Sweden’s central bank says it has begun testing an e-krona | Hacker News Reader

Sweden’s central bank says it has begun testing an e-krona

reuters.com

77 pointspseudolus76 comments

> The pilot will run until February 2021 and will use block-chain technology, the Riksbank said.

Will it really?

Riksbanken can have a central server to resolve any double spends, which is only really a problem in a decentralized network. Once you have a singular authority you can just let them decide, and you'll have no need for an inefficient cryptocurrency.

> which is being developed by consulting firm Accenture

Accenture is quite famous for developing bullshit solutions for made-up problems, so I guess this is a good fit for them.

> The sharp decline in the use of cash and competition from alternative currencies, such as Facebook’s Libra, has also prompted central banks around the world to consider issuing their own electronic currencies.

This is poor reporting, as e-krona predates Facebook's Libra, which is still far from being launched. They probably mean the perceived competition from Bitcoin.

It's buzzwords being thrown around again. Blockchain is highly inefficient for anything other than decentralized consensus.

For sure, doesn’t seem like there’s a need to solve for adversarial Byzantine style attacks here. Even a permissioned proof of authority blockchain is overkill for this (which is most likely what Accenture is building/configuring for them)

Maybe the blockchain is meant for "offline" transactions, when neither part is in contact with the Main Server.

Disclaimer: I dont know

Blockchains are highly inefficient for decentralized consensus as well.

But they are the most efficient known solution to the problem. Efficiency is relative.

No, they are the most efficient known solution to global consensus for double-spend. There are alternatives that relax the constraints using extra information such as connections in the network to get a relatively good approximation of the global consensus. See Safecoin, for example.

Are blockchains inefficient if you’re not using proof of work? I thought it was the latter that was a source of inefficiency, and you don’t need PoW on a permissioned network.

If you're not using proof of work, blockchains start to look more like distributed storage with an audit trail and immutable row level db constraints

- if it's a Proof of Authority is like a way to deal with who has access to write to the db

- the distributed consensus part is well researched (Raft, Paxos etc)

The only advantage that I can think of is interoperability: you will be able to communicate with the public blockchain for point in time "backups". Also, building your internal smart contracts you can use an existing language like Solidity.

Even if you use some other consensus mechanism they're still inefficient. All full nodes in the network still have to propagate, validate and store all transactions forever.

This is indeed much more inefficient compared to a centralized solution and it's very difficult to create a decentralized network that can handle the amount of transactions that VISA processes for example.

It seems inevitable that when the buzzwords wear off some executive will ask "So we have this central server we trust right? Why not just use that?"

Nah, they'll just kill the project when it fails and move onto the next buzzword

External Auditing. I can't audit the central bank's server but I can audit the publicly published blockchain.

This can be solved by making all ordinary transactions public. Blockchain is not needed in 100% of the cases when central authority is in place.

There is a difference between deciding all transactions will be published and making them public by design constraint. Blockchains make transactions public by design, and this design cannot be easily subverted by the people running it.

Not really. Ever heard Monero or Zcash fe?

I certainly have. But this system is not designed like them.

All transactions in both Monero and ZCash are public, and we can verify that they're valid.

But what we cannot do is see all transactions details, such as the transaction amount.

These are two different things.

> There is a difference between deciding all transactions will be published and making them public by design constraint.

In a "blockchain" with a centralized validator set, there's no constraint forcing transactions to be public. The network will keep running even if the validators decide to stop publishing transactions. It's very much still a social contract.

Tampering (adding false transactions) is the only thing that could be hampered thanks to the requirement of client signatures: transaction/partial information censoring will still be possible. But in reality such a system will have the design constraint that funds must be seizable by the government, which in turn negates the only remaining technical advantage of a "centralized blockchain".

All that's left is the now empty word "blockchain". It's going to fit perfectly next to "democracy".

Right, but users would know when a secret transaction has been added. And no, your example does not negate the only technical advantage. Governments are not the only entities that might tamper. And most importantly, a blockchain forces even government tampering to be transparent, whereas a private database does not.

