US Digital Currency • Hacker News Board

Re: US Digital Currency

#91

Post by mrb » Thu, May 10, 2018, 6:53 PM UTC

bastawhiz wrote: post #26

How would this be better than what we have now? If the answer is "cryptocurrency increases in value," I can assure you that's a terrible reason. Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions. After all, what'…

«Cryptocurrency is slower than card networks»

Not inherently. If you compare apples to apples, accepting a credit card transaction is equivalent to accepting a zero-confirmation cryptocurrency transaction, which is just as fast as a CC charge (instantaneous.) And it is technically safer for a merchant to accept a 0-conf crypto tx because a CC charge is trivial to reverse (via a fraudulent chargeback) while a tx in the mempool of thousands of nodes is typically (not always!) hard to make disappear.

«It's more expensive than practically any other way of sending money»

Far from true. Average remittance fees are around $7 per $100 sent. Meanwhile Ethereum has fees typically under $0.50 per tx: https://bitinfocharts.com/comparison/ethereum-transactionfee... Of course there are periods of fee surges (over $5 per tx!), but it's not common.

«a full record of every monetary transaction performed with such a currency»

That's technically not needed. There have been proposals to implement what we call UTXO commitment sets, which is basically a way to revamp a blockchain so that it can discard old transactions and just keep track of current balances. (This is different, but roughly the same principle as "pruning.")

Re: US Digital Currency

#92

Post by searine » Thu, May 10, 2018, 6:53 PM UTC

joejohnson wrote: post #87

Amazing that someone so naive could be given such a platform. Oh, silicon valley :) >> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitraril…

Or you just peg USDC to the dollar so traditional monetary controls still apply. I don't know how exactly you'd do that but I'm sure you could figure out something clever.

The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's a governments wet dream.

Re: US Digital Currency

#93

Post by devinhelton » Thu, May 10, 2018, 6:56 PM UTC

I think it could make sense for the US government to provide a way to hold existing dollars in digital form, directly with the government. So I could go to a bank (or specially designated federal institution), deposit cash, and have that cash turned into a balance of 100% reserve digital cash held on the government's books. I could then make cost-free, instant transfers to other people or other accounts. The government could support people outside the US holding accounts. It could have API's that allow people to build transaction systems on top of the digital currency system.

What I don't understand is:

1) Why the US government would make a brand new currency rather than just support holding existing US dollars in digital form.

2) Why crypto-currency is needed. The crypto aspects of bitcoin are needed to support the fully decentralized processing. If you the currency is centrally controlled anyways, might as well just use an ordinary database with good transaction logging.

Re: US Digital Currency

#94

Post by freeone3000 » Thu, May 10, 2018, 6:59 PM UTC

searine wrote: post #92

joejohnson wrote: post #87

Amazing that someone so naive could be given such a platform. Oh, silicon valley :) >> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitraril…

Or you just peg USDC to the dollar so traditional monetary controls still apply. I don't know how exactly you'd do that but I'm sure you could figure out something clever. The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's…

Why peg it to the dollar? Most dollars aren't physical, so we could "simply" shift the dollar financial systems to this process.

Re: US Digital Currency

#95

Post by dnomad » Thu, May 10, 2018, 7:05 PM UTC

mundo wrote: post #50

jasode wrote: post #14

>Ideally the initial coins would be evenly distributed to US citizens and taxpayers— [...] The government can likely create a lot of de novo wealth for its citizens in the process. This USDC proposal seems to reiterate the same themes as a previous blog post "American Equity".[1] >, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when…

> Inflating currency is a hidden way to spend money it doesn't have. This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now: * The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed mo…

> When inflation is too low, we print money.

This is really not how it works. Many economists think this is how it works but actual real world events have made it very clear that governments cannot simply manufacture inflation [1]. Governments like Japan wish they could produce inflation.

Inflation is much, much, much more complicated than merely "too much money." It's much more about real economic quantities affecting the price level [2]. This is usually driven by demand for something an economy cannot manufacture itself, not government spending. See oil shocks [3] for real inflation.

That said, it's always funny to see paranoid Americans go on about the government stealing money via inflation. What do you think money is? Talk about missing the forest for the trees.

[1] https://www.bloomberg.com/news/articles/2018-03-22/the-great...

[2] http://bilbo.economicoutlook.net/blog/?p=10554

[3] https://www.investopedia.com/ask/answers/06/oilpricesinflati...

Re: US Digital Currency

#96

Post by starshadowx2 » Thu, May 10, 2018, 7:06 PM UTC

foepys wrote: post #72

starshadowx2 wrote: post #5

What do you think the effects would be if China did this instead of/before the US?

