Wall of texting.

@marcwhinery as you notice, I liked you comment overall. I'd like to offer my thoughts in addition, particularly in respect to using crypto-money for government purposes. As you said "it should be 'hard' enough to make it difficult to break/steal, not hard to create". Just to add to this, government should be able to create it super-fast, as in "the time it takes to generate a PPK key pair". We would not want societal needs to be delayed even a moment because "currency wasn't made yet". So, I agree with you that quick creation time is an important factor, especially if used in $VBE$ as you mentioned.

The main difference between Stateful Money and BitCoin modalities is that BitCoin is designed to be non-centrally controlled, where Stateful Money is designed TO be centrally controlled.

BitCoin's main feature is its "block chain", which is essentially a shared public ledger of ALL BitCoin transactions ever done, which as of this moment is 19 gigabytes. The number of BitCoin transactions per day is around 50,000...for the entire world. That's around 18 million transactions per year.

Contrast that with 333 billion electronic transactions for the world, as of 2012, according to the World Payments Report 2013:

http://www.capgemini.com/resource-file-access/resource/pdf/wpr_2013.pdf

Even with all the proposed BitCoin optimisations, that is still quite a large difference in transaction volumes. If we use extrapolation, we get a block chain that is 18,500 larger than it is today, or 351.5 terabytes! So, reducing that to a manageable size would be the challenging goal of any optimisations.

Stateful Money™ (SM) turns the BitCoin idea on its head. Instead of inferring a wallet's balance by combing through a long list of block-chain entries, SM actually has separate files for the money itself, where each one is serialised and cryptographically locked to a particular AssetBank account. Where BitCoin stores the ownership of value within the list of block chain entries, SM stores the ownership of value within a single small file. Where BitCoin has a network of BitCoin wallet nodes, each having its own private signing key, SM has a network of AssetBank nodes, each having its own private signing key. In BitCoin each node stores a ledger of ALL transactions ever done (ignoring pruning), while in SM, each node functions more like a bank, where multiple people can have accounts on a given node, and within each account, each account holder has a set of files holding that accounts "stateful" money. What makes it stateful is that those e-money files are ONLY valid within the account they are now sitting in. Each node only keeps a record of its transactions and not the transactions of other nodes.

Also, each account in an AssetBank has a counter that gets incremented for every transaction in that account. When an SM digital-note gets put into an account, it gets crypto-stamped with the current account sequence number. If that file is transferred out of that account into another account, either in the same bank or another bank, the counter gets incremented, thereby making all copies of that file invalid. Once a digital-note gets deposited to an account, that same file can never be deposited again into any account...a new version must be transferred to another account. In other words, ALL valid SM money-notes MUST exist within some AssetBank account somewhere, even though they can be transferred via wire or storage device.

Incidentally, when thinking about the world's present financial woes, I found it very telling that the world made $475 billion in transactions in 1997, and a whopping $2.2 QUADRILLION in transactions in 2008, with 95% of that enormous amount spent on speculation.

@kennethkopelson "So, I agree with you that quick creation time is an important factor, especially if used in $VBE$ as you mentioned."

I was trying to use VBE for the economy and $VBE$ for the, as yet, undetermined money used in VBE.

Also, there's no reason why money can't be pre-created, and not "issued" until needed. We could "create" a near infinite amount of money day-1, but only "issue" it as the value is created.

As an aside, one of the problems with HTTPS is keys. If the government ran keyspace (optional, as are all keyspaces), then we could have a free location of key issuance. It's a public service to have valid root keys. We just leave it to for-profit companies because they were the only ones that volunteered for this.

Though they turned evil when they worked to "consolidate" the roots to gain power and ticket-clipping options.

Everyone should have a key pair. They can be used for lots of things. HTTPS fails because it authenticates the site to the user, but not the user to the site. Attacks can happen pre-authentication. And web standards are poor. Forcing the use of keypairs as a part of RealMe and the government $VBE$ wallets would be a good thing.

Even the technical savvy often don't understand them well. If evey email sent by the government was signed and encypted, we'd have fewer accidental emails violating privacy. Or perhaps as part of the privacy policy for the party, require emails with "sensitive" information be encrypted and signed.

