
Central bank cryptocurrencies - prostoalex
https://www.bis.org/publ/qtrpdf/r_qt1709f.htm
======
trowway21
Lol. So back crypto $ with trillions of $ of debt going back to the Louisiana
purchase; kept alive by a pyramid scheme dependant on a certain and limitless
supply of debt free immigrants, after they continue to prove they don't
require anything concrete to generate demand & subsequently value?

Aka: how interested are people in a cryptocurrency worth market value minus 20
trillion $?

~~~
neilwilson
The banks are in debt to trillions of dollars to people who are 'in credit'.
That's what 'in credit' means. It is the accounting term for a liability.

Does that keep you awake at night too?

For every asset there is a liability - even with cryptocurrencies.

What you are missing with government 'debt' is that it creates safe private
assets that keep the pension system going.

~~~
beefield
> For every asset there is a liability - even with cryptocurrencies.

I would think that bitcoin is no-ones liability? I mean, there are a bunch of
bitcoins that you may or may not be able to sell someone with a price, but
there is no-one who has any kind of legal or even moral obligation to give you
anything in exchange of a bitcoin.

~~~
option_greek
Liability will start once you start loaning them out to others and package the
loans to other investors who them show them as assets to borrow something from
someone else :).

~~~
beefield
Sure. But it is not the bitcoin that is the liability, it is the loan
contract.

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gtrubetskoy
"(preventing double-spending without the use of a trusted authority requires
transaction validators (miners) to employ large amounts of computing power to
complete "proof-of-work" computations); there is only probabilistic finality
of settlement; and all transactions are public. These features are not
suitable for many financial market applications."

The words "only probabilistic finality" makes it sound uncertain, whereas in
reality the uncertainty of a bitcoin transaction is insignificant compared to
the uncertainty of a trusted entity, which they advocate.

In other words, they still don't understand it.

~~~
rmah
They understand it just fine and you simply wrong. Proof of work validation IS
probabilistic and central agency validation is not probabilistic. But it does
require trust in that central agency. You may not trust that central agency,
but that doesn't change the facts.

~~~
runeks
Using your definition, all cryptography is also probabilistic. It's
technically correct, ie. there's a risk that someone guesses your AES key, but
it's practically irrelevant because the probabilities involved are so small
(and key sizes can be adjusted to make guessing as improbable to succeed as we
want).

~~~
andrewla
This is not the aspect that is considered to be probablistic. The problem is
that forks can happen by design -- blocks can be orphaned and the tree can be
reorganized. So a transaction is only final so long as it is on the main
chain; if the main chain switches to a forked chain that does not contain your
transaction, then it is not settled; the resulting coins cannot be spent.

There are attack scenarios, but even without those it is possible for forks to
occur; single-block forks are common (so-called "orphaned blocks") due to some
combination of network latencies and chance. Longer forks may be possible if
there are more dramatic breaks in network connectivity. The original
whitepaper originally advocated waiting for six blocks before a transaction is
considered "settled". That's probably high, but the guarantees are strictly
probablistic; any software dealing with bitcoins has to be aware of the
possibility of reorganizations.

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meri_dian
Very interesting. I'm intrigued by Fedcoin and how it incorporates the
possibility of monetary policy into the cryptocurrency framework. The rigidity
and hard ceiling on liquidity of Bitcoin is a major weakness of the currency
(I know that Bitcoin enthusiasts see it as a strength) but if technology like
Fedcoin can overcome that weakness I'm more bullish about cryptocurrency
becoming part of the monetary scheme.

~~~
EGreg
Deflationary currencies are hoarded, not spent in circulation. Even
Aristophanes described it thousands of years ago. That's what advocates of
"sound money" need to understand. Sound money is good, but for savings. On top
of this you build other, less sound money, which circulates. This is also
known as "Gresham's Law".

~~~
narrator
Nobel prize winner F.A Hayek wrote a great defense of deflationary currency
and a rebuttal to Keynes back when he was debating Keynes in the 30s[1]. He
also predicted Bitcoin with his book "The Denationalization of Money" written
in the 1970s[2].

[1] [https://mises.org/library/hayek-paradox-
saving](https://mises.org/library/hayek-paradox-saving)

[2] [https://mises.org/library/denationalisation-money-
argument-r...](https://mises.org/library/denationalisation-money-argument-
refined)

~~~
notahacker
Hayek didn't really adequately defend a deflationary currency at all. Hayek
was attacking a related, but different underconsumptionist argument that
consumption was more important than investment.

