10 ms·

US Digital Currency

91 points by rloomba 8y ago

jerkstate 8y ago
The US Dollar is already a digital currency, only a small portion of it is represented by notes and coins.
d--b 8y ago
You could peg the digital currency to the dollar. There is zero value in a fluctuating digital currency...
swiss_beatz 8y ago
Sam seems to not understand that most fiat currency is already "digital"
starshadowx2 8y ago
What do you think the effects would be if China did this instead of/before the US?
- foepys 8y ago
  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.
  - starshadowx2 8y ago
    Just being digital isn't equal to a cryptocurrency. I'm aware of Wechat and how pretty much everything is connected to it now. I'm more wondering of the global political-economic consequences of China beating the US at this.
tpfour 8y ago
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.
- stale2002 8y ago
  "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.
  - davebryand 8y ago
    I think he was positing that they couldn't inflate in a future world of a GovCoin. There is actually an interesting nugget in the Obama idea. The "trillion dollar coin" thing completely misunderstands market dynamics, but the idea of the Executive taking power back from The Federal Reserve is interesting.
  - kolbe 8y ago
    If the US Treasury did that, it would be illegal. The coin thing is a hack that would probably be challenged in court, because it's illegal for the Treasury to arbitrarily print money, except when it's silver. So, you're not wrong in that the treasury can physically do those things, but it's in the same way that you wouldn't be wrong if you claim North Korea can do the same by illegally counterfeiting endless dollars.
mikeyanderson 8y ago
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.
- 5555624 8y ago
  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.
booleandilemma 8y ago
We’d be copying what Venezuela did with their “Petro” :) https://en.wikipedia.org/wiki/Petro_(cryptocurrency) https://en.wikipedia.org/wiki/Petro_(cryptocurrency)
ErikAugust 8y ago
If we go back to the original reasons why Bitcoin was created, one can easily see just how cringe worthy this is.
gwbas1c 8y ago
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.
- stale2002 8y ago
  > 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.
  - Zarath 8y ago
    Here's a thought experiment. Satoshi (who we'll pretend is Hal Finney) owns 10% of Bitcoin, we assume he's lost the keys. Bitcoin becomes a global, and universal currency as we slowly colonize the entire galaxy. Satoshi has been unfrozen from his cryogenic sleep, and remembers his keys. Satoshi now owns 10% of the entire economy of the galaxy. Seems ridiculous right? Satoshi contributed nothing for hundreds or thousands of years yet still owns the same fixed portion of the total economy.
dangero 8y ago
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.
deleted 8y ago
[deleted]
jasode 8y ago
>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. [1] http://blog.samaltman.com/american-equity http://blog.samaltman.com/american-equity
- whitepoplar 8y ago
  Social Security in the U.S. is inflation-adjusted.
  - jasode 8y ago
    The government also controls the COLA Cost of Living Adjustment. Ask retirees if they feel the modest COLA increases have kept up with real expenses.
  - johnm1019 8y ago
    against a benchmark formula derived by the same US govt that can print more money. There has also long been discussion that the existing inflation measures are inaccurate [0]. https://www.bloomberg.com/news/articles/2018-05-02/the-consumer-price-index-may-be-getting-inflation-wrong https://www.bloomberg.com/news/articles/2018-05-02/the-consu...
- lsc 8y ago
  The big thing is the ability to pay bond repayments with inflated currency. The vast majority of government debt is fixed rate
vinhboy 8y ago
> 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.
- thiscatis 8y ago
  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".
  - berberous 8y ago
    To add to your comments: 1) Mining is still possible with individual GPUs for certain cryptocurrencies (e.g. Ethereum), although you probably aren't making more than 50 cents per days. 2) Decentralized exchanges will let you convert any cryptocurrency to another (e.g. mined Ethereum to privacy centric coins and back again). 3) In addition to mining, earning crypto for work, and receiving crypto for payments, you can still buy crypto locally for cash.
davebryand 8y ago
"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.
- Toine 8y ago
  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.
skorbenko 8y ago
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.
slg 8y ago
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.
raesene9 8y ago
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.
- drewrobb 8y ago
  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.
  - actsasbuffoon 8y ago
    > The essential feature is preventing a single party from tampering with transactions or account balances. Are there examples of this actually happening? I'd think that would be pretty damaging to any bank that engaged in such behavior.
    - uudhodhd 8y ago
      There are countless examples. The US government seized all gold. The Greek government froze accounts, Cyprus engaged in a 'bail in', governments constantly freeze accounts of 'bad' actors, payment processors will decide without cause to stop servicing clients because they are in adult content or because they are WikiLeaks. There so many examples, it goes on and on ad nauseum.
      - 8y ago
deleted 8y ago
[deleted]
bastawhiz 8y ago
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.
- paulmd 8y 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. 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-mint-pushes-ahead-in-murky-world-of-crypto-currency-with-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).
deleted 8y ago
[deleted]
thebooglebooski 8y ago
I used to work in payments in the public sector. 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).
dnautics 8y ago
> the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to Then why would the government bother to implement this? If anything it's disincentivized to set things up in this fashion.
berberous 8y ago
On a similar note, here's a NYT article from last week quoting a former Fed governor stating that this is something central banks should look into: https://www.nytimes.com/2018/05/04/upshot/should-the-fed-create-fedcoin-to-rival-bitcoin-a-former-top-official-says-maybe.html https://www.nytimes.com/2018/05/04/upshot/should-the-fed-cre...
