One could imagine crypto that wasn’t amenable to speculation and possessed guaranteed real-world value. Imagine the US Government issued 10B “USG Coin” for $1 each, and one of the perks was that the US Government would accept 1 USG Coin as payment of 99 cents in US taxes. Imagine further that the system was set up so that the US Government could issue additional USG Coin at will with the same perk. USG Coin has a clear non-speculative value and should never fall below about 98 cents. It also should not be the target of speculation or rise about $1.01 or so, because the US Government would just be motivated to issue more. Or imagine something similar with Amazon, its A-COIN could be guaranteed to be worth 99 cents on Amazon.
Of course, no one is getting crazy rich off of USG Coin or A-Coin (other than maybe the USG or Amazon?) But it might be a useful in some use cases, e.g., as a replacement for high-cost credit card networks like Visa/MC for small purchases. It would basically be a true electronic version of the US dollar.
Blockchain tech allows for a sharply reduced role of the middleman—who you might not trust or who might charge unreasonable fees. The other way I can think of for truly electronic currency requires the transmitter to send to the middleman, who verifies it, destroys it, and reissues the same amount (less fees) to the recipient. Direct transmission without blockchain wont work because third parties will have no way to know whether the transmitter has already transmitted the money to someone else, creating multiple copies of it.
Okay, explain to me how I just Revoluted my friend 50 bucks for gas money, with no fees. Or direct transferred my landlord several hundred dollars, instaneously, no fees.
First off, your bank (and landlord’s bank) are trusted entities ~ not everywhere in the world has trusted entities like that.
At least in the US, the overall costs to a bank for a checking account are estimated at $250-400 a year. https://www.bankdirector.com/issues/the-profitability-of-the-average-checking-account/ You are getting free transfers, sure, but presumably the bank feels it is getting $250-$400 of revenue off you in some fashion. So the bank is getting “paid” somehow, just not a la carte.
There are five layers of logical error in your argument here, any one of which would invalidate your argument on its own:
In your examples with the US government and Amazon, the US government and Amazon could easily do this “middleman” verification work themselves. No middleman required.
Even if you use a middleman, the US government and Amazon totally control this situation—they own and completely control everything about these fictional currencies! - and so they are able to renege on their guarantees or otherwise cheat you at any time. A middleman can’t stop them from doing that—only the law can, which is not reliant on crypto. So letting them manage the transactions, as suggested in point 1, isn’t handing them any more power.
Even if you had to use a middleman, it wouldn’t be much less expensive to leave all that verification to the government, and middleman fees are small anyway. You’re zeroing in on a hypothetical problem that basically does not exist in reality! It’s extremely rare to hear about PayPal or Visa or Mastercard defrauding their users, and these businesses are in competition to provide the lowest fees. Meanwhile, the crypto ecosystem is burdened by gas fees and massive electrical/computer hardware losses, depending on whether you use PoS or PoW. Plus, the legal infrastructure which prevents Visa from defrauding users doesn’t exist yet for crypto, and if it did, then the arguments about crypto letting you evade regulation (i.e. commit money laundering) would disappear. There’s no way to win here. Crypto is just worse, and it always will be.
You’re arguing that crypto might be more trustworthy than these established middlemen, who have long histories of abiding by financial regulations? We all know that the crypto ecosystem is teeming with scams; it’s a safe bet that scams would pop up to take advantage of these new cryptocurrencies.
Crypto technology is inefficient garbage. Here, a computer science professor explains how you can make a system that does everything Bitcoin does, with a tiny fraction of the electrical consumption, using a network of ten Raspberry Pi mini-computers: https://www.currentaffairs.org/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fireEven if all my previous four arguments are nonsense, the US government or Amazon could save money and resources by using this extremely primitive system instead of crypto, and still get all the supposed benefits.
