User monsterer has suggested I share in this thread a letter I wrote to him regarding his question above. I have agreed to do so and include it below as others may find it helpful. This is private correspondence from me, does not reflect formal Federal Reserve of WIP (name change pending this year) policy, and is in several places informal or forward-looking. It was simply meant to help monsterer with some of his questions expressed above. In particular, the comparison with bitcoin is of a generic nature and should not be taken literally or too formally, but rather suggest some areas for thinking or research by himself. It does not fall under formal Federal Reserve of WIP (name change pending) communications, but reflects some of my personal thoughts.
With that said, it may be helpful to those of you who are wondering about the purpose of this thread. Later, I may also be replying to this thread with some of my own ideas on this subject.
Please note that Call for Brief Papers on Bearer Instruments is outside of the core offering of WIP and is a research area only. The letter below is informal guidance to him or others.
Best regards:
Chairman, Federal Reserve of WIP (name change pending this year.)
My letter to monsterer:
Some analogy might be useful.
You're creating paypal for a non-existent physical currency?
You're creating paypal for a non-existent physical currency?
I am not sure if you were asking about the Call for Short Papers, or about WIP generally. I will answer by telling you about WIP generally (briefly) and then about the Call for Short Papers subject.
1. WIP generally.
WIP generally at the moment is limited to transactions that do not have a monetary value (for example they may not be exchanged for BTC or USD/EUR/GBP or other currency.) In this sense - during introduction - they are like a points system that is centrally controlled by a central server. Like an in-game virtual economy. Points can be created or destroyed at any time, indeed the Federal Reserve of WIP (name change pending) can take any and all action at any time for any reason or no reason at its sole discretion, and makes no guarantees. This extends to completely retroactively rewriting any aspect of the public ledger (that we publish) in any way that we want, including the history of transactions.
So we retain very high power. In this sense we are explicitly quite different from any currency where people would rightfully expect some kind of control over accounts, and quite different especially from decentralized crypto currencies.
We are doing this as part of demonstrating some of the benefits, and pitfalls, of a strongly, sanely, managed inflationary and expansionary central monetary authority. I've written about some of the negatives above, but as for some of the positives, very briefly:
- Bitcoin is irreversible and subject to theft. This happens on a daily basis. Most bitcoin-denominated businesses and exchanges have turned out to be literal theft. Ponzi schemes are a daily occurrence. Since there is no central authority of any kind, as long as anyone can reach an audience, that audience has no protection or recourse. (For example, bitcointalk does not actively ban scams, but if it did these scammers could approach victims in other forums.)
- By contrast, WIP is reversible and subject to our authority. If someone is running what appears to be a ponzi scheme, we can simply require documentation over actual uses of WIP currency. This is just one example. Blatant, outright theft would be another example, which is not reversible and has no recourse in bitcoin.
- There are certain monetary (macroeconomic) facts that we have better control over. This does not directly relate to its technical properties and I can elaborate separately, but I do not have the space here. See my other posts.
- Technically there are some advantages. At the moment there is $200 million in bitcoin mining equipment supporting a bitcoin market share that is $4 billion assuming all bitcoins exist, or closer to $2 billion accounting for lost bitcoins. That is a high cost of minting and maintaining money. Despite this high cost, twice recently a mining pool has accidentally reached 51% of hash rate (in theory this makes bitcoin totally broken) though did not abuse it. In addition, the blockchain size is over 26 gb. By contrast, the base model of both the iPhone 6 and iPhone 6 Plus come with only 16 gigabytes of total flash storage. In addition, all $200 million in mining equipment supporting the bitcoin network support a grand total of up to 7 transactions per second. (A hard-coded limit). If there are even a handful of people worldwide trading a handful of dollars (worth of btc) in a given second, then other transactions cannot go through except by outbidding them and causing them to fail.
Out of these areas, the one that I have chosen not to write to you at large length just now (sane, trustworthy monetary authority exercising oversight of an inflationary, expansionary money supply) is perhaps the most interesting, but is a subject you can read about in my other posts.
The above covers some of the key differences and comparisons with bitcoin.
2.
Turning to the idea of Bearer Instruments. This is not a core offering of WIP, and you read about it in a Call for Brief Papersfor our journal or internal use.
Please see the definition of bearer instruments here: http://en.wikipedia.org/wiki/Bearer_instrument
In theory, it is basically an impossibility to maintain a secure bearer instrument for a crypto currency. Any secret that is in the device can be recovered, and a future holder of the physical object cannot know whether it has been compromised. So it would seem to be a basic non-starter.
The same thing is not true of a physical US Dollar (for example), as if you hold one and can verify its anti-fraud features, then you can rely on it truly storing $1 in value. It cannot disappear from you due to having been possessed by someone earlier. It's truly a bearer instrument.
So, in theory there is a very large gap between what is theoretically possible in crypto currencies, and any idea of a bearer instrument. (In other words, by default we would never publish or produce anything physically, as it's meaningless.)
A call for papers is for new directions to explore that may be interesting and unusual. It would certainly be nice (although expected to be impossible) to have some kind of physical bearer instrument. We are interested in any innovative ideas anyone has even tangentially related to this subject.
Can you think of any ideas that are in any way related to these directions? If so, you could summarize an abstract and I would be very happy to review it.
I may publish some of my own thoughts in a follow-up to the above-mentioned forum post.
I hope this answers your questions.
Please let me know if you have any further questions, and I do welcome any ideas on this subject that you may have.
Best regards:
Chairman, Federal Reserve of WIP (undergoing a name change this year.)