throwawayjava 8y 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 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"?
thisisit 8y ago
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?
tboyd47 8y ago
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.
mindslight 8y ago
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.
- andrewla 8y ago
  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.
  - mindslight 8y ago
    Um, what? The basic system obviously isn't vulnerable to double spends. Are you perhaps talking about why the construction is unsuitable for offline use or for grafting onto a blockchain?
ex3ndr 8y ago
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. Exactly what happens with bitcoin thought.
- devinhelton 8y ago
  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.
WhiteOwlLion 8y ago
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.
- kekeblom 8y ago
  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.
moeadham 8y ago
We've been building this in Canada. I would be surprised if the US beat us to it. https://explorecatena.com https://explorecatena.com
kcorbitt 8y ago
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.
jdoliner 8y ago
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.
urda 8y ago
> 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.
lossolo 8y ago
> 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.
dnomad 8y ago
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. [1] http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2012/12/14/tax-breaks-for-sale-transferable-tax-credits-explained http://www.pewtrusts.org/en/research-and-analysis/blogs/stat... [2] http://www.hmblaw.com/media/97814/the_transferability_and_monetization_of_state_tax_credits__jmt_march-april_2015_.pdf http://www.hmblaw.com/media/97814/the_transferability_and_mo... [3] https://www.bna.com/incentives-watch-monetizing-b17179870903/ https://www.bna.com/incentives-watch-monetizing-b17179870903... [4] https://www.quora.com/Does-California-really-have-30-of-the-USAs-welfare-cases https://www.quora.com/Does-California-really-have-30-of-the-... [5] https://fivethirtyeight.com/features/most-welfare-dollars-dont-go-directly-to-poor-people-anymore/ https://fivethirtyeight.com/features/most-welfare-dollars-do... [6] https://www.nevadabusiness.com/2016/12/transferable-tax-credits/ https://www.nevadabusiness.com/2016/12/transferable-tax-cred... [7] https://www.bna.com/incentives-watch-transferable-b57982065135/ https://www.bna.com/incentives-watch-transferable-b579820651...
otakucode 8y ago
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.
joejohnson 8y ago
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.
- nobrains 8y ago
  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.
  - nostrademons 8y ago
    #2 is actually significantly harder to solve, although I do think that distributing new money directly to consumers rather than to banks who are supposed to make loans to consumers would help the situation. Inflation doesn't affect all firms equally. Excess money tends to pool at bottlenecks within the economy: industries where a single firm has monopoly power over its suppliers or customers. It ends up receiving all the new cash that is circulating within the economy, but has little incentive to pay out that cash to suppliers because they have few other buyers but plenty of competitors should they try to raise prices proportionally. As a result, prices rise upstream of the monopoly, but remain constant downstream, with the added money going into asset purchases that the monopoly firm believes will give it a bigger moat. The Fed, meanwhile, tends to look at prices downstream (in the broader economy), sees that they are remaining stubbornly low, and keeps adding money into the economy, which all collects as cash on the balance sheets of monopoly firms or asset prices for things they want to buy. Warren Buffett has remarked on this effect in a few of his annual reports, and his entire investment thesis is based upon it. It's also why the FANG stocks have been on a tear (each of them owns a local monopoly in their consumer-based industry), and why software engineering salaries for Big Tech have been skyrocketing (on the supply-side, each of these companies isn't quite a monopsony, as engineers can choose to work for another one), and why land in the Bay Area is unaffordable (all these engineers need to live somewhere, and the supply of land is fixed). It also manifests as a plummeting velocity of money and recurrent asset bubbles, which we've also seen. Distributing money directly to taxpayers would help - at the very least, it'd let the Fed more accurately measure the impact of new money on prices, as consumer price levels would jump immediately rather than waiting for the money to cycle back as salaries, which it never does unless they're in an industry where they have bargaining power over their employers. But ultimately, fixing it requires doing something about monopoly concentration within the economy and ensuring there's healthy price competition at all levels of the value chain.
devinhelton 8y ago
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.
- freeone3000 8y ago
  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.
  - devinhelton 8y ago
    No, that is not how banks work. You are not holding actual legal tender, your bank account is a credit with that specific bank that the bank promises to pay back to you with legal tender on demand. But the bank has lent out that money and might not be able to actually pay you back (or might need to be bailed out by the FDIC to pay you back if your account is under $250k). I agree though that existing banks could technically implement costless transfers or accounts for people outside the US with existing tech, but it is not worth it because of regulatory compliance issues and the archaic nature of the banking systems. But if those issues were to be fixed, might as well just hold what are now checking accounts directly with the government, rather than have the convoluted system of banks + massive regulation + FDIC insurance.
    - freeone3000 8y ago
skywhopper 8y ago
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.
- kenpomeroy 8y ago
  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.
returnnan 8y ago
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.
simonpaul 8y ago
Apparently my views are too much for the moderators. 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.
- AnimalMuppet 8y ago
  > 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.
Toine 8y ago
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.