Yes, it's less black and white than I suggested, but the improvement is still a minimal increment compared to what someone would expect when hearing "blockchain". I guess I'm afraid the public record would just end up looking like this:

https://upload.wikimedia.org/wikipedia/commons/0/09/Redacted...

with citizens unable to discern between abusive and reasonable interventions.

> Accenture is quite famous for developing bullshit solutions for made-up problems, so I guess this is a good fit for them.

Came here to see what consulting firm was behind this tomfoolery.

Problem with a central server for money is that it makes the whole state vulnerable. If everybody use central bank e-currency you can just attack their sever to destroy the flow of all money.

But if it is distributed like real crypto currency, you have to be able to attack and take down hundreds or thousands of severs geographically spread.

I don’t know why your comment is being downvoted. That was my understanding as well. A distributed ledger is much harder to tamper with, which is why “blockchain technology” is actually a reasonable solution to this problem, IMO. I am open to being proven wrong, though

I did not downvote him, but a cryptocurrency is only tamper proof because the entities that decide the rules are distributed (in Bitcoin it's the miners who extend the blockchain). So to being down the Bitcoin network you need to bring down all the miners, which is basically impossible.

But here there's only a single entity that decides the rules. So if you shut down riksbanken's servers, the servers that are deciding which transactions are valid, you essentially shut down the network.

Sure you can have thousands of servers around the globe sharing the last seen state or new but not yet verified transactions, but that's not a very useful network. They would instantly be discarded once riksbanken's servers come online to sort out the mess.

You can have this problem in Bitcoin too, if you isolate a majority of the miners from the rest of the network, essentially splitting it in too. But that's much harder to do.

Edit: Here I refer to deciding double spends, which the critical problem any digital currency needs to solve. Without it anyone can print money out of thin air.

I don’t disagree with you, but central server for money is what we have had since the beginning of time right? We have central banks, where banks have cash, and and central securities depositories, where they have their securities.

Yup, this is nothing new.

When one of these banks inevitably gets hacked, we're talking billions stolen overnight.

Part of the appeal of Bitcoin was it's decentralized authority, giving people more confidence in a currency that was digital.

> Once you have a singular authority you can just let them decide, and you'll have no need for an inefficient cryptocurrency.

Unfortunately the mass of confused language around blockchainism has made its own miniature political weather system, and consequently there is a growing niche for such Potemkin Decentralization models.

I would even buy the argument that all decentralization models turn out to be mere smokescreens that misdirect the focus of critical attention on to one aspect of a complex system, only to obfuscate de facto centralization accumulating in a different part of that same system.

By the time this concentration of leverage has become too dominant to hide, the new Potemkin Decentralization system has made serious inroads into the incumbent it seeks to displace.

I believe Riksbanken want it to be decentralised though. They don’t want to have to bother with Know-Your-Customer stuff. I believe they don’t want to have to store personal data. At the same time they don’t want it to be anonymous.

That’s why a solution where the commercial banks drive the chain, and keeps the KYC, allocating “anonymous” blockchain addresses, or accounts at the riksbank, has been proposed. The customers bank know the customer, the Riksbank does not. But the Riksbank, can still issue interest directly on the currency directly to the customer.

There are several ways that the nodes, or commercial banks, or whoever it might be, can make the whole think pseudo-anonymous for the customer. Would also let commercial banks offer services around it, making it easier to get the banks on board.

> Once you have a singular authority you can just let them decide

There are still a few benefits of crypto here:

- the “service” can stay up even when gov’t servers go down

- you can even make some transactions without network access at all

- transparency about money supply

My company’s suggested implementation made it to the second round of proposals. Unfortunately we are not involved any more.

There are some serious challenges that needs to be ironed out. Two that comes to mind is how to solve offline payments, the other one is how to live up to the requirement from the government that the currency needs to be liquid also during a crisis (what if electricity or telecom doesn’t work?)