China is already on its way of doing this. WeChat (built by Tencent, a government supported company) is the payment platform between businesses and customers nowadays. As soon as China gets reliable internet and power into its western parts, everything will become digital.

Just being digital isn't equal to a cryptocurrency.

I'm aware of Wechat and how pretty much everything is connected to it now. I'm more wondering of the global political-economic consequences of China beating the US at this.

Re: US Digital Currency

#97

Post by devinhelton » Thu, May 10, 2018, 7:06 PM UTC

ex3ndr wrote: post #53

Does Sam knows about Russian "privatization" when everyone in the country got some "tokens" of various nationalized entities like factories or farms. What's in the end?. People didn't know what to do with this and traded them for bunch of vodka or some amount of cash. Eventually everything became owned by a small group of the people. Exactly what happens with bitcoin thought.

Similar thing happened with the original US dollar. After the Revolutionary War, everyone thought that the paper currency issued by the Continental Congress was going to be worthless, so veterans sold their paper dollars for a fraction of face value. Speculators bought them up, and then got a windfall when the new Constitution was passed and the currency actually became valuable.

Re: US Digital Currency

#98

Post by skywhopper » Thu, May 10, 2018, 7:06 PM UTC

What I don't see in this article is any indication of why such a system is desirable or beneficial for the government or for the users. For cryptocurrency fans, maybe it's self-evident. But I'm not sure what benefits cryptocurrency provides for those groups that they can't find better elsewhere.

Re: US Digital Currency

#99

Post by uudhodhd » Thu, May 10, 2018, 7:07 PM UTC

actsasbuffoon wrote: post #61

drewrobb wrote: post #51

Earlier quoted context omitted.

Having transaction data hidden from governments isn't the essential feature of decentralization in the original promise of cryptocurrencies. The essential feature is preventing a single party from tampering with transactions or account balances. This is still true for bitcoin and many others.

> The essential feature is preventing a single party from tampering with transactions or account balances. Are there examples of this actually happening? I'd think that would be pretty damaging to any bank that engaged in such behavior.

There are countless examples.

The US government seized all gold.

The Greek government froze accounts, Cyprus engaged in a 'bail in', governments constantly freeze accounts of 'bad' actors, payment processors will decide without cause to stop servicing clients because they are in adult content or because they are WikiLeaks.

There so many examples, it goes on and on ad nauseum.

Re: US Digital Currency

#100

Post by nostrademons » Thu, May 10, 2018, 7:08 PM UTC

nobrains wrote: post #90

joejohnson wrote: post #87

Amazing that someone so naive could be given such a platform. Oh, silicon valley :) >> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitraril…

There are two problems with this control (QE) that the citizens are concerned about: 1. It reduces their cash savings by the ratio of the amount of new money injected to the total supply 2. It is unfair, as the first receipients of this new money get free money. (Inflation increases as that money flows through to everyone, however, the first receipients of this money don't get to face the inflation). The second issue…

#2 is actually significantly harder to solve, although I do think that distributing new money directly to consumers rather than to banks who are supposed to make loans to consumers would help the situation.

Inflation doesn't affect all firms equally. Excess money tends to pool at bottlenecks within the economy: industries where a single firm has monopoly power over its suppliers or customers. It ends up receiving all the new cash that is circulating within the economy, but has little incentive to pay out that cash to suppliers because they have few other buyers but plenty of competitors should they try to raise prices proportionally. As a result, prices rise upstream of the monopoly, but remain constant downstream, with the added money going into asset purchases that the monopoly firm believes will give it a bigger moat. The Fed, meanwhile, tends to look at prices downstream (in the broader economy), sees that they are remaining stubbornly low, and keeps adding money into the economy, which all collects as cash on the balance sheets of monopoly firms or asset prices for things they want to buy.

Warren Buffett has remarked on this effect in a few of his annual reports, and his entire investment thesis is based upon it. It's also why the FANG stocks have been on a tear (each of them owns a local monopoly in their consumer-based industry), and why software engineering salaries for Big Tech have been skyrocketing (on the supply-side, each of these companies isn't quite a monopsony, as engineers can choose to work for another one), and why land in the Bay Area is unaffordable (all these engineers need to live somewhere, and the supply of land is fixed). It also manifests as a plummeting velocity of money and recurrent asset bubbles, which we've also seen.

Distributing money directly to taxpayers would help - at the very least, it'd let the Fed more accurately measure the impact of new money on prices, as consumer price levels would jump immediately rather than waiting for the money to cycle back as salaries, which it never does unless they're in an industry where they have bargaining power over their employers. But ultimately, fixing it requires doing something about monopoly concentration within the economy and ensuring there's healthy price competition at all levels of the value chain.