Wednesday, September 26, 2018

The simplicity of central bank liquidity in digital systems

I talked about this before, enforce a contract that lets the bots manipulate a banking account. This is all easy to do if Open Banking stays around.

Write a secure app in your smartphone to pass around the account password, and limit spending to specified value.  If the smartphone is hack secure then it can be made app secure, and all parties use the same secure trading bot which operates its own hidden key. In fact, writing this app is an upper grad project, a starving student will do it as a simple example of using open banking.  Secretly passing secure tokens among a network of smartphone users is already done when the smartphone presents its security kernel calls.


Makes life simple, just touch phones and loan out a twenty.  But wait, you say, we can use Open Banking to switch money between accounts, directly with a message to SWIFT.  But that app is actually more complicated, it involves a third party in the code.   The secure phone already passes secure messages, it should also be able to hide a random, self generated key.  

The the shortest app it to keep track of money message sent and avoid double spends while properly subtracting from the virtual account.. A hundred lines of code while the other app using banks will be another five hundred lines of code.

We have some big conflicts on the road ahead regarding pure liquidity and security.  Most of the current bankers are  aware. They have good trade press.  They have one choice, join the parade and impose their own contract including a reserve requirement.  Central bank still has tax currency monopoly, I see no problem.  Keep Open Banking and central bank can produce the liquidity app themselves.

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