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What is the fuss over central-bank digital currencies?

economist.com

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Re: What is the fuss over central-bank digital currencies?

#111

Post by kharak »

aero- wrote: post #100

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…

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.

Re: What is the fuss over central-bank digital currencies?

#112

Post by chrisco255 »

burundi_coffee wrote: post #101
zadler wrote: post #90

Earlier quoted context omitted.

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.

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.

Re: What is the fuss over central-bank digital currencies?

#113

Post by imtringued »

anm89 wrote: post #60
sanxiyn wrote: post #48

Earlier quoted context omitted.

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.

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.

Re: What is the fuss over central-bank digital currencies?

#114

Post by imtringued »

bawolff wrote: post #46
sanxiyn wrote: post #39

Earlier quoted context omitted.

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?

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.

Re: What is the fuss over central-bank digital currencies?

#115

Post by imtringued »

PeterisP wrote: post #73
bawolff wrote: post #46

Earlier quoted context omitted.

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…

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.

Re: What is the fuss over central-bank digital currencies?

#116

Post by imtringued »

headmelted wrote: post #74
surfsvammel wrote: post #35

Earlier quoted context omitted.

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 t…

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 respons…

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.

Re: What is the fuss over central-bank digital currencies?

#117

Post by imtringued »

surfsvammel wrote: post #105
headmelted wrote: post #74

Earlier quoted context omitted.

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 respons…

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 requireme…

The question is, why would banks run nodes? How do they get money to pay for the datacenters?

Re: What is the fuss over central-bank digital currencies?

#118

Post by dgellow »

zadler wrote: post #90
ryukafalz wrote: post #87

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…

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).

Re: What is the fuss over central-bank digital currencies?

#119

Post by imtringued »

geraldbauer wrote: post #47
anm89 wrote: post #14

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. Central bank digital currencies are essentially a new hybrid monetary/fiscal policy tool. Historically the Federal re…

Important note: bitcoin is a ponzi [1] and not digital gold. Learn how the investment fraud works. [1] https://github.com/openblockchains/bitcoin-ponzi

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.

Re: What is the fuss over central-bank digital currencies?

#120

Post by imtringued »

charcircuit wrote: post #91
geraldbauer wrote: post #47

Earlier quoted context omitted.

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…

> 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.

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