Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin (opens in new tab)

> A blockchain, is a cryptographically signed linked list.

I've always assumed this definition by analogy with Cipher Block Chaining (https://en.wikipedia.org/wiki/Block_cipher_mode_of_operation...), but of course where a word starts out and where it ends up can be two very different things.

What about a cryptographically signed linked list that can't be used as a distributed ledger?

Because if those are blockchains too, then my country had dozens of developers writing blockchains before Bitcoin ever appeared, since we had to implement https://en.wikipedia.org/wiki/SAF-T

... like your classification. My version of that is in short:

Blockchain is a technical protocol ( crypto signed list over a P2P network with consensus). DLT is a higher level function on top of a blockchain which adds social / legal / economic status to the data in a blockchain.

"Consensus" was a word used in the distributed systems literature for all sorts of problems well before the Bitcoin paper. (As was "Sybil-attack-resistant", which is another phrase I ~used that was also in common use.) Bitcoin is interesting because it allows reasonably trustworthy consensus in a Sybil-attack-resistant way for a particular problem, namely, a distributed ledger that permits anyone to participate without permission from a central authority. There were lots of other systems for distributed consensus for other problems: a random example is BitTorrent.

I would actually dispute the definition of "cryptographically signed linked list" for Bitcoin. What makes Bitcoin blocks valid is not that they're cryptographically signed (signatures are over transactions, from the address that is trying to send money, but you can sign two different transactions and now you have double-spend). What makes them valid is the inclusion of a solution to the mining problem that incorporates the data being sent, and I think that in any context other than Bitcoin, "a message that includes a random nonce such that the hash has certain properties" wouldn't be called a "signature" at all. Take Hashcash, the proof-of-work system for email anti-spam that somewhat inspired Bitcoin: the web page and paper calls the authentication token a "stamp", and doesn't use the word "signature". The FAQ suggests an extension for mailing lists using the phrase, "A hashcash specific approach (avoiding signatures)".

I am super excited about CRDTs but they seem like an entirely unrelated problem space to Bitcoin, so using the term "blockchain" doesn't make sense to me. (In the same way that I am excited about DVCSes like git using Merkle trees to allow mergeable offline work without a central coordinator, but git is definitely not a blockchain.) That said, I did say this on an IRC channel the other day:

    < geofft> I would define "blockchain" as "a Merkle tree that solves the double-spend problem in a way that's resistant to Sybil attacks"
    < geofft> if your transactions commute, you don't have a double-spend problem, and therefore "blockchain" isn't meaningful
    < ...> geofft: doesn't stop people hawking blockchain solutions though :P
    < geofft> oh, sure
    < geofft> I would also define "blockchain" as "the word you should use instead of Merkle tree on your investor pitch"

So if that's your reason for using the word "blockchain," good for you :-)

I am reading through your Distributed Matters slides - exciting stuff and the point about ATMs not being strongly consistent is a very good one. Will need to reread a few times to make sure I get it!

Smart contracts are cool, but I don't think smart contracts and blockchain are the same technology. (Indeed, Bitcoin does not meaningfully support smart contracts, so we should use different words because they're different concepts.)

It's certainly possible to implement centralized, non-proof-of-work smart contracts: publicly send the Fed's API a Lua script. Whenever the Fed changes their ledger, they run your Lua script in a sandbox with limited CPU, see if it outputs any transactions, and processes them. Anyone can run the Lua script themselves and see if the Fed was trustworthy - but if the Fed chooses not to run your script, well, that's just a centralized bank doing its centralized thing, tough luck.

If you want to not put your reliance on a centralized bank to run your script, then you've got to use a distributed consensus platform. Even if you had something Ethereum-like that the Fed simply oversaw, they could just refuse blocks they don't like (and in fact they'd essentially have to to have any meaningful control of the currency at all), so all the complexity of gas and proof-of-work isn't buying you anything.

Relatedly, and along the lines of what 'patio11 was saying: you can implement smart contracts for a centralized currency today. A startup that had its own API for opening accounts, sending it USD, and running publicly-visible Lua scripts would be a straightforward thing to build, and if that startup ran for enough time, you'd gain (centralized) trust in it doing its thing.

