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April 20, 2012 7:59 AM   Subscribe

A new initiative recently proposed by the Royal Canadian Mint proposes to create the MintChip, a digital currency that’s similar (to BitCoin), but is backed by the Canadian government. Aiming to become “the digital equivalent of the coins we use every day,” in the Canadian Mint’s own words, the MintChip will target micro- and nano-transactions conducted both online and offline, whether at the physical point of sale, on mobile devices, or among peers. Via
posted by infini (37 comments total) 6 users marked this as a favorite

 
It's an interesting system. I haven't pulled apart all the details but
The MintChip system is based on a direct asset transfer model that moves value between trusted stores without the involvement of any intermediary. Each participant has a trusted store loaded in an account in the cloud, mobile device, USB stick on a PC or a tablet.
If I understand correctly it works mostly like a stored value card, where the bits that prove you have the cash really do live in your device. Ie, it's not like PayPal where your money is really in a third party account. The hard part with this more cash-like system is verification and preventing double spending, I haven't found a succinct explanation of MintChip's approach to that. They're clear it works offline, and they're also clear it's for small value transactions, less than $10. So maybe they just take some risk.

There were a bunch of digital cash startups in the late 90s / early 00s that worked out this kind of technology pretty well. They all failed, partly for business reasons (would you trust a startup to hold your money?) and partly because the technology was too complex at a time when sites were struggling to take credit cards and PayPal was novel. Now is a good time to revisit that tech, and having a government mint backing it is pretty impressive.
posted by Nelson at 8:08 AM on April 20, 2012


The penny will be gone by autumn. A glow-in-the-dark dinosaur quarter is in the works. And now we're getting rid of paper money all together. Oh Canada!

Also, not to be confused with.
posted by Fizz at 8:09 AM on April 20, 2012 [2 favorites]




I am not being obtuse here but I don't get it. I already have a card in my wallet that lets me make transactions of all sizes, why do I need another for small ones?
posted by Cosine at 8:14 AM on April 20, 2012


This is a critique of the project from the via link.

It seems like the things that made Bitcoin unreliable (no backing agency, they are easily lost or hacked when in the hands of non-experts) were also the things that made Bitcoin more anonymous and decentralized. How long will the Canadian government tolerate subversion of its laws (buying drugs, laundering money, avoiding taxes) in a system that they can control the methodology of? How long will their bellicose southern neighbor tolerate their own citizens doing the same thing with Canadian currency?

Also, from the official site, is the Canadian government taking a rake of each transaction? If this isn't totally private, and isn't totally transaction free, then I don't see it being much different from a credit card (albeit with a credit card your transactions and surveillance are being done by an unelected monolithic banking system, which is either better or worse depending on your political bent).

This puzzle of reliability versus privacy seems to be the Gordian Knot of digital currency at the moment.
posted by codacorolla at 8:16 AM on April 20, 2012


The card in your wallet lets you ask Visa/MC/etc. to make a transaction on your behalf; which requires a fair amount of infrastructure. This cuts out the middleman and allows for direct transfers between ordinary people.
posted by ConstantineXVI at 8:17 AM on April 20, 2012 [6 favorites]


The card in your wallet lets you ask Visa/MC/etc. to make a transaction on your behalf; which requires a fair amount of infrastructure. This cuts out the middleman and allows for direct transfers between ordinary people.

Ah, ok, my credit union already does this with email transfer to any email address from my phone but yeah I get it now.
posted by Cosine at 8:19 AM on April 20, 2012


In my haste to post I missed the explanation of how they keep the currency secure
The MintChip chip is a Tamper Resistant Module (TRM), sometimes also called a Hardware Security Module (HSM). The Value Transfer Protocol cannot be modified without detection. The integrity of the TRM must be assured and the cryptographic mechanisms protecting the Value Transfer Message are adequately resistant to attack.
So basically they're assuming the MintChip hardware you have in your pocket is a secure black box that no one (not even you) can hack. In this sense it's like a DRM system and not like BitCoin at all. There's risk associated with this approach, the cryptonerds will laugh at it, but for small amounts of money I think it's a reasonable compromise. It's not that different from the MetroCard system in New York, for instance. Although part of why MetroCard works is there's also a backend keeping track of all transactions and eventually invalidating cards suspected in fraud; I don't know if MintChip has a centralized clearing house tracking everything after the fact.

