Comments for New Money Review

Comment on JPM Coin adds to pressure on central banks by Paul Amery

Paul Amery — Wed, 20 Feb 2019 10:15:17 +0000

In reply to Alex Gloy. Hi Alex, interesting, thanks for sharing. I would be very interested to see what kind of capital relief this kind of netting could offer to a bank like JP Morgan.

Comment on JPM Coin adds to pressure on central banks by Alex Gloy

Alex Gloy — Wed, 20 Feb 2019 02:46:39 +0000

Hi Paul, I attended the Ledgerfest’19 blockchain conference last week at Columbia University in NYC. They had a guy there from the JPM Coin project. He played it down, repeating that it is only a trial, and was very coy otherwise. Kept saying “I can’t comment on this, can’t comment on that”. I asked him why we needed a ‘stable coin’ linked to the USD, when the USD already is (to 99.9%) a digital currency. He explained that JPM settles $6-7 trillion per DAY (!) in payments, and that cross-border it is just not possible to do real-time with USD’s due to regulatory hurdles. So the JPM Coin idea is to enable instant cross-border settlement, say, within a company with accounts (liquidity and liabilities) around the world, so netting becomes much easier. JPM will hold 100% of the corresponding value in USD’s (digital form).
My thoughts: So it’s another abstraction of money. This will increase the velocity of money. Also, once adopted by many clients, JPM could decide to not hold 100% of the value in USD’s, effectively opening the door to more fractional reserve banking (not sure that is the intention at this stage; I tend to believe motivation is really cross-border settlement).
Dude claimed that JPM has so many counterparties around the world that they could offer to settle 80% of world-wide settlements with their coin.
Will be interesting to see what central banks have to say about that since it effectively creates private money outside their control.

Comment on Quantum-proofing digital money by Liu Jin

Liu Jin — Wed, 23 Jan 2019 09:04:23 +0000

Great job! Dear Paul, Very good article! Literally, a rough draft number is that there are around 40K cryptography guys worldwide now, only 2K guys are specialized in post quantum cryptography, it’s totally new scientific area for whole cryptography space. just 5%, for all these 2K guys, most of them are mathematicians or Ph. D students, or Ph.D candidates, or Master degree students. I myself believe most of these 2K PQC guys can NOT code, only around 50 guys of these 2K people can code, very few of them are architects. it’s about 2.5%. that’s in 2017. now PQC comes to be in great deamdn especially from NIST calling for proposal of PQC, for PQC coder, guess will no more than 100 before 2022.
Including that, available algorithms is not that much just like RSA, ECC design, of course, that even NISt do not list an algorithm as a standard doesn’t mean the algorithm is not available, just depends on how mathematicians evalute its long-term secure.
Meanwhile, actual practical quantum attack happen is not the key issue, all of us need to prepare for future. especially a public cryptocurrency like bitcoin.

Comment on Can cryptocurrency networks govern themselves? by Paul Amery

Paul Amery — Fri, 23 Nov 2018 17:44:40 +0000

In reply to Kevin Alexanderman. Hi Kevin, thanks for the comment, preventing a cryptocurrency (and any currency) regime from descending into an oligopoly seems like a serious challenge.

Comment on Can cryptocurrency networks govern themselves? by Kevin Alexanderman

Kevin Alexanderman — Fri, 23 Nov 2018 14:12:44 +0000

Bitcoin is an oligarchy, just as modern Western society.
Why?
Because fundamentally, the consensus algorithm, whether applied in politics or computing, produces decentralized, but not distributed authority.
The original, ancient Athenian democracy selected its leaders by random draw (“sortition”), not consensus–the two are completely different paradigms. For an example of a digital currency that uses purely a sortitive algorithm, rather than consensus, see the FreeMark by Worldfree.

Comment on Heat rises over cryptocurrencies’ energy costs by Joseph Van Name

Joseph Van Name — Sun, 07 Oct 2018 20:07:50 +0000

Any non-reversible computation, like the hash function used by bitcoin, consumes energy. So energy consumption is an inevitable fact of doing bitcoin mining,” says Joseph Bonneau, a postdoctoral researcher at Stanford University.

