[paulmd]

> Cryptocurrency is slower than card networks. It's more expensive than practically any other way of sending money. And as far as scale goes, it would need to become orders of magnitude more efficient to handle even a small percentage of consumer transactions.

Cryptocurrency with a centralized authority is not subject to these issues. After all, if there is a trusted authority then what you really have is a database with some API layered on top. You don't need miners, you don't need a blockchain, etc. It's no more difficult to scale a currency like this than it is for Visa. Canada was looking at exactly this idea about 5 years ago, with the MintChip project.

http://business.financialpost.com/news/fp-street/canadian-mi...

Think of this as a bank account that you can interact with in a programmatic/scriptable fashion using a private key. Which is really a lot of what people find desirable about cryptocurrency.

The deflationary monetary policy ponzi-schemes, the waste of energy and data, etc can all go. And in turn, the government gets to eventually eliminate the cash economy and make sure that all of that gets taxed (this is the dark side of cryptocurrency - since everyone gets to see all transactions, it's quite easy to trace the flows of money, and it's only anonymous until you try to do something outside the network, like cash out or exchange it for real-world goods).

[skybrian]

Yes, that's not really cryptocurrency anymore. It's a federal bank that has retail customers.

Maybe not a bad idea, though. It might make some government payments (such as Social Security) more efficient?

[soperj]

>that's not really cryptocurrency anymore

Why not?

[nostrademons]

The "crypto" in "cryptocurrency" refers to the use of encryption primitives and digital signatures to ensure the authenticity of one's balance without needing to trust a central authority.

If you're trusting a central authority anyway, then all this is unnecessary, and you can replace it all with an API over a database, as paulmd's post suggests. But then you've eliminated the whole reason why people use cryptocurrency, and what differentiates it from Visa.

[otakucode]

What differentiates it from Visa is that there is literally nothing behind Visas numbers. They could be pure fiction right now and no one but Visa would know. Also, Visa takes a cut. As more and more of the whole economy flows through payment processors, they have become de facto taxing bodies. Their fees drain the economy, and can be used to manipulate the economy to Visas whim. A government-backed cryptocurrency would be provably legitimate, and would cut Visa out of the loop.

[nostrademons]

Up-thread, the proposal is to fix the scalability & energy usage issues by having a trusted authority such as the U.S. government run a database with a payment API on top.

Under such a system - how do you know that there is anything behind the government's numbers? They could be pure fiction right now and no one but the government would know. Also, the government takes a cut. As the whole economy flows through their currency, they become a de jure taxing body. Their taxes drain the economy, and can be used to manipulate the economy to the government's whim.

It may shock you to learn that not everybody trusts the U.S. government. The growth of cryptocurrencies worldwide is largely fueled by the fact that the set of people who don't trust the U.S. government is larger than the set of people who do - and in fact, they've seen their biggest up-take in societies like Zimbabwe and Venezuela where trust in civil monetary authority has completely collapsed.

[otakucode]

You are correct that it wouldn't bring any sort of additional guarantee of the money being backed beyond what fiat currency already has. But, the advantage is that it could be proven, mathematically, that each bit of the currency was actually issued by the federal reserve and is actually backed by the government. As it is now, it could just be a bug, or malware, or pure fiction invented by a company to make their numbers look better. And you can't prove that either way.

I am no economist, but I have never thought the idea of "trust" had much to do with the value of US currency. Certainly it's not backed by gold any longer. But I think it's backed by something real. Bombs. The US has more than enough to force others to accept their currency as having value.

[QML]

The FED can still be a central issuer, and a digital USD can thus still be considered a cryptocurrency.