[devinhelton]

I think it could make sense for the US government to provide a way to hold existing dollars in digital form, directly with the government. So I could go to a bank (or specially designated federal institution), deposit cash, and have that cash turned into a balance of 100% reserve digital cash held on the government's books. I could then make cost-free, instant transfers to other people or other accounts. The government could support people outside the US holding accounts. It could have API's that allow people to build transaction systems on top of the digital currency system.

What I don't understand is:

1) Why the US government would make a brand new currency rather than just support holding existing US dollars in digital form.

2) Why crypto-currency is needed. The crypto aspects of bitcoin are needed to support the fully decentralized processing. If you the currency is centrally controlled anyways, might as well just use an ordinary database with good transaction logging.

[freeone3000]

You can already hold US dollars in digital form. You're describing exactly how banks work. The reasons that transfers cost money or people outside the US can't hold accounts are not technical.

[devinhelton]

No, that is not how banks work. You are not holding actual legal tender, your bank account is a credit with that specific bank that the bank promises to pay back to you with legal tender on demand. But the bank has lent out that money and might not be able to actually pay you back (or might need to be bailed out by the FDIC to pay you back if your account is under $250k).

I agree though that existing banks could technically implement costless transfers or accounts for people outside the US with existing tech, but it is not worth it because of regulatory compliance issues and the archaic nature of the banking systems. But if those issues were to be fixed, might as well just hold what are now checking accounts directly with the government, rather than have the convoluted system of banks + massive regulation + FDIC insurance.

[freeone3000]

So instead of a distributed transaction ledger held by one party, it's a transaction ledger held by one party, with the shared fiction that there's backing paper somewhere? I don't see a difference.