US Digital Currency

91 points by rloomba 8y ago

jerkstate 8y ago

The US Dollar is already a digital currency, only a small portion of it is represented by notes and coins.

d--b 8y ago

You could peg the digital currency to the dollar. There is zero value in a fluctuating digital currency...

swiss_beatz 8y ago

Sam seems to not understand that most fiat currency is already "digital"

starshadowx2 8y ago

What do you think the effects would be if China did this instead of/before the US?

foepys 8y ago
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.
- starshadowx2 8y ago
  Just being digital isn't equal to a cryptocurrency. I'm aware of Wechat and how pretty much everything is connected to it now. I'm more wondering of the global political-economic consequences of China beating the US at this.

tpfour 8y ago

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.

stale2002 8y ago
"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.
- davebryand 8y ago
  I think he was positing that they couldn't inflate in a future world of a GovCoin. There is actually an interesting nugget in the Obama idea. The "trillion dollar coin" thing completely misunderstands market dynamics, but the idea of the Executive taking power back from The Federal Reserve is interesting.
- kolbe 8y ago
  If the US Treasury did that, it would be illegal. The coin thing is a hack that would probably be challenged in court, because it's illegal for the Treasury to arbitrarily print money, except when it's silver. So, you're not wrong in that the treasury can physically do those things, but it's in the same way that you wouldn't be wrong if you claim North Korea can do the same by illegally counterfeiting endless dollars.

mikeyanderson 8y ago

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.

