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A Revolution in Money

43 points by wallflower 13y ago

deleted 13y ago
[deleted]
bsirkia 13y ago
I like that this is at least opening up to the possibility of new, more efficient transaction methods. Marc Andreessen made me think about credit cards differently after hearing him on a Freakonomics podcast: "And so one way to think about credit card fraud, is credit card fraud is a two-to-three percent drag on the entire economy. It’s an artifact of the fact that credit cards were never designed to be used the way that they’re being used today. Credit cards never anticipated online transactions. Credit cards, by the way, the credit card system, never anticipated malware running inside a cash register at Target. In the 1950s that was an inconceivable idea, which is when credit cards were dreamed up. And so if you have a payment system like Bitcoin where you don’t have the credential exchange, and you have no risk of identity fraud, and you have no risk of people being able to run transactions on your credit card after the fact, you can basically eliminate that entire category of fraud…"
- wdewind 13y ago
  On the other hand... The 2 to 3% drag needs to be corrected for increased liquidity, which is difficult to do. People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth. If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. The premise the article presents (essentially a different crypto currency for every business I interact with, as well as loan instruments built on top of btc) is actually not a preferable reality to the current one. Also his claim that you have no chance of identity fraud is really only relevant to the merchant (and is obviously worse for the consumer). But merchants have already done the calculation: even at 2-5% transaction fee and eating a lot of fraud, they are happy to process credit cards.
  - bsirkia 13y ago
    Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. I also don't think the article is necessarily saying that we will have different crypto-currencies for each business, just that we already use a bunch of different payment methods (points, air miles, credit, etc.) and it will be faster and easier to choose which one you use.
    - wdewind 13y ago
      > Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. How?
  - Xdes 13y ago
    >If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. Why? One way transactions cut down fraud. It's not inconceivable to have a hardware digital currency wallet that can be used similar to the modern credit card. Banks could issue credit that is spendable in the same way with additional automatic escrow. Why continue to have the fraud ridden system when the alternative exists?
    - wdewind 13y ago
      Huh? One way transactions cut down charge backs, they don't cut down fraud. It just moves the fraud risk to the consumer (and the wallets), instead of the merchants. Great for merchants, not great for consumers. Again, as merchants are already willing to take a cut to attract consumers via credit cards, it seems unlikely that consumers will be motivated to use bitcoin over credit cards.
  - QuantumChaos 13y ago
    There is no logical relation between credit vs debit cards, and fraud. You could have a bitcoin based account with a borrowing limit, which could only make payments to registered identities (equivalent of merchants), creating a credit card-like account. And when you say that merchants find credit cards acceptable in spite of fraud, that doesn't imply that fraud isn't a huge drain on the economy, it just means that credit cards are still a better alternative than cash. But if we could get rid of the fraud, we would still save a huge amount.
- tpeng 13y ago
  Bitcoin doesn't eliminate security risks, it pushes the costs onto consumers. It's inconceivable to me that regular users can be trusted to maintain and secure their own wallets, so the only solution is an online wallet. But those businesses will need to be paid for their service, and face security risks as well, which under the current system are ultimately transferred to users. For bitcoin to work, we need a system that guarantees that consumers will not bear losses from fraud or hacking.
  - vvvv 13y ago
    1) the only solution is an online wallet 2) those businesses will need to be paid for their service, and face security risks as well 3) government will regulate 4) some businesses will start wallets/vaults, which will enable you to open a wallet free of charge in exchange for depositing your bitcoins 5) those businesses will use the deposited bitcoins for lending, investments and speculation hello brave new world...
  - hibikir 13y ago
    So, the short version is that for a digital currency to be popular and convenient, it has to not be like bitcoin at all
mbrynard 13y ago
The idea of wallets with dozens of digital currencies ties in with another idea which I've been intrigued by recently. Apart from the payment mechanism functionality, units of cryptocurrency are much like shares in a company. The Cypherfunks experiment (www.thecypherfunks.com) illustrates this concept: Imagine anybody could own shares in the music industry. To make this possible bands simply accept payment in a specific cryptocurrency (e.g. FUNK). As more people support bands using this form of payment, the value of the cryptocurrency grows and the entire network of bands and their supporters benefits.