The Fed can create unlimited money out of nowhere and doesn't have to answer questions about it from anybody. I don't think they dream is a transparent blockchain and money supply limited by an algorithm.

Would it have an incentivized structure?

The properties of "unlikely to go down" don't require a trustless blockchain; the attributes of being resistant to a node being compromised don't require trust beyond consensus. git is unlikely to go down and verifiable. Copies of a git repo verified by gpg signatures and repos that only accept commits that pass verification requires only as much distribution as running three instances. The fed can do all of this without giving up any control.

All Chinese miners are subject to the government's laws. They don't have to be directly day-to-day controlled by the government for the government to say, "We are applying sanctions to this entity, nobody may participate in helping them move money. Mining a block that involves a transaction from this Bitcoin address counts as helping them move money. Mining on top of any new blocks that involves transactions from this Bitcoin address, and therefore causing consensus to accept that block as part of the longest chain, also counts as helping them move money."

This isn't a China-specific argument: I'd expect that any functioning government could the same. The only difference is that governments without a working national firewall would probably be less willing to spend resources on chasing down miners who connect to Bitcoin peers via VPNs in other countries. It just happens to be true in this case that the Chinese government has a national firewall that they use to shut down VPNs, the Chinese government's international interests are often opposed to the US Fed's, and 70% of Bitcoin mining happened in China's jurisdiction last year.

It's a safe assumption that everything is under government control in China. If not today, maybe tomorrow.

> blockchain was not defined in Nakamoto's work

However the whitepaper does use the phrase "chain of blocks". https://bitcoin.org/bitcoin.pdf, page 7.

So probably the word "blockchain" came about because someone read or heard someone else say "chain of blocks" in the paper and they said "oh, so a blockchain", and thus the word was born.

Wikipedia cites what looks like a mirror of Nakamoto's original Bitcoin source, which uses "block chain" in the comments of main.h: https://github.com/trottier/original-bitcoin/blob/master/src...

What? There is no mechanism to "detect and punish rule-breakers" in either Ethereum or Bitcoin. Bitcoin's only mechanism is to push global human-readable alerts, or to pressure rule-breakers to stop through a blog post, as in the case of SPV mining: https://bitcoin.org/en/alert/2015-07-04-spv-mining.

If you define "rule-breaker" as "generates invalid blocks", then the only punishment rule-breakers receive is that... their block is invalid, they're ignored, and they get to try again next time.

I don't see any sophisticated collaboration model in play here.

> Even if the Fed required only trusted nodes... Lots of other problems -- everything from medical records to real-estate -- become a lot more tractable.

Why aren't they solved by a database and a public API? What does the blockchain add?

(1), (2), and (3) are true of Certificate Transparency.

(1), (2), and (3) are true of a system where a single trusted coordinator gets to order (and perhaps reject) transactions. A slightly less anonymous version of any electronic stock exchange would count.

(1), (2), and (3) are true of the Debian apt repository.

(1), (2), and (3) are true of any game without secret information, like chess or Go or Pretty Pretty Princess.

You could call all of these "blockchains," but I think that makes the term so generic as to be useless. If you want a national public ledger, that sounds interesting, but please call it a national public ledger, not a blockchain.

Well, ultimately a decentralized blockchain tackles the issue in a much different way. In the 1800s, if you were a money issuer, you could print any amount you wanted. In a truly decentralized blockchain, there are defined rules for how new currency enters the system. You cannot just print new money. The amount that exists is fully visible by anyone.

Transparency is everything. This also explains why a currency like XRP is not a real blockchain. Beware these pseudo-blockchain projects, because they are much more similar to your example from the 1800s.

> We tried the "anyone can issue money" model in the 1800s, all it led to was bank runs and scams.

And now it's back with technology behind it. A lot of people call ICOs scams. What's the equivalent bank run? Perhaps a panic flee from fiat reserves?