$VBE$ is one of the uses for public key encrpytion, but it would be nice to find a lever to push it into the general population. It's like a PIN. Just a little longer, so you have it written down. People understand that, so anyone that can use a PIN in a chip card can use PKI, they just need help, as they did the first time they used a PIN or a chip card.

@kennethkopelson ". What makes it stateful is that those e-money files are ONLY valid within the account they are now sitting in. Each node only keeps a record of its transactions and not the transactions of other nodes."

When the government is the only one who "approves" transactions, that'd be easy. The down side is it makes it easily trackable, which is something that most digital currencies try to avoid.

The up side is that only the approvers can track it. For bitcoin, everyone is an approver, so everyone can track it (but, in practice, nobody knows anything about anyone else's wallet, unless they've directly done business with them). But the government would know everyone's wallet, and so no trade could happen without the government knowing who to and who from, if the government was the only approver. But that seems the most straight-forward solution to the parameters you gave.

Also, a central approver is required to get the ability for a single entity to "destroy" or "revoke" money. If you issue currency for a building, then find out that the contractor used the wrong materials, making the building worthless, you'd have to get him to voluntarily transfer the funds back for destruction, if you didn't have control of the authorization network.

If you have control of the authorization network, you could (effectively) delete them from his account and "destroy" them, or (effectively) force the trade of them back to the government coffers for storage until re-issued for some other value creation.

That ability exists in BC now. It's just that someone would need 51% of the authentication network for a few minutes for that to happen. With SM (or $VBE$), the central authentication network can do that at will.

I keep saying "network" for the central thing because there's no reason the authentication can't be "approved" with a math-dumb action by some central computer, and the math-hard work for crypto-currency be done on all the computers storing money and on at that point. Like the @home networks (SETI@home, folding@home and others), you get computations to make, make them, and send back answers. You have no knowledge of what you are doing, other than abstract computations. So you have the central authority (SETI or folding) controlling the network and preventing any node from learning anything about any others, or what they are actually working on.

The idea of distributed networks doing "unknown" work for a central authority exists, and is a more efficient way of distributing the computing resources, if a high level of computation is needed.

And yes, I'm a very tangential thinker. We've wandered far from the initial topic. The point is that everything is possible. Most of the "problems" with this are solved problems that just haven't been combined in the specific manner we are now considering.

@marcwhinery An excellent collection of thoughts there! Thanks for taking the time to think about it and comment :)

If I thought before I spoke, I'd never say anything. I prefer to think while speaking, or failing that, sometime after.

Unfortunately I also see the role of a central approver as essential in this scheme.

I don't think that being required to have a central approver is a bad thing. It's required today. The central bank, the decisions on the economy, they need someone to point to if a problem happens. Having that accountability lost to "the people" will result in anarchy and abuse, much more so than governments abuse. It's in the government's best interest to have a stable economy. So they do their best there. They just don't understand it enough to change it, and those that do understand it are vested in perpetuating it (the bankers are more likely to know how to make it better, but wouldn't want to, as it could hurt their jobs and power.

So yes, in general, I'm against the consolidation of power in the central government. But some things they can simply do better than anyone else.

@marcwhinery "Also, there’s no reason why money can’t be pre-created, and not “issued” until needed. We could “create” a near infinite amount of money day-1, but only “issue” it as the value is created."

Agrees. In Bitcoin styled crypto currencies since they are designed not to have a central bank or banks, I presume the deflation/inflation rate is controlled by the speed of which coins are minted - which with Bitcoin is intentionally preconfigured to be deflationary. Many other altcoins are not so though.

A Government crypto currency would not need a mining difficulty factor as far as I can see, so could in fact be premined to a certain percentage if not all of it premined/preminted and maybe just the issuance speed be controlled.

To all:
Whilst we are having this wonderful discussion about domestic digital currencies and also the potential affects of P2P crypto currencies on the current banking system, my concern is that somewhere further up the chain, things may already have been decided on for another kiwicoin idea that perhaps was already in play before these discussions began.

@terangikaiwhiriake
In respect to your note, I also think this might have already been decided up the chain. And I guess the other interested members also assume this.
I'll send an email to the party asking for any form of update possible.

You guys really know how to derail a thread.