What Joseph Bonnaeu is attempting to allude to is the fact that by Landauer’s principle, every bit erased costs k*T*ln(2) energy where k is Boltzmann’s constant (k=1.38*10^(-23) Joules/second), T is the temperature, and ln is the natural logarithm. By irreversible computation, Bonnaeu means a computation that deletes information while a reversible computation is a computation that does not delete any information. Landauer’s limit does not apply to reversible computation, and there are no theoretical limits to the energy efficiency of reversible computation. Bonnaeu however has committed the there-can’t-possibly-be-an-efficient-reversible-algorithm-that-does-so-and-so fallacy where he assumed that there cannot be any efficient completely reversible algorithm that mines Bitcoin.

1. Cryptocurrency mining problems are quite amenable to reversibility. After all, collision resistance is a weak form of reversibility, and the best way to ensure collision resistance is to incorporate reversible components into your cryptographic hash function.

2. If you look at the algorithm for SHA-256, you will notice that it contains many instances of modular addition, and modular addition can be computed using reversible ripple carry adders. SHA-256 is therefore quite amenable to reversible computation.

3. In this paper https://arxiv.org/pdf/math/9508218.pdf, you can see that any computation can be carried out in a completely reversible manner with a quite reasonable computational complexity overhead.

4. Any cryptocurrency mining problem can be mined reversibly with only a linear space/time overhead.

5. Before you state that Bitcoin mining cannot be done reversibly, perhaps you should write a program in the reversible programming language Janus so that you know how reversible computation works in practice.

I always have to correct people about this issue and it is getting really old really quickly.

On a related note, people still use SHA-256 as a cryptocurrency mining problem while SHA-256 mining has some bugs since it is susceptible to ASIC-BOOST, approximate mining, and it is an algorithm which was not designed for cryptocurrency mining. Instead, people should use a cryptocurrency mining problem which is specifically designed for cryptocurrencies instead of a mining problem with these bugs. I personally have designed such a mining problem myself which is optimized so that it will incentivize the development of the energy efficient reversible computer (in other words, people will build reversible computers in order to efficiently mine this cryptocurrency). Such a mining problem cannot be considered wasteful since the resources will be spent on a good cause.

I have contacted Bonnaeu’s colleagues about this issue, so there is no excuse.

-Joseph Van Name Ph.D.

Comment on Old payment systems never die by Albert J

Albert J — Thu, 20 Sep 2018 14:14:14 +0000

You’re being way to optimistic. Payments systems only survive if there is a power structure to support them. Gold was phased out because it protected the public from inflation and cash will be phased out because it protects the public from negative rates. The examples you mention are rackets run by powerful entities. Those will stick around – forever.

Comment on The cat-and-mouse game of cryptocurrency mining by Paul Amery

Paul Amery — Thu, 24 May 2018 11:59:03 +0000

In reply to Alex Gloy. Hi Alex, thanks for the comment and the interesting calculation. I suppose if there's any trend towards decentralisation of mining it will only be among large-scale industrial players. Unless you have access to energy at a near-zero cost, as some people reportedly had in Venezuela for a while...or if a state actor does it to obtain a way around sanctions.

Comment on The cat-and-mouse game of cryptocurrency mining by Alex Gloy

Alex Gloy — Thu, 24 May 2018 11:06:09 +0000

Very interesting article.
Just another thought: you can use any mining equipment profitability calculator to verify this:
Take the latest AntMiner S9i ($889) with 14 TH/s computing power. Ceterus paribus, you can expect to mine your first (!) Bitcoin after more than 40 years (!). That’s way too long for an individual with a single machine (since you have to pay electricity monthly, and so many things will change in the meantime, like difficulty, Bitcoin price, block reward, total hashing power). So you would have to purchase at least 40 x 12 = 480 of those miners to expect to mine, on average, one Bitcoin per month (or join a mining pool, with fees eating away at your profits). Few individuals will be will to make such an investment.
So we can see there is a certain danger of centralization of mining power also from that perspective.

Comment on Bitcoin: competitor or complement to gold? by Paul Amery

Paul Amery — Wed, 16 May 2018 20:50:10 +0000

In reply to Alex Gloy. Hi Alex, thanks for the comment. I agree it's difficult to imagine governments obtaining bitcoin on a scale needed to back national currencies. Couldn't debt still exist, though on a smaller scale? Under the gold standard banks didn't necessarily follow a 100% reserve policy.