One could imagine crypto that wasn’t amenable to speculation and possessed guaranteed real-world value. Imagine the US Government issued 10B “USG Coin” for $1 each, and one of the perks was that the US Government would accept 1 USG Coin as payment of 99 cents in US taxes. Imagine further that the system was set up so that the US Government could issue additional USG Coin at will with the same perk. USG Coin has a clear non-speculative value and should never fall below about 98 cents. It also should not be the target of speculation or rise about $1.01 or so, because the US Government would just be motivated to issue more. Or imagine something similar with Amazon, its A-COIN could be guaranteed to be worth 99 cents on Amazon.
Of course, no one is getting crazy rich off of USG Coin or A-Coin (other than maybe the USG or Amazon?) But it might be a useful in some use cases, e.g., as a replacement for high-cost credit card networks like Visa/MC for small purchases. It would basically be a true electronic version of the US dollar.
OK. Without evaluating your proposal for its pros and cons… there is no reason why the thing you propose should be implemented as a cryptocurrency.
You’re describing something which is in no way dependent on or enabled by blockchain tech.
Blockchain tech allows for a sharply reduced role of the middleman—who you might not trust or who might charge unreasonable fees. The other way I can think of for truly electronic currency requires the transmitter to send to the middleman, who verifies it, destroys it, and reissues the same amount (less fees) to the recipient. Direct transmission without blockchain wont work because third parties will have no way to know whether the transmitter has already transmitted the money to someone else, creating multiple copies of it.
Okay, explain to me how I just Revoluted my friend 50 bucks for gas money, with no fees. Or direct transferred my landlord several hundred dollars, instaneously, no fees.
First off, your bank (and landlord’s bank) are trusted entities ~ not everywhere in the world has trusted entities like that.
At least in the US, the overall costs to a bank for a checking account are estimated at $250-400 a year. https://www.bankdirector.com/issues/the-profitability-of-the-average-checking-account/ You are getting free transfers, sure, but presumably the bank feels it is getting $250-$400 of revenue off you in some fashion. So the bank is getting “paid” somehow, just not a la carte.
There are five layers of logical error in your argument here, any one of which would invalidate your argument on its own:
In your examples with the US government and Amazon, the US government and Amazon could easily do this “middleman” verification work themselves. No middleman required.
Even if you use a middleman, the US government and Amazon totally control this situation—they own and completely control everything about these fictional currencies! - and so they are able to renege on their guarantees or otherwise cheat you at any time. A middleman can’t stop them from doing that—only the law can, which is not reliant on crypto. So letting them manage the transactions, as suggested in point 1, isn’t handing them any more power.
Even if you had to use a middleman, it wouldn’t be much less expensive to leave all that verification to the government, and middleman fees are small anyway. You’re zeroing in on a hypothetical problem that basically does not exist in reality! It’s extremely rare to hear about PayPal or Visa or Mastercard defrauding their users, and these businesses are in competition to provide the lowest fees. Meanwhile, the crypto ecosystem is burdened by gas fees and massive electrical/computer hardware losses, depending on whether you use PoS or PoW. Plus, the legal infrastructure which prevents Visa from defrauding users doesn’t exist yet for crypto, and if it did, then the arguments about crypto letting you evade regulation (i.e. commit money laundering) would disappear. There’s no way to win here. Crypto is just worse, and it always will be.
You’re arguing that crypto might be more trustworthy than these established middlemen, who have long histories of abiding by financial regulations? We all know that the crypto ecosystem is teeming with scams; it’s a safe bet that scams would pop up to take advantage of these new cryptocurrencies.
Crypto technology is inefficient garbage. Here, a computer science professor explains how you can make a system that does everything Bitcoin does, with a tiny fraction of the electrical consumption, using a network of ten Raspberry Pi mini-computers: https://www.currentaffairs.org/2022/05/why-this-computer-scientist-says-all-cryptocurrency-should-die-in-a-fire Even if all my previous four arguments are nonsense, the US government or Amazon could save money and resources by using this extremely primitive system instead of crypto, and still get all the supposed benefits.