Monday, December 4, 2017

Bank of Canada gets the concept of digital cash

The bank defines a Canadian version of digital cash, then evaluates it efficiency.  Here is their definition:

Access to CBDC
• Access is non-exclusive—anyone could use the CBDC—but access to related technology is required.
• CBDC is held and transferred with a chip card or a digital wallet available to any person or firm with the technology, through various devices, including personal computers, tablets and mobile phones with online capability.
• The digital wallet would be provided by designated private service providers that are certified or licensed by the central bank.
• As noted above, the underlying technology (like a digital ledger) is not specified here. 

They get all the points, and hint at the intelligent 'chipcard'.    In the analysis, they also use a good definition of the three central banking color pit, with tax reserve accounting.  They understand the special set of banks that get first looks at the tradebook.

They skipped the part about how digital cash allows auto-trading. Nor did they get the connection between between HFTs and extra looks at the books. We can allow, or disallow special transactions, under contract.  We can do multi-color pits, and the corresponding bit error functions.

When we get our protocol theories straightened

We find that complex exchange protocols are easily done once the medium supports the cash transaction, with no double spending. It is that expansion of contract complexity that makes pure cash a requirement.

But this implies the intelligent cash card; and the central bank is free to add an additional contract on tax money, if you bet at the BOC then please maintain a tax reserve account. In other words, the essence of central banking, the three color, is available to anyone, at scale.  That is what the CBs need to compete in Sandbox, we give it to them and rhy compete well.

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