The Riskbank have had a hard time steering towards the inflation goals. Cutting the commercial banks from that chain, and giving interest, for example, directly on the currency, would make The Rikabanks job a lot easier.

> My company’s suggested implementation made it to the second round of proposals.

If you don't mind me asking what company do you work for? I am actually studying computer science (security and privacy emphasis) at KTH in Sweden and I have been interested in CBDC for some time now. If your company offers master's theses I would love to connect on LinkedIn or via email.

> the other one is how to live up to the requirement from the government that the currency needs to be liquid also during a crisis (what if electricity or telecom doesn’t work?)

This is the first thing I thought of when reading the article. Since you seem to have some knowledge about the field, what are some proposed solutions to this problem?

The article mentioned something that I find particularly interesting:

> Sweden is the least cash-dependent country in the world, making it a litmus test for how central banks can react to people using less of the money they print.

To be honest I had my suspicions that this was the case. Anecdotally, I have lived in Sweden since August of 2018 and I cannot recall a single time where I have carried cash in my wallet or used cash for a transaction in Sweden. If I am not paying with a credit/debit card I usually just use Swish (similar to Venmo or Cash app for US readers, except it's operated by several Swedish banks and I believe the Swedish central bank).

> If you don't mind me asking what company do you work for? I am actually studying computer science (security and privacy emphasis) at KTH in Sweden and I have been interested in CBDC for some time now. If your company offers master's theses I would love to connect on LinkedIn or via email.

I might have the same employer, and the kind of company we and Accenture are don't primarily focus on this tech, but usually have a wide variety and ever changing list of options for a masters thesis.

How do those without bank accounts like tourists or the indigent operate in this "cashless" system?

Tourists tend to have cards and use them.

The poor people have bank accounts, because if you're poor and getting some gov't assistance, that gets transferred to a bank account (I mean, how else? No non-financial institution or gov't agency is going to employ tellers handing over cash directly, they all use banks for that, and checks aren't used); it's general EU policy that basic financial services (bank accounts, bank transfers, electronic bill paying, card payments) should be available to everyone including the very poorest. Even a homeless, unemployed drug addict would be expected to have access to these services.

I appreciate the insight. Regarding offline payments: Isn't the physical Krona exactly just that? Why is a new solution for this required?

I couldn't help but chuckle at the two typos (Freudian slips?) of Riksbank: "The Riskbank" and "The Rikabank" (bank of the rich).

Kudos to the swedes for working methodically to try to find a way for the central bank to issue digital money. They have been working for a number of years on this and seem to be thinking effectively about all of the issues involved.

One of the reasons that most interest me in this type of digital money comes from its use by the government itself within its various branches. Moving the financial accounts of the government from internal systems to a public blockchain potentially opens up the government accounts to public scrutiny in a way that has not yet been possible. This offers a potential for transparency which matters less, perhaps, in Sweden, than in other governments around the world.

As a historical fun fact, Sweden was also the first country in Europe to adopt paper money. They needed more currency but didn't have access to the Americas and its precious metals to mint coins.

Currently, 1 US Dollar is worth around 10 Swedish Kroner. Both currencies ultimately started out equally at 1oz silver, but since Sweden could easily just print more, they couldn't contain themselves and caused a 4x inflation in the 1700s (the other ~2.5x is since WW2).

> Kudos to the swedes for working methodically to try to find a way for the central bank to issue digital money.

Can you elaborate what you mean by digital money? My understanding is that vast majority of money issued by central banks is already digital.

Sweden is moving unusually rapidly to a cashless (or near cashless) society. A lot of countries are seeing big increases in the use of digital payments but generally not big decreases in the value of cash payments although that may well come eventually. In Sweden it's already happening.

Like most central banks, the Riksbank runs 2 credit risk free payment systems: one that supports commercial banks and another, cash, that supports both companies and the general public.

The central bank's relationship with commercial banks isn't really affected by this initiative. However, the thinking is that a credit risk free payment system for the general public is still valuable for the reality/perception of a stable financial system.

