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The real solution is to let the receiver of the money have a "verify" button which will, if connected to the internet, contact a central server and check that no double-spends etc. have happened. Up until verification is done, the money shows as "provisional" in your account - but you can still spend it. Only one person in the chain needs to verify for the whole chain to become permanent.

Then the users and merchants can decide if they wait to click the verify button. And the default for anyone with data connectivity should probably be auto-verification. There is an incentive to verify, because if any double-spending has happened, the first to verify is the one who gets the money.

Double-spends will happen in any system that allows offline transactions, because a user has to be allowed to log into a new device (if they lose their old one), and there is no way to know if the money spent from their old device was synced to the server yet.

I get the idea, but I think this is a terrible UX. People shouldn’t have to worry about whether they have real money or not. Either the system is secure or it isn’t.

Eh, checks and chargebacks are a thing. People are already used to the idea that money has to clear to be real.

Not nowadays. Most people never deal with cheques and never accept payment by credit card.

> because a user has to be allowed to log into a new device (if they lose their old one)

You can solve for that by having short validity of the offline tokens on device and having that equal the cool-off period for reclaiming those funds when new device is provisioned. If I had ₹100 unspent tokens in my offline capable device that I lost, and got a new device provisioned the same day, then that ₹100 will show up in my account and be available to load on my device only after, say 7 days, of cooling-off period. In those 7 days, if someone who found your device could spend it and if so you lose it. If you know you are likely to be offline only sporadically for few hours and not for days, you can reduce the validity (and hence cooling-off period) significantly to just 12 or 24 hours.

I think this system has to be designed for some users who will never be online. Think of villages where there is no internet access yet (only 8% of Eritrea has access to the internet for example!). Hence there can't be a 'if you don't log in for 7 days you lose your money' mode.

Let me clarify: if you have you device with you (didn't lose the device) and you didn't make contact with another online device for more than cool-off period, your device tokens won't be refreshed and they will expire and become unspendable. You don't lose that money – it is still in your account and will be available for you spend as soon as you go online. The "lose your money" scenario is only if you lose your device and someone finds your device and spends the money on the device within the cool-off period. It is equivalent to losing your cash wallet and someone else spending your cash. Except in case of cash, that stolen/found cash is lost forever and is valid to be spent by the thief/finder forever whereas in this case there is a small time-window after which you automatically don't actually lose your money!

> Up until verification is done, the money shows as "provisional" in your account - but you can still spend it.

Who would accept "provisional money" though, if there is a realistic risk of it being double spent and therefore effectively worthless?

> Double-spends will happen in any system that allows offline transactions

Only if you assume untrusted devices. That's why in most past and existing stored-value systems, smartcards are being used – these have different security properties.

> Only if you assume untrusted devices.

If all the devices are trusted, but can be lost/destroyed and re-issued, you have the same problem.

There are ways to do reissuance for lost or damaged stored-value cards, but they require shadow accounts and periodic reconciliation: https://news.ycombinator.com/item?id=37380539

But these aren't mandatory: Physical cash also can't be replaced when lost, and only rarely when physically destroyed. That model might be preferred in some scenarios.

> Who would accept "provisional money" though, if there is a realistic risk of it being double spent and therefore effectively worthless?

It's up to the receiver whether they want to walk to the internet cafe and connect to verify it, or if they just trust the person they got it from.

> Then, when does reconciliation happen? When either party goes online?

In many existing systems, there's a split between "merchant" and "customer" cards, of which only merchant cards are allowed to accept payments. Merchants often have to go online once per day and batch-submit all of the day's payments in order to be guaranteed settlement.

Among other advantages, this allows for a "lost/stolen" card feature: If a user loses a card, that card can be denylisted on a global list synchronized to all merchant terminals daily. After another day of waiting for straggler transactions, it's possible to determine the remaining balance of the lost card from the backend, and reimburse its owner, since further funds on the card can no longer be spent anywhere in the system.

One day is essentially just an arbitrary timespan here – you could make it 14 days, or an hour. In the systems I've looked at closely, one day makes sense because these are historically transit-focused, and e.g. buses don't have continuous network connectivity, but do go to a depot in the evening, which is a good opportunity to clear and settle all of the day's payments.

Customer cards never need to be online in such a scheme.

If both parties are offline, exchanging cash trivially solves this problem.

:-) that assumes cash is trivial. It is not for so many reasons. Cash is bulky and discrete. Cash is visible and easily snatched/coerced from you.

Apart from classical robbery held at knifepoint or gunpoint and taken to an atm and being robbed or being blackmailed to actually do instant money transfer online which do happen, there are other lower threshold but more frequently occurring and more painful cash "thefts".

