I don't know too much about the topic domain, so for those who do, what would be required of a purely digital currency to be a good candidate for a national currency?
But a purely digital currency need not be a distributed cryptocurrency with a limited supply like Bitcoin.
From electronic transactions with the Fed down to direct deposits and debit and credit card purchases, US currency could function without paper bills already.
But that's nonsense. If anything a sovereign digital currency would give governments even more fine-grained control over the money supply.
Of course governments shouldn't use Bitcoin, but a sovereign altcoin is a very interesting idea.
Sure, they couldn't use Bitcoin itself, but in a hypothetical world of government-backed cryptocurrencies Bitcoin would be more of a reserve commodity, like gold, than a circulating fiat currency.
A sovereign cryptocurrency without that limitation might be an interesting alternative to cash, but the bulk of our money couldn't be in a "hard" cryptocurrency unless we also eliminated fractional reserve banking.
(Why? In short, with fractional reserve banking, the total value of everyones checking and savings accounts is far greater than the supply of currency, whether paper or crypto.)
But the real hallmark of FRB is that banks only need hold in reserve a fraction of their depositors' account balances. I don't see how CC would change that requirement. As scary as FRB is, without it lending would be a much, much more limited activity.
Money is funny - it's just an IOU. An IOU blown up to massive scale, obviously, but since a business sets the price of something and the market determines if it fits well in to a tradable value comparison, then I don't see how a digital IOU is any worse than a paper one, considering how little that paper is worth when everyone decides it has no value.
And let's be honest. If the value of paper can crash when people agree it has no value, it's just as easy for everyone to agree gold isn't worth a lick either. So in the end, we're just choosing a representation of an IOU we all agree upon, and if that's paper, rock, or digital (or 4 ton coins [0]) what does it matter, in the end?
(This all presumes some degree of safety in CC - with the recent value of Bitcoin thefts, people would ditch it really quickly on a national scale.)
/rambling
> But the real hallmark of FRB is that banks only need hold in reserve a fraction of their depositors' account balances. I don't see how CC would change that requirement.
My question is, what will a CC replace? If the answer is all cash and electronic transactions, will there be enough CC, with FRB? If the answer is simply cash transactions (already limited), what's the point?
In fact, you could probably utilize the increase in the money supply in much more productive ways than the current system, which primarily benefits banking institutions.
what if Keynes is wrong?
For a fiat currency to work, there must be faith in the currency and the governing bodies that support it. The US dollar used to be tied to the price of gold and silver, then later entirely to gold, then it was turned fiat in the Nixon years.[1]
BitCoin, in particular, does not allow a central bank to "print" currency (which is a tool used to control the inflation rate). Without the ability for a central bank to regulate the creation of a fiat currency, there would eventually be an erosion of faith in the currency. Alternatively, a digital currency could be tied to a gold silver / other commodity standard, but then it's not much different than any other commodity.
The Canadian bank is experimenting with a digital currency, but it won't replace the paper+coin currency, only augment it.[2]
[1] https://en.wikipedia.org/wiki/Nixon_Shock [2] http://business.financialpost.com/2013/09/19/canadian-mint-p...
No traditional nation-state will _really adopt_ a crypto-currency unless it bakes in some ability to seize or inflate it's subject's currency. If that exists in their desired crypto-currency then, of course, no one will ever use it without the threat of violence. Catch-22 for modern nation-states.
Except that they do. All the time.
Because governments are not evil machines that only want to steal your money. That's just a Dunning-Kreuger / nutjob interpretation of reality that is often repeated by a certain kind of broken individual.
Governments are not evil machines. They're machines staffed by people and people do what people often do: follow the laws blindly because "it's their duty", exploit the existing laws to their advantage "because it's legal", and craft new laws to monkey-patch the flaws in older laws "because it's their job." When two opposing groups of people disagree with each other, they resort to theatrics and name-calling and the machine kind of idles in its current state. The machinery isn't evil and the people aren't evil. This is just how the machine works. If the people operating the machine decide it needs more of a resource, they'll try to get it by any any available means to keep the machine running. Their job, and belief in the machine depend on it. Whether or not the machine gives the world "a better place" is a coincidental side-effect of the machine that happens often, but not always.
Adopting a crypto-currency would give this machine less control over resources because it would either have too much transparency (no black budgets or quid-pro-quos) or perfect opacity (no ability to seize funds from victims or punish criminals financially).
Elections do not change the machine except in the sense of an oil-change--to optimize its continuous operation. The machine is never replaced. And people who do not believe in the machine are always attacked by the operators with a vested interest in the machine... a certain kind of broken individual.
And thus it naturally follows that you shouldn't have to pay taxes. Isn't that convenient?
(I think this formulation was originally conceived by anarchists, where it is at least logically consistent, but tax protestors and some libertarians have adopted and deformed it into a convenient catch-all for "anything the government does that I don't like is ZOMGviolence.")
But in general, "monopoly on violence" is a legitimate concept and I think it's a requirement for a state-sized group of people to live in (a relative) harmony. You need to have some means to enforce coordination or else people get trapped in various destructive behaviours.
"Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density"
This holds for other political and economical ideologies as well - they may have some good and important points (that's why they gain followers), but ultimately pure theoretical models rarely work well when applied to the complexities of the real world. One needs to remember that and see places where tradeoffs are needed to be made.
[0] - http://www.antipope.org/charlie/blog-static/2013/12/why-i-wa...
Power exists. Violence exists. Both are independent of whether or not they're manifested in a state. Arguments to the contrary collapse into tautologies.
Humans like physical objects even if they're worse, just ask any vinyl record enthusiasts to explain why they like vinyl and you'll see this dynamic.