Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions. After all, what's the point of a cryptocurrency if the only people who can host the full blockchain (or even acquire the full blockchain) are large banks and the government? I.e., where do you even get an internet connection that can accept, in near realtime, a full record of every monetary transaction performed with such a currency? Unlike card networks, every member of the network needs to process every transaction eventually.
I don't think cryptocurrency is at the point where the scalability concerns can be addressed to be used as legal tender for an economy as large as the US.
If this is meant to replace bonds or other government issued securities, what problem is it solving? I can't think of one.
Cryptocurrency with a centralized authority is not subject to these issues. After all, if there is a trusted authority then what you really have is a database with some API layered on top. You don't need miners, you don't need a blockchain, etc. It's no more difficult to scale a currency like this than it is for Visa. Canada was looking at exactly this idea about 5 years ago, with the MintChip project.
http://business.financialpost.com/news/fp-street/canadian-mi...
Think of this as a bank account that you can interact with in a programmatic/scriptable fashion using a private key. Which is really a lot of what people find desirable about cryptocurrency.
The deflationary monetary policy ponzi-schemes, the waste of energy and data, etc can all go. And in turn, the government gets to eventually eliminate the cash economy and make sure that all of that gets taxed (this is the dark side of cryptocurrency - since everyone gets to see all transactions, it's quite easy to trace the flows of money, and it's only anonymous until you try to do something outside the network, like cash out or exchange it for real-world goods).
Maybe not a bad idea, though. It might make some government payments (such as Social Security) more efficient?
Not inherently. If you compare apples to apples, accepting a credit card transaction is equivalent to accepting a zero-confirmation cryptocurrency transaction, which is just as fast as a CC charge (instantaneous.) And it is technically safer for a merchant to accept a 0-conf crypto tx because a CC charge is trivial to reverse (via a fraudulent chargeback) while a tx in the mempool of thousands of nodes is typically (not always!) hard to make disappear.
«It's more expensive than practically any other way of sending money»
Far from true. Average remittance fees are around $7 per $100 sent. Meanwhile Ethereum has fees typically under $0.50 per tx: https://bitinfocharts.com/comparison/ethereum-transactionfee... Of course there are periods of fee surges (over $5 per tx!), but it's not common.
«a full record of every monetary transaction performed with such a currency»
That's technically not needed. There have been proposals to implement what we call UTXO commitment sets, which is basically a way to revamp a blockchain so that it can discard old transactions and just keep track of current balances. (This is different, but roughly the same principle as "pruning.")
Except my charge is guaranteed to happen (or be rejected) within a reasonable amount of time. If you scale up anything to the size of, say, Visa, the transaction times are going to grow to be unbounded. I know my credit card charges are going to settle in about a day. There's no guarantee when the miners will work through the backlog of transactions and actually give me my money in any time frame.
If you're a small business, this matters a LOT.
> Average remittance fees are around $7 per $100 sent. Meanwhile Ethereum has fees typically under $0.50 per tx
My bank charged me $10 to send a 50k wire transfer last week. What service, exactly, is more expensive than a 7% fee?
Ethereum, meanwhile, swings in price violently enough that in the time it takes for an ACH transfer to complete, the value could have shifted enough to negate the entire savings on fees. What benefit does low fees have on a currency if the currency is worth 5-10% more or less day to day?
There's no reason to assume a government issued cryptocurrency will be any less volatile than cryptocurrency.
> There have been proposals to implement what we call UTXO commitment sets, which is basically a way to revamp a blockchain so that it can discard old transactions and just keep track of current balances.
And here we are, talking about creating a new legal tender for the second largest economy on the planet. As I said in my original post, it doesn't matter if it's on its way. Speculative fixes for a real problem don't make the problem go away. Major cryptocurrencies currently don't do it, so we shouldn't talk about them as if they do.
Even still, the number of balances will grow over time. Unlike a real bank, you can't just close an account when someone dies. Anyone can create as many balances as they want. And losing your private key means there's a permanent record of the money you lost.
Two cryptocurrencies come to mind:
a) Nano (formerly RaiBlocks) which achieves 7000 tps, compared to Visa's capacity of 25k-65k tps (but VISA rarely spikes over 4000 tps), its wallets and network is already live
b) Solana (still in dev stages), which claims to be able to achieve 710k tps without network partitioning. This actually knock centralized systems out of the water. Of course, the centralized systems can always mimic the behavior and achieve similar throughput.
But the main point is, because a lot of money is in blockchain, a lot of it is being spent on finding ways to make it faster (which is why, innovation for faster throughput is happening in the blockchain field).
In order to move money out of my own bank account, digitally, into another account, it is impossible to do instantly. Many banks charge a substantial fee, even for a 3 day turnaround[1].
Looking only at card networks, while ignoring the greater banking system is an incomplete view of the potential here.
1. https://www.nerdwallet.com/blog/banking/ach-transfers-costs-... M
That's the cost of the spread.
If you tried to convert $10000 BTC to USD today, you would pay anywhere between -$200 and $200 (Or ????$, if the market decides to go crazy), depending on the exchange rate when your transaction would clear. With a forex transaction through a bank, the bank fixes the exchange rate (And charges you money for it.)
Having a central actor, like a government, would solve a lot of scaling problem, as well as transaction history issues and also cost associated with making transactions.
Then why Bitcoin, Ethereum, etc. instead of USD? Why the need for a crypto currency if everything is already in place? In place with laws and regulations.
It's a legal pump and dump scheme!
How long does it take you to set up a merchant account? With cryptocurrency, it's practically instant.
A cryptocurrency could enable the next evolution of mobile payment services like M-Pesa. I touched on this in a past blog post:
https://medium.com/@petershin45/hate-bitcoin-this-might-chan... (You can scroll down to the section titled "How Bitcoin can help the poor and unbanked")
(of course, overall throughput is still atrocious)
>> 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.
Thoughts are my own, not my employers.
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.
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.
No. That is, it can, but it doesn't have to. Their cash savings are only affected if the value of money changes, not if the quantity of money changes. The Fed's mandate is for stable value, not stable quantity.
And if you're going to ask what the difference is: Velocity. There may be other things as well, but definitely velocity.
But even my argument here isn't needed to defend QE. QE injected 4 trillion dollars into the US economy. Why did the Fed do that? Because $4 trillion had just evaporated in the meltdown of 2008. That wasn't even changing the quantity of money, it was trying to prevent a change in the quantity of money.
The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's a governments wet dream.
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.
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.
The short answer, though, is that if you have a trusted 3rd party managing the monetary system, there's really no need for cyptocurrency. (Edit) Cryptocurrency solves the trust problem.
Overall, we can trust our government, thus there's no need for cryptocurrency.
In reality, all that cryptocurrencies are doing is, partially, replacing governments and banks with unregulated companies who are still quite likely to be subject to government actions.
There are then external controls (banking ombudsman, the police, the judiciary) if the bank decides to take my money from me.
Also in the country I live in (the UK) there is a government guarantee, that even if my bank fails entirely, up to £75000 I'll get my money back.
For all practical purposes, my bank is very unlikely to try and take my money from me like that.
whilst cryptocurrencies might in isolation provide that immutability, in practice we have seen several cases where trusted parties involved in the cryptocurrency ecosystem have taken currency from participants in their marketplaces.
I'd be willing to wager that the risks of me losing money to a traditional fiat fraud are far lower than my risks of making use of cryptocurrencies in practice given the current state of regulation of the exchanges that are used.
Are there examples of this actually happening? I'd think that would be pretty damaging to any bank that engaged in such behavior.
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.
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?
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.
This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now:
* The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan.
* Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation.
These are two separate things. The government can run a deficit without the Federal Reserve printing money. The Fed can print money without the government borrowing anything. Inflation is emphatically not something the government does so it will have more money to spend.
When inflation is too low, we print money. When we want to spend more than we take in, we borrow. Two related but separate things.
This is really not how it works. Many economists think this is how it works but actual real world events have made it very clear that governments cannot simply manufacture inflation [1]. Governments like Japan wish they could produce inflation.
Inflation is much, much, much more complicated than merely "too much money." It's much more about real economic quantities affecting the price level [2]. This is usually driven by demand for something an economy cannot manufacture itself, not government spending. See oil shocks [3] for real inflation.
That said, it's always funny to see paranoid Americans go on about the government stealing money via inflation. What do you think money is? Talk about missing the forest for the trees.
[1] https://www.bloomberg.com/news/articles/2018-03-22/the-great...
[2] http://bilbo.economicoutlook.net/blog/?p=10554
[3] https://www.investopedia.com/ask/answers/06/oilpricesinflati...
A main reason is so that government debt can grow perpetually/exponentially. Hence a hidden tax taken from wages.
Opinions are my own not my employers.
https://www.bloomberg.com/news/articles/2018-05-02/the-consu...
"A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to)."
This is how the current monetary system works. The "government" can't "arbitrarily inflate the currency". I'm surprised at the lack of depth of this article, is this a brainfart? Haha.
The 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.
https://www.investopedia.com/ask/answers/082515/who-decides-...
The myth that the central bank prints money became prevalent following the Great Recession, when many were concerned about the unconventional policies of the central bank, which included intervention in the commercial paper market, mortgages and outright purchases of debt to keep the system from collapsing. By the end of the recession, the Federal Reserve had expanded its balance sheet by nearly $4 trillion.
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.
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.
"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.
Exactly what happens with bitcoin thought.
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.
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.
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.
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.
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"?
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.
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.
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.
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.
Seems ridiculous right? Satoshi contributed nothing for hundreds or thousands of years yet still owns the same fixed portion of the total economy.
2. Scalability will be much improved over the next year (see: lightning network, plasma, raiden, sharding, alternate consensus systems like dPOS, etc.; for a deep dive, this is a good place to start: https://multicoin.capital/2018/02/23/models-scaling-trustles...).
This is laughable. Your definition of "work" includes a presumption that we all want the government to control and manipulate the economy without regard for the interests of the individual.
Ask any individual citizen whether they would prefer that their savings increased in value or decreased in value, and I suspect they'll have a different answer as to whether a deflationary currency "works" for their purposes.
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.
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.
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.
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.
Then why would the government bother to implement this? If anything it's disincentivized to set things up in this fashion.
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.
https://www.nytimes.com/2018/05/04/upshot/should-the-fed-cre...
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.
The Fed generates ~$90 BN of revenue for the US government every year.
And it does it by printing physical cash. I think the first step to traction would be convincing Congress that they can get by without $90 BN every year. (Edit: if they haven't already been convinced).
The entities that could reap enormous benefits from cryptocurrencies are precisely those entities which today for various reasons have tax power but do not have currency power. But tax power is currency power. This means those states with truly dynamic (high tax, high growth) economies -- California, Massachusetts, New York -- could issue transferable tax credits [1] which would be, fundamentally, money. There would be widespread and deep demand for such credits. The problem is that today the trading, control and verification of such credits is very difficult and costly [2][3]. A distributed public ledger could dramatically decrease the trading and operational costs.
Monetizing state credits with a block chain could reap enormous efficiencies. The immediate big win would be in welfare. Today California has extraordinarily vast, complicated, and inefficient welfare system [4]. All of this could be replaced with a highly efficient system where credit-money is issued directly to those who most need it. There's a lot of literature that such direct cash grants are the most efficient mechanism to fight poverty and this is why modern welfare is so inefficient [5]. Imagine the effect of a system where the hundreds of billions of California welfare money could be efficiently and securely distributed directly to those who truly need it with the press of a button with zero cost. The recipients of these credits wouldn't have to wait until one magical date nor would they have to file complicated returns to claim and monetize these credits they could go out and spend them immediately.
Note that here the advantages of a distributed public ledger would work particularly well for California Credits. The transparency of the scheme means it is always immediately clear how many credits are outstanding and who owns them. There would never be any doubt about whether a credit is transferable or valid. The big problem with tax credits -- fraud[6] and "double spends" [7] -- would be eliminated over night. A distributed public ledger for all this public money would allow true, real-time public accountability.
[1] http://www.pewtrusts.org/en/research-and-analysis/blogs/stat...
[2] http://www.hmblaw.com/media/97814/the_transferability_and_mo...
[3] https://www.bna.com/incentives-watch-monetizing-b17179870903...
[4] https://www.quora.com/Does-California-really-have-30-of-the-...
[5] https://fivethirtyeight.com/features/most-welfare-dollars-do...
[6] https://www.nevadabusiness.com/2016/12/transferable-tax-cred...
[7] https://www.bna.com/incentives-watch-transferable-b579820651...
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.
