Ecuador becomes the first country to roll out its own digital durrency

http://www.cnbc.com/id/102397137

by prostoalex • 11 years ago

108 48 11 years ago

nhaehnle2• 11 years ago

Quite frankly, this type of system is the future. Moreover, this type of system already almost exists in many places (consider, for example, how regular people can easily transmit money within SEPA, the Single European Payments Area).

Bitcoin, by contrast, is interesting technology but with weaknesses that make it unsuitable as something that regular people interface with every day (security implications, mostly). It is also economically problematic (widespread use of Bitcoins would mean regressing back to gold-standard times).

Ideally, though, Bitcoin can play a useful role by putting enough pressure on other payment systems to remove any remaining suckiness (mostly the fact that existing payment systems are very bad at international and cross-currency payments).

icebraining• 11 years ago

SEPA is nice, but it still takes too much time to transfer money. If I make the transfer on a Friday at 16h00, the recipient might only get in on Tuesday, despite the fact that the money was immediately written off my account.

That's fine for paying my rent and such, but not for many use cases, especially w.r.t. commerce.

Slartibreakfast• 11 years ago

I like digital currency, and at the same time I am somewhat concerned about the idea of moving away from paper currency and over to an electronic system. My main concern is that once we can't buy something with coins or paper currency, it will be too easy for the government to suppress people by threatening their ability to perform even the smallest transaction.

zanny6• 11 years ago

Then thats why bitcoin is a good thing. No one individual or group has control over it, and if it were adopted by a state it would have enough mining power to eclipse whatever 51% attack a state might attempt.

The only thing a state could do is try to outlaw transacting with individual addresses, which is only as effective as trying to tell people not to do in person transactions with them. I guess the downside is that you can trace all payments, but with bitcoin you can easily generate new addresses and pad your money path to obscure who you are.

zanny6• 11 years ago

security implications

Like what? I have a wallet with around $3000 in it and I feel my money is a lot safer there than in some bank, because I control the security, and it is all mathematically provable. You have to trust your bank, and at that trust your state to insure your deposits. I don't have to trust anyone with my wallet.

widespread use of Bitcoins would mean regressing back to gold-standard times

The problem under the gold standard was that dollars were valued at fractions of gold and the US could not control the monetary base at all. With bitcoin they could hold a reserve to inject in or out of the economy to maintain consistent growth, and the rate of coin generation is incredibly predictable.

I don't think that btc is the right currency to use in daily transactions. Something like doge makes a lot more sense, because doge is perpetually inflating with constant volume increase, which keeps monetary velocity high. BTC is naturally regressive, so it is a fantastic gold replacement, but disincentivizes spending as the rate of generation slows and coins are lost over time since the monetary base is shrinking.

I would like to see someone try to implement a cryptocurrency where the generation algorithm is not as simple, that could take into account velocity in the economy to increase or decrease coin generation to attempt to maintain a healthy velocity (ie, not too much hoarding but not over-capacity spending like most fiat currencies are in right now, which I believe is one of the reasons 2008 happened, and why it will likely happen again soon).

Dylan168074• 11 years ago

I don't have to trust the bank very much to use an insured account.

I'm trusting the state whether or not I use bitcoin, so I might as well take advantage of its insurance.

I'm not cocky enough to assume I won't get hacked.

I control the security, and it is all mathematically provable

The parts that are provable won't keep you safe. And control is a feel-good measure, not a safety measure. Consider the people scared of air travel despite how safe it is compared to automobile.

orbifold• 11 years ago

$3000 dollars is a ridiculously low amount when it comes to trusting a bank. Deposits up to 100000$ are usually insured by the state and save unless there is a major crisis. I think the fundamental misunderstanding a lot of people have, is that they use money as a value store. It is pretty crappy at that and that is by design. You are supposed to invest or consume with the money you earn, not leave it in your bank account or wallet, which is why what currency you use is more or less irrelevant as long as it is relatively stable and doesn't devalue too fast. The things Bitcoins are good at are niche applications for the majority of the population and simply irrelevant for the majority of "business users" of money, since they already have ultra-fast money transfer etc. available.

nadaviv• 11 years ago

I would like to see someone try to implement a cryptocurrency where the generation algorithm is not as simple, that could take into account velocity in the economy to increase or decrease coin generation to attempt to maintain a healthy velocity

Vitalik Buterin wrote a very interesting essay on that subject: https://blog.ethereum.org/2014/11/11/search-stable-cryptocur...

nawitus• 11 years ago

It seems to be a stretch to call this a "digital currency", since it is "directly tied" to the local currency. Besides, digital currencies are not really interesting, as one can make digital transactions of traditional, "non-digital" currencies.

rhino369• 11 years ago

I would be very interested in a crypocurrency run by the Federal Reserve (bitcoiner brains pop). The fed would be able to peg the bitBuck at 1:1 exchange rate with the USD$ but also have many of the benefits of cryptoprotocols.

jordigh3• 11 years ago

Isn't USD already a mostly digital currency? Only around 10% of all dollars exist as bank notes or coins.

What would a centralised cryptocurrency contribute? If you're centralised, you don't need the crypto part of all, which handles distributed trust. "Crypto" here doesn't refer to all applications of cryptography, but to the blockchain. So what do you have in mind? Perhaps a blockchain where every block has to be signed with a unique private key? This seems even more horribly inefficient than the current digital USD.

wmf• 11 years ago

If you trust the Fed you might as well use Chaumian digital cash; a blockchain just adds overhead and reduces privacy.

unwind• 11 years ago

Epic typo in the submission ("durrency"), that is not on the original page. Somebody please fix.

boriskourt• 11 years ago

It is the title tag of the original document.

vonnik• 11 years ago

it's a mistake, though. the word durrency appears no where in the article.

adamnemecek• 11 years ago

probably a typo but it would be a cool portmanteau of digital and currency.

angersock• 11 years ago

That's what I thought it was. And even that being the case, it's a little face-palmy. It makes the whole matter seem even sillier than it already is. :|

brickmort• 11 years ago

Interesting, I completely missed that.

dghughes• 11 years ago

digital currency = durrency?

