Cash or Blockchain?

There is an interesting article in MIT Technology Review which says that “More and more security holes are appearing in cryptocurrency and smart contract platforms, and some are fundamental to the way they were built.

That does not surprise me. If the blockchain can be built then so indeed can it be unbuilt or subverted. It is like any man made system – logically always able to be unmade by man. Certainly vast amounts of electricity are required by computers to make the blockchain, but these are also used to undermine it  –  just as the street bank robber asked why he does it, replies because that is where the money is, this is a logical necessity. There are also many other technical and practical difficulties with the system, which are explored in the article linked to above.

The blockchain is not a solution to anything and if Central Banks suggest it is they are are very wide of the mark.

Some Central Banks – notably Sweden  – have allowed a near cashless society. This in my opinion, just gives money to Visa and Mastercard – a prosperous duopoly.

And as Professor Richard Werner suggests:

Among the reasons why cash suddenly needs to be abolished are the usual arguments, such as that criminals may be using cash, or that electronic money is more ‘efficient’. Some media even claim that people are annoyed in queues when someone pays with the more cumbersome cash, instead of the faster plastic money. The truth is of course the opposite, although the recent introduction of contactless debit cards in the UK, which only need to be waived at the card terminal for payment, have speeded up the payment of petty transactions compared to the usually much longer processing time for debit cards compared to cash.

And this is taking no account of the European Central Bank’s sometime desire for negative interest rates which when there is no cash is oh so easy to institute…

The RSA has put in a forceful word for cash, too:

3.4 million people in the UK rarely use cash, but 2.2 million people rely almost wholly on cash, up from only 1.6 million people in 2014….

SMEs rely on branches for credit as well as cash: Branch closures appear to reduce SME lending and hence are likely to damage employment, productivity and growth.

I can endorse this – everyone says, Go to the Post Office! – but they are not banks and the supply of cash is, at best, unreliable and if you need floats in your tills, this is problematic.

Indeed, the short supply of cash is pretty similar to underfunding the NHS – by so acting you help to hasten its abolition.

We really should take on the fact that, as the RSA says:

“Cash is the only free means of payments available to the consumer with universal coverage. [And it boosts] economic resilience: Cash insures against cyber risks and other network failures.”

Printing it it seems to be easily the most reliable – so, I think that in fact, your cash will do nicely.

 

 

Comments

  1. Peter Dawe -

    This is just wrong! “It is like any man made system – logically always able to be unmade by man.”

    Even with my limited knowledge I can prove this is wrong!

    That implementation and execution is so prone to error one should treat all systems as vulnerable… thats OK!

    In Pedant mode

  2. Peter May -

    Agreed philosophically. But practically cash has, as it were, no entry cost – it is freely available.

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