What is the fuss over central-bank digital currencies?(economist.com)
economist.com
What is the fuss over central-bank digital currencies?
https://www.economist.com/the-economist-explains/2021/02/16/what-is-the-fuss-over-central-bank-digital-currencies
147 comments
If you really just want everyone to have access to banking, create post banking. [1] Then, if you really just want everyone to get monthly checks from the government, deposit them electronically. That’s all you need to do. This already works in many countries. It can even work in the US with a bit of spit and polish (we used to have a post banking service and it’s been proposed to be reinstated).
[1] https://en.m.wikipedia.org/wiki/Postal_savings_system
[1] https://en.m.wikipedia.org/wiki/Postal_savings_system
As a german I don't see it. We had the "Postbarscheck", which is now gone. Since maybe about 20 years? That is not the direction they/them/the Reptiloids want to march the human cattle in. There need to be more efficient 'dig it all' threadmills. Anyways. Don't care. Am banked. Multiple times. Even have Alipay, Yay!
This makes no sense. Are you saying that digital currency is a fancy term for a direct deposit? We've had direct deposits for a very long time. My tax refund comes as a direct deposit. The government seems to be able to directly give me money digitially just fine.
> Are you saying that digital currency is a fancy term for a direct deposit?
Basically yes, but specifically only for the case of a direct deposit between the Federal reserve and an individual. That doesn't currently exist.
But that's also basically my point. CBDCs are nothing new from an operational or technological perspective which I think is something many people are getting confused about. They are a new thing in terms of policy capabilities for central banks. They are not a new thing in any other way. All the technology already exists.
Basically yes, but specifically only for the case of a direct deposit between the Federal reserve and an individual. That doesn't currently exist.
But that's also basically my point. CBDCs are nothing new from an operational or technological perspective which I think is something many people are getting confused about. They are a new thing in terms of policy capabilities for central banks. They are not a new thing in any other way. All the technology already exists.
Fair enough. I guess it feels almost unbelievable that all this fuss is over something so mundane.
I guess i dont really understand why though. It sounds like the central bank is thinking about becoming, well, a normal bank. We already have normal banks. Governments can already transfer cash to accounts in normal banks. Governments can already sell bonds to people who want some sort of very stable investment backed by the state. What's the point of becoming a consumer bank? Why are they bothering? How do they benefit? Is there anything to this other than the desire to jump aboard the anything-that-sounds-remotely-like-bitcoin-even-if-unrelated hype train.
I guess i dont really understand why though. It sounds like the central bank is thinking about becoming, well, a normal bank. We already have normal banks. Governments can already transfer cash to accounts in normal banks. Governments can already sell bonds to people who want some sort of very stable investment backed by the state. What's the point of becoming a consumer bank? Why are they bothering? How do they benefit? Is there anything to this other than the desire to jump aboard the anything-that-sounds-remotely-like-bitcoin-even-if-unrelated hype train.
I think this is actually a monumental shift in the whole US political system were it to be enacted.
Because it drastically broadens the scope of actions the Fed or another CB is capable of therefor increasing its influence and importance. And keep in mind the people running it are not democratically elected and are partially private banks.
Right now the fed basically has no direct tie to the real economy. They always have to act indirectly via asset purchases from large institutions. They basically have one hand tied behind their back all the time. This unties that hand and allows them to interact with the real economy directly and not just the financial intermediaries.
Because it drastically broadens the scope of actions the Fed or another CB is capable of therefor increasing its influence and importance. And keep in mind the people running it are not democratically elected and are partially private banks.
Right now the fed basically has no direct tie to the real economy. They always have to act indirectly via asset purchases from large institutions. They basically have one hand tied behind their back all the time. This unties that hand and allows them to interact with the real economy directly and not just the financial intermediaries.
> It sounds like the central bank is thinking about becoming, well, a normal bank. We already have normal banks.
That's not entirely the right way to think about this. The money in your account at a "normal bank" only exists as a liability of that bank, and thus would disappear if the bank goes under. A CDBC would not be a liability of any bank, it would be equivalent to physical cash.
I guess you could still think of that as a "liability of the central bank" because they would be responsible for maintaining the ledger. But a central bank cannot go bust in the same way that a normal bank can.
That's not entirely the right way to think about this. The money in your account at a "normal bank" only exists as a liability of that bank, and thus would disappear if the bank goes under. A CDBC would not be a liability of any bank, it would be equivalent to physical cash.
I guess you could still think of that as a "liability of the central bank" because they would be responsible for maintaining the ledger. But a central bank cannot go bust in the same way that a normal bank can.
Technically, at least in the case of the fed, all currency is a liability on the feds blanace sheet, and cbdcs would probably be included in that. That's really just a technicality though.
Sorry to nitpick.
Sorry to nitpick.
"Fair enough. I guess it feels almost unbelievable that all this fuss is over something so mundane."
It's because Bitcoiners chants to rally a number of different causes, that pro-Bitcoiners claim through their propaganda will claim it's the solution for A, B, C ... X, Y, Z - from local to global issues - so the group grows by bringing in people who want to solve those issues and believe the claims to be true - who are aligned by what - money, a financial incentive of Bitcoin being structured as an MLM - and arguably has a Ponzi scheme structure as well. Then you have it being global and decentralized, then you get marketing forums online taking it on to be at the base of the MLM, then you get the VC-financial industrial complex aligned with it + amplified by mainstream media.
The Republican party many decades ago was taken over by industrial complexes/corporations - and because corporations couldn't vote - they rallied with narratives/messaging to attract different smaller interest groups to become aligned; Noam Chomsky explains this here: https://boingboing.net/2019/04/20/useful-idiots-r-us.html
It's because Bitcoiners chants to rally a number of different causes, that pro-Bitcoiners claim through their propaganda will claim it's the solution for A, B, C ... X, Y, Z - from local to global issues - so the group grows by bringing in people who want to solve those issues and believe the claims to be true - who are aligned by what - money, a financial incentive of Bitcoin being structured as an MLM - and arguably has a Ponzi scheme structure as well. Then you have it being global and decentralized, then you get marketing forums online taking it on to be at the base of the MLM, then you get the VC-financial industrial complex aligned with it + amplified by mainstream media.
The Republican party many decades ago was taken over by industrial complexes/corporations - and because corporations couldn't vote - they rallied with narratives/messaging to attract different smaller interest groups to become aligned; Noam Chomsky explains this here: https://boingboing.net/2019/04/20/useful-idiots-r-us.html
> I guess i dont really understand why though.
Accounts at central banks might make taxation easier for governments, especially if other current (and possibly savings) accounts at normal banks would be banned.
Also it would be easier for governments to select policies based on someones income. E.g. tax high income people more and provide financial benefits for low income people.
Also a universal basic income would be easier to implement if every citizen has only a single account at a central bank.
Accounts at central banks might make taxation easier for governments, especially if other current (and possibly savings) accounts at normal banks would be banned.
Also it would be easier for governments to select policies based on someones income. E.g. tax high income people more and provide financial benefits for low income people.
Also a universal basic income would be easier to implement if every citizen has only a single account at a central bank.
It would also be easier to watch and seize the transations of people who oppose the governments. Maybe your tax would depend on your social score.
It would allow to automatically punish not only the targets directly, but also everyone who interacts with them. Like, not only would the undesirables not be allowed to get a good job or study at university, they couldn't even buy an ice cream at the corner, because the vendor would be warned that if they accept their money, the vendor's social score will be reduced in turn. (And there is no way to accept the payment without the system seeing the transaction.) The companies would be warned that if they hire them, their tax rate will be increased. The government could enforce social ostracism even if most people wouldn't mind the thoughtcrime per se.
It would allow to automatically punish not only the targets directly, but also everyone who interacts with them. Like, not only would the undesirables not be allowed to get a good job or study at university, they couldn't even buy an ice cream at the corner, because the vendor would be warned that if they accept their money, the vendor's social score will be reduced in turn. (And there is no way to accept the payment without the system seeing the transaction.) The companies would be warned that if they hire them, their tax rate will be increased. The government could enforce social ostracism even if most people wouldn't mind the thoughtcrime per se.
They want to obviate cash. Visa is a payment processor, not a general purpose cash.
Eliminating the man in the middle(What you call normal banks). Saving costs(Fuck them all!). Tracking(Harr Harr!). Control(Control!). Whatever(Yes. Really.)
Btw. from my point of view the central bank thing would be the normal, what we have now is an inversion, IMO. We're just used to it because that's how it was and is until now.
Btw. from my point of view the central bank thing would be the normal, what we have now is an inversion, IMO. We're just used to it because that's how it was and is until now.
Benefit is that currently government insures bank deposit, which is subsidy to banking. For example, FDIC does deposit insurance in US. There is cap in FDIC insurance, which complicates large deposit. We can get rid of all these complexity with CBDC.
FDIC is funded via premiums paid for by member banks, not the gov. That's not a subsidary.
As far as the insurance cap goes, if the new plan is that the central bank doesn't need insurance because it can always print new money, i suppose that's true, but that is one hell of a subsidary and one that sounds scary from a fiscal responsibility standpoint.
As far as the insurance cap goes, if the new plan is that the central bank doesn't need insurance because it can always print new money, i suppose that's true, but that is one hell of a subsidary and one that sounds scary from a fiscal responsibility standpoint.
I personally don't belive this has anything to do with deposit insurance.
No, but it's the consequence of equating a dollar in a database with a real dollar and the subsequent ownership of that dollar. A deposited dollar in your bank account is a low yield investment. You don't own the dollars, you own the promise that you will get your dollars back.
You can have deposit in a bank, and that bank has deposit in the central bank. That's the current situation. With CBDC, you can have deposit in the central bank. This is an important difference.
Important to whom? As a private citizen, why would i want this? As a central bank, why would i want this? Which parties benefit from such an arrangement, which to me seems only superficially different from the staus quo? How and why do they benefit?
One less middleman that can only add extra delay and extra fees.
Also, removes part of systemic risk since "digital currency" is held at central bank and not with retail banks, then it decouples transactions/accounts from deposits/lending. Currently, if a major bank fails because of lending issues, there's a push to prop them up since them failing would also cause immense harm to all the businesses who just transact through that bank, if this is decoupled, then the economic system would be a bit more stable during crisis.
Also, removes part of systemic risk since "digital currency" is held at central bank and not with retail banks, then it decouples transactions/accounts from deposits/lending. Currently, if a major bank fails because of lending issues, there's a push to prop them up since them failing would also cause immense harm to all the businesses who just transact through that bank, if this is decoupled, then the economic system would be a bit more stable during crisis.
Bank bailouts will become very unattractive since there is a less risky alternative. It's like building a nice bridge that can collapse vs an ugly bridge that will never collapse.
Consider the difference between a Bitcoin and dollars in your bank account. You can own Bitcoin but your bank account just shows how much dollars your bank owes you, you don't own any of the dollars yourself.
I answered elsewhere.
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You know what's new that hasn't been done before? Your government giving money to me (not a citizen) in an effort to popularize your currency.
If President Xi wants to gift me some digital Yuan to spend how I wish (so the Yuan becomes more accepted outside China).. I say hell, why not?
If President Xi wants to gift me some digital Yuan to spend how I wish (so the Yuan becomes more accepted outside China).. I say hell, why not?
> Important note: central bank digital currencies are not crypto currrencies. They are not block chains. They are not decentralized. They are not permissionless. I cannot find a record of any CBDC which clearly states that it want's to use any of these technologies. I'd be interested to be proven wrong.
Indeed, by default almost majority of CBDCs are permissioned chains since CB is the only authority to create money and destroy, aka mint.
Technology-wise though you‘d be surprised. Most of the solutions out there are actually DLT based, almost all blockchain based. There are modern aspects that work differently than other cryptos (well, borrowed), e.g. there are permissioned blockchain solutions that allow „channels“ to be private. This allows a bank to still be on a ledger while txns are hidden from other banks. They are also decentralized because Central banks are not high tech companies, but they have trusted middle layer still to be fast and cheap at some other disadvantages for citizen, e.g. control.
Indeed, by default almost majority of CBDCs are permissioned chains since CB is the only authority to create money and destroy, aka mint.
Technology-wise though you‘d be surprised. Most of the solutions out there are actually DLT based, almost all blockchain based. There are modern aspects that work differently than other cryptos (well, borrowed), e.g. there are permissioned blockchain solutions that allow „channels“ to be private. This allows a bank to still be on a ledger while txns are hidden from other banks. They are also decentralized because Central banks are not high tech companies, but they have trusted middle layer still to be fast and cheap at some other disadvantages for citizen, e.g. control.
Central bank digital currencies can be blockchain based, they can be decentralised etc. In fact, he central banks that I have spoken to would rather have a decentralised currency, because it would mean less work for them.
The motivation of a central bank is easy; make sure the currency is liquid, make sure they can use the currency to affect inflation and so forth. Whatever setup gives them the best ability to meet those kinds of goals will be what decided what they go for.
They motivation and goals are quiet unique in that sense, it is totally different from the commercial banks or the private sector. Therefore I do believe we will see proper blockchain, decentralised, systems in the future.
The motivation of a central bank is easy; make sure the currency is liquid, make sure they can use the currency to affect inflation and so forth. Whatever setup gives them the best ability to meet those kinds of goals will be what decided what they go for.
They motivation and goals are quiet unique in that sense, it is totally different from the commercial banks or the private sector. Therefore I do believe we will see proper blockchain, decentralised, systems in the future.
I could see CBDCs using blockchain solely because someone utterly non-technical, at some higher level in the bureaucracy, insisted that they make a blockchain-based cryptocurrency “so as to not get left behind” or “because we need to compete with Bitcoin”.
Clearly neither of those two rationales make any sense whatsoever - and they might even seem like a downright ridiculous suggestion to some readers of this response. If that’s you, then welcome to wild and whacky world of public spending.
Clearly neither of those two rationales make any sense whatsoever - and they might even seem like a downright ridiculous suggestion to some readers of this response. If that’s you, then welcome to wild and whacky world of public spending.
That’s not me. I but can see how a DLT could work very well as means of a currency.
We could have the commercial banks, and others if necessary, run nodes. They could verify payments on “accounts”, or addresses, (if we want to keep the old meaning of bank account, that’s fine, then we could instead call these addresses) which are held by the commercial banks. These addresses could be non-anonymous such that requirement for know-your-customer still reside with the commercial banks (the central banks really don’t want to have to get anyway near KYC requirements). Each such “account”/address could be linked to addresses of currency at the CB, which at that point was anonymous.
The CB could then have full control of the issuance of currency, control interest directly on the currency itself, everything being anonymous to the CB.
We could have the commercial banks, and others if necessary, run nodes. They could verify payments on “accounts”, or addresses, (if we want to keep the old meaning of bank account, that’s fine, then we could instead call these addresses) which are held by the commercial banks. These addresses could be non-anonymous such that requirement for know-your-customer still reside with the commercial banks (the central banks really don’t want to have to get anyway near KYC requirements). Each such “account”/address could be linked to addresses of currency at the CB, which at that point was anonymous.
The CB could then have full control of the issuance of currency, control interest directly on the currency itself, everything being anonymous to the CB.
But why do that though?
If the currency is going to be centrally issued then what reason is there to use a DLT given all of the drawbacks it would introduce?
DLTs aren’t a solution to a technical problem, they’re a technical solution to a trust problem that comes with some pretty hefty implementation baggage and performance constraints.
If you have to trust a single issuer anyway (as would be the case with a CBDC) then the core reason for using a DLT doesn’t exist.
If the currency is going to be centrally issued then what reason is there to use a DLT given all of the drawbacks it would introduce?
DLTs aren’t a solution to a technical problem, they’re a technical solution to a trust problem that comes with some pretty hefty implementation baggage and performance constraints.
If you have to trust a single issuer anyway (as would be the case with a CBDC) then the core reason for using a DLT doesn’t exist.
The question is, why would banks run nodes? How do they get money to pay for the datacenters?
Well. Same as they do today. Lend money, borrow money (savings), finance ventures and mortgages, services.
A private blockchain is just a blockchain where miners have to be authorized by a central authority i.e. the central bank.
Since each miner is linked to a publicly known institution, attacks on the blockchain could be punished with jail time and revocation of the authorization.
Proof of work is just a very advanced anti spam protection system. In decentralized systems people can create as many accounts as they want. You need to make sure that they can't.
I'm just saying this is how it could work. It's not obvious whether its a good or bad idea.
Since each miner is linked to a publicly known institution, attacks on the blockchain could be punished with jail time and revocation of the authorization.
Proof of work is just a very advanced anti spam protection system. In decentralized systems people can create as many accounts as they want. You need to make sure that they can't.
I'm just saying this is how it could work. It's not obvious whether its a good or bad idea.
The central bank is CENTRAL. They want to CENTRALLY coordinate monetary activity. They are never going to sign up to decentralize their one policy tool.
I don't disagree that it is technically feasible to implement these on a block chain, and I think it is possible that there may be some effort to tokenize a currency to track it on a block chain in a secondary way, but that is very different from the block chain being the irrefutable source of truth for ownership of the currency for a sovereign. That will never happen.
I don't disagree that it is technically feasible to implement these on a block chain, and I think it is possible that there may be some effort to tokenize a currency to track it on a block chain in a secondary way, but that is very different from the block chain being the irrefutable source of truth for ownership of the currency for a sovereign. That will never happen.
I do not agree. And I think the fact that almost every central bank around is showing interest in the idea, and some perusing it more than others, could be seen as arguments against your position.
I think it’s very simple. The central banks are given an assignment and a goal by the government, in many ways it has become harder for them to do that; making sure the currency is liquid and people have means of payment, for example in situations of crisis, is much harder today when people are paying less in hard cash monies, and most stuff is electronic or how affecting inflation by means of repo-rates have become much slower and much harder. They need to do something. Having it as a DLT might give them more control, not less, since they could for example add interest rates directly on the currency to affect inflation, rather than having to take the route via the commercial banks.
I am not an expert, but I have though quiet a bit about it, and I have a bit of experience with a couple of European central banks. I really do think that we will see this, at least in some placss, it’s just a matter of time.
I think it’s very simple. The central banks are given an assignment and a goal by the government, in many ways it has become harder for them to do that; making sure the currency is liquid and people have means of payment, for example in situations of crisis, is much harder today when people are paying less in hard cash monies, and most stuff is electronic or how affecting inflation by means of repo-rates have become much slower and much harder. They need to do something. Having it as a DLT might give them more control, not less, since they could for example add interest rates directly on the currency to affect inflation, rather than having to take the route via the commercial banks.
I am not an expert, but I have though quiet a bit about it, and I have a bit of experience with a couple of European central banks. I really do think that we will see this, at least in some placss, it’s just a matter of time.
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I find it funny that when the state designs a new currency, it gives it the exact opposite characteristics as the ones designed by the civilians
Edit: I wrongly called the government ones cryptocurrencies
Edit: I wrongly called the government ones cryptocurrencies
It's literally not a crypto currency and they aren't claiming it is. There is nothing cryptographic in nature about its implementation.
> The idea of these new CBDCs is to setup a similar system but where the digital currency could be distributed to individual citizens.
I don't think this is the point of CBDC at all. Individual citizens gain nothing with the ability to sell financial assets to the CB, and neither does the CB.
I don't think this is the point of CBDC at all. Individual citizens gain nothing with the ability to sell financial assets to the CB, and neither does the CB.
The idea here is about security of money: the money stored in the CB ledger does not lose i ts contractual value in difficult times, as it is garanteed by the central bank.
Compare that to your money in your bank, which is backed at 10% with fiat reserves. If crisis happens and people want to pull their cash out the bank goes bankrupt. Central banks do not go bankrupt, hence your money is always safe.
Compare that to your money in your bank, which is backed at 10% with fiat reserves. If crisis happens and people want to pull their cash out the bank goes bankrupt. Central banks do not go bankrupt, hence your money is always safe.
Sure, but bank deposits are very secure anyway. They are protected by insurance and by central banks which provide liquidity to commercial banks that are experiencing financial distress.
The BIS released a paper where they argue for permissioned ledgers for central bank digital currencies because you can tie that to identity, government benefits, and things like money laundering.
But centralized also means "subject to control by dictatorships" which is not nice.
But centralized also means "subject to control by dictatorships" which is not nice.
Important note: bitcoin is a ponzi [1] and not digital gold. Learn how the investment fraud works. [1] https://github.com/openblockchains/bitcoin-ponzi
By that definition literally all investments are ponzis. You buy something hoping that someone else will be willing to buy it from you at a higher price. Oops the cryptocurrency bubble popped. Oops the company went bankrupt and your stocks are worthless. Oops a natural disaster happened and the house and land lose a lot of value. Oops pokemon is no longer popular and all the TCG cards you have become worthless. Oops the government is no more and your treasury bonds are worthless.
Realize that there is always a bubble and take advantage of the bubble while it lasts.
Realize that there is always a bubble and take advantage of the bubble while it lasts.
Not really. Company stocks indeed do have an intrinsic value: companies pay dividends. Now they can go bankrupt, sure, but that's an independent issue. Indeed the very fact that they can go bankrupt (in which case your stock will probably be worth 0) shows that they have an intrinsic value.
So, as opposed to BTC, you don't have to buy it in order to sell it to someone else at a higher price. You can hold it and still make a real profit. (As opposed to the price increase, which you'll only realize if/when you do sell.) And since this is the case, it will mostly anchor the price in the long term to the profit (dividend) making capabilities of the stock.
So no, it's not always a bubble. You could argue that 'fiat' money is a ponzi/bubble but that also has intrinsic value (as the issuing central bank/government will stand up for it, e.g. force every merchant to accept it, you can pay taxes in it, etc.). But if you say that gold is a similar ponzi/bubble, then your probably right. While gold also does have intrinsic value (for its usage as a base material e.g. in electronics), its price is, as far as I can understand a lot higher than what that use would guarantee. (We use relatively little compared to how much we keep in safes.)
So, as opposed to BTC, you don't have to buy it in order to sell it to someone else at a higher price. You can hold it and still make a real profit. (As opposed to the price increase, which you'll only realize if/when you do sell.) And since this is the case, it will mostly anchor the price in the long term to the profit (dividend) making capabilities of the stock.
So no, it's not always a bubble. You could argue that 'fiat' money is a ponzi/bubble but that also has intrinsic value (as the issuing central bank/government will stand up for it, e.g. force every merchant to accept it, you can pay taxes in it, etc.). But if you say that gold is a similar ponzi/bubble, then your probably right. While gold also does have intrinsic value (for its usage as a base material e.g. in electronics), its price is, as far as I can understand a lot higher than what that use would guarantee. (We use relatively little compared to how much we keep in safes.)
>companies pay dividend
Not all companies do that though. $GOOG has no voting rights nor dividends yet is worth more than $2100. It does literally nothing as far as I can tell, making it useless compared to even something like bitcoin. Despite this, you could have made a lot of money by just buying the stock years ago and selling it now.
>You can hold it and still make a real profit
That would take 33 years to happen with the stock that currently has the highest yield assuming that yield is constant over those 33 years which is probably a bad assumption. Who wants to get a profit 33 years in the future? If I could not resell it, it would be worthless to me.
With cryptocurrency you can also yield farm to make some money while you are just holding by essentially loaning them and having interest paid to you.
Not all companies do that though. $GOOG has no voting rights nor dividends yet is worth more than $2100. It does literally nothing as far as I can tell, making it useless compared to even something like bitcoin. Despite this, you could have made a lot of money by just buying the stock years ago and selling it now.
>You can hold it and still make a real profit
That would take 33 years to happen with the stock that currently has the highest yield assuming that yield is constant over those 33 years which is probably a bad assumption. Who wants to get a profit 33 years in the future? If I could not resell it, it would be worthless to me.
With cryptocurrency you can also yield farm to make some money while you are just holding by essentially loaning them and having interest paid to you.
> By that definition literally all investments are ponzis. You buy something hoping that someone else will be willing to buy it from you at a higher price. Oops the cryptocurrency bubble popped. Oops the company went bankrupt and your stocks are worthless.
Stocks aren't ponzis. Companies pay out dividends all the time and sometimes (very rare nowadays) they pay for stock buybacks out of their own pockets from the profit they have accumulated. There is no need for a greater fool because the investment itself is paying out to investors.
>Realize that there is always a bubble and take advantage of the bubble while it lasts.
That's how you get bubbles. People see a chart with unsustainable 300%+ gains and think, if I were to act rationally and sell now, I would lose out on future irrational gains when the bubble goes up to 600%.
If you thought. Hey, I see a bubble with X gains, if I take Y < X gains then I will get very safe money. Say 10% gains on 300% actual gains on Bitcoin. It would be very safe money and it would be rational and you weakened the bubble, but you also just lost out on big gains, so you stop doing the rational thing.
Stocks aren't ponzis. Companies pay out dividends all the time and sometimes (very rare nowadays) they pay for stock buybacks out of their own pockets from the profit they have accumulated. There is no need for a greater fool because the investment itself is paying out to investors.
>Realize that there is always a bubble and take advantage of the bubble while it lasts.
That's how you get bubbles. People see a chart with unsustainable 300%+ gains and think, if I were to act rationally and sell now, I would lose out on future irrational gains when the bubble goes up to 600%.
If you thought. Hey, I see a bubble with X gains, if I take Y < X gains then I will get very safe money. Say 10% gains on 300% actual gains on Bitcoin. It would be very safe money and it would be rational and you weakened the bubble, but you also just lost out on big gains, so you stop doing the rational thing.
>Companies pay out dividends all the time and sometimes (very rare nowadays) they pay for stock buybacks out of their own pockets from the profit they have accumulated
Not, all stocks do that though. I just checked the FAANG stocks and only Apple pays dividends. Even so Apple has a yield of 0.63% That means you have to hold it for almost 159 years to recoup that investment. Meanwhile if you bought a year ago, by now the stock price has doubled which can allow you to recoup your investment because you can sell it to the "greater fool." Eventually dividends go down, the company goes bankrupt, or some other thing happens and you don't want to be the fool holding the bag.
In cryptocurrency there also exists yield farming and buy backs.
>That's how you get bubbles.
There will always be bubbles. It's like a video game. You need to be minmaxing. Find what bubbles currently exist and figure out how to profit off of them.
Not, all stocks do that though. I just checked the FAANG stocks and only Apple pays dividends. Even so Apple has a yield of 0.63% That means you have to hold it for almost 159 years to recoup that investment. Meanwhile if you bought a year ago, by now the stock price has doubled which can allow you to recoup your investment because you can sell it to the "greater fool." Eventually dividends go down, the company goes bankrupt, or some other thing happens and you don't want to be the fool holding the bag.
In cryptocurrency there also exists yield farming and buy backs.
>That's how you get bubbles.
There will always be bubbles. It's like a video game. You need to be minmaxing. Find what bubbles currently exist and figure out how to profit off of them.
No Bitcoin is not a Ponzi. A Ponzi scheme has a very particular set of characteristics. Bitcoin is not even a pyramid scheme. It does not require new buyers for its value to increase.
It currently is highly speculative and manic market, possibly a bubble.
The quality of your link speaks for itself, it reads like schizoid scribbles.
It currently is highly speculative and manic market, possibly a bubble.
The quality of your link speaks for itself, it reads like schizoid scribbles.
Uhh.. Where do you think this number that you call "value" comes from?
It comes from the crypto exchanges. The value. Is the latest settled sale. So when someone sets a sell price and someone buys at that btc, is when the value is set.
So yeh. You absolutely need new buyers for its value to increase.
It comes from the crypto exchanges. The value. Is the latest settled sale. So when someone sets a sell price and someone buys at that btc, is when the value is set.
So yeh. You absolutely need new buyers for its value to increase.
Needing new buyers for price to increase is not the definition of a Ponzi scheme. Because that is true for any speculative asset due to the price setting mechanism.
Your argument entails that the price of Bitcoin is highly inflated over its fundamental value, i.e. that it is a speculative bubble. Speculative bubbles are very different from Ponzi schemes. A Ponzi scheme has the following definition according to the SEC:
>“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves."
Ponzi schemes require a central fraudster to pass on money directly from old to new investors with the underlying asset obfuscatedly held on promise by the fraudster.
With cryptocurrency the buyer has control of the commodity, you actually have control of the crypto, there is no promise of a consistent return with little risk, there is no central entity defrauding targets with promises that hold the asset in reserve passing on money directly from new to old investors.
What we do have is a speculative bubble which will no doubt be devastating for new investors when it collapses. But the definition of a Ponzi scheme is not met.
>“A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves."
Ponzi schemes require a central fraudster to pass on money directly from old to new investors with the underlying asset obfuscatedly held on promise by the fraudster.
With cryptocurrency the buyer has control of the commodity, you actually have control of the crypto, there is no promise of a consistent return with little risk, there is no central entity defrauding targets with promises that hold the asset in reserve passing on money directly from new to old investors.
What we do have is a speculative bubble which will no doubt be devastating for new investors when it collapses. But the definition of a Ponzi scheme is not met.
What about the bit coin whales?
The btc-e money the Mt gox coins. Satoshish original coins and all the gpu miners pre 2012?
There are plenty of people walking around with btc wallets with hundreds to thousands of coins that are basically funny money to them.
For every btc price cycle there is more usd and less coins in circulation.
Selling off 10 btc at the moment on any exchange would tank the price with about 10k usd....
The btc-e money the Mt gox coins. Satoshish original coins and all the gpu miners pre 2012?
There are plenty of people walking around with btc wallets with hundreds to thousands of coins that are basically funny money to them.
For every btc price cycle there is more usd and less coins in circulation.
Selling off 10 btc at the moment on any exchange would tank the price with about 10k usd....
> Selling off 10 btc at the moment on any exchange would tank the price with about 10k usd....
That's just not true and I don't even see any reason how it could be. I am looking at the Binance BTC order book and depth chart and 24 BTC sell orders at 56500 just went through. Price is not crashing.
Mining and whale centralisation are huge problems and downside in crypto depending on how prevalent it is. I am not saying that Bitcoin is not a dangerous investment, that there it is not a speculative bubble. I am just saying that it does not meet the definition of a Ponzi scheme.
There is indeed a lot to critique about the current crypto market but at least make sure the arguments are founded on facts.
That's just not true and I don't even see any reason how it could be. I am looking at the Binance BTC order book and depth chart and 24 BTC sell orders at 56500 just went through. Price is not crashing.
Mining and whale centralisation are huge problems and downside in crypto depending on how prevalent it is. I am not saying that Bitcoin is not a dangerous investment, that there it is not a speculative bubble. I am just saying that it does not meet the definition of a Ponzi scheme.
There is indeed a lot to critique about the current crypto market but at least make sure the arguments are founded on facts.
Coinbase moved 400+ BTC in 15 minutes this morning at 7 am ish central time.
I know because I had to move my sell orders higher.
Y’all are crazy. This is not accurate.
I know because I had to move my sell orders higher.
Y’all are crazy. This is not accurate.
I thought the real value of Bitcoin is hiding shady deals: drugs, money laundering, etc. Needless to say, there is plenty of that to drive Bitcoin value up.
Hiding by making a permanent and public record of every shady deal? ;)
That's a large part of my view on it.
Even if no one "believes" in it, and the value essentially freefalls, BTC or something like it is still useful as a short term settlement device in lieu of taking suitcases of cash over a border or similar. You buy the token, send it to someone, they cash it out. People on each side (maybe the same person!) take a cut.
Even if no one "believes" in it, and the value essentially freefalls, BTC or something like it is still useful as a short term settlement device in lieu of taking suitcases of cash over a border or similar. You buy the token, send it to someone, they cash it out. People on each side (maybe the same person!) take a cut.
You are looking for Monero.
Yes, Bitcoin is a ponzi scheme that collapsed 4 times. The problem is that people will bet that there will be more ponzi schemes to come in the future.
Thank you for the link. The document could benefit from being a bit more polished and have less exclamations, but it contains some useful links and references at the end, such as this interview here, which I found it reflects what the bubble of cryptocurrencies is about: https://amycastor.com/2021/02/11/nouriel-roubini-tether-is-a...
>Robert Shiller
Here's what I'm most interested in here: right now, if I'm using an alternative mobile OS (besides iOS or Android), it's basically impossible for me to implement digital payments through existing payment networks. On the other hand, because cryptocurrencies are FOSS and very well-standardized, it's very possible to implement a cryptocurrency wallet.
If central-bank digital currencies are closer to cryptocurrencies in this regard, and the protocol is standardized enough that mobile Linux OSes can have wallets... that'll be very much appreciated. I'd love to have mobile payments but not depend on Apple or Google.
If central-bank digital currencies are closer to cryptocurrencies in this regard, and the protocol is standardized enough that mobile Linux OSes can have wallets... that'll be very much appreciated. I'd love to have mobile payments but not depend on Apple or Google.
I’d wager that only very progressive and liberal countries would have this degree of openness. Think Switzerland and Holland. Most countries will distribute their own apps (which may also spy on you) and/or use preferred technology partners.
Switzerland isn't considered progressive in any way, in fact it's a very conservative country compared to its neighbors (source: I'm from there).
Progressive used to mean you were concerned with the freedom and liberty of individuals and with transparency in government. That seems closest to "Libertarian" in American terms, and Switzerland, as a neutral country along with other European style politics, seems to fit that bill
Well, progressive originally meant marching forward, making progress [1]. As such it is literally the opposite of conservative, which means "disposed to retain and maintain what is established, opposed to innovation and change," or, in a negative sense, "opposed to progress" [2].
[1] from Etymology Online (!ety on DDG): "characterized by advancement, going forward, moving onward" (in action, character, etc.), from progress (n.) + -ive, or else from French progressif, from past participle stem of Latin progredi. From the notion of "using one's efforts toward advancement or improvement" comes the meaning "characterized by striving for change and innovation, avant-garde, liberal" (in arts, etc.), from 1908; of jazz, from 1947. In the socio-political sense "favoring reform; radically liberal" it emerged in various British contexts from the 1880s; in the U.S. it was given to a movement active in the 1890s and a generation thereafter, the name being taken again from time to time, most recently by some more liberal Democrats and other social activists, by c. 2000.
https://www.etymonline.com/word/progressive
[2] https://www.etymonline.com/word/conservative
[1] from Etymology Online (!ety on DDG): "characterized by advancement, going forward, moving onward" (in action, character, etc.), from progress (n.) + -ive, or else from French progressif, from past participle stem of Latin progredi. From the notion of "using one's efforts toward advancement or improvement" comes the meaning "characterized by striving for change and innovation, avant-garde, liberal" (in arts, etc.), from 1908; of jazz, from 1947. In the socio-political sense "favoring reform; radically liberal" it emerged in various British contexts from the 1880s; in the U.S. it was given to a movement active in the 1890s and a generation thereafter, the name being taken again from time to time, most recently by some more liberal Democrats and other social activists, by c. 2000.
https://www.etymonline.com/word/progressive
[2] https://www.etymonline.com/word/conservative
I think you mean liberal and not progressive, in the "classical liberal" sense (though the US seems to have a different meaning for this, so I'm not sure if that matches well). Switzerland is economically liberal and socially very conservative. I don't know what you mean by European style politics, I cannot see what the country system has in common with the EU, but we regularly clash with EU's politics and refused multiple time to join the union.
Classical "liberals" were similar. Believed in free speech, free markets, rule by law. Languages change in interesting ways when people all pile on to a "positive word" that they want to be, but that changes the meaning of the word. It's like iterative word redefinition.
Point of order: the name of the country is The Netherlands, not Holland.
Another point of order: Switzerland might be financially liberally oriented but the political landscape is largely conservative and right leaning.
What does financially liberal even mean here? When it comes to CBDCs and currency policy I don't even think I have gotten a strong sense of how the different camps split on this issue.
If the problem is "I have a bank account, now I want to receive payments automatically without depending on anything else", you are looking for a money transfer protocol. The Brazilian Pix is quite interesting, as an open protocol, but I don't known of any read made FOSS client for it yet.
There are other nationwide protocols around, some open, but most closed, some closed with publicly accessible middleman. Now we are mostly missing some protocol for international settlement between those.
Honestly, I don't get the point of state sponsored e-money. They looks like me-too projects by people that don't understand what they are doing.
There are other nationwide protocols around, some open, but most closed, some closed with publicly accessible middleman. Now we are mostly missing some protocol for international settlement between those.
Honestly, I don't get the point of state sponsored e-money. They looks like me-too projects by people that don't understand what they are doing.
There are a lot of cost savings to be made in a move to a national digital currency. Just settlement alone could be made way cheaper. Swift could be cut out as the middleman. It would be a good cost saving innovation.
Yes, I saw the other threads about international settlements. The discussion here on HN is very illuminating.
This is actually one of the main USPs to have payment at public layer. Even USA is pushing for an open API and SDKs, one day maybe an open source protocol.
Can't you just use the many existing web payment frameworks? Do you have some more specific requirement?
I should clarify: I mean physical payments with a merchant in person here. If I want to use a digital wallet at an in-person merchant, my only options are to use products by Apple or Google (or possibly both Samsung and Google). If I'm working on software for a non-Android or iOS phone? It's just not an option, not without (what I can only assume are) hugely expensive business deals with banks and card issuers.
A digital currency issued by a central bank, if sufficiently standardized, could lower the barrier to entry here such that it's feasible for developers who don't make billions of dollars in revenue to participate.
(Now, I also think the way credit card payments work right now in general is silly and unsafe, but that's only tangentially related here. Still, I think a digital currency could probably do it better. :)
A digital currency issued by a central bank, if sufficiently standardized, could lower the barrier to entry here such that it's feasible for developers who don't make billions of dollars in revenue to participate.
(Now, I also think the way credit card payments work right now in general is silly and unsafe, but that's only tangentially related here. Still, I think a digital currency could probably do it better. :)
Digital currencies allow for full tracking of every transactions and are a privacy nightmare.
They allow applying negative interest rate on everybody and they would facilitate neverending hyperinflation (no need to print new bills at great expense).
Hence they can't coexist with cash so say goodbye to cash.
I don't like where we're going.
They allow applying negative interest rate on everybody and they would facilitate neverending hyperinflation (no need to print new bills at great expense).
Hence they can't coexist with cash so say goodbye to cash.
I don't like where we're going.
To the uninitiated some of what you say may sound like conspiracy thinking. But it’s really not. People in ECB have been talking along these lines for over a year. Here is the latest example. [1] The more you follow it the more it really seems like if the people in the ECB had their way they’d force everyone to live paycheck to paycheck and never save. They’ve been running negative interest rates and they don’t work (because they simply, empirically don’t). They won’t accept the empirical evidence and go back to the drawing board. Instead the problem in their minds is always they’ve never gone far enough! They want to keep doubling down and try to gain more and more centralized control of people’s money.
[1] https://www.bloomberg.com/news/articles/2021-02-10/ecb-s-pan...
[1] https://www.bloomberg.com/news/articles/2021-02-10/ecb-s-pan...
Negative rates are only popular because the technocrats can't get expansionary fiscal policy to happen. Because Eurozone governments are boxed in with debt rules.
The only way out of this to getting money circulating in the real economy is to go after the giant concentrations of wealth that are distorting the situation so badly.
The only way out of this to getting money circulating in the real economy is to go after the giant concentrations of wealth that are distorting the situation so badly.
Yeah, the central bank only has a hammer (interest rates) but its supposed to do jobs that require screwdrivers. That's why it gets dumber and dumber. At some point you apply so much force on your hammer that it can drive screws. That's the idea behind negative interest rates.
Privacy is ranked the second after security in a recent survey from ECB, so it is a known demand and design criteria for both sides.
CBDC will co-exist with cash for years to come. Fully monitored CBDC will be at a high disadvantage by citizens specially in modern world, while fully private one would not be allowed by CBs due to need for transparency.
Here also comes the product builders. We could design a CBDC that is fully transparent, which is the easiest to build, these days mostly DLT based. The challenge is how to enable some TXNs to be private by design and not only policies.
A major country is taking the extreme case of full transparency, while ECB and others like Canada are strongly focusing on privacy as a feature.
CBDC will co-exist with cash for years to come. Fully monitored CBDC will be at a high disadvantage by citizens specially in modern world, while fully private one would not be allowed by CBs due to need for transparency.
Here also comes the product builders. We could design a CBDC that is fully transparent, which is the easiest to build, these days mostly DLT based. The challenge is how to enable some TXNs to be private by design and not only policies.
A major country is taking the extreme case of full transparency, while ECB and others like Canada are strongly focusing on privacy as a feature.
"privacy" as defined by the grocery store down the street can't see your history of purchases or privacy as in the government doesn't have every detail of every sexual fetish you've ever paid for? The FBI has been stockpiling that for decades.
Those are very different things, and from Europe's approach to the GDPR, I think it is the first.
Those are very different things, and from Europe's approach to the GDPR, I think it is the first.
Rather privacy as there can't be a direct connection between you and each one of your transactions, nor can the ECB refuse and cancel transaction of yours or completely exclude you from the system altogether.
The former is almost a given that it will in fact be possible. The latter was raised as an added benefit of the system either by BIS's Carstens or IMF's Georgieva -- can't recall with certainty currently. Both are promoted as weapons against black markets, corruption, and terrorism.
Yet those who are willing to give up liberty for safety, and all that.
The former is almost a given that it will in fact be possible. The latter was raised as an added benefit of the system either by BIS's Carstens or IMF's Georgieva -- can't recall with certainty currently. Both are promoted as weapons against black markets, corruption, and terrorism.
Yet those who are willing to give up liberty for safety, and all that.
Great point.
The control of privacy should be in the protocol and not in the hands of the authorities, if there is going to be a trust built around it. Otherwise, we have what is there today, without the anonymous cash element.
There are different designs today to address this concern, see e.g. the one from Bank of Canada, as one of the frontiers of privacy for citizen: https://www.bankofcanada.ca/2020/06/staff-analytical-note-20...
The control of privacy should be in the protocol and not in the hands of the authorities, if there is going to be a trust built around it. Otherwise, we have what is there today, without the anonymous cash element.
There are different designs today to address this concern, see e.g. the one from Bank of Canada, as one of the frontiers of privacy for citizen: https://www.bankofcanada.ca/2020/06/staff-analytical-note-20...
Applying negative interest rates can be a good thing depending on what policy the central bank pursues, and they don't add to any risk of hyperinflation, because central banks if anything pursue price stability or targeted inflation as one of their policy goals. (and have been very good at it in fact, and digital cash changes no incentives here).
I personally have absolutely no problem with them and I'd be very glad if I could settle every transaction with a digital Euro. I don't particularly enjoy the middlemen in the form of countless payment processors who all take cuts out of transactions, and I don't really see what privacy or tracking burden applies that existing firms don't already engage in.
To me the payment infrastructure consisting of countless of private firms seems more like a relic of the past. Free, instant financial services to me are ideally a public utility in the same way the water or transport infrastructure is.
I personally have absolutely no problem with them and I'd be very glad if I could settle every transaction with a digital Euro. I don't particularly enjoy the middlemen in the form of countless payment processors who all take cuts out of transactions, and I don't really see what privacy or tracking burden applies that existing firms don't already engage in.
To me the payment infrastructure consisting of countless of private firms seems more like a relic of the past. Free, instant financial services to me are ideally a public utility in the same way the water or transport infrastructure is.
> I'd be very glad if I could settle every transaction with a digital Euro. I don't particularly enjoy the middlemen in the form of countless payment processors who all take cuts out of transactions
Are we sure those digital currencies would be handled directly and fully by the central bank at no (direct) fee per transaction? Who's to say that the way things currently work won't stay exactly the same, except for your Visa card being denominated in dEuros instead of Euros?
I may be a pessimist, but the way I see it, the current end-user facing financial system (retail banks and payment processors) are much too big and much too greedy to stand idly by while the central bank takes their pie away.
Are we sure those digital currencies would be handled directly and fully by the central bank at no (direct) fee per transaction? Who's to say that the way things currently work won't stay exactly the same, except for your Visa card being denominated in dEuros instead of Euros?
I may be a pessimist, but the way I see it, the current end-user facing financial system (retail banks and payment processors) are much too big and much too greedy to stand idly by while the central bank takes their pie away.
Just because the central banks issue the money, it doesn't necessarily mean that they also have to handle the transactions.
The current state of merchant banks and payment providers can very well continue, without CBs having to assume new responsibilities.
After all, the trend is towards more privatisation, not less.
I share your pessimism. I'd say the central bank is the oven wherein the commercial banks bake their pies.
The current state of merchant banks and payment providers can very well continue, without CBs having to assume new responsibilities.
After all, the trend is towards more privatisation, not less.
I share your pessimism. I'd say the central bank is the oven wherein the commercial banks bake their pies.
> I don't like where we're going.
Me neither, not at all.
The idea of a digital Euro is already worked on:
https://www.ecb.europa.eu/euro/html/digitaleuro.en.html
Obviously, it's an "inclusive" system, a term that evokes in me strong feelings of mistrust, as it has no provisions of alternatives like not moving to a digital currency. "Inclusive" by mandate and without consent, or the possibility to opt out. (Somewhat reminds me the Onion's Google privacy village.)
Let's crack open the windows, so we can throw privacy and liberty right out.
Me neither, not at all.
The idea of a digital Euro is already worked on:
https://www.ecb.europa.eu/euro/html/digitaleuro.en.html
Obviously, it's an "inclusive" system, a term that evokes in me strong feelings of mistrust, as it has no provisions of alternatives like not moving to a digital currency. "Inclusive" by mandate and without consent, or the possibility to opt out. (Somewhat reminds me the Onion's Google privacy village.)
Let's crack open the windows, so we can throw privacy and liberty right out.
The mandate is not discsussed yet but could come. CBs are running many pilots since they don‘t know also whether CBDC would work for their incentive, since it has to be accepted by citizens and not create a shock to economy.
side note, „inclusive“ here refers to unbanked population. Today they can use cash, but many people specially in poor countries have no access to banking. A no-smartphone no-bank-needed digital cash could enable big part of countries to be included in financial system (some up to 40% of population)
side note, „inclusive“ here refers to unbanked population. Today they can use cash, but many people specially in poor countries have no access to banking. A no-smartphone no-bank-needed digital cash could enable big part of countries to be included in financial system (some up to 40% of population)
The transition can be done quickly enough, though probably not overnight in Europe (like with India's overnight demonetisation of the 500 and 1,000 Rupee notes).
In the current climate, where we're all ever so slightly microbiophobic, it'll even be easier to push through as a good thing, handwaving any concerns with respect to privacy and centralised control as conspiratorial.
Indeed I am aware of the intended meaning of "inclusive" in their texts, I just played around with expanding it a bit.
In the current climate, where we're all ever so slightly microbiophobic, it'll even be easier to push through as a good thing, handwaving any concerns with respect to privacy and centralised control as conspiratorial.
Indeed I am aware of the intended meaning of "inclusive" in their texts, I just played around with expanding it a bit.
Right on point distinction. There are various models:
- almost all CBDC designs are transparent (monitored and stored), since they sit on the ledger and has to be auditable by a third party. So, the only way to allow privacy is to give some „vouchers“ that those transactions are either not stored or stored with a different key. ECB has proposed one such designs, e.g. 300 euro vouchers a day.
- there are other models that do not use DLTs so they can provide means not to store specific txns, hence private.
If stored, it can be audited.
- almost all CBDC designs are transparent (monitored and stored), since they sit on the ledger and has to be auditable by a third party. So, the only way to allow privacy is to give some „vouchers“ that those transactions are either not stored or stored with a different key. ECB has proposed one such designs, e.g. 300 euro vouchers a day.
- there are other models that do not use DLTs so they can provide means not to store specific txns, hence private.
If stored, it can be audited.
I take a more optimistic view. Digital currencies seem to be perfectly suited to transactions where corruption is rampant. Take the construction industry. There is poor chain-of-custody and a lot of counterparty trust involved, so things disappear and the mafia gets richer. I don't want the construction industry to have great privacy standards, I want it to be transparent. So digital currency can absolutely be bad for privacy and a boon in certain spaces, specifically ones where trust is commonly abused.
Cash can still exist in industries where we want trust to exist between different parties, those kinds of spaces are small enough that I doubt they'd be worth the effort to eradicate anyway.
Not to say that I like where all of this is going myself, but blockchain for large and official transactions + metal currency for local informal transactions is one direction I wouldn't mind at all.
Cash can still exist in industries where we want trust to exist between different parties, those kinds of spaces are small enough that I doubt they'd be worth the effort to eradicate anyway.
Not to say that I like where all of this is going myself, but blockchain for large and official transactions + metal currency for local informal transactions is one direction I wouldn't mind at all.
I buy pretty much everything with VISA or Paypal. If I want something to be private, I could do it with cash or a cryptocoin. I think it would be nice if govt (via crown-corp or some such) provided an alternative that I can choose to use sometimes. They might have a better privacy-policy than I'm getting from the big companies lol.
This might also open up new markets, e.g. micropayments, because govt could choose to eat the cost of this to enable some industries that right now cannot exist because transactions are too expensive.
This might also open up new markets, e.g. micropayments, because govt could choose to eat the cost of this to enable some industries that right now cannot exist because transactions are too expensive.
Cash is doomed to be phased out and Covid has sped this up a lot. Eventually you won’t have the option to use cash.
Cash is private. Most cryptocoin are not particularly private. The few that set out to be private may or may not succeed at being private or being a widely exchanged digital currency.
I'd like to introduce you to a man named David Chaum
https://en.wikipedia.org/wiki/Blind_signature
https://docs.wasabiwallet.io/building-wasabi/TechnicalOvervi...
https://en.wikipedia.org/wiki/Blind_signature
https://docs.wasabiwallet.io/building-wasabi/TechnicalOvervi...
>I don't like where we're going.
You'll own nothing and you'll be happy.
You'll own nothing and you'll be happy.
I'm pretty sure for the first part of your sentence but not the second one ;)
just to footnote the quote since I didn't know what it meant the first couple times I saw it: It's likely in reference to an article and line in a video as part of the World Economic Forum's "Great Reset" concept. The article generated some backlash so they changed the article title and added some notes to bookend it. (edit: WEFwoof posted this below as well)
https://www.weforum.org/agenda/2016/11/how-life-could-change...
Video: 8 predictions for the world in 2030
https://www.youtube.com/watch?v=Hx3DhoLFO4s
https://www.weforum.org/agenda/2016/11/how-life-could-change...
Video: 8 predictions for the world in 2030
https://www.youtube.com/watch?v=Hx3DhoLFO4s
> Digital currencies allow for full tracking of every transaction
This is an implementation detail. Merely adding “digital currency” in the sense of “personal accounts at the treasury” isn’t proper cash replacement.
It is however possible to make a more anonymous kind of e-cash in which your transactions are not tracked. Chaum E-cash and similar ideas are useful cash-replacements. They aren’t without their on problems so e.g the Swedish central bank appears to be eyeing a double system where you have both types of system: a centralized/non-anonymous store and a token based type which provides anonymity. The latter could be used with a cap on transactions because if it’s properties wrt double spending.
This is an implementation detail. Merely adding “digital currency” in the sense of “personal accounts at the treasury” isn’t proper cash replacement.
It is however possible to make a more anonymous kind of e-cash in which your transactions are not tracked. Chaum E-cash and similar ideas are useful cash-replacements. They aren’t without their on problems so e.g the Swedish central bank appears to be eyeing a double system where you have both types of system: a centralized/non-anonymous store and a token based type which provides anonymity. The latter could be used with a cap on transactions because if it’s properties wrt double spending.
>They allow applying negative interest rate on everybody and they would facilitate neverending hyperinflation (no need to print new bills at great expense).
The central bank doesn't have hyperinflation as a policy goal though. If you are worried about hyperinflation ask yourself this: Will the economy will suddenly have a collapse in production capacity (nimbys cough cough)? If yes, then expect inflation higher than the policy goal.
The central bank doesn't have hyperinflation as a policy goal though. If you are worried about hyperinflation ask yourself this: Will the economy will suddenly have a collapse in production capacity (nimbys cough cough)? If yes, then expect inflation higher than the policy goal.
Hyperinflation might be a (not so) sneaky way to pay public debts without defaulting.
Sure, BTC and other popular ones work this way, but monero is completely anonymous (as long as senders don’t collude), so it’s not an inherit trait of crypto.
CBDC is half-transparent, it's a private database: the owner sees everything, people see nothing.
>but monero is completely anonymous (as long as senders don’t collude).
Not exactly. The decoy inputs/outputs provide anonymity if you look at a transaction in isolation, but doesn't when you look at repeated transactions. This is a problem that any cryptocurrency with a transaction graph will have. There are cryptocurrencies that don't have transaction graphs, but those have other issues (ie. not being able to detect counterfeiting)
Not exactly. The decoy inputs/outputs provide anonymity if you look at a transaction in isolation, but doesn't when you look at repeated transactions. This is a problem that any cryptocurrency with a transaction graph will have. There are cryptocurrencies that don't have transaction graphs, but those have other issues (ie. not being able to detect counterfeiting)
> (no need to print new bills at great expense)
This is not how modern money supply works. The M2 has increased massively, and the number of new bills in circulation will not change materially.
Currency is already digital. And sometimes we use physical paper to represent it.
This is not how modern money supply works. The M2 has increased massively, and the number of new bills in circulation will not change materially.
Currency is already digital. And sometimes we use physical paper to represent it.
IMF video clip with BIS director on CBDCs (at 24:00), https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/...
> With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger.
> With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger.
Thank you for the link!
Indeed it was Carstens and not Georgieva (as I wasn't clear in my other comment).
Indeed it was Carstens and not Georgieva (as I wasn't clear in my other comment).
One benefit I didn't see mentioned was that central banks, being an arm of the government, presumably won't cut off payment processing for completely-legal-but-socially-unacceptable sites like private payment services do. I know this happens to porn artists/websites all the time, and recently it's been happening to political extremist sites like Parler etc. too.
A lot of that was due to government "suggestion": https://en.wikipedia.org/wiki/Operation_Choke_Point
That's interesting. As I commented elsewhere on the thread, I'm not sure why people think that with a central bank digital currency the retail banking and payment processor sectors would be shut down, or at the least that it would be possible to easily circumvent them.
I think they will continue the way they do today, but instead of trading in "paper" tokens they will trade in digital ones. Which, what with the fractional reserve and all, shouldn't be all that different. So they could continue with their current kind of policies, like "we won't do business with people / companies we consider undesirable".
I think they will continue the way they do today, but instead of trading in "paper" tokens they will trade in digital ones. Which, what with the fractional reserve and all, shouldn't be all that different. So they could continue with their current kind of policies, like "we won't do business with people / companies we consider undesirable".
a concern I've heard of CBDCs and cashless systems in general is that governments will be able to do exactly that, and there wouldn't be a recourse to someone pushed out of the system.
More realistically they could have your purchases and income streams feed into a social credit system or actuarial models.
More realistically they could have your purchases and income streams feed into a social credit system or actuarial models.
I would expect the use of the system for policy enforcement to be much more intrusive.
In the end it's just another censorship mechanism, and the only question will be how to extend its use. Once the system is in place, it becomes a neverending temptation.
>political extremist sites like Parler
i can't read the entire article, but i can read the comments. it doesn't look like anyone is talking about the real reason for CBDCs. which is to create more liquidity. in other words, to get money out of escrow while international cross border payments are settled.
when a large transaction [billions] is made between two countries, there must be that much of each currency in either institutions account. it is there for days or weeks at a time. so that money isn't being put to work, it's just sitting there. a CBDC would settle these transactions within seconds. this is why something like xrp is interesting to many people.
specifically, CBDCs are interesting where the IMF is involved. they issue to countries something called special drawing rights, SDRs. these are a basket of currencies used to 'balance' the international monetary system between the developed world and the developing world. [the world bank is where the g7-20 do their banking]. a 'one world currency' might look something like a CBDC SDR. since currency transactions can be immediately settled anywhere in the world, a [diversified package of] SDR would essentially serve as a 'world dollar'.
as an aside, the economic reset being promoted, coincidentally by the world economic forum, i think, is an attempt at a peaceful transition away from the US dollar as the worlds reserve currency. and while it might be china's Yuan or reminbi that replaces it, i think it might be something more like an SDR. or, in other words, a basket of currencies lumped into one digital currency; a one world digital currency.
when a large transaction [billions] is made between two countries, there must be that much of each currency in either institutions account. it is there for days or weeks at a time. so that money isn't being put to work, it's just sitting there. a CBDC would settle these transactions within seconds. this is why something like xrp is interesting to many people.
specifically, CBDCs are interesting where the IMF is involved. they issue to countries something called special drawing rights, SDRs. these are a basket of currencies used to 'balance' the international monetary system between the developed world and the developing world. [the world bank is where the g7-20 do their banking]. a 'one world currency' might look something like a CBDC SDR. since currency transactions can be immediately settled anywhere in the world, a [diversified package of] SDR would essentially serve as a 'world dollar'.
as an aside, the economic reset being promoted, coincidentally by the world economic forum, i think, is an attempt at a peaceful transition away from the US dollar as the worlds reserve currency. and while it might be china's Yuan or reminbi that replaces it, i think it might be something more like an SDR. or, in other words, a basket of currencies lumped into one digital currency; a one world digital currency.
I think the notion that BTC or Ethereum are actually decentralized digital currencies is the biggest farce of the last 5 years. A small concentration of miners (mostly based in china) control the vast majority transactions and will continue to so based on the increased difficulity that only large economies of scale will profit from. Middlemen(brokers and exchanges) charge fees just like banks do to transact and store. The transaction fees on the chains are equivalent to that of just sending a bank wire, and your wallet is no more secure than a bank account (can still be hacked) and not FDIC insured. Where is the benefit now?
Concentration seems to be unavoidable. A direct consequence of the power law respectively Matthew principle. I haven't researched the alternative PoS (prof of stake) concept too deeply, but I'd wager it'll end the same way.
This isn't a technological problem, but a fundamental principle of our reality. Still, the ability to fork and just restart the chain from a previous point, with new miners, gives the collective some choice on a fundamental level, should the concentration ever become a problem.
This isn't a technological problem, but a fundamental principle of our reality. Still, the ability to fork and just restart the chain from a previous point, with new miners, gives the collective some choice on a fundamental level, should the concentration ever become a problem.
The concentration, though undesired, is accidental and not coordinated. That's the difference.
The central bank (government) issues money in two forms:
1. Paper money (notes and coins)
2. Digital money (deposit account at the central bank)
#1 is not practical for much modern commerce, e.g. online shopping.
#2 is only available to banks and a few other select institutions
So, most of us don't really use government issued money much. We use money issued by retail banks (credit balances in checking accounts) and, due to deposit guarantee schemes, everyone is happy to accept that private money as if it is government money.
Central banks are still exploring model of CBDC. They could expand #2, and allow any of us to hold central bank deposit accounts. But some central bankers worry that they are not the best folks to provide consumer services, so maybe private companies should design and operate the apps which will interface with the central bank's ledger.
1. Paper money (notes and coins)
2. Digital money (deposit account at the central bank)
#1 is not practical for much modern commerce, e.g. online shopping.
#2 is only available to banks and a few other select institutions
So, most of us don't really use government issued money much. We use money issued by retail banks (credit balances in checking accounts) and, due to deposit guarantee schemes, everyone is happy to accept that private money as if it is government money.
Central banks are still exploring model of CBDC. They could expand #2, and allow any of us to hold central bank deposit accounts. But some central bankers worry that they are not the best folks to provide consumer services, so maybe private companies should design and operate the apps which will interface with the central bank's ledger.
If regular citizens could get an account with the central bank, with a specified protocol and digital currency, there could be several providers in open competition using this protocol.
Switching banks would become like switching email clients. They could expose new functionality over an existing prococol. But it would also introduce new problems, malware banks could proliferate just like malware flashlight apps.
These comments threads always attracts comments like how these are not trustless, not mined by anyone etc. That misses the point. CBDCs are exciting. Citizens never had an account with central banks before.
Switching banks would become like switching email clients. They could expose new functionality over an existing prococol. But it would also introduce new problems, malware banks could proliferate just like malware flashlight apps.
These comments threads always attracts comments like how these are not trustless, not mined by anyone etc. That misses the point. CBDCs are exciting. Citizens never had an account with central banks before.
Currently digital money are used for the reserve deposits of commercial banks at central banks. If it keeps working this way, it won't be just a client, and you won't be able to switch it easier than now.
I agree. CBDC is super exciting. We could get rid of deposit guarantee scheme, which is an abomination, once CBDC is in place.
They dont have a public audit trail like other popular digital currencies maybe?
I welcome the convenience CBDC provides, but I am absolutely against the abolition of cash. You don't need to be an economist to see that having no cash is a nightmare - every transaction you make across your lifetime is tracked and can be shot down by somebody that is not you. I believe that cash should always exist as an alternative backup to any convenient electronic system. With responsibility comes authority, and taking too much authority from individuals is not healthy for a free society.
The problem with electronic cash is the dependence on internet and electricity. That's a very complicated foundation to build your society on. At a minimum you would need to provide free internet access to banking apps and free access to banking devices for it to be a solution for literally every citizen.
CBDCs are not cryptocurrencies. Central banks are simply running their money transfer servers 24/7. It’s insane they haven’t done this before. Major economies will not offer central bank accounts to individuals because it would raise funding costs for banks. And the central bank doesn’t want to deal with customers directly.
Do we still need payment processors (or perhaps even retail banks?) once we have central bank digital currencies?
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The CBDCs started with a great idea: to share the stability and security banks enjoy today with all citizen and retail sector in digital format, as public layer similar to internet, between what we have today (cash) and what the future maybe (web3). At the same time, the way you have right to use cash today (almost) in the way you desire, you should have right and possibility to do so also in the digital world of future.
Today, most of the digital money is actually a private sector coin backed by fiat: you send paypal coin to another person, not real euro, and exchange it via another CC provider service. Cross-borders are order of magnitude more messy. They have similar problems like other stablecoins and cryptocurrencies while a few of their main value added are the solution to the challenges of cryptocurrencies: UX, and security among others. The private sector also has an incentivized and risk-averse view towards the basic right, e.g. inclusion and usage. The covid crisis showed that we cannot leave it to the private sector and banks among others to ensure the financial safety of people. Bank-runs happened because people do not have trust toward private sector, and regulatory actions are reactive at best.
So enter CBDCs. Central banks wanted to provide the benefits while retaining control of money flow in country. Same incentives of old age into the digital world. But the challenge is that by providing a real CB backed currency one disintermediates the banking system. One reason not to break the economy without understanding the effects and the other reason being CBs themselves are not high tech and prefer to piggy back available distribution channels. So, CBs started offering two-layer approaches, which is almost identical to the today‘s financial model, mostly a technological improvement at best. DLTs replace Swifts of the world. Accounts will stay accounts, KYC stays in place, maybe some tools would be given to not require accounts for e.g. <$1k etc. External sovereignty threats, e.g. e-renminbi, is also a whole different story, taken the topic to the extreme, while still acting as a strong external motivator.
One could ask then what‘s the fuss then? So, there is a technological demand to build CBDC, CBs have all incentives for themselves to build it to keep control, banks get to have a modern payment system for themselves, but what would change for the end user? Lower fees? obviously the view is biased towards modern world, e.g. in broken economies any order is better than none, some wallet is better than no bank, etc.
Eventually, CBDCs in the first roll out are an evolution of the current banking system. There is no fuss about it, but rather finally there is enough momentum to align multiple heavy stakeholders on one strategy.
disclaimer: the views are my personal views.
Today, most of the digital money is actually a private sector coin backed by fiat: you send paypal coin to another person, not real euro, and exchange it via another CC provider service. Cross-borders are order of magnitude more messy. They have similar problems like other stablecoins and cryptocurrencies while a few of their main value added are the solution to the challenges of cryptocurrencies: UX, and security among others. The private sector also has an incentivized and risk-averse view towards the basic right, e.g. inclusion and usage. The covid crisis showed that we cannot leave it to the private sector and banks among others to ensure the financial safety of people. Bank-runs happened because people do not have trust toward private sector, and regulatory actions are reactive at best.
So enter CBDCs. Central banks wanted to provide the benefits while retaining control of money flow in country. Same incentives of old age into the digital world. But the challenge is that by providing a real CB backed currency one disintermediates the banking system. One reason not to break the economy without understanding the effects and the other reason being CBs themselves are not high tech and prefer to piggy back available distribution channels. So, CBs started offering two-layer approaches, which is almost identical to the today‘s financial model, mostly a technological improvement at best. DLTs replace Swifts of the world. Accounts will stay accounts, KYC stays in place, maybe some tools would be given to not require accounts for e.g. <$1k etc. External sovereignty threats, e.g. e-renminbi, is also a whole different story, taken the topic to the extreme, while still acting as a strong external motivator.
One could ask then what‘s the fuss then? So, there is a technological demand to build CBDC, CBs have all incentives for themselves to build it to keep control, banks get to have a modern payment system for themselves, but what would change for the end user? Lower fees? obviously the view is biased towards modern world, e.g. in broken economies any order is better than none, some wallet is better than no bank, etc.
Eventually, CBDCs in the first roll out are an evolution of the current banking system. There is no fuss about it, but rather finally there is enough momentum to align multiple heavy stakeholders on one strategy.
disclaimer: the views are my personal views.
They are inherently dangerous, money as a service, with all associated risks. What's next? Car as a service? House as a service? Government as a service? Life as a service?
"Welcome To 2030: I Own Nothing, Have No Privacy And Life Has Never Been Better"
https://www.weforum.org/agenda/2016/11/how-life-could-change...
Some people call that utopia "technocratic collectivism", and others still salivate at the mere thought.
In any case, it's part of the "new normal" championed by Schwab's WEF.
https://www.weforum.org/agenda/2016/11/how-life-could-change...
Some people call that utopia "technocratic collectivism", and others still salivate at the mere thought.
In any case, it's part of the "new normal" championed by Schwab's WEF.
I remember this article being posted on HN. My response was basically: What prevents a single individual from taking all the free stuff and using it in a wasteful manner?
E.g. you get a car for free, only use it for one trip, scrap it and get another car for the next trip.
E.g. you get a car for free, only use it for one trip, scrap it and get another car for the next trip.
In the context of the post/video, I'd say the social credit system (the "calories card"). If you abuse the resources, your card gets zeroed out, and you're effectively banished from society.
In the example of the car that you give: cars are pooled anyway, and assigned for a trip, then returned to the pool. So essentially you always get another car for each trip, but you don't own it.
In the example of the car that you give: cars are pooled anyway, and assigned for a trip, then returned to the pool. So essentially you always get another car for each trip, but you don't own it.
Except that we won't have post-scarcity by 2030.
Exactly, like we didn't have a life of leisure to spend it in cultural pursuits after the 1950s.
Ah, well, perhaps when the robots come to serve, and until they revolt.
Ah, well, perhaps when the robots come to serve, and until they revolt.
This world sounds like hell.
I'm confused. The current banking system is money as a service.
BTC: normies know it; network effect wills it
ALGO/XLM/Etc: CBDC hop on and ride the road to riches.
ZEC: what Hal Finney was trying to make BTC.
ALGO/XLM/Etc: CBDC hop on and ride the road to riches.
ZEC: what Hal Finney was trying to make BTC.
Central bank digital currencies are essentially a new hybrid monetary/fiscal policy tool. Historically the Federal reserve and many other central banks function by buying and selling the debt of their sovereignty to influence interest rates. They pay for these securities by essentially creating money that didn't exist before and trading it to an institution for their debt security. For a long time this money has just been digital, when the Fed creates money to buy a bond from JP Morgan, all they do is to update a line in a database. So they already have a digital currency, but only for dealing with large institutions.
The idea of these new CBDCs is to setup a similar system but where the digital currency could be distributed to individual citizens. This would give the Fed a more powerful tool than it has ever had before because giving money directly to people is almost guaranteed to create real economic activity unlike adding to bank reserves(which is why we haven't seen meaningful inflation after 11 years of the Fed spamming reserve creation).
Some of this is lightly speculative but a detailed scheme which is almost exactly this was already proposed in a bill to congress, The Banking For All Act: https://www.congress.gov/bill/116th-congress/senate-bill/357...
I don't think it is hyperbolic to say that CBDCs are the "how" part of MMT. They take most of the logistical difficulties out of direct to citizen cash transfers and this is their primary goal.