The thing that really makes this interesting is a government is proposing it. That gives it a sort of reality and legitimacy that systems like most previous digital cash systems don't have.
posted by Nelson at 8:20 AM on April 20, 2012 [1 favorite]


I can't entirely tell from their technical descriptions from their site, but it sounds like almost all of their security relies on malicious users not being able to emulate the technology on the physical chips. I think it would be incredibly unlikely that such a system would work in the long term. If Chip A can convince Chip B that it has $50 to spend, then without some sort of centralized system to stop it their's nothing preventing someone from creating a bunch of duplicates of Chip A.
posted by burnmp3s at 8:20 AM on April 20, 2012 [1 favorite]


If I want to send someone direct transfer, I can go to my bank's website and -- assuming they also have a Canadian bank -- send a money transfer to their email address for about a dollar. (I can see a lot of points of lack of security, but in reality I've used it a lot and find it amazingly convenient and I've never had trouble with it.)

If I want to buy something for less than 10$, probably I have the cash handy anyhow.
posted by jeather at 8:21 AM on April 20, 2012


my credit union already does this with email transfer

Not quite; the credit union is still the one making the transfer. This requires no intermediate accounts, the money lives on the chip.

Or to put it simpler, it's a digital form of cash.
posted by ConstantineXVI at 8:24 AM on April 20, 2012


So basically they're assuming the MintChip hardware you have in your pocket is a secure black box that no one (not even you) can hack. In this sense it's like a DRM system and not like BitCoin at all.

And we all know how unhackable DRM schemes tend to be!
posted by burnmp3s at 8:26 AM on April 20, 2012


Also here's some photos and info on the MintChip dev kit.

Does that cat come with the kit, then?
posted by infini at 8:30 AM on April 20, 2012


I expect a rocky road for this MintChip from the land of frozen delights!
posted by bendybendy at 8:31 AM on April 20, 2012 [4 favorites]


And we all know how unhackable DRM schemes tend to be!

At least the monetary estimates of what is lost due to nefarious behaviour will be somewhat reality-based.
posted by ODiV at 8:33 AM on April 20, 2012 [1 favorite]


I don't know if it's secure or not. What I do know is that the've put it out there and are saying, "fuck with it: do something cool, make a neat app, try and crack it, put it in a VitaMix, whatever. We think we're on to something and we've put our brains on it and it seems to be a good thing. Now you let us know. Oh, and by the way, there's some money in it for you."
posted by seanmpuckett at 8:35 AM on April 20, 2012 [4 favorites]


Ah, ok, my credit union already does this with email transfer to any email address from my phone but yeah I get it now.

However transactions with mintchip are supposed to be anonymous.
posted by Mitheral at 8:36 AM on April 20, 2012


Neither this technology - nor the problems it needs to overcome - are all that new in the world. Here is a 1997 Economist article discussing some of the "electronic purse" technologies available at that point (Proton and Mondex specifically).
posted by rongorongo at 8:40 AM on April 20, 2012


I'm waiting for the hackers to get past the crypto, then inflation goes crazy as everybody just puts $MAX_INT on their cards, and then people are buying bread with wheelbarrows full of MintChip cards that are only worth their materials cost.

(Coming to a theater near you, summer 2014!)
posted by kmz at 8:41 AM on April 20, 2012 [1 favorite]


This is not a true currency. It is a medium of exchange of Canadian Dollars. For that reason it is not comparable to Bitcoin, which is an actual currency. This distinction appears to pass most people by when discussing this and other supposed "digital currencies".
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 8:47 AM on April 20, 2012 [3 favorites]


But the reason Bitcoin was interesting was because it used data as a cash-equivalent, allowing for anonymous digital transactions, not because of what the data was (or wasn't) backed by.
posted by Holy Zarquon's Singing Fish at 8:50 AM on April 20, 2012 [2 favorites]


I have a bunch of links going back just over 4 years looking at this broad space of digital currency, too bad they're on delicious (urgh the current version) but can check to see what's still live and collate somewhere, if anyone needs reference.
posted by infini at 9:03 AM on April 20, 2012


For that reason it is not comparable to Bitcoin, which is an actual currency.

Well, in the same way that Canadian Tire Money could be called an actual currency.

What, it's got lots of uses! Just like Bitcoin!
posted by Lentrohamsanin at 9:11 AM on April 20, 2012 [2 favorites]


It's Flooz, in a toque and a parka!
posted by scruss at 9:16 AM on April 20, 2012


How long will the Canadian government tolerate subversion of its laws (buying drugs, laundering money, avoiding taxes) in a system that they can control the methodology of?

Crime reduction is, apparently, at least part of the reason why this is being proposed. A truly cashless society would certainly prove detrimental to certain forms of crime, especially things like street-level drug deals and prostitution. There are ways around this, I'm sure, but it is definitely a part of the motivation behind MintChip.