If cash (effectively) goes away then so does the second payment system. What the Riksbank are doing is looking at alternatives that have the payment system properties of cash but in a digital form.

As I understand it, they're looking at a couple of models. A digital cash equivalent i.e. mostly anonymous peer to peer. And an account balance based i.e. central banking accounts for joe public.

It's interesting work and, in my opinion, likely to be followed closely by other central banks as I'm sure they are predicting similar dynamics in the next 20-30 years.

You are right, of course, that most of the accounts at the central bank are digital. Also, 'money' is a loose term and 'digital money' much more so. I used the term loosely since fully defining it would take a lot of time and space.

The difference of the initiatives, such as the 'e-krona' project, comes from central banks asking themselves whether the public at large could have an obligation, direct from the central bank, in digital form. Most cash is an 'obligation' to some central bank, a guarantee backed by them. Yet no individual citizen can hold a digital account with the central bank. A natural question is 'why not'? Up to now, it has been mostly practical, that the bank did not want to have to run a retail system. The rise of digital currencies has opened a new possibility: the central bank could run the system and not need to run retail operations. Thus, the research and experiments.

This headline is goofy. Central banks have been using digital electronic currencies for decades. The difference is that now they want to include all Swedes in the electronic currency system, not just Swedish banks, as they have been for decades. (And the claim that this uses "blockchain technology" is just a lie; it's a centralized database. It's no more a blockchain than Git is.)

I think this is a terrible idea given both the current appallingly bad state of unintended vulnerabilities in computer security and the appalling intended security vulnerabilities inherent in centralized architectures like the one they're proposing.

Git is somewhat like a blockchain though

Without proof of work

The term you’re looking for is “Merkle tree”. Git and Bitcoin are both Merkle trees.

having proof of work or not is orthogonal to whether it's a blockchain or not. see: blockchains for proof of stake cryptocurrencies.

I think a lot of non-technical business people and journos didn't fully understand that the Bitcoin blockchain is more than just a Merkel tree, and so have started using "blockchain" to mean a bare MT, despite the fact that the blockchain in Bitcoin is only meaningful because of how it's computed.

So maybe proof of work can be replaced, but without some consensus protocol it's not a blockchain in any meaningful sense.

"Merkle graph" may be a better term, since both Git and Bitcoin may have multiple hash references to the same node [in some sense].

I pretty much agree that "some consensus protocol" is probably the right place to draw the line. I'd add "decentralized", in the sense that no single entity can control the "consensus", which I think may be what you mean: "some decentralized consensus protocol".

Most of your money is already on a centralized architecture of you are using a bank. But I agree that a decentralized system would be preferable.

However I can see a benefit in electronic money becoming a public utility rather than being controlled by private companies trying to extract rent.

Visa and MasterCard engage in massive rent extraction.

Would have been nicer with some form of robust international system for money transfer and exchange where middle men could not nickel and dime you the whole way.

> a decentralized system would be preferable. ... a public utility rather than being controlled by private companies ... Would have been nicer with some form of robust international system for money transfer and exchange where middle men could not nickel and dime you

Well, in fact, the system you are describing has existed for 11 years and inspired the Swedish system being discussed here; presumably the attributes you are wishing for are precisely the ones that they want to eliminate by creating their own private system instead of just using Bitcoin.

(And of course currencies have been digital, as opposed to analog, for thousands of years, and one of the leading hypotheses on the origin of digits as a way of representing numbers is that they were used for accounting. "Digital" is not simply a synonym for "electronic"; rather, it's the practice of representing numbers or other information as sequences of discrete, arbitrary symbols, rather than continuously varying quantities of something like weight, width, or voltage; symbols such as "4", coins, or cuneiform glyphs.)

This effort betrays a supreme misunderstanding about what makes Bitcoin important.

"Blockchain technology" is not what makes Bitcoin revolutionary.

Bitcoin is censorship-resistant electronic cash. It's teleportable currency - without a deplatforming option.

That's the innovation.