5555624 8y ago
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.

booleandilemma 8y ago

We’d be copying what Venezuela did with their “Petro” :) https://en.wikipedia.org/wiki/Petro_(cryptocurrency) https://en.wikipedia.org/wiki/Petro_(cryptocurrency)

ErikAugust 8y ago

If we go back to the original reasons why Bitcoin was created, one can easily see just how cringe worthy this is.

gwbas1c 8y ago

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.

stale2002 8y ago
> 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.
- Zarath 8y ago
  Here's a thought experiment. Satoshi (who we'll pretend is Hal Finney) owns 10% of Bitcoin, we assume he's lost the keys. Bitcoin becomes a global, and universal currency as we slowly colonize the entire galaxy. Satoshi has been unfrozen from his cryogenic sleep, and remembers his keys. Satoshi now owns 10% of the entire economy of the galaxy. Seems ridiculous right? Satoshi contributed nothing for hundreds or thousands of years yet still owns the same fixed portion of the total economy.

dangero 8y ago

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.

deleted 8y ago

[deleted]

jasode 8y ago

>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. [1] http://blog.samaltman.com/american-equity http://blog.samaltman.com/american-equity

whitepoplar 8y ago
Social Security in the U.S. is inflation-adjusted.
- jasode 8y ago
  The government also controls the COLA Cost of Living Adjustment. Ask retirees if they feel the modest COLA increases have kept up with real expenses.
- johnm1019 8y ago
  against a benchmark formula derived by the same US govt that can print more money. There has also long been discussion that the existing inflation measures are inaccurate [0]. https://www.bloomberg.com/news/articles/2018-05-02/the-consumer-price-index-may-be-getting-inflation-wrong https://www.bloomberg.com/news/articles/2018-05-02/the-consu...
lsc 8y ago
The big thing is the ability to pay bond repayments with inflated currency. The vast majority of government debt is fixed rate

vinhboy 8y ago

> 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.

thiscatis 8y ago
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".
- berberous 8y ago
  To add to your comments: 1) Mining is still possible with individual GPUs for certain cryptocurrencies (e.g. Ethereum), although you probably aren't making more than 50 cents per days. 2) Decentralized exchanges will let you convert any cryptocurrency to another (e.g. mined Ethereum to privacy centric coins and back again). 3) In addition to mining, earning crypto for work, and receiving crypto for payments, you can still buy crypto locally for cash.

davebryand 8y ago

"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.

Toine 8y ago
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.

skorbenko 8y ago

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.

slg 8y ago

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.

raesene9 8y ago

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.

drewrobb 8y ago
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.
- actsasbuffoon 8y ago
  > The essential feature is preventing a single party from tampering with transactions or account balances. Are there examples of this actually happening? I'd think that would be pretty damaging to any bank that engaged in such behavior.
  - uudhodhd 8y ago
    There are countless examples. The US government seized all gold. The Greek government froze accounts, Cyprus engaged in a 'bail in', governments constantly freeze accounts of 'bad' actors, payment processors will decide without cause to stop servicing clients because they are in adult content or because they are WikiLeaks. There so many examples, it goes on and on ad nauseum.
    - 8y ago

deleted 8y ago

[deleted]

bastawhiz 8y ago

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.

paulmd 8y 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. 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-mint-pushes-ahead-in-murky-world-of-crypto-currency-with-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).

deleted 8y ago

[deleted]

thebooglebooski 8y ago

I used to work in payments in the public sector. 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).

dnautics 8y ago

> the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to Then why would the government bother to implement this? If anything it's disincentivized to set things up in this fashion.

berberous 8y ago

On a similar note, here's a NYT article from last week quoting a former Fed governor stating that this is something central banks should look into: https://www.nytimes.com/2018/05/04/upshot/should-the-fed-create-fedcoin-to-rival-bitcoin-a-former-top-official-says-maybe.html https://www.nytimes.com/2018/05/04/upshot/should-the-fed-cre...

throwawayjava 8y 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 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"?

thisisit 8y ago

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?

tboyd47 8y ago

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.

mindslight 8y ago

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.

andrewla 8y ago
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.
- mindslight 8y ago
  Um, what? The basic system obviously isn't vulnerable to double spends. Are you perhaps talking about why the construction is unsuitable for offline use or for grafting onto a blockchain?

ex3ndr 8y ago

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. Exactly what happens with bitcoin thought.

devinhelton 8y ago
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.