funkydallas 13y ago
"A Revolution in Money" would mean that no third parties do have control over its value. Nowadays we have something like a server based money network. If the server (bank) goes down, everybody is screwed. Imagine a peer to peer kind of money network. Every member is a bank himself. Getting a credit works like crowd funding. People can invest their money into several projects. Investors get a certain percentage of the profit. This way you avoid the "interest and compound interest" problem.
- dllthomas 13y ago
  "Imagine a peer to peer kind of money network. Every member is a bank himself." This sounds a lot like the original vision behind Ripple.
jdimov 13y ago
What all of this discussion is severely lacking is an understanding of how money actually works and how it is created. In a modern economy, money is created by commercial banks every time a bank makes a loan. So the questions in this article are a bit off. E.g.: "What happens when you no longer need a bank to provide capital? Where will people store money in the future?" These questions are off-target, because it's not so much about where people store it, or how it moves around. If you want to replace banks, you will need some other mechanism of money creation on-demand, and I'm not at all convinced that 'bitcoin mining' is the correct kind of answer...
- bubbleRefuge 13y ago
  Agreed. Upvote. And those banks get their legitimacy from the federal reserve system which provides a stable interbank payments system as well as deposit insurance. Also, money is created when the federal government spends more than it taxes. You are right in pointing out that there is a lack of understanding of what modern money is and where it comes from. For better or worse, its a creature of the state. This article touches on some of it : http://dailyreckoning.com/the-real-reason-the-u-s-dollar-has-value/ http://dailyreckoning.com/the-real-reason-the-u-s-dollar-has...
- lingben 13y ago
  What this discussion lacks is a basic understanding of economics. It baffles me every time! No one on HN would stand it for one second if a group of gardeners suddenly popped up and only with their knowledge and mastery of agriculture and botany decided to teach all the engineers and programmers a thing or two! But by some miraculous logic, programmers and engineers are now pretending like they can replace wholesale the system that economics is built on and has mastered over hundreds of years of theory and practice. ps money is not created by commercial banks but by the Fed through their ability to either buy or sell treasuries issued by the government but maybe that's splitting hairs
  - pocoloco 13y ago
    David Graeber from the Guardian writes that: When banks make loans, they create money. This is because money is really just an IOU. And that the paper: ...co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong. The truth is out: money is just an IOU, and the banks are rolling in it http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity http://www.theguardian.com/commentisfree/2014/mar/18/truth-m... The Bank of England Paper: Money creation in the modern economy http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... Edit: added more text to second quote.
burkemw3 13y ago
A wallet with a dozen virtual currencies sounds rather hard to make a budget with.
evli 13y ago
While I would enjoy living in such a world. Changes like this often take a very long time. Have you used a self checkout machine lately?
- yaddayadda 13y ago
  I have a love/hate relationship with the darn things. While I try to avoid them, I had to use one just a couple days ago. So, to answer your question, a couple of days ago. But I know lot's of people who love them and when present I see them being used by others with high frequency. Other than it being loosely related to the technology of money and shopping, what does your question have to do with, "A Revolution in Money"? Specifically, what does the recency of an individual's interaction with a self-checkout machine have to do with the article?
gus_massa 13y ago
> We are going to have individually issued currencies. We already have corporations issuing currency: frequent-flier miles, although people don’t see them as that from a legal perspective. Imagine that A issue A-coins and send them to B, then B sends the A-coins to C, C send them to D and D sends the A-coins to you. But a few days later you discover that A was a fake account of a scammer, or A goes bankrupt, or A an all his family died in a car accident and he was renting his house, or ... Then the A-coins are worthless and you are screwed. A few years ago, here in Argentina each province (state) issued it’s own money, and paid all the public employed with that money. It was technically a bond, but it looked as money and was used like money. The more successful case was the Patacón http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) . But in all the other provinces, after a time it was very difficult to exchange the bond to real money (pesos or dollars) or products, and in that case you get only the 70% of the face value. (Now they have been absorbed.) I don’t trust in the money of the province, and I really will not trust in the money issued by Joe Doe.

