Thursday, June 9, 2016

Issuing National Currencies On The Bitcoin Blockchain

The cashless society is upon us and like it or not governments will want a secure digital currency for which they control value, quantity and rate of issuance. The good news is that they do not have to hire teams of developers and consultants to put in place this digital currency. They can issue these tokens on the Bitcoin Blockchain at a cost 0.05 XCP ( less than 10 cents ) using the Counterparty platform.

Why issue their digital token on the Bitcoin Blockchain ?
The answer - SECURITY, SECURITY, SECURITY. No other system can achieve the level of security of the Bitcoin blockchain proof of work consensus system, currently secured by greater than 200 Peta hashes of mining power.

Anybody can issue tokens but giving the tokens value is another matter. Governments can confer value to their digital tokens by making them legal tender and mandating that only such tokens be accepted for paying taxes and government services.

Digital currency issued on the Counterparty platform will be smart money. Ethereum style smart contract will soon be a feature of Bitcoin. It is only waiting on discussions to be finalised and a vote by XCP token holders by the end of June or early July.

Bitcoin blockchain imposes a 10 minute block confirmation time frame, however developers at Storj another token using the Counterparty platform, have implemented micro payments using offchain solutions similar to the proposed Thunder and Lightning network. All that is needed for implementation is CSV which is very near activation at 90% adoption and Segwit which should follow shortly. Off chain transactions will be instant and at scale. 

Mainstream adoption will require an easy to use wallet on smart phones and SMS phones. There is already a mobile wallet Indiesquare, operational for Counterparty tokens, which can be easily adapted to function with a single token. Extending bitcoin wallets to SMS phones should not be too far away either.

In conclusion, governments can already issue secure digital currency on the Bitcoin platform at very low cost and retain full issuance and value control. For those who claim that they do not trust governments to issue currencies, Get Real, That will never change. The only difference is that this process can be more transparent. Bitcoin will always remains as an alternative backup currency, should the natives lose confidence in the government issued variety.

Update 3/1/2017: The cost of a bitcoin transaction still holds this system back but micro transactions and payment channels are coming.

Bitcoin will be many things including being a currency, a settlement layer and a reserve asset.