WhiteOwlLion 8y ago

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.

kekeblom 8y ago
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.

moeadham 8y ago

We've been building this in Canada. I would be surprised if the US beat us to it. https://explorecatena.com https://explorecatena.com

kcorbitt 8y ago

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.

jdoliner 8y ago

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.

urda 8y ago

> 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.

lossolo 8y ago

> 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.

dnomad 8y ago

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. [1] http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2012/12/14/tax-breaks-for-sale-transferable-tax-credits-explained http://www.pewtrusts.org/en/research-and-analysis/blogs/stat... [2] http://www.hmblaw.com/media/97814/the_transferability_and_monetization_of_state_tax_credits__jmt_march-april_2015_.pdf http://www.hmblaw.com/media/97814/the_transferability_and_mo... [3] https://www.bna.com/incentives-watch-monetizing-b17179870903/ https://www.bna.com/incentives-watch-monetizing-b17179870903... [4] https://www.quora.com/Does-California-really-have-30-of-the-USAs-welfare-cases https://www.quora.com/Does-California-really-have-30-of-the-... [5] https://fivethirtyeight.com/features/most-welfare-dollars-dont-go-directly-to-poor-people-anymore/ https://fivethirtyeight.com/features/most-welfare-dollars-do... [6] https://www.nevadabusiness.com/2016/12/transferable-tax-credits/ https://www.nevadabusiness.com/2016/12/transferable-tax-cred... [7] https://www.bna.com/incentives-watch-transferable-b57982065135/ https://www.bna.com/incentives-watch-transferable-b579820651...

otakucode 8y ago

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.

joejohnson 8y ago

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.

nobrains 8y ago
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.
- nostrademons 8y ago
  #2 is actually significantly harder to solve, although I do think that distributing new money directly to consumers rather than to banks who are supposed to make loans to consumers would help the situation. Inflation doesn't affect all firms equally. Excess money tends to pool at bottlenecks within the economy: industries where a single firm has monopoly power over its suppliers or customers. It ends up receiving all the new cash that is circulating within the economy, but has little incentive to pay out that cash to suppliers because they have few other buyers but plenty of competitors should they try to raise prices proportionally. As a result, prices rise upstream of the monopoly, but remain constant downstream, with the added money going into asset purchases that the monopoly firm believes will give it a bigger moat. The Fed, meanwhile, tends to look at prices downstream (in the broader economy), sees that they are remaining stubbornly low, and keeps adding money into the economy, which all collects as cash on the balance sheets of monopoly firms or asset prices for things they want to buy. Warren Buffett has remarked on this effect in a few of his annual reports, and his entire investment thesis is based upon it. It's also why the FANG stocks have been on a tear (each of them owns a local monopoly in their consumer-based industry), and why software engineering salaries for Big Tech have been skyrocketing (on the supply-side, each of these companies isn't quite a monopsony, as engineers can choose to work for another one), and why land in the Bay Area is unaffordable (all these engineers need to live somewhere, and the supply of land is fixed). It also manifests as a plummeting velocity of money and recurrent asset bubbles, which we've also seen. Distributing money directly to taxpayers would help - at the very least, it'd let the Fed more accurately measure the impact of new money on prices, as consumer price levels would jump immediately rather than waiting for the money to cycle back as salaries, which it never does unless they're in an industry where they have bargaining power over their employers. But ultimately, fixing it requires doing something about monopoly concentration within the economy and ensuring there's healthy price competition at all levels of the value chain.

devinhelton 8y ago

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.

freeone3000 8y ago
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.
- devinhelton 8y ago
  No, that is not how banks work. You are not holding actual legal tender, your bank account is a credit with that specific bank that the bank promises to pay back to you with legal tender on demand. But the bank has lent out that money and might not be able to actually pay you back (or might need to be bailed out by the FDIC to pay you back if your account is under $250k). I agree though that existing banks could technically implement costless transfers or accounts for people outside the US with existing tech, but it is not worth it because of regulatory compliance issues and the archaic nature of the banking systems. But if those issues were to be fixed, might as well just hold what are now checking accounts directly with the government, rather than have the convoluted system of banks + massive regulation + FDIC insurance.
  - freeone3000 8y ago

skywhopper 8y ago

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.

kenpomeroy 8y ago
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.

returnnan 8y ago

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.

simonpaul 8y ago

Apparently my views are too much for the moderators. 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.

AnimalMuppet 8y ago
> 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.

Toine 8y ago

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.