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Comment by kypro | Hacker News Reader

Would it be possible to create some form of anonymous digital currency?

Personally I think it would be sad purely for cultural reasons to completely move away from physical currency, but I think if there were some verifiably anonymous way to make transactions digitally I'd probably be okay with it.

I'm sure there would still be some state issued physical currency which you could trade or deposit at a bank if people wanted to some for the novelty of it. For me, like most people, the primary concern is the power it gives the state. It seems clear society will continue to move away from using cash, regardless of what the state mandates. In the UK there are already plenty of retailers who won't accept cash payments. So I think whether we like it or not, we probably need to be proactive to ensure the inevitable move towards cashless is done in a way that protects our freedoms.

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Monero makes for a strong anonymous digital currency. But it also suffers from all the inconvenient benefits a truly anonymous digital currency offers that cash does not and which governments and casual users tend not to appreciate (for understandable reasons).

> But it also suffers from all the inconvenient benefits a truly anonymous digital currency offers that cash does not

If you mean that it's used for criminal activities, how is it any different from cash in that manner?

The difficulty in tracking and the ease with which large transactions can be done in it would be a big differentiator from cash and one of the things government wouldn't like about it.

While it doesn't bother me personally, it would be an issue of any digital truly anonymous currency as far as governments are concerned.

That said, I was referring to more mundane things, like how most people aren't used to the responsibility that comes with that kind of currency (eg if you accidentally send to the wrong address, the money is essentially irreversibly lost).

Cash, being a physical item is less prone to some of these issues and because it isn't entirely fungible (with bills having serial numbers), there are various things that can be done with cash that can't with a truly anonymous digital currency, like tracking stolen currency and/or reissuing it.

Digital is always prone to being lost/tracked/etc. You need to keep some "wallet" of credentials or something, there's always a trail, etc.

For societies with no trouble, that might seem fine. In societies (which can include a huge chunk of the world) with turmoil, dictatorships or hostile governments, war, and so on, it's impossible to have the anonymity and portability of cash in digital form, while also being able to use it (a) without electricity, (b) without internet access, (c) without a trail

I don't disagree. Similar issues exist with most digital technologies though and that doesn't stop their adoption – outside of the situations you describe digital solutions tend to be more convenient. I mean I'm not going to stop using Google Docs because one day I might not have electricity.

I think if you live somewhere where you're concerned about the government your best bet isn't physical state issued currency, but owning commodities like gold. I'm not sure your concerns are specific to cashless, but digital solutions generally.

Yes, but Google Docs, or any word processor for that matter, is an inessential nicety.

Access to means of storing value and exchange, on the other hand, is a necessity.

> Would it be possible to create some form of anonymous digital currency?

Yes. Zero knowledge proofs might be some way to get there.

that's how zcash and monero work

The issue I see is that the privacy of cash is non-scalable. This results in an equilibrium where ordinary transactions can be untrackable, but you can't quite move hundreds of millions in or out of the country in a suitcase.

For digital currency it's just a number. One cent or a trillion dollars are equally easy to transfer. This tips the balance in favor of the "grey" and "black" economies. Long-term, that's likely to be destablizing.

(Grey being roughly "not technically legal but the average citizen doesn't care", such as paying people small amounts of cash so they can avoid tax, and black being "illegal and also agreed to be bad for society")

Actually this might be a case for GNU Taler - unlike cryptocurrencies it’s specifically designed so that merchants do not have anonymity, so tax can still be assessed, but users do.

> it's specifically designed so that merchants do not have anonymity, so tax can still be assessed

This is one of the biggest selling points of GNU Taler - it's not designed to circumvent the government, it's designed to cooperate with it. It is perhaps one of the few privacy-focused systems that have a chance of getting widely adopted in a legal way.

Germany had something like that ("kontoungebundene Geldkarte"), it failed. You could store money on the card itself and use it to pay without trace and without a network connection. You could do that with the card that almost everyone carried around, and also the anonymous kontoungebundene variety. The former was traceable given enough cooperation, the latter not.

It failed, and after 10-15 years of steady decline almost all banks have now stopped issuing new cards with this function. Paying to maintain a system people don't care to use is unattractive.

I think it's fair to say that the system failed because it wasn't traceable. People wanted insight into their own card. The design which blocked tracing also blocked insight. That's not the whole story, there were other reasons, but that reason is both relevant and significant.

> I think it's fair to say that the system failed because it wasn't traceable. People wanted insight into their own card.

What do you mean by insight? You couldn't check the balance on your card?

How about monthly statements? Purchase history? Stats, analytics, budgeting? In a mobile app? Without you personally or the merchants you buy stuff from having to do anything for that?

Are we comparing things against cash or against digital stuff?

> How about monthly statements? Purchase history? Stats, analytics, budgeting? In a mobile app? Without you personally or the merchants you buy stuff from having to do anything for that?

Cash has none of these.

Let's not move the goal posts.

The general public is not required to keep the goalposts still.

The organisations that set up the system surveyed the public to learn why >80% never started using it and the users dropped off. The common answers included things like "can't see my own recent activities", "can't see how much money there is on the card" and "adding money to the card is a hassle", all of which were truish and IMO were side effects of features intended to make use of the card untraceable.

If you can't deliver a realtime feed of the transactions anywhere you can't deliver such a feed to your own smartphone either, see? And if you could deliver one to your smartphone, the system could also deliver a feed to other authorised destinations, and what's authorised, exactly? Can the card be traced to an authorising party? If not, how can you ensure that the destinations receiving a feed a really authorised? That kind of thing.

> You couldn't check the balance on your card?

Not without making a purchase, visiting an ATM, or carrying an additional gadget to be able to read out the balance from the card.

I think the main problem is as follows: By its very nature, digital cash has the problem that you can't look up your current balance without some additional technical doohickeys, so compared to cash it always starts out at a disadvantage in that regard.

If you then add the additional constraint that your digital cash should mirror the privacy properties of physical cash, which means mimicking most of its major properties (both good and bad) into the digital domain, too, it means you haven't got all that many degrees of freedom left in order to positively differentiate yourself from physical cash and overcome the initial disadvantage of digital cash's intangibility.

Some advantages do indeed still exist (e.g. takes up less space in your wallet, avoids "no change given" situations and the like), but even taking those things into account, compared to the annoyance of not being able to simply look up my balance the way I can do with physical cash I personally never found the Geldkarte all that enticing.

(Whereas with a classic credit or debit card at least I get some more tangible benefits in return for giving up the tangibility of cash, like not having to manually re-charge the card all the time, or having a full transaction history available.)

Does Monero fit the bill?

yes

zcash

monero

grin and other implementations of mimblewimble

also, currency has been digital for thousands of years; plausibly it's what digits were invented for in the first place

The New Zealand government is working on a central bank digital currency but it has requirements for AML and terrorism funding so they refuse to make it anonymous. I'm sure most governments are similar. They just need one reason like that and then they can poke around in people's spending for whatever reason they want. There'll always be some bogeyman that the general population or international pressure leads them to track people for.

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