Almost everyone gets crypto currency wrong.

In this discussion by Moneyness he defines his key characteristic of digital curren, I boldfaced the key quote.

JP Koning writing and quoting Ludwin: 


For instance, Ludwin calls his presentation Why Central Banks Will Issue Digital Currency, a title that must have got Janet Yellen scratching her head since the Fed has been issuing digital currency, or reserves, for a long time now. A system called Fedwire, one of the most important utilities in the U.S., allows some 9,000 financial institutions to transfer these digital reserves among each other.

Ludwin goes on to provide more details on the sort of blockchain-style digital currency he is promoting:

...I find it more helpful to look back to bearer instruments, like banknotes, to appreciate what this new medium enables: a digital bearer instrument... With bearer instruments the payment is also the settlement. It is one step. This is a neat property of a bearer instrument...The goal of the blockchain industry is to collapse these steps into a single step, where payment is the settlement, just like with physical notes. 

Ok, Ludwin wants not just digital currency but instantly-settled digital currency. But Fedwire already achieves this. In a Fedwire payment between banks, the exchange of reserves constitutes settlement. Put differently, in the same way that a banknote or bitcoin payment involves a single step, a Fedwire payment also involves but one step. Say bank A wants to pay bank B $10,000 in reserves via Fedwire. The moment a bank hits the button to complete the payment, reserves change hands and the transaction is complete. An ensuing clearing process does not need to be initiated, nor does an underlying set of assets need to be mobilized to settle the payment. To top it off, trades cannot be undone. Fedwire payments are final. The moment reserves enter your account, you own them. 





No, JP, not instantly, but in sequence.  Currency means the holder decides when to declare his/her reserves to the banks.  Fedwire is when the bank directly intervenes in transactions between two parties.   The former is currency, the latter is not.   Instead of instantly, the word is anonymously, just like paper cash, otherwise it's not currency.  

The deal is not to change currency so that 'instant clearing; takes place, but to exactly duplicate  paper cash, a bearer instrument.  

Why on earth would we want to do that!

If crypto currency exactly duplicated paper cash then I can walk down the street to the yard sale and just do a local wireless transfer from my smartr card to his, just exactly like cash.

Wait, isn't that illegal?

No, paper cash has been around for quite some time, it is exactly legal for a purpose, it allows the user to spend the cash privately, and reveal  his plot at a time of his choosing.  That is why we call it cash, it is paper to make it easy to carry around.  The smart card exactly duplicates that function, in fact you can make smart card with paper, just slip a flexible LCD in there to show the denomination.

I digress.  Bearer instruments mean, no central banker allowed until the bearer bears all.   Here is how it works.  The wealthy guy foes to his investment manager and withdraws 20 million onto a digital 20 million dollar bill.  The official bank notes a cash withdrawal of 20  million, crypto cash, sure, but it still works like a paper that bear the holder 20 million.  However, most holders prefer plastic to paper, and some use their smart phone wallets.  It allows two parties to secretly transfer cash, and when one party returns to the bank, it can convert the crypto-cash into a deposit, with a tap.

How can bankers be sure peer to peer cash transfer is honest?

Because Fedwire does it, the protocol is simple so put a version of Fedwire in everyone's smartcard.  The  main problem is maintaining encryption within the crypto network, make it human tamper proof.