[cryptography] Digital cash in the news...

Ian G iang at iang.org
Sat Jun 11 18:57:46 EDT 2011

On 12/06/11 8:29 AM, Jeffrey Walton wrote:
> On Sat, Jun 11, 2011 at 4:13 PM, John Levine<johnl at iecc.com>  wrote:
>>> Unlike fiat currencies, algorithms assert limit of total volume.
>>> And the mint and transaction infrastructure is decentral, so there's
>>> no single point of control. These both are very useful properties.
>> Useful for something, but not useful for money.  I can't help but note
>> that the level of economic knowledge in the digital cash community is
>> pitifully low, and much of what people think they know is absurd.
> OK, I bite - who has the knowledge? Is it the expert folks who have
> the US 14 trillion or so in debt? Or is it embodied in experts in
> other countries, such as Greece?

Unfortunately, those in central banks and other similar places have 
largely forgotton a lot of the processes of new issuance.  Also, they 
are really only familiar with their own type of issuance (e.g., worried 
about inflation).  They don't need more knowledge because it is no 
advantage to them to promote free market issuance.

Issuance is somewhat a lost art.  Before 1900 or so we knew a lot more 
because free banking was prevalent.  The 20th century can be described 
as the century of the central bank, which unfortunately split the 
issuance of monies into various components, so the knowledge stagnated 
and dispersed.  What then became important to central banks as 
custodians of the already issued national unit was monetary economics, 
which isn't the same thing as issuance.

Some of that knowledge has been re-learnt in the financial cryptography 
tradition.  You can see some of the lessons in e.g., the history of 
Paypal, e-gold, webmoney, goldmoney etc.  Other parts of that knowledge 
are vested in IPOs and the bond markets.  Yet other parts are found in 
contract law, accounting, and governance.  Another important part would 
be applications, which could be seen as a cross between software 
architecture and startup venture innovation.

I wrote a paper about John Levine's observation of low knowledge, way 
back in 2000, called "Financial Cryptography in 7 Layers."  The sort of 
unstated thesis of this paper was that in order to understand this area 
you had to become very multi-discipline, you had to understand up to 7 
general areas.  And that made it very hard, because most of the digital 
cash startups lacked some of the disciplines.


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