One eye-opening story I learnt a while ago was this: the women daily wage workers (or the household help that comes to my home) who are typically the breadwinners for the family are coerced by their drunk husbands to give their hard earned cash which they will waste on more alcohol or gambling. This was the situation for decades. Now, with zero-balance, zero-cost bank accounts being made available at scale in India, these women can now keep their money safe and provide care for their children by refusing to give money to their husbands (usually it involves telling them they don't have the money to give when in fact they do in their banks). Such is the social reality for so many.

cash also has a fantastic advantage that no piece of technology will ever have - its ability to level the playing field in terms of access. No government can invalidate your cash without simultaneously invalidating all cash. This is not the case with any digital system.

See here for one example where the indian state denied citizens access to their money by freezing their UPI accounts after unproven allegations. https://www.thenewsminute.com/article/bank-acs-can-be-frozen...

That doesn’t sound a lot different than “hiding” the cash. If she is working, the husband knows she is getting money.

I do not think the loss of privacy is worth the convenience when talking about replacing cash in a society.

I fully agree, but in fact stored-value cards offer a plausible path forward for private electronic money:

Most existing stored-value systems use "shadow accounts" for reconciliation (in case one of the card-level private keys gets compromised and makes it possible to "double-spend" electronic cash), but that's not really a required part of the system. If it's secure enough, it's possible to just leave these out!

It's probably also possible to create some kind of hybrid system which does create pseudonymous traceable logs which offer some trade-off between privacy and security, similar to how banknotes have serial numbers which can theoretically be traced, but practically mostly aren't.

And the enormous advantage of a privacy-preserving e-cash/stored-value system over cash is that it works on the internet too.

The story and the connection to bank accounts don't sound logical at all. It's not like the husbands wouldn't know that the money is there somewhere. If a random person can do to another person a "classical robbery held at knifepoint or gunpoint and taken to an atm and being robbed or being blackmailed to actually do instant money transfer online", why wouldn't husbands catch on to this? The women could, in theory, have more than one bank account and hide how much they earn and save by keeping a lower balance in the account known to the husband. But the same could also be done with physical cash by handing a chunk of it to a trusted person (for expenses and savings) and keeping a smaller amount at home to be snatched.

With one or more bank accounts, the woman must now keep her phone safe and inaccessible from the husband too. Or she must be very quick and diligent in deleting all the SMSes sent by banks for all kinds of transactions. This adds more hassles than saving cash with someone else.

In all the cases of alcoholism and men snatching money from the women/household without any other care, it's violence that keeps that relationship and "contract" alive. That violence isn't going to disappear just because physical cash is replaced by a bank account.

In summary, I don't buy the conclusion you've quickly jumped to.

I don't quite get the example, like the other user said in this case the husband would clearly understand his wife is still working, so of course he won't believe it? So if he has a alcohol and gambling problem then he will still try some method?

>For open systems like UPI we have recently introduced offline payments capability with very small stored value stored as tokens on the mobile phone and used for very small transactions.

Sounds interesting! I read about India's UPI for the first time a couple of months ago in an Economist article: https://archive.ph/WoqQp

> Then, when does reconciliation happen? When either party goes online? What if it is not a closed loop system? Then, reconciliation needs to happen for both parties independently. How long can either

You can solve that by actually having the money in the device so that reconciliation is not required, digital cash like the abandoned Mondex stored value system.

Please don't scorch me HN, this isn't an endorsement, just a question for thought -- but isn't this one of the things Lightning is sort of meant to solve?

lol, literally less than 20 seconds.

> Then, when does reconciliation happen? When either party goes online? What if it is not a closed loop system? Then, reconciliation needs to happen for both parties independently. How long can either party stay offline and continue to make transactions? Is it both send and receive or only send on one side and only receive on another side? What if one party (merchant/receiver) is more likely to be online (almost always). Does it just become online payments problem then? NFC tap and pay is exactly this scenario.

Again, literally the exact problem statement and value proposition of Lightning, but stupid, stupid me for daring to mention it here, I guess. Feel free to ignore that the idea behind Lightning could be useful without being tied to crypto, but can't possibly have a conversation about that. Nope.

>but can't possibly have a conversation about that. Nope.

What conversation? You just dropped in here with flamewar bait and complaining about some self-imagined persecution without contributing any substance. Hence your comment is now gray.

they didn't even explain what they were talking about. Where I'm from, lightning is an electrical discharge weather phenomenon usually accompanied by thunder

No, not lightning. If anything, it would be something like this: https://blog.gridplus.io/the-phonon-network-59835328b799

Thanks for at least offering something interesting. To be honest, the state of crypto is past what I can keep up with, but that gives me some concrete foot-holds to look into Phonon vs Lightning more.

thanks!