... while minimizing the wasteful environmental impact of blockchains due to the power requirements of each transaction.

This is probably the one "feature" of blockchains that will kill it, since they're based on proof-of-lots=of-work, and work needs power.

Free/cheap digital payments exist (eg. EU SEPA credit transfers); for credit cars, however, the majority part of the cost (and thus price) is not just making the payment but ensuring that payments are reversible in case of fraud and other disputes, and that customers can get their money back even if the money can't be recovered from a fraudster.

If you'd add a reputable escrow service, dispute resolution system and fraud insurance on top of any cryptocurrency, these features will drive the cost up just as high or more.

You are underestimating the cost of maintaining such a network and underwriting the risk of fraud. Before anyone chimes in here with a neckbeard and a “but [libertarian blockchain drivel]” I do not think the effective monopoly that visa has on transactions is a good thing nor do I think it’s the best system.

The funny part is that EC (a German-only card network that stands for the E in EMV, with MasterCard and VISA being the M and V) has less than 0.125% fees for the smaller retailers, and even less for larger ones – you basically only pay the interchange fees.

This is why e.g. ALDI for many years only took EC, but not MasterCard or VISA.

I don't think it's perfect by any means, but it's quite a bit more than simply moving kilobytes around.

Yes, the SEC will continue to take a very light touch. There's no upside to them cracking down on ICOs. The only people losing money are the people who mostly understand the risks of cryptocurrencies and "invest" anyways. The SEC may get serious when grandmothers lose money or there's blood in the streets. Until then there's a kind of regulatory sovereignty that must be defended on a pro forma basis eg the slam-dunk enforcement actions and various announcements that "some ICOs are securities but we won't say which, never the less it's our decision to make and nobody else's." The only real risk to the SEC is that some other regulator like the NFA or the CFTC will step in and say "these coins are currencies and we're gonna regulate them" or "these coins are commodities and we're gonna regulate them."

Except IRS has guidance on ICOs and it has become a real big problem that bullshit ICOs are out there. If large investment banks are interested in the space then regulation will eventually come forth.

Remember that Coinbase was asked to reveal people who made trades over $10,000.

I was at a conference with someone who gave a speech saying that ~80% of all ICOs are fraudulent. I think that is a bit low in my opinion.

Why competition? This isn’t a zero sum game.

That's not a limitation of USD. If the Fed wanted to create an API that let you do that and sidestep banks, they could. (And if they couldn't because a government agency can't casually destroy an industry like that, that restriction applies to FedCoin, too.)

There's no reason at all the government couldn't give every citizen a bank account and let them wire funds to each other. In fact this used to be exactly the case: any citizen could walk into the Post Office and open a savings account [1]. Like most services that didn't benefit the rich and actually benefited the poor it got shutdown once the neoliberals took over in the 70s. Nowadays 7-10 percent of the population is unbanked and forced to rely on criminal pay day lenders, check cashers or hiding money in their cars.

FedCoin would have one benefit though over a traditional banking system and that is surveillance. It'd be very interesting to have a public, error-free record of eactly how much money each citizen is receiving or has. If it ever did happen and people could see in perfect black and white just how ridiculously unequal the country is I don't think the republic would survive much longer after that.

Which is why this article is kinda hilarious. Even the central bankers, supposedly the smartest men on the planet, don't grasp that this is the whole reason private banks exist: to obfuscate cash and risk flows. Like that's the point [3]. We wouldn't have an economy if private banks couldn't do their thing. An economy based on any kind of public ledger without private banking (and private ledgers) would be radically different.

[1] https://en.wikipedia.org/wiki/United_States_Postal_Savings_S...

[2] https://www.americanprogress.org/issues/economy/reports/2014...

[3] https://www.interfluidity.com/v2/2669.html

The connection is that this is the same person making both predictions.

Not OP, but I think the point being made is that his prior judgement on financial matters doesn't exactly inspire confidence.

That said, I have some sympathy for any policy maker giving public statements in an overheated economy: the seeds of the crisis have already been laid and the statements one makes may actually precipitate the crisis rather than avoid it...