Tokens vs Accounts: A love letter to the NY Fed (and a quibble)

I was just reading an excellent recent post on the New York Fed’s blog Liberty Street Economics, entitled “Token- or Account-Based? A Digital Currency Can Be Both” by Rod Garratt, Michael Lee, Brendan Malone, and Antoine Martin.

The post is right, of course (except for a paragraph right at the end). The “tokens vs accounts” distinction no longer works in the world of blockchains. In some ways it’s a helpful distinction, in other ways it creates confusion.

Crypto tokens, especially those on Ethereum shouldn’t have a claim on the word “token”.

Ready?

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CBDCs – Asking the Hard Questions

I’ve been following along the CBDC narrative for a number of years. It has been fun watching how the talking points have rapidly evolved. CBