back to article Top banker batters Bitcoin for sucky scalability, security

The head of payments policy at Australia’s Reserve Bank – the equivalent of the Federal Reserve or the Bank of England - has asserted that cryptocurrencies’ strengths are also their weakness and suggested central banks won’t need to create their own equivalents any time soon. The Bank’s Tony Richards outlined those arguments …

  1. BebopWeBop

    While I agree with the general tenor of the remarks, there are a lot of other reasons why Bitcoin will never make it in the long term, and why any similar shared trust mechanism (or majority voting system) has significant issues of trust and vulnerability to manipulation (other than just speculation) majority miner/validator voting being just one problem.

    That of course doesnot invalidate the whole 'blockchain' concept or even a currency outwith of the direct control of one government entity.

    1. DavCrav

      "a currency outwith of the direct control of one government entity."

      What are the benefits of dollarization? For countries with poor local currencies, dollarization presents a defence against runaway inflation, but in an emerging economy you want an inflation rate above rich countries to push producivity growth. Bitcoin is highly deflationary, which is a catastrophe in more or less any scenario.

      Worse, the money supply in a general blockchain currency appears to be tied to investor confidence. During an economic boom people will pile in and generate lots of new money, fuelling inflation and bringing forward the recession, when people will run away from mining and you will have deflation to go with your recession. (To see how fun that is, look at Japan's lost decades.)

      As for a currency under the control of several government entities, see the Euro, which is unbalanced without fiscal transfers. Which isn't going to happen as they are separate government entities. (Although the bailouts are a version of fiscal transfers, just hidden.)

  2. LucreLout

    No.... really??

    One of the purposes of digital currency is to prevent inflation - you can't print them. One of the main goals of a central bank is to create inflation - they usually have a target around 2%ish, like our own BoE.

    Surely I'm not the only one seeing an obvious reason why central banks wouldn't like a decentralised unofficial currency?

    I make no comment on the usefulness or otherwise of crypto coins.

    1. Brangdon

      Re: No.... really??

      Some digital currencies have inflation. The real purpose is for the inflation to be at a rate free from interference by humans. The reason being, whoever controls how new money is created has enormous power, and history shows that power corrupts eventually.

      Otherwise I agree. Central banks don't want to give up that power. They say they need it. They may be right.

      1. pklausner

        Re: No.... really??

        The central banks only create the actual cash. All the other money on the books is created by the commercial banks. The central bank interest rate just sets the incentive for them to grant credit aka create money.

        Cryptocoiners may not have noticed, but we are beyond simple token money, be it cowrie shells or bitcoins.

  3. c1ue

    Cross of Bitcoin

    Follow the Bitcoin Road

  4. Claptrap314 Silver badge

    Borderline FUD

    I'm not much of a believer in coin, but this is some pretty weak sauce.

    First of all, a great number of the coin hacks have been because people don't understand security. Wallets getting stolen, or their owner being threatened with catastrophic loss of blood, are not failures of coin in any meaningful sense. Exchange owners scamming out is nothing but old fashion commodities fraud. It's not until you get into exchange hacking and/or "smart" contract exploits that you are talking about anything particular to coin, and I would argue that most or even all exchange hacking is no different than hacking of any other commodity exchange being hacked.

    The difference, then, is almost entirely down to a lack of professionalism and/or threat awareness.

    The one remaining hacking issue is "smart" contract exploits. Yes, this is a big and unique risks. And it would be almost nonexistent if the safe arithmetic operations were cheap instead of the unsafe ones. So yes, Etherium has a serious problem because it failed to define a VM that was safe in default mode for certain core operations.

    I remain highly skeptical about the dangers of deflation for currencies that are divisible to the extent that most coin is. I think that the mechanics are quite different.

    Far more serious to me are the fact that these markets are so small & thin that they are highly volatile & easily manipulated. Furthermore, if they ever DO get large enough to be considered a threat to the fiat currencies, less than 1% of the US budget and you set up enough mining rigs to own a majority. Oops.

    Speaking of the fiat issuers, until you can keep the soldiers off your lawn by paying in coin, don't bet against the fiat currencies.

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