Ecuador becomes the first country to roll out its own digital durrency | Hacker News Reader

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

cnbc.com

108 pointsprostoalex48 comments

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

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

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).

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.

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.

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.

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.

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.

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.

Yeah, I have difficulty understanding this too. In what sense is USD not a digital currency? The vast majority of USD exists only in digital form, albeit it is exchangable for physical currency. The vast majority of USD transactions take place purely digitally. To be sure, the implementation is not as nice as some people would expect, as not every bank has a convenient/free/cheap way to send currency to other individuals (though plenty do).

Is "digital currency" just a buzzword? A misnomer referring to cryptocurrencies?

I think people just fundamentally misunderstand money. USD is "real" money and Bitcoins are "fake" money. They use other words instead of "fake", such as "virtual" or "digital", but the intent is the same: it's not as valid as USD. The actual details of how the money works across the internet are not under scrutiny. What people seem to convey with words like "virtual" and "digital" is distrust: this is not as real as USD.

This sort of distrust with new methods of currency is not new. Bank notes were viewed with suspicion and not as real as coins when they were first introduced into Europe from China.

It's 'fake' in the same sense that 'investing' in say, trading cards or some other good mostly backed by the interest of the public to buy it is. In fact, it's very much like stock for quantities of stock too small to have a meaningful impact on corporate operations.

What is backing USD or any currency other than the interest of the public? It's not like any country gets to dictate to other countries how much their money is worth.

Taxes back fiat money.

More generally, currencies are backed by demand for that currency. A lot of that demand is ouroboros-style circular demand of two kinds: (a) shops demand the currency for their goods because their suppliers and employees demand it, who in turn demand it because shops demand it; and (b) people have loans because somebody else demanded currency, and now they will be subjected to demand for a longer time period.

Taxes are special in that they create an outside demand for the currency, so they act as the bootstrap and anchor of this whole demand cycle.

Also note that the sibling comment by jzwinck is confused: the Swiss central bank decided for some time to put an upper bound on the value of the Swiss franc. This is easy because they can always create more Swiss francs, and is irrelevant to your question.

Here is the official document from the Swiss government wherein they dictated to other countries how much their money was worth: http://www.snb.ch/en/mmr/reference/pre_20110906/source/pre_2...

This became news several days ago when they let their currency float again, resulting in a jump in its value and the ruin of multiple firms involved in foreign exchange trading.

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

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).

> 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).

$3000 dollars is a ridiculously low amount when it comes to trusting a bank. Deposits up to 100000$ 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.

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.

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

And I'm not going to my faith in the state to guarantee my assets because between my bank and bitcoin, I can (and have) read the source, the implementation, and the algorithms behind the security, whereas with my bank, I have no access to the software they use, to the procedures they use to secure my funds, or have any reason to trust the people in positions of power in the bank regarding my money. I'd much rather put faith in the mathematics I can observe and reason about than the behavior of an entity who wont' tell me squat about how they operate.

That, and the fact they are using terribly implemented mass produced web sites and apps to access critical bank details do not give me any faith in their actions. Individual bank entities are mingling in software intimately on the consumer facing front in ways they have been for decades on the backend but never have they been software companies and from my engagements with banks (I've talked to several local credit unions and regional banks about security and potentially working on contract to fix their broken web portals when I find loopholes) the decision makers are not computer literate or competent in the slightest. They deal in effectively informational data without any desire to invest or put effort into actually knowing what they are doing, and it is incredibly dangerous.

Given the long history of computer security, there doesn't seem to be a very strong correlation between "smart person believes code X is secure" and "code X is secure".

Of course, you can inspect the code that keeps your bank account safe. It's not source code, it's legal code. In particular the FDIC is a pretty well understood institution. It has been around 81 years this point, and despite many bank failures, it has never failed to make good on its guarantees. Consumer finance regulations are also publicly available and well tested.

Banks have terrible security, it's true.

But you don't lose your dollars when they get hacked.

You do lose bitcoins in a hack.

>faith in the mathematics

All the mathematics do is keep your money from disappearing in the situation where there are no security breaches. I'm confident enough in the bank+FDIC to do that.

So how exactly do you steal bitcoin out of a password protected wallet, when I have never written the password anywhere, it is "reasonably secure" (no dictionary, mixed notation, 16+ characters) and it is encrypted AES-256, which has not been cracked yet? I'm not talking about online wallets which are just as untrustworthy as banks unless they FOSS their implementation, and even then you are trusting their system administration, especially if they keep backups of your password and thus have access to the contents on their end.

Virus on your computer as you type in that password.

I'm wondering how I'm going to get a virus on a curated Arch installation without usb autoexecute, also considering its on my office and usually locked, behind two firewalls without any inbound ports default open. They would need to get an executable on my system - shell or not - somehow give it executable permissions (which reminds me, there really should be some mechanism in almost any file transfer protocol to deny-execute on downloaded files so users need to manually allow it), run it somehow, and have it running when I'm accessing my wallet, via somehow injecting itself into an autorun mechanism. And I have PAX disabled access to xinitrc, bashrc, bash_profile, ~/.config/systemd, ~/.pam_environment, and ~/.config/autostart.

I'll take my chances. If I heard of wallets getting keylogged, I'd just access my wallet via a TTY without my desktop running without any user autostart configuration. It is also a partial advantage that X is horribly implemented and since the window manager grabs the keyboard, you need to exploit the window manager to listen to keystrokes like that, if you deny /dev access to keystroke polling. I think it gets even better in Wayland where the system compositor controls keyboard access, so you can stay diligent in only passing keystrokes to the actually selected application, and take steps to avoid situations like false frames over the GUI login prompt that passthrough keystrokes from an invisible keylogger (I'm not aware of if thats even possible on X or Wayland, though, should look into that).

What program are you using to make the actual transaction? It needs knowledge of the blockchain, is that coming from another computer or is it connecting to the network? A firewall isn't going to protect you in the latter case.

I would want a nearly completely airgapped machine before I would be comfortable using it to self-manage significant quantities of bitcoin. Maybe feed blockchain info over a one-way serial cable. Definitely no disk sharing.

With a bank I know that a hack might happen but nothing is irrevocable. If they want to use bad security it only hurts their insurance premiums.

>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.

Exactly. Why would I think _I'm_ better at security than professionals who have spent years getting good at it? The past year has shown us that even the professionsl who have spent years getting good at it make major mistakes -- but that doesn't mean I'll make fewer myself!

To me, it means I'd never trust a significant portion of my wealth to computer security, with no recourse if the computer security fails. What's different about my money in a bank isn't just that it's professionals doing security (I dont' think bank IT is very good), it's that if it gets hacked, that's not the end of the story I'll probably be made good for it.

> 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...

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.

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.

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.

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

It is the title tag of the original document.

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

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

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. :|

If that were the actual case, "digital durrency" would be horribly redundant. Just a typo IMO.

Interesting, I completely missed that.

digital currency = durrency?

I'm stealing that name dibs!

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).

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.

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.

Countries that don’t have a currency of their own

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

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

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

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 ;).

> "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.

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