer|4 years ago|reply
If government bits are just the beginning of a banning of cash, that's the real problem; but there's no reason they can't ban cash now.
The benefit to some sort of government semi-distributed ledger would be that independent people could set up ATMs. Otherwise, I'd just be happy with postal checking/savings. We already have a bunch of post offices.
[+] [-] 6gvONxR4sf7o|4 years ago|reply
We live in a world with prisons. Stopping your spending is nothing compared to literally locking you up.
[+] [-] RandomLensman|4 years ago|reply
The economic nightmare is maybe a degree up, but not really more. Generally speaking, it also tends not to be just "the government" doing stuff that no-one wants - there will be people liking whatever the policy is.
The only real new point is that CDBCs with any kind of programming would effectively be vouchers, not money (ie your first point).
[+] [-] pphysch|4 years ago|reply
Why CBDC is good:
- Efficiency: much of the legacy financial institutions are no longer needed in current form (going as far as the Fed and IRS). Opportunity to reform finance as a whole and remove legacy waste.
- Fraud detection: money laundering and financial crime becomes very difficult to hide
- Observability: much better data & insight into economic trends
- Security: Infra being controlled by a public org that can be held more accountable than a decentralized mess of private corporations (see endless Equifax leaks, etc)
- Responsiveness: can rapidly implement policy changes in response to crises
[+] [-] _xnmw|4 years ago|reply
[+] [-] logicalmonster|4 years ago|reply
Keynesian economists that dominate a lot of official politics have a hard-on for viewing consumption as the root of all goodness and prosperity. In the midst of a future economic crisis with a central digital currency, it would be trivial for the politicians to start blaming a lack of spending for the problems and to force people to spend received money within X amount of time or it disappears from your digital wallet and thereby incentivize desired behavior. No real saving for the future possible: citizens would be turned into a cattle-like consumption class.
[+] [-] koshergweilo|4 years ago|reply
> complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
This problem has nothing to do with having a digital currency, if the government wanted to punish people "if you don't behave as a citizen", it has plenty of tools to do that already. Something like this would be huge government overreach and frankly a violation of the first amendment, I doubt if any law suggested this it would even make it to the supreme court.
Also the current centralized currencies such as PayPal and Banks already do this, if anything this gives deplatformed people more freedom as they have a viable digital alternative to purchase.
> total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys
Banks already know this information and the government could audit the banks if it wants to. What's stopping a banker from publishing your purchase history? Many Decentralized currencies would also publicly show this. That said I think it's a totally valid point.
> security nightmare : preventing the leakage of citizen's private financial information.
This is true, hence why JP thinks "It's more important to do this right than to do it fast". As I said before though, banks and private companies already leak this kind of information.
> economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs
I don't see how this changes anything. The Fed can already run the money printer to whatever throughput it needs. This doesn't change that. Only thing this changes is that it would be easier to give direct aid to citizens, especially the lowest 5% who don't own bank accounts.
>if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt
Yeah that's why I kind of think this is a good idea. We already have private versions of this and we could always... Just use those if we don't want to use whatever Powell coin turns out to be. It only gives us more options. Also it would be great to have digital transactions without the $.35 fees
[+] [-] mrkentutbabi|4 years ago|reply
[+] [-] _xnmw|4 years ago|reply
- Geo-replicated latency <1 second.
Amazing technical feat.
[1] https://github.com/mit-dci/opencbdc-tx
[+] [-] warabe|4 years ago|reply
[+] [-] wolverine876|4 years ago|reply
[+] [-] bhawks|4 years ago|reply
[+] [-] ur-whale|4 years ago|reply
[+] [-] cryptica|4 years ago|reply
This is why such important financial systems MUST be decentralized, at least to the extent that anyone should be able to verify the correctness of the system's state independently.
[+] [-] dragonelite|4 years ago|reply
Like can i get paid instantly for every KWH i deliver back to the grid via solar panels. Can my salary or hourly contract be streamed to my bank account. These sort of things are all possible in crypto.
[+] [-] annoyingnoob|4 years ago|reply
[+] [-] whimsicalism|4 years ago|reply
AFAIK, none of the major cryptocurrencies have ever been "hacked."
[+] [-] skybrian|4 years ago|reply
[+] [-] RandomLensman|4 years ago|reply
[+] [-] _-david-_|4 years ago|reply
[+] [-] tantalor|4 years ago|reply
They could simply copy & paste the existing laws regarding banking privacy, e.g., RFPA.
https://en.wikipedia.org/wiki/Right_to_Financial_Privacy_Act
[+] [-] rvense|4 years ago|reply
[+] [-] hnaccount141|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] throwthere|4 years ago|reply
I jest, it actually is kind of interesting and could allow an even closer look at the day to day operations of banks if the ledger was in fact published.
[+] [-] kangaroozach|4 years ago|reply
[+] [-] jonathan-adly|4 years ago|reply
"banking institutions are more dangerous to our liberties than standing armies," Thomas Jefferson
[+] [-] newaccount2021|4 years ago|reply
[deleted]
[+] [-] mjevans|4 years ago|reply
The idea of a public ledger and distributed witness signatures is sound though, and that should be the basis of a government approved system of inter-reserve asset tracking.
[+] [-] politician|4 years ago|reply
Tiered systems for central bank digital currencies that allow complete tracking of all transactions are an active area of interest by central banks. For instance, the PBoC has filed over 80 patents on the subject. You can be sure that these systems don't attempt to solve BFT, don't use as much electricity, and don't protect the peasants from the abuses of the rulers.
[1] https://decrypt.co/resources/byzantine-fault-tolerance-what-...
[+] [-] jlarocco|4 years ago|reply
A blockchain is just blocks of data linked together using hash functions to guarantee the authenticity of previous blocks. There's no mining, and only a tiny amount of electricity used.
[+] [-] ur-whale|4 years ago|reply
You are either ill-informed and should educate yourself on the subject (blockchain != proof of work-based consensus) or willingly creating confusion by mixing up concepts.
Let's assume the first, shall we?
[+] [-] anm89|4 years ago|reply
Proof of work is the thing that uses the electricity. blockchains can use or not use proof of work.
[+] [-] RandomLensman|4 years ago|reply