43 points by wallflower 13y ago

deleted 13y ago

[deleted]

I like that this is at least opening up to the possibility of new, more efficient transaction methods. Marc Andreessen made me think about credit cards differently after hearing him on a Freakonomics podcast: "And so one way to think about credit card fraud, is credit card fraud is a two-to-three percent drag on the entire economy. It’s an artifact of the fact that credit cards were never designed to be used the way that they’re being used today. Credit cards never anticipated online transactions. Credit cards, by the way, the credit card system, never anticipated malware running inside a cash register at Target. In the 1950s that was an inconceivable idea, which is when credit cards were dreamed up. And so if you have a payment system like Bitcoin where you don’t have the credential exchange, and you have no risk of identity fraud, and you have no risk of people being able to run transactions on your credit card after the fact, you can basically eliminate that entire category of fraud…"

wdewind 13y ago
On the other hand... The 2 to 3% drag needs to be corrected for increased liquidity, which is difficult to do. People don't use credit cards because they are convenient, people use credit cards because they do not have the extra money, which drives compounded economic growth. If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. The premise the article presents (essentially a different crypto currency for every business I interact with, as well as loan instruments built on top of btc) is actually not a preferable reality to the current one. Also his claim that you have no chance of identity fraud is really only relevant to the merchant (and is obviously worse for the consumer). But merchants have already done the calculation: even at 2-5% transaction fee and eating a lot of fraud, they are happy to process credit cards.
- bsirkia 13y ago
  Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. I also don't think the article is necessarily saying that we will have different crypto-currencies for each business, just that we already use a bunch of different payment methods (points, air miles, credit, etc.) and it will be faster and easier to choose which one you use.
  - wdewind 13y ago
    > Definitely a good point, particularly that bitcoin will have credit mechanisms built on top of it. Maybe I'm wrong, but I think that the point of bitcoin is that any credit mechanism built on top of it wouldn't have the same problems of identity fraud. How?
- Xdes 13y ago
  >If bitcoin succeeds, credit mechanisms will be built on top of it, and they'll behave almost identically to credit cards, including have fraud. Why? One way transactions cut down fraud. It's not inconceivable to have a hardware digital currency wallet that can be used similar to the modern credit card. Banks could issue credit that is spendable in the same way with additional automatic escrow. Why continue to have the fraud ridden system when the alternative exists?
  - wdewind 13y ago
    Huh? One way transactions cut down charge backs, they don't cut down fraud. It just moves the fraud risk to the consumer (and the wallets), instead of the merchants. Great for merchants, not great for consumers. Again, as merchants are already willing to take a cut to attract consumers via credit cards, it seems unlikely that consumers will be motivated to use bitcoin over credit cards.
- QuantumChaos 13y ago
  There is no logical relation between credit vs debit cards, and fraud. You could have a bitcoin based account with a borrowing limit, which could only make payments to registered identities (equivalent of merchants), creating a credit card-like account. And when you say that merchants find credit cards acceptable in spite of fraud, that doesn't imply that fraud isn't a huge drain on the economy, it just means that credit cards are still a better alternative than cash. But if we could get rid of the fraud, we would still save a huge amount.
tpeng 13y ago
Bitcoin doesn't eliminate security risks, it pushes the costs onto consumers. It's inconceivable to me that regular users can be trusted to maintain and secure their own wallets, so the only solution is an online wallet. But those businesses will need to be paid for their service, and face security risks as well, which under the current system are ultimately transferred to users. For bitcoin to work, we need a system that guarantees that consumers will not bear losses from fraud or hacking.
- vvvv 13y ago
  1) the only solution is an online wallet 2) those businesses will need to be paid for their service, and face security risks as well 3) government will regulate 4) some businesses will start wallets/vaults, which will enable you to open a wallet free of charge in exchange for depositing your bitcoins 5) those businesses will use the deposited bitcoins for lending, investments and speculation hello brave new world...
- hibikir 13y ago
  So, the short version is that for a digital currency to be popular and convenient, it has to not be like bitcoin at all

mbrynard 13y ago

The idea of wallets with dozens of digital currencies ties in with another idea which I've been intrigued by recently. Apart from the payment mechanism functionality, units of cryptocurrency are much like shares in a company. The Cypherfunks experiment (www.thecypherfunks.com) illustrates this concept: Imagine anybody could own shares in the music industry. To make this possible bands simply accept payment in a specific cryptocurrency (e.g. FUNK). As more people support bands using this form of payment, the value of the cryptocurrency grows and the entire network of bands and their supporters benefits.