What Sweden is engaging in is a cargo cult. Build the blockchain runway, hoping the planes will land. They won't because they have no reason to.

Censorship-resistant money is a direction no government will pursue voluntarily. The reason is simple: censorship of transactions will be demanded by a ruling class indent on "doing something" about drugs, terrorism, and rogue states. Some governments may be forced to follow the censorship-resistant direction by market forces, but that's probably far off from today.

Bitcoin is also valuable because the rules of the system are transparent. The rules of the system cannot easily be changed without a majority concensus.

In regard to censorship resistance that becomes somewhat of a struggle because Bitcoin transactions aren't truly anonymous and now there are various companies working to deanonymize users. This means you can still be persecuted for your bitcoin activity. I've been shifting towards privacy coins like monero for this very reason.

Why is this getting downvoted?

Some people really don't like cryptocurrencies

Is it just pure hatred ? There don't seem to be much arguing going on...

My theory is that the nerds on here who spend too much time in the financial fun house become imbibed with the ethos of it. It's really a sad end to a lot of idealistic young hackers who give up on changing the world in order to defend their fancy new stock portfolios. The joke is ultimately on them however, as everyone who trusts wall street eventually gets taken to the cleaners.

Because it isn't relevant and e-krona has nothing to do with bitcoin, certainly isn't trying to beat bitcoin. Neither is it trying to solve the same problems as bitcoin.

They are not building it to be censorship-resistant. They are building it to be a public alternative to commercial digital payment services.

That's actually his whole point!

All these banks and financial institutions launching digital currencies miss the whole point: FRICTIONLESS transactions. Right now you have layers upon layers of network companies nickle and diming you. This is literally someone taking a penny from everyone’s account except it is a lot more than that. There’s absolutely no reason for Mastercard and Visa to even exist in 2020. They’re sitting on top of some obsolete imaginary network collecting rent.

Isn't that the point though -- that the issuer of currency should manage the system? It should simply be part of the currency just like physical cash is.

Seems like this is exactly what we need then?

The issuing banks provide credit and insurance, and quite a lot of effort in the system goes to anti-fraud. Especially for online payments.

It used to be that way but with all the data available to us now, managing fraud isn’t as difficult as it used to be. Definitely not to the tune of 3-4% both ways combined in many cases.

EU fees are capped at 0.2 per cent of the transaction value for debit cards and at 0.3 per cent for credit cards. Americans presumably are getting ripped off for the usual "free market" reasons.

(Not counting Amex cards, which take 3% off the merchant and hand most of it back to the customer)

Isn't SEPA free for retail bank customers?

The blockchain technology that will be used in this pilot is apparently R3 Corda : https://www.corda.net/

Sorry if this is naive, but how is this different to electronic currency? The whole difference between cryptocurrencies and electronic currency, is that cryptos are decentralised and have a public ledger.

A CBDC (central bank digital currency) does not have a public ledger, and is not distributed. If they are using a blockchain internally (an entirely pointless concept done only for the addition of a buzzword to their webpage), that doesn't make it a crypto in the currently known sense.

So I ask again: how is this different to digital/electronic currency that already exists? I can open my bank app, check the funds, send them to another person instantly. None of that involved paper, and all of it was backed and controlled by the central bank. What makes this any different?

Since currency is de-facto already digitized, and everyone does everything electronically, how the h is an e-currency different from what's already there?

I guess one advantage is that now every marketing company/institution can analyze the entire flow of money within the country.

The blockchain was not meant to solve the problem they are trying to solve.

We already have digital currency and it works quite well.

I really have no idea what they are doing.

https://xkcd.com/2267/

Big Data and banking - I think it's the best combination! And thta's also what the author of this article thinks: https://devsdata.com/big-data-financial-services/

Why not something like GNU Taler[1]? It's a centralized digital currency with privacy for the payer at its core, but payees are always identified (very useful for taxation purposes). That sounds like exactly the use case for a government entity that wants a digital cash replacement.

- [1] https://en.m.wikipedia.org/wiki/GNU_Taler

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