At 21:25 16/04/2012, Natalie wrote:
(N) Here's another scheme to create wealth, for
the Mint--though they say they don't yet know how---for government
(K) Yes, a digital loonie will create wealth by
virtue of cost savings on coin and note
production. However, the Mint will have already
noticed that physical money is fast changing to
digital anyway. By hosting a contest for a
suitable system, I imagine that the Mint feels
itself to have a duty of care to Canadians to encourage a sound system.
(N) by tracking all cash transactions for taxation
This will be the reason why the Mint has been
given the go-ahead to hold the contest. It might
help the Canada Revenue Agency to get their tabs
on the grey and black markets (though whether
they will succeed is another matter -- see below).
(N) and for hackers.
(K) Due to encryption, digital currency systems
are already unhackable while money is in transit.
The problem so far lies in some retailers' sloppy
storage of personal credit card details. If a
person-to-person system is encouraged by the
government then, before a transaction can ensue,
both devices would have to make contact with a
validation source (governments or
government-approved banks. But more of this below.)
(N) Privacy issues aside, successes in Iceland
aside, shouldn't we stabilize the economy first,
make government and corporations accountable
first, before committing to more (possibly messy) technology in our lives?
(K) Governments will never stabilize their
economies as long as they can individually print
as much money as they like. Meanwhile, several
electronic transfer systems are already in
existence and, in the case of sensible retailers,
they're not messy. Ease of use would have to be
the case in any government-approved system.
(N) I can appreciate that issuance of metals and
paper add to harmful environmental impact and
bring associated costs, but if such a system
were to get hacked in a major way, the entire country could be devastated.
(K) As before, encryption could enable a currency
system to be totally unhackable before, during or
after any transaction. Any government-approved
system would ensure this. (This is actually
another reason why governments would like to see
a cash-less society. It avoids counterfeiting,
which is a constant -- and significant -- problem.)
(N) Pro's and con's?
(K) It's all pros and no cons in principle with a
properly designed system. But such a big culture
change will take a long time to mature, particularly among the old.
However, Emily Jackson's article must be wrong
where she writes: "The difference with MintChip
is it doesnt plan to link to a persons bank
account or credit card information." As already
explained, MintChip would most definitely have to
link to an objective validation database which,
moreover, would have to be approved by
government. Otherwise, an underground
peer-to-peer currency system would arise which
would not only make existing black markets easier
but could amplify them and deprive governments of
even more taxation that they're due. This would
be the final straw which would break the back of
governmental taxation systems -- which are
already so complex as to be colanders used by
rich persons' accountants (often retired tax inspectors!).
The main deficiency so far with most black market
operations (as far as users are concerned) is how
to launder fiat (governmental) money in and out
of them via bank accounts. This is the only way
by which most operations can be investigated.
I've written "most" because, for all we know,
there may be some rich people who are already
members of quite independent (black market)
currency systems which can short-circuit banks by
means of gold coins and tablets (being the best
way of doing it. Diamonds, precious stones and
objets d'art would do just as well except that
they're not so easily standardised.). This
possibility cannot be written off. We need to
remember that money arose quite independently
from governments in the first place. The first
coins were not issued by the Athenian government
(such as it was) but by Greek merchants all
around the Mediterranean for their own
convenience. The first central bank, the Bank of
England, was not created by government but by
merchant bankers mainly for their own purpose
(obtaining a low-risk revenue for their capital.
They established their income [with government
agreement] by appropriating the state lottery and customs duties.).
In summary, governments would like coins and
banknotes to disappear but they would never allow
a truly private person-to-person digital system
to operate with their consent. Indeed, together
with the banks, governments prevented this from
happening 40 or so years ago when credit cards
came on the scene. Everybody could have had a
card-swiping machine attached to their telephone
line. Long before now, mobile phones could have
had the same facility. Nor will mobiles ever be
able to transfer money directly unless every user
is also linked to a government-supervised bank
account which keeps a record of all transactions.
Keith
<http://www.thestar.com/business/article/1159513--royal-canadian-mint-to-create-digital-currency?bn=1>http://www.thestar.com/business/article/1159513--royal-canadian-mint-to-create-digital-currency?bn=1
Emily Jackson Staff Reporter
The Royal Canadian Mint wants to get rid of
pocket change and its enlisting hacker-types for help.
Less than a week after the government announced
the
<http://www.thestar.com/news/canada/politics/article/1153779--federal-budget-2012-pennies-to-be-withdrawn-from-circulation>pennys
impending death, the Mint quietly unveiled its
digital currency called MintChip.
Still in the research and development phase,
MintChip will ultimately let people pay each
other directly using smartphones, USB sticks,
computers, tablets and clouds. The digital
currency will be anonymous and good for small
transactions just like cash, the Mint says.
To make sure its technology meets the gold
standard in a world where digital transactions
are gaining steam, the Mint is holding a
<http://mintchipchallenge.com/>contest for
software developers to create applications using the MintChip.
The old-fashioned prize? Solid gold wafers and coins worth about $50,000.
Its such an unusual move from the crown
corporation, which has been in the coin-making
business for more than 100 years, that
<http://news.ycombinator.com/x?fnid=xLehDc5saU>Hacker
News questioned whether it was an elaborate hoax.
Its not, the Mints chief financial officer Marc Brûlé said Tuesday.
Commerce is changing and the Mint has always
been innovative, Brûlé said. (For instance, it
did an initial public offering of exchange
traded receipts of its gold holdings last year.)
Theres been a very huge growing digital
economy that is really going to be fueled by
smartphones and mobile being the next big thing, he said.
Despite the variety of payment options, he said
there are still no cost effective electronic
solutions for low value transactions that can
be used regardless of a persons age or credit standing.
<http://www.youtube.com/watch?feature=player_embedded&v=9PX-vW4VccY>MintChip,
a secure microchip, will be able to do this by
letting people transfer small amounts of money
(for an iTunes song or a newspaper) with no
personal information attached to it, he said.
The Mints move into the digital market is a
reflection the competitive payments industry,
Interac spokeswoman Caroline Hubberstey said.
Despite a December 2011
<http://paymentsystemreview.ca/wp-content/themes/psr-esp-hub/documents/rf_eng.pdf>government
report claiming Canadas payments system is
outdated and has simply not evolved,
Hubberstey said it the industry is highly competitive and rapidly changing.
Interac pegs the value of small cash and coin
transactions (under $20) at $90 billion, and
companies big and small want a share of that
market as it turns digital, Hubberstey said.
Players you wouldnt have thought of before
are looking for ways to get into the market of secure transactions, she said.
Youre seeing competitors that have been in the
space in a while and new competitors looking at
the payments market as an opportunity.
The payments industrys last major shake
happened in the mid-90s when debit card use took
off. As more smartphones adopt Near Field
Communication (NFC) technology, which lets users
hover their phones over NFC-enabled devices to
make payments, mobile payments are expected to soar.
Interac, Mastercard and Visa already have
contactless cards that use near field
communication (NFC) chips for small payments at
gas stations and grocery stores.
PayPal, Google and Visa have introduced digital
wallets where consumers control all their
cashless payments from one place. Companies
Square and Payfirma let people accept credit
card payments on their smartphones.
The difference with MintChip is it doesnt plan
to link to a persons bank account or credit
card information. And unlike BitCoin, a
peer-to-peer hosted digital currency with a
fluctuating value, MintChip is simply a new way
to exchange Canadian dollars. Plus, its backed by the Canadian government.
Its still too early for specifics such as how
the Mint will make a profit from this, how it
will prevent hackers from stealing cash, whether
the money is anyway traceable or who exactly
will load a chip with money, but Brûlé said the
response to the contest has been tremendous.
Developers may have been skeptical about
MintChip, but the 500 contest spots were filled in just four days.
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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