The argument against [sustained] deflation is that _investment will be reduced
along with consumption_. In order for investment to take place, it is
necessary [though not sufficient] for the investor to expect to earn a money
profit as a result. In the case of sustained deflation resulting from an
economy being tied to a fixed supply of money, the expected money return on an
average investment over a time period is negative (especially after adjusting
for risk) and the expected _real_ return to burying money in the garden is
positive. Thus the money stock is more likely to be buried in the garden and
less likely to be invested in production, with the result that less stuff is
produced and sold than otherwise could have been.

The best thing that can be said about Hayek's argument as a defence of this is
that he points out that profitable companies confident of still having a
market in future might still be inclined to invest money in cutting production
costs (which is true, and necessary for the deflation to be sustained,
otherwise you can expect prices of goods to start rising again in future as a
result of greatly reduced production) but there's no reason to expect that
level of investment to not be lower than an economy where nobody is
incentivised to hoard.

(the original paper is included in this compendium for those interested
[http://www.hayek.sk/wp-
content/uploads/2012/12/hayekcollecti...](http://www.hayek.sk/wp-
content/uploads/2012/12/hayekcollection.pdf))

~~~
ttoinou
If you keep the same deflationary money over the years, you are making a
profit. So what's "good" is not a money which supply grows or shrinks, but a
money with which people can make good predictions and plans accordingly.

Plus, burying your money is withdrawing it from the money supply, maybe it has
effects like "giving it to everybody" ? (added the risk that you can dig the
money and put it back into circulation)

~~~
EGreg
How do you know an elastic money supply is not better?

What is your criterion : goal for measuring how good a currency is?

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otakucode
I have been curious about this idea for a long time. Consider the situation
the USA is in right now. What percentage of all transactions which occur in
the US economy right now pass through a payment processor? I would imagine the
majority, and growing. And payment processors don't just charge for their
services. They charge a percentage of the size of the transaction. Their cost
to provide the service of moving numbers from one place to another over a wire
does not increase for larger numbers, yet they still insist that the parties
in the transaction pay more to move larger numbers.

This makes payment processors a de-facto taxing body and gives them at least
as much control over the monetary supply in a society as any central bank. If
the Federal Reserve decided to take actions that private banks or payment
processors disagreed with, it is entirely within their legal power to adjust
the rates they charge and counteract the central bank. This is very dangerous.
It's terribly unfortunate that modern government is so packed with nibshits
and the clinically paranoid that they would never again back a currency which
offers the same features as cash (untraceable, unfreezable, etc), but even
without those, just escaping from the tyranny of payment processors might be
worth it.

~~~
sova
If we could somehow move from private banks to a public distributed ledger
that worked Government-style, we could probably reduce taxes and streamline a
lot of things.

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imaginenore
I welcome it. It will make the flow of fiat into good cryptocurrencies so much
easier. Let the better system win. Monopolies are almost never good.

------
Findeton
Perhaps you should add [https://fiatcoin.net](https://fiatcoin.net) to the
list.

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sandGorgon
does anyone know how will banks and accounts work in such a system ? because
funds will be held by individuals and not banks.

will banks become the authoritative proof-of-stake entities ?

~~~
sova
Would not proof-of-stake be an algorithmic calculation, available to anyone
with the dataset (blockchain) and the computational power? Right now certain
credit card companies charge a fee for calculation of a credit score (at that
instant/ on the fly). Presumably in a cryptocoin economy everyone who has
access to the dataset and knows the formula could tell you the proof-of-stake.
Banks historically act as a time-throttler on transfer of funds, making sure
the economy does not move without the inner cogs of the banks turning first.
It is widespread now globally. With a cryptocoin economy, banks would not
throttle time any longer and would instead help facilitate additions to the
blockchain (via fee) as many exchanges currently do. What all factors does one
need for proof-of-stake?