What, [Canadian Tire Money has] got lots of uses!

Noticeably absent from that list is the liquor store in Edmonton that accepts Canadian Tire money.
posted by asnider at 9:26 AM on April 20, 2012 [1 favorite]


The problem with interac e-transfers is it looks like just about everywhere they're not free. If I give my kids their allowance, it doesn't cost me a dollar per kids to hand them a few bills and coins. With PC, heck it would cost me $4.50 per week to pay allowance. If the interac e-transfer is free at your bank / credit union I'd find it interesting to know, but the big names (rbc, scotia, cibc/PC) are charging at least a dollar per transfer. That's more expensive than checques. I don't write my kids checks for allowance, and I'm certainly not wasting funds with an e-transfer. Sure, it's a kind of neat idea, but the fee for what it is is too high.

I looked at this earlier in the week flagging it to look at later, but I didn't immediately see a cost for each transaction. And to actually have a digital version of cash, it is going to have to be free of transaction costs.

Regarding "what's to prevent someone from making a fake mint chip" , have people never asked, "what's to prevent someone from printing paper that looks like money." Yes, there's a barrier to entry to forging money, but if the crime of a fake e-chip is the same as for counterfeit bills, I wouldn't find it hard to believe that it will occur at about the same rate.

I'd imagine (but am unsure) some counterfeit bills make it into banks and get destroyed without getting tracked down. I'd like to know whether there's a way to either 1) check online if a payment is 100% legit, instead of just looking legit, and 2) if upon trying to depost funds into a bank this would be immediately knowable to be fake or not.

Essentially, each mintchip could have a unique serial number (generated in a way such that it's not trivial to duplicate a serial), possibly incorporating the issueing entity (bank) into it. It's one thing for some phones to have a NFC transfer to agree that $4 of the block is transfered from person A to person B, but when person B wants to put that $4 in their account later, it should be checkable that some bank issued that serial, and if they didn't, we know the person who tried to deposit, and their phone will know the transaction that this occured from ... and that can keep being tracked until we discover the fake alias. Meanwhile with cash, how many people know where a particular $5 bill came from? The mintchip, if well designed, should be able to track the transactions to allow investigators to get pretty close to the conterfeiters. And just a fake serial's just be discoverable, so should duplicate serials.

Heck, give people a small bonus/finders fee if they manually check their mintchips and discover fakes and upload their transaction data. At the same point, for those who never want to use banks, never check their mint chips, but still don't use counterfeit data won't have big government knocking on their door.
posted by nobeagle at 9:28 AM on April 20, 2012


Ah, ok, my credit union already does this with email transfer to any email address from my phone but yeah I get it now.

However transactions with mintchip are supposed to be anonymous.


It might not be very anonymous depending on how easy it is to link the MintChip ID to the person who it belongs to. In most places today you can do anonymous cash transactions online, although it's expensive. Just go to your local convenience store and buy a prepaid card, they have ones these days that can dump money into PayPal or otherwise pay for stuff online. Fill up the card with the amount you want to transfer using cash at the register (paying a significant fee to do so). Then send the card number to the person you want to transfer money to. Neither side needs to enter in any identifying information at any point.
posted by burnmp3s at 9:29 AM on April 20, 2012


The Royal Canadian Mint is an odd institution. It's a Crown Corporation serving in the public interest while mandated to operate "in anticipation of profit." It publishes slick annual reports, complete with boastful management statements on profits and revenues ($46.5 million and $2 billion respectively in 2010). They launched an "exchange traded receipt" for gold bullion stored at their headquarters in Ottawa in what was the biggest IPO of the year at $600 million. They're involved in a "mine is bigger" gold coin arms race with Australia. (Theirs is bigger; ours is purer.) They run a huge business in novelty commemorative coins, with the latest featuring a glow-in-the-dark dinosaur (not kidding).

The MintChip thing is probably just a strategic corporate decision to stay relevant once physical money goes extinct. Where else are you going to get your commemorative glow-in-the dark virtual coins?
posted by pharaohmagnetic at 9:33 AM on April 20, 2012 [2 favorites]


A truly cashless society [...]. There are ways around this, I'm sure, but it is definitely a part of the motivation behind MintChip.

Managing cash costs money.

The Central Bank of Nigeria (CBN) has introduced a new policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals or cash deposits that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The new policy on cash-based transactions (withdrawals & deposits) in banks, aims at reducing (NOT ELIMINATING) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)

Why the Cash Policy?

The new cash policy was introduced for a number of key reasons, including:

1. To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
2. To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
3. To improve the effectiveness of monetary policy in managing inflation and driving economic growth.

In addition, the cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:

* High cost of cash: There is a high cost of cash along the value chain - from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
* High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
* High subsidy: CBN analysis showed that only 10percent of daily banking transactions are above 150k, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10percent incur in terms of high cash usage.
* Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
* Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.


Real-Time Economy Competence Center

Real-Time Economy is an environment where all the transactions between business parties are in digital format, increasingly automatically generated, and completed in real-time both from business and IT-processing perspectives. For enterprises, public sector, and citizens this means, for example, that orders, order confirmations, invoices, and payments flow from system to system without delays. This makes it possible to move towards electronic archiving, electronic book-keeping, and automated accounting. The benefits for society at large are enormous - both in terms of productivity and environment. RTE program is a joint development project between Tieto, Aditro, and Aalto University School of Economics.
posted by infini at 9:45 AM on April 20, 2012


I've often wondered if buying people's Canadian Tire money at say 50 cents on the dollar would be a route to easy wealth and happiness (i.e. 2. ????; 3. profit!). Has anybody ever tried a scheme like this?
Well, maybe you wouldn't get rich but you could score some tires or some Noma Moon Rays real cheap.

More to the point, I looked into buying some weed online a few months ago (just for fun, to see if it was actually possible, from the same outfit - the Farmer's Market or something - that just got busted by the FBI last week) and the payment of choice was some sort of BitCoin that you actually had to fund by buying tiny amounts of gold, and one of the people you could buy the gold from, funnily enough, was some branch of the Canadian Mint. The whole anonymous currency system was so labrynthine and confusing that I just gave up.
posted by Flashman at 9:49 AM on April 20, 2012


[Insert MintChocolateChip joke here]
posted by unSane at 9:58 AM on April 20, 2012


Crime reduction is, apparently, at least part of the reason why this is being proposed. A truly cashless society would certainly prove detrimental to certain forms of crime, especially things like street-level drug deals and prostitution. There are ways around this, I'm sure, but it is definitely a part of the motivation behind MintChip.

Yeah, this is the aspect of it that really bothers me. And forget cost per transaction, what about the cost of buying this chip thing? Pockets are free.
posted by Meatbomb at 10:56 AM on April 20, 2012 [1 favorite]


Pockets are free.

Only if you buy into the bourgeois notion that wearing pants is required to participate in society.
posted by asnider at 11:24 AM on April 20, 2012 [2 favorites]


I'm surprised that the Octopus card hasn't been mentioned yet (?) - started as a way to pay for mass transit but stores, parking meters, and vending machines accept them now in Hong Kong.
posted by porpoise at 11:57 AM on April 20, 2012


The Octopus card and similar systems have centralized operation and are not private. They're more like an easier to use debit card than like cash.
posted by parudox at 12:11 PM on April 20, 2012


If I give my kids their allowance, it doesn't cost me a dollar per kids to hand them a few bills and coins.

That's actually my issue, more or less. For big amounts, the dollar isn't really more than cheque and envelope and stamp, and it's convenient, so it's worth it. For small amounts, which is apparently what it's aiming at, cash works fine and I don't have to hope the person I am giving it to also has a MintChip. I am not sure what problem this is going to solve.

(Also why is it being named after a flavour of ice cream?)
posted by jeather at 1:30 PM on April 20, 2012


I am not sure what problem this is going to solve.

Micro-transactions on the Internet. Buy a newspaper, buy a song, or a magazine. Buy a single story in the newspaper or an article on a website. Buy a shareware program. Or sell those things. Buy stuff in the real world like gum, candy bars, hot dogs, parking, transit fares, and so on, without mucking around with a pocketful of one and two dollar coins.


nobeagle: ...If the interac e-transfer is free at your bank / credit union I'd find it interesting to know, but the big names (rbc, scotia, cibc/PC) are charging at least a dollar per transfer. That's more expensive than checques. I don't write my kids checks for allowance, and I'm certainly not wasting funds with an e-transfer. Sure, it's a kind of neat idea, but the fee for what it is is too high.

Exactly. Interac fees are too expensive for small transactions, and credit card fees paid by the merchant make small transactions unprofitable. It's like a tax that's constantly collected by the banks and credit card companies, that impedes commerce - but unlike real taxes, citizens like you and I see no indirect benefits from paying it. If this MintChip thing works, it could free up a lot of money that's currently being sucked away into the vaults of big corporations, and put it to work buying small things by and from ordinary people.
posted by Kevin Street at 1:48 PM on April 20, 2012 [2 favorites]


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