the _money stack_
September 29, 2018 5:55 AM   Subscribe

Money will only have a true "Uber Moment" when the central bank constricts the money supply to the point that practically none is available, deflation sets in, and people switch to using JetBlue Frequent Flyer Points for their usual medium of exchange. In place of banks, there will be freelance "tellers" offering discount financial services via smartphone, with a 60% share of the profits somehow ending up in Silicon Valley.
posted by sfenders at 6:56 AM on September 29, 2018 [1 favorite]

mumble mumble blockchain something something mumble profit mumble
posted by flabdablet at 7:01 AM on September 29, 2018 [2 favorites]

mumble mumble invalid security certificate something something second link mumble
posted by davejay at 7:11 AM on September 29, 2018 [2 favorites]

mumble mumble invalid security certificate something something second link mumble

mumble mumble link directly to the story, not google something something second link mumble

I've been hearing a lot about this challenge to the dollar lately, and it seems like it's something that actually will happen. Interesting times, eh?

Sometimes, it seems like all of Trump's international and financial moves are actually aimed at isolating the US from the rest of the world to the point where the US has no choice but to go back to manufacturing everything in-country, because the dollar won't be worth squat outside our borders. I know that's crazy talk, but...
posted by Thorzdad at 7:34 AM on September 29, 2018

By 2038, the U.S. quarter could be a sleek banknote.

So much depends upon
Being long wheelbarrows
posted by chavenet at 7:47 AM on September 29, 2018 [1 favorite]

isolating the US from the rest of the world to the point where the US has no choice but to go back to manufacturing everything in-country

aka the North Korea model
posted by flabdablet at 8:25 AM on September 29, 2018 [3 favorites]

Interesting articles, thanks kliuless! Forgive my naive question as I'm very new to thinking about these parts of the world, but is the stack model for money referred to in the first article a well established way to think about the current system? Are there other ways? Where/how may I learn more about it?
posted by oracle bone at 9:21 AM on September 29, 2018

I had to stop reading the first article when the author failed to note that a large number of banks run ACH batches 4-6 times a day now. Or that most banks, finding dealing with figuring out which ACH payments are required to be credited to the customer's account without delay somewhat difficult, just credit them all on the accelerated schedule. If you're trying to prognosticate on the future of money, it helps to actually know the current state of the system.
posted by wierdo at 11:02 AM on September 29, 2018

I thought the stack article floated too much over the connection of money to all the material things that we buy with it. (Layer cake before stack: 🍰 🥞 )

I did find a linked short story interesting, Ken Liu's Byzantime Empathy. Didactic but plausibly so, and the unpointed moral I got from it is that you cannot fix, with any money system, an actual scarcity in the underlying good. But that's the moral I had going in, so you might get something else.
posted by clew at 12:13 PM on September 29, 2018

This is all very interesting. I’ve been working in a call center for a major bank and I try to wrap my head around these concepts as much as possible, especially since the bank did not teach anybody how these systems work. It’s frustrating as a consumer (and as an employee) of the bank to attempt to understand what the hell is going on with your money. I have a lot of people call up asking about their money, wondering where it is, asking weird questions that require detailed answers that I sometimes can’t find and nobody knows. I just hope banking gets easier, but I have little hope of that. I’m probably going to end up leaving my job soon simply for the fact that I am having a hard time justifying overdraft fees to poor people, or explaining to people who are verbally abusing me how the banking system works.
posted by gucci mane at 2:58 PM on September 29, 2018

Does anyone else remember 11 years ago when the Euro was supposed to become the alternate global currency? And how bout a few years back when Bitcoin was going to upend everything? Every time someone trots out the 'This could be so much better! We have the technology!' trope, I kinda want to slap them. The advantage of the currencies/banks we use today are shown by all the fixes that are currently in-place against the frauds and cons that have come before now. You have to prove who you are to open a bank account and a normal bank is FDIC insured. When we relax or get cute with these rules, problems like Bear Sterns tend to show up.

Localized, alternate currencies are great, but are usually based on extreme need and the absence of an accessible/normal banking system coupled with the presence of a strong community or strong brokering organization.

I do believe that systems will get faster. Your FICO score is already updated same-day when there's a credit pull. I doubt they will alter more radically in the next 20 years than they have in the last 20 years. FWIW, if you go back that far, that's about when they started introducing the magnetic readers on cash registers that would instantly debit a paper check from your account.
posted by cult_url_bias at 4:50 PM on September 29, 2018

When I was a developer in the banking industry our (very large French-Canadian) coop was reluctant to open any branches beyond their main time zones because it would risk fucking up their very singular EOD processed. I’m sure they’ve figured things out in the past 10 years.
posted by furtive at 5:06 PM on September 29, 2018

is the stack model for money referred to in the first article a well established way to think about the current system? Are there other ways? Where/how may I learn more about it?

i don't know how 'well established' (among participants?) it is, but the FPP first article's author, jp koning -- if perhaps not always up to date -- knows his stuff (i think :P see his moneyness blog for more!)

like recent discussions -- the middle bulleted part -- on 'the narrow bank', full reserve banking, central bank digital currency and real-time gross settlement (for all) implicitly acknowledge the 'money stack'.

as for other ways/resources...
-the 'money view'
-Why Are Banks Special?
-The End of Banking (book)
-Banking in a Digital Fiat Currency Regime
-Blockchain, Cryptocurrencies and Central Banks (slides)
posted by kliuless at 10:32 PM on September 29, 2018

Does anyone else remember 11 years ago when the Euro was supposed to become the alternate global currency?