funkydallas 13y ago

"A Revolution in Money" would mean that no third parties do have control over its value. Nowadays we have something like a server based money network. If the server (bank) goes down, everybody is screwed. Imagine a peer to peer kind of money network. Every member is a bank himself. Getting a credit works like crowd funding. People can invest their money into several projects. Investors get a certain percentage of the profit. This way you avoid the "interest and compound interest" problem.

dllthomas 13y ago
"Imagine a peer to peer kind of money network. Every member is a bank himself." This sounds a lot like the original vision behind Ripple.

jdimov 13y ago

What all of this discussion is severely lacking is an understanding of how money actually works and how it is created. In a modern economy, money is created by commercial banks every time a bank makes a loan. So the questions in this article are a bit off. E.g.: "What happens when you no longer need a bank to provide capital? Where will people store money in the future?" These questions are off-target, because it's not so much about where people store it, or how it moves around. If you want to replace banks, you will need some other mechanism of money creation on-demand, and I'm not at all convinced that 'bitcoin mining' is the correct kind of answer...

bubbleRefuge 13y ago
Agreed. Upvote. And those banks get their legitimacy from the federal reserve system which provides a stable interbank payments system as well as deposit insurance. Also, money is created when the federal government spends more than it taxes. You are right in pointing out that there is a lack of understanding of what modern money is and where it comes from. For better or worse, its a creature of the state. This article touches on some of it : http://dailyreckoning.com/the-real-reason-the-u-s-dollar-has-value/ http://dailyreckoning.com/the-real-reason-the-u-s-dollar-has...
lingben 13y ago
What this discussion lacks is a basic understanding of economics. It baffles me every time! No one on HN would stand it for one second if a group of gardeners suddenly popped up and only with their knowledge and mastery of agriculture and botany decided to teach all the engineers and programmers a thing or two! But by some miraculous logic, programmers and engineers are now pretending like they can replace wholesale the system that economics is built on and has mastered over hundreds of years of theory and practice. ps money is not created by commercial banks but by the Fed through their ability to either buy or sell treasuries issued by the government but maybe that's splitting hairs
- pocoloco 13y ago
  David Graeber from the Guardian writes that: When banks make loans, they create money. This is because money is really just an IOU. And that the paper: ...co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong. The truth is out: money is just an IOU, and the banks are rolling in it http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity http://www.theguardian.com/commentisfree/2014/mar/18/truth-m... The Bank of England Paper: Money creation in the modern economy http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf http://www.bankofengland.co.uk/publications/Documents/quarte... Edit: added more text to second quote.

burkemw3 13y ago

A wallet with a dozen virtual currencies sounds rather hard to make a budget with.

evli 13y ago

While I would enjoy living in such a world. Changes like this often take a very long time. Have you used a self checkout machine lately?

yaddayadda 13y ago
I have a love/hate relationship with the darn things. While I try to avoid them, I had to use one just a couple days ago. So, to answer your question, a couple of days ago. But I know lot's of people who love them and when present I see them being used by others with high frequency. Other than it being loosely related to the technology of money and shopping, what does your question have to do with, "A Revolution in Money"? Specifically, what does the recency of an individual's interaction with a self-checkout machine have to do with the article?

gus_massa 13y ago

> We are going to have individually issued currencies. We already have corporations issuing currency: frequent-flier miles, although people don’t see them as that from a legal perspective. Imagine that A issue A-coins and send them to B, then B sends the A-coins to C, C send them to D and D sends the A-coins to you. But a few days later you discover that A was a fake account of a scammer, or A goes bankrupt, or A an all his family died in a car accident and he was renting his house, or ... Then the A-coins are worthless and you are screwed. A few years ago, here in Argentina each province (state) issued it’s own money, and paid all the public employed with that money. It was technically a bond, but it looked as money and was used like money. The more successful case was the Patacón http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) . But in all the other provinces, after a time it was very difficult to exchange the bond to real money (pesos or dollars) or products, and in that case you get only the 70% of the face value. (Now they have been absorbed.) I don’t trust in the money of the province, and I really will not trust in the money issued by Joe Doe.