I'm stealing that name dibs!

nly• 11 years ago

So basically a state run bank? Disturbing politically, and with respect to the privacy implications to Ecuadorians, but otherwise technically boring.

There we greater and more interesting strides in to real digital currency in the early 90s. See, for instance, eCash[0]. The problem is, aside for some potential wrt saving the cost of counterfeiting, minting and replenishing grubby notes, there's no tangible incentive for a State to get behind a respectable replacement for cash. It's much easier just to pass the buck to the card industry.

[0] https://en.wikipedia.org/wiki/Ecash

zanny6• 11 years ago

And there is all the reason why a state would not want to adopt a currency they don't control. The ability to print money is one of the greatest powers any group can have.

jMyles• 11 years ago

It's possible that state A might want to adopt a currency that it doesn't control in order to gain increased independence from state B whose economic influence is too powerful to evade but which makes poor long-term decisions about its own state-controlled or state-influenced currency.

bubbleRefuge2• 11 years ago

Why is the idea of a state run bank disturbing ? Would like to see a state run bank with digital sovereign currency proposed here in California to help fund the commons and to provide consumers with checking accounts devoid of parasitic fee's like overdraft, monthly maintenance, ATM, etc( maybe credit unions are close enough).

boobsbr• 11 years ago

Brazil has two state-owned-and-run banks, Caixa Econômica Federal and Banco do Brasil.

Most lucrative businesses ever, besides Petrobrás, a mixed-economy oil and gas giant with 51% of shares owned by the state.

known• 11 years ago

Countries that don’t have a currency of their own

http://qz.com/260980/meet-the-countries-that-dont-use-their-...

Eleutheria• 11 years ago

"The project initially created buzz in in the bitcoin blogosphere, but that interest faltered once it was clear that Ecuador's project would not present a competing alternative."

and

"In fact, Ecuador's project is more similar to M-Pesa, a mobile phone-based money transfer service"

Headline is deceiving.

Nothing to see here. Move along.

moron4hire• 11 years ago

The consensus amongst the middle-class and affluent Ecuadorians I have met was that tying their currency to the US dollar was an important first step to regaining stability, and they weren't sure the government had yet changed its corrupt ways enough to make a new Ecuadorian currency a good idea. Now, Ecuador has a very large poor population as well, who need a lot of help (I mean so poor they can't afford a door on their shacks), and the competing ideology is that a new currency that is locally controlled is necessary for new growth to bring those people out of poverty. Though there also send to be an unspoken understanding and willful ignorance of the fact that the government is too corrupt still to make that a good idea.

I don't know, that's just the impression I got from talking to people in one city, and a particularly affluent one at that (Quito).

pjc50• 11 years ago

This is closer to M-PESA, I think: operating on mobile phones, a financial service for the unbanked. Because Ecuador is dollarised but can't print their own $, physical wear on notes is a significant cost. A digital service allows for an expansion of the money supply (M1? not M0), cost savings in money transfer, etc.

bubbleRefuge2• 11 years ago

Key question #1 : how is payment settlement going to take place? In the US and the vast majority of floating fx currency regimes(fiat money regimes), payment settlement occurs via credit/debits to/from reserve accounts at banks. Banks have accounts at the Federal Reserve which are used to settle payment amongst each other. By settling in reserves and allowing bank deposits to be merely denominated in reserves -US case- money supply is much more flexible.

Key Question #2: How will loans be made ? Will banks be able to make loans out of thin air as in the US and most of world or will loan creation be tied to reserves?

As it stands today, Ecuador's monetary regime looks like a gold standard fixed currency regime. This digitization change appears to be an attempt to eliminate cash transactions but maintain the dependency on dollar reserves which the Ecuadorian government cannot print and must be obtained via exports, which is hard. Golds standards died because of this inflexibility. My guess is this is a first step in returning to a sovereign currency but without saying so explicitly. If loans and settlement are based 100% on dollar reserves today maybe tomorrow they can remove the US Dollar reserve usage.

logicalman• 11 years ago

Iceland already did something similar: http://www.auroracoin.org/

brianbarker• 11 years ago

Why is this getting downvoted? Iceland did roll out a crypto-currency, the article did claim this other to be the first. Seems logicalman is being just that ;).

mark_l_watson• 11 years ago

Ecuador seems to be progressive in a lot of ways. Given a relatively weak economy, and a desire to stand on their own, it seems reasonable to have a state bank provide easy to use digital currency. Central and South America are looking more interesting as alternative places to live (a friend of a friend is permanently moving to Ecuador with his family in two weeks from the USA). My wife and I were considering buying a home in Belize or Costa Rica last year, but the US government, with FICA laws, etc., is making it more difficult for Americans to live abroad. I totally understand why the American empire does not want its citizens spending their retirement dollars abroad, but the effect seems to take away a lot of freedom of choice.

I have visited Columbia, Belize, Guatemala, and Costa Rica multiple times and I find a freshness to their society that I like. Sure these areas have their problems but people seem to have good life values there.

+1 Ecuador

taternuts• 11 years ago

Is 'durrency' a new made-up word that's a play on 'digital currency' or a typo?

Ecuador becomes the first country to roll out its own digital durrency

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