I remember that it did not take long and having a quick look at the statistics, and the countries that have pegged their currencies to it, I'm surprised at just how accurate that prediction was.
posted by romanb at 12:24 PM on September 30, 2018 [1 favorite]

Thank you, kliuless. The FPPs are enlightening for those of us who wonder how the U.S. can bully the rest of the world with the dollar & sanctions. Also a valuable learning tool is the Why Are Banks Special article. The 'roads & cars' metaphor really opened my understanding. That last thought posted there on how banks regulate their regulation by having made themselves indispensable brings the entire monetary framework to a human level.
posted by artof.mulata at 8:05 PM on September 30, 2018

Announcing Sila — building the new financial world
"something between a stablecoin and @stripe" :P
posted by kliuless at 3:03 PM on October 2, 2018

Also fwiw, which I sincerely hope will end up being rather more than the eventual worth of Sila just because anything based on blockchains is so completely the wrong tool for high transaction volumes: GNU Taler
posted by flabdablet at 4:58 AM on October 3, 2018

The money stack also provides a useful way to think about what Taler does as well.

Essentially, Taler is a fast, efficient online payment processing system. It works by completely decoupling customer identity from customer purchasing power, much as cash does, but it makes no attempt to be a top-to-bottom replacement for existing currencies in the manner of BitCoin, Ethereum and whatnot.

This means it scales well, because the only entities in a Taler-based payment ecosystem that need to interact with the existing money stack are Taler coin exchanges, and there will presumably be far fewer of those in the real world than of vendors and customers. Provided only that the exchanges are trusted to resolve all their monetary transactions eventually, Taler can operate at lightning speed over the top of them.

Taler "coins" are tokens that represent value denominated in existing currencies rather than in some new one. Taler is completely currency-agnostic though, so if you wanted to set up a Taler payment facility for values denominated in BtC you could absolutely do that. In fact an architecture like that is about the only way that any of the blockchain-based currencies will ever become capable of operating at useful real-world speeds and volumes.

A Taler coin is signed by the Taler coin exchange that issued it, and only the issuing exchange can subsequently redeem that coin's underlying value in currency. Issued coins carry no information at all about the customer they were issued to: the only identity information they carry is that of the issuing exchange and it's this, rather than the identity of the customer actually holding the coin, that validates the coin's value information. This makes Taler exchanges operate as central points of trust, as is currently the case for banks and credit card operators: in order for a customer to purchase from a merchant over Taler, there needs to exist at least one Taler exchange that both of them trust.

Provided only that there are quite a lot of customers and quite a lot of merchants who all trust quite a small number of Taler exchanges, the way the issuing and redemption processes work makes it completely infeasible for Taler itself to leak information about who is purchasing what from whom. In this regard it's much like cash.

This architecture also means that the only way to find out whether any given Taler coin has already been spent is to attempt to redeem it with the issuing exchange. If that transaction succeeds, the coin was good; if it doesn't, it wasn't. But precisely because the issuing exchange is a central point of trust, it doesn't need to do anything more complicated than a digital signature check and a database transaction to do that verification, and that makes Taler transactions very, very fast and very, very cheap.

Because the double-spending prevention is centralized in the exchanges, Taler coins can't assume a life of their own and act as stores of speculative value independent of their issued "face" value. Buying stuff with a Taler coin requires that the merchant has an online connection to the issuing exchange so that the process of burrowing down into the money stack can happen during a purchase.

To make the trust networks more robust, Taler also has support for auditors; it's the exchange's job to prevent Taler coin holders from successfully double-spending their coins, and it's the auditor's job to ensure that the exchanges it audits are doing that right.

What I like most about Taler is that it addresses the correct problem: how to make online transactions robust and fast and cheap and convenient while preserving customer privacy. Unlike any of the ideology-driven cryptocurrency "solutions" it makes no attempt to handwave away the need for a trusted intermediary between customer and a vendor that's actually the entire basis of a monetary system.

By squarely acknowledging that such an intermediary must exist in some form, and using a system design that allows that intermediary to be one of several actual legal entities rather than a shifting school of self-selected protocol designers, and acknowledging that if you're going to trust the intermediary to issue the coinage you might as well trust it to check the transactions as well, it avoids all the waste inherent in blockchains - which exist to address a nonexistent problem - and just gets on with it.

It also doesn't hurt that MeFi's Own jeffburdges is one of the architects.
posted by flabdablet at 6:19 AM on October 3, 2018 [1 favorite]

courtesy of mefi's own jeffburdges!

also btw...
"Meanwhile the new found popularity of stable coins SAYS IT ALL. Crypto is and always was a poor man's substitute for the Eurodollar (which was regulated out of providing any possible advantage to anyone post 2008)." :P
posted by kliuless at 6:39 AM on October 3, 2018

« Older wheatgrass juice and garden hose   |   Marty Balin of Jefferson Airplane R.I.P. Newer »

This thread has been archived and is closed to new comments