Digital Currency

Michael L Torrie torriem at
Mon Jul 2 11:20:47 MDT 2007

On Sun, 2007-07-01 at 23:50 -0600, Daniel C. wrote:
> I just finished reading Cryptonomicon for the third or fourth time,
> and it's got me wondering (again) about how digital currency would be
> possible.  He talks a lot about how "strong crypto" can enable you to
> have digital currency that is unforgeable, but I've thought and
> thought about it and I just don't see how it's possible to issue a
> digital, transferable document that you couldn't just make a copy of,
> thereby doubling the amount of this currency that you own.  Is digital
> currency really possible, or is it purely a product of Neal
> Stephenson's imagination?

I think we have digital currency already.  And it's unforge-able for
reasons that have nothing to do with encryption.

If I recall from my Econ 110 class, currently in our economy only 1/3 of
the cash supply is actually created by the government.  The rest is
created by banks and institutions in non-tangible form.  In fact I was
recently told that the US government has only $500 billion in cash in
circulation that supports an economy of a dozen trillion dollars.

So really we already have digital currency.  There is no cold hard paper
cash, and no gold bars, that back up my bank accounts.  It's nothing
more than some number in a computer.  When I make a transaction, an
encrypted protocol transfers a number.  So one could argue that credit
cards and bank cards are already de-facto electronic cash.  Basically
Visa is the digital currency vendor.  While credit card fraud is
rampant, Visa itself has never up to this point lost digital money nor
created more, because it is in their interest to prevent this from
happening.  Certainly hackers could and probably have mess with Visa's
transactions, but Visa always fixes things, even to their own loss,
because it is expedient to do so.

I know this doesn't really answer your question, though.  But I guess
what I mean is maybe the specifics of encrypted digital currency aren't
that important.

> Thanks,
> Dan

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