So they are forced to decentralize the currency to some extent, so that banks are the ones to actually issue the currency (after borrowing it from the fed).
[1] “The Fed vs. Stablecoins” https://www.bloomberg.com/opinion/articles/2022-02-01/hedge-...
[2] “Stablecoins: Growth Potential and Impact on Banking” https://www.federalreserve.gov/econres/ifdp/stablecoins-grow...
Because banks lend the money out, earn revenue from that, and thereby pay you interest. Banks aren't vaults; they are money circulation machines. Their business is finding the best investments, which creates efficiency in allocation of capital in the economy.
They were authorized to print 3 trillion, but actually printed 30 trillion
All across the world a China style social credit score called ESG is now being adopted by banks.
What happens when they decide you used up your quota? No flight, no meat or no car ride for you because they won’t let you spend your money.
https://github.com/mit-dci/opencbdc-tx
Detailed architecture:
https://github.com/mit-dci/opencbdc-tx/blob/trunk/docs/archi...
Some remarks:
- Seems to be implemented in C++
- Looks like they reused bits and pieces from the Bitcoin code base (bech32, secp256k1, sha256)
- Claim of being able to handle 1.7M TPS
- Experimented with UTXO-style (Bitcoin-like) but seem to have bet on something called "unspent hashes" instead.
- I found very little on things that matter (policy-related):
- How is the "central authority" implemented
- How is the coin supply managed1. They make it possible to deliver helicopter money directly to the consumers. Now central banks can only work trough banks or financial markets. Digital currency where everyone has access to central bank money can correct the errors in current systems.
2. Currency would be anchored in real economy with sound monetary policy. Nobody in their right mind takes Bitcoin denominated 10 year mortgage.
if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary policy?
Many argue that helicopter money is better alternative to quantitative easing (buying bonds). Just give money to the people. Buying bonds is ineffective because bond holders don't consume. The velocity of money just drops and asset prices increase.
(you may picture helicopter money as trowing more money than is needed, but that's now what the idiom means. It means that the money lands on people, not banks).
Maybe so (I disagree), but wait until central-bank issued digital currencies become a reality, you'll very quickly learn the real meaning of social catastrophe.
Spending 10 seconds thinking about it, I can come up with the following scenarios:
- complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
- total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys.
- security nightmare : how do you guarantee the soundness of such a system when it is centralized. Just ask Sony how long they manage to keep their private keys secret on average.
- security nightmare : preventing the leakage of citizen's private financial information. If the chain is public, there is none. If it is kept under lock and key by the govt: 1) no way to check what the actual supply is 2) subject to hackage and publishing the data publicly. Knowing the track records of governmental institutions when it comes to IT security, this is basically a guaranteed fuck-up within the first 5 years of such a system existing.
- economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs, without leaving any decision-making power to the citizens.
If government bits are just the beginning of a banning of cash, that's the real problem; but there's no reason they can't ban cash now.
The benefit to some sort of government semi-distributed ledger would be that independent people could set up ATMs. Otherwise, I'd just be happy with postal checking/savings. We already have a bunch of post offices.
We already have all of this. The government can tell your bank to do something, and your bank will do it.
It's different from the mass surveillance that a CBDC enables.
You can park your money safely anyway, just buy a vault. There are even specialized bank accounts where they just store you money and don't lend it out.
However, you won't earn any interest, and thus will lose opportunity cost and also lose value as cash inflates.
Additionally, the money that banks lend is critical to the economy - which includes your job and the general welfare - like water to a person. If banks stop lending - if all that money gets put in a vault - businesses and citizes lose access to money to develop things and we get talented people and valuable resources sitting dormant, a depression.
We live in a world with prisons. Stopping your spending is nothing compared to literally locking you up.
The economic nightmare is maybe a degree up, but not really more. Generally speaking, it also tends not to be just "the government" doing stuff that no-one wants - there will be people liking whatever the policy is.
The only real new point is that CDBCs with any kind of programming would effectively be vouchers, not money (ie your first point).
Why CBDC is good:
- Efficiency: much of the legacy financial institutions are no longer needed in current form (going as far as the Fed and IRS). Opportunity to reform finance as a whole and remove legacy waste.
- Fraud detection: money laundering and financial crime becomes very difficult to hide
- Observability: much better data & insight into economic trends
- Security: Infra being controlled by a public org that can be held more accountable than a decentralized mess of private corporations (see endless Equifax leaks, etc)
- Responsiveness: can rapidly implement policy changes in response to crises
Fraud detection: I'd be very concerned about false positives here.
Observability: forcing everyone to opt into a financial panopticon will have unintended consequences.
Security: we really struggle to hold any organization accountable. Public organizations are not magic, was anyone held accountable for solarwinds? The office of personnel management? If anything holding public entities accountable is even more difficult then private entities because of politics.
Responsiveness: The ability will be there, will it be used effectively or responsibly?
Keynesian economists that dominate a lot of official politics have a hard-on for viewing consumption as the root of all goodness and prosperity. In the midst of a future economic crisis with a central digital currency, it would be trivial for the politicians to start blaming a lack of spending for the problems and to force people to spend received money within X amount of time or it disappears from your digital wallet and thereby incentivize desired behavior. No real saving for the future possible: citizens would be turned into a cattle-like consumption class.
> complete and utter "financial deplatforming" if you don't behave as a citizen. This is basically China's CCP dream come true.
This problem has nothing to do with having a digital currency, if the government wanted to punish people "if you don't behave as a citizen", it has plenty of tools to do that already. Something like this would be huge government overreach and frankly a violation of the first amendment, I doubt if any law suggested this it would even make it to the supreme court.
Also the current centralized currencies such as PayPal and Banks already do this, if anything this gives deplatformed people more freedom as they have a viable digital alternative to purchase.
> total loss of privacy: the absolute entirety of your financial interactions are an open book to the government. You won't be able to buy a pack of gums without big brother knowing about it, much less paying for your sex toys
Banks already know this information and the government could audit the banks if it wants to. What's stopping a banker from publishing your purchase history? Many Decentralized currencies would also publicly show this. That said I think it's a totally valid point.
> security nightmare : preventing the leakage of citizen's private financial information.
This is true, hence why JP thinks "It's more important to do this right than to do it fast". As I said before though, banks and private companies already leak this kind of information.
> economic nightmare: running the printing press full steam is now instantaneous and gives the government even more unchecked power to spend money on brain-dead programs
I don't see how this changes anything. The Fed can already run the money printer to whatever throughput it needs. This doesn't change that. Only thing this changes is that it would be easier to give direct aid to citizens, especially the lowest 5% who don't own bank accounts.
>if there's healthy competition from decentralized chains such as Bitcoin, the craziness will be kept in check because there will be an escape hatch to the govt
Yeah that's why I kind of think this is a good idea. We already have private versions of this and we could always... Just use those if we don't want to use whatever Powell coin turns out to be. It only gives us more options. Also it would be great to have digital transactions without the $.35 fees
- Geo-replicated latency <1 second.
Amazing technical feat.
This is why such important financial systems MUST be decentralized, at least to the extent that anyone should be able to verify the correctness of the system's state independently.
Like can i get paid instantly for every KWH i deliver back to the grid via solar panels. Can my salary or hourly contract be streamed to my bank account. These sort of things are all possible in crypto.
It just seems to me that everything you can do with crypto you can do with the existing financial system. Maybe not 100% of crypto's features, but easily what a huge majority of people and institutions rely on and use today.
AFAIK, none of the major cryptocurrencies have ever been "hacked."
They could simply copy & paste the existing laws regarding banking privacy, e.g., RFPA.
https://en.wikipedia.org/wiki/Right_to_Financial_Privacy_Act
I jest, it actually is kind of interesting and could allow an even closer look at the day to day operations of banks if the ledger was in fact published.
"banking institutions are more dangerous to our liberties than standing armies," Thomas Jefferson
Also fun fact - back when the US had private currencies, people WILLINGLY preferred to use them despite a gov currency existing. It is only after the government passed high taxes on these currencies(ie having to pay tax for each transaction to exchange them) that they went out of favor. If they were really so terrible, why did the gov feel the need to kill them?
Central banking is nothing but a power grab. The "it stabilizes the baking system" is nothing but a lie.
In fairness, if Jefferson had his way, there wouldn't be much of a military around to plot a coup in the first place.
He'd also be considered a staunch non-interventionist were he alive today - "peace, commerce, and honest friendship with all nations and entangling alliances with none." Not much use for a standing army when that’s how you see your role in global affairs.
I wonder why
Standing armies’ threat to liberty isn't exclusively, or even mostly, via military coup, it's through acting without effective oversight against citizens when employed in a domestic security role, heightened by the separate culture and us-vs- them attitude standing forces create.
And, since the mid-19th century, it's mostly been realized in the US through standing paramilitary police forces rather than an normal standing military, as the former were established as permanent entities before regular standing armies in the US, and displaced regular standing armies from the dangerous domestic role that is the main underpinning of them being in Jefferson’s statement.
The idea of a public ledger and distributed witness signatures is sound though, and that should be the basis of a government approved system of inter-reserve asset tracking.
Tiered systems for central bank digital currencies that allow complete tracking of all transactions are an active area of interest by central banks. For instance, the PBoC has filed over 80 patents on the subject. You can be sure that these systems don't attempt to solve BFT, don't use as much electricity, and don't protect the peasants from the abuses of the rulers.
[1] https://decrypt.co/resources/byzantine-fault-tolerance-what-...
A blockchain is just blocks of data linked together using hash functions to guarantee the authenticity of previous blocks. There's no mining, and only a tiny amount of electricity used.
You are either ill-informed and should educate yourself on the subject (blockchain != proof of work-based consensus) or willingly creating confusion by mixing up concepts.
Let's assume the first, shall we?
Maybe the summary is saying something completely different, in which case the use of 'blockchain' within it can still concern me and any other readers who are similarly wrongly informed.
Proof of work is the thing that uses the electricity. blockchains can use or not use proof of work.