
Fedcoin - andrewljohnson
http://jpkoning.blogspot.com/2014/10/fedcoin.html?m=1
======
crystaln
This misses a major benefit of our current system - reversibility.

Currently, if someone initiates a fraudulent billion dollar wire transfer from
the fed, it would quickly be reversed.

Does anyone thing the Fed or our monetary policy should be entirely subject to
the rule of algorithms and undoubtedly flawed security policies and people?
Isn't it better that a government agency or a court can reverse the
transaction when a Putin lackey transfers $100B?

I understand the benefits of irreversibility with bitcoin, however at a
certain scale, this benefit becomes a handicap. Legal systems have humans who
can correct things when they go terribly wrong. Cryptocurrencies as a whole
are vulnerable to the next zero-day exploit, which in this case could destroy
the government and all of our hard earned currency. That's not a risk I think
any of us could consider rational.

~~~
awt
Reversibility is all about trusting a third party with your wealth, which has
obvious downsides. That said, reversibility will always be there for those who
are not prepared to take responsibility for their wealth.

Moreover, the scenario you propose is ridiculous. If Bitcoin wins, government
will have to change, as it will no longer be able to coerce tax payment. Who
would voluntarily give their bitcoins to the government in the first place?
What individual or group could be trusted with the private key? I don't know
how it would work, but it would have to be different.

~~~
jamesaguilar
Nope. The government derives most of its tax base from various income-based
taxes (corporate and personal), or property and use taxes at the state and
local level. Only anonymous entities would be able to avoid these, Bitcoin or
no. It would be hard to organize significant non-digital economic activity
through anonymous entities in the face of government interference, and trivial
for a government to mount that interference. Some possible mechanisms include
forbidding all brick and mortar + other non-anonymous entities from
interacting with anonymous ones, infiltration, etc.

TL;DR: Bitcoin does not enable _The Diamond Age_.

~~~
awt
More likely is that those with a lot of Bitcoin would exit to more hospitable
states like Saverin did. In addition, the tactics you propose are not only
draconian, but expensive to enforce on a large population. See the War on
Drugs.

Also, why would a state give up it's printing press? No clue what the Diamond
Age is, but I will check it out.

~~~
dllthomas
The tactics he proposes are not too far from what has always been done to tax
cash, except with marginally more information available automatically to
authorities.

------
trothamel
Once you have a central authority that everyone trusts, what does the
blockchain add?

~~~
wmf
The author attempted to explain this in a previous post:
[http://jpkoning.blogspot.com/2013/04/why-fed-is-more-
likely-...](http://jpkoning.blogspot.com/2013/04/why-fed-is-more-likely-to-
adopt-bitcoin.html) Summary: A blockchain is cheaper than maintaining three
redundant data centers.

As long as mining is involved, I don't agree with that argument.

~~~
Rhapso
Rather than mining, you could just let a trusted authority issue blocks which
would be validated by peers, it still prevents double spend, but would allow
the authority to prevent transactions.

~~~
wmf
That raises the question of whether a central audit log counts as a
blockchain.

------
felipelalli
Clearly a joke, shame that few understand the irony.

~~~
Ironchefpython
It would have been a better joke if the author had pointed that that if it's
controlled by the Federal Reserve, you don't need a proof of work distributed
blockchain and you could simply allow all parties to connect to the Fed in
some kind of Automated Clearing House network.

This hypothetical system would allow debits and credits to be settled
electronically at very low transaction costs and could be scaled to billions
of transactions, and anyone could participate in such a system by spending 10
minutes and opening a free "checking account" at a local credit union.

~~~
kaonashi
I think the problem (from a BTC hoarder's perspective) with that is that BTC
is neither required nor desirable from an operational perspective in such a
system.

~~~
Ironchefpython
From the perspective of the government, Bitcoin is only for Cowards, Crazies,
and Criminals.

Cowards, who want to find technological solutions to social problems.

Crazies who are terrified that Satan will take over the Fed and decide to
suddenly make dollars worthless, and in the process destroy the county.

And of course criminals who use it to buy drugs.

=====

Luckily we know better, that assuming you are one of the technical 1% who can
keep your wallet from being hacked, you can (for a little extra money in
conversion costs) use bitcoin to shop at overstock.com.

------
Animats
This guy just re-invented Chaum's DigiCash. DigiCash is a centrally-issued but
privately transferable digital currency from the 1990s. Bitcoin is DigiCash
with distributed issuers ("mining").

------
drcode
The most direct way to explain why these types of posts are misguided are to
understand the mechanics of "rent seeking behavior" which is an incentive that
always exists for a third party involved in a financial transaction.
[http://en.wikipedia.org/wiki/Rent-seeking](http://en.wikipedia.org/wiki/Rent-
seeking)

------
Hyena
I proposed something similar to this as a way to handle fraud or non-
performance in Federal contracts:

[https://plus.google.com/u/0/+StevenFlaeck/posts/BNzLK4wwwPY](https://plus.google.com/u/0/+StevenFlaeck/posts/BNzLK4wwwPY)

------
adventured
This is silly in concept and fails to grasp why the Fed exists in the first
place.

The entire purpose of the Federal Reserve is to enable a system of monetary
expansion or contraction on whim, which is also why the gold / silver standard
had to be abandoned (they are contradictory concepts).

The modern central bank, in this case the Federal Reserve, is the very
antithesis of the bitcoin / cryptocurrency concept. There can be no union of
the concepts. The Fed requires the ability to debase the nation's currency at
any time and for any reason it sees fit. Without the current Fed system you
can't run the military industrial complex, you can't 'pay for' the entitlement
liabilities via inflation, you can't hold consumer and corporate borrowing
costs artificially low, you can't run wild budget deficits and then pay hyper
low interest rates on that debt via debt monetization / QE, you can't
arbitrarily inflate assets to fake prosperity, and so on. There's zero chance
the Fed or US Government gives up any of those powers unless they have no
other choice.

~~~
philrapo
>The entire purpose of the Federal Reserve is to enable a system of monetary
expansion or contraction

This is just one of several mandates that the Fed has. The Fed also exists to
supervise and regulate banking institutions, in addition to running the
national payment system.

The author's post could fall under the latter responsibility.

~~~
zanny
> The Fed also exists to supervise and regulate banking institutions

So how, exactly, in a world where bitcoin was king (and pigs could fly) would
the fed "regulate" bitcoin institutions?

You cannot do fractional reserve banking in bitcoin without all your loans
being blatantly obvious and public. Users would track the coins they put in
the wallets you control in their name, and if you touch them they will raise
hell. You don't need consumer protections in that system because everything is
public. And I don't condone whatever privacy violations would be necessary to
audit a bitcoin banks wallet security infrastructure, when they can naturally
(in the same way services like bitfinex and campbx have sought security
accreditations) do so on their own as a competitive advantage without any
unnecessary violence.

So what exactly is the federal reserve going to do to bitcoin wallet holders
(aka bitcoin banks) besides the above? Bitcoin as property is just as
prosecutable in court if your bank fucks up and loses your money as any other
asset, I can't believe that is reason for an entire bureaucratic federal
infrastructure to exist.

~~~
krschultz
We did fractional reserve banking w/ the gold standard. There is no reason you
couldn't do fractional reserve banking on top of bitcoin, with the bitcoin
replacing gold.

~~~
zanny
I don't mean you cannot do it, you just cannot obfuscate where the money goes,
since you can trace bitcoins across the block chain unless people are actively
and intentionally diluting them, in which case you know where the paper trail
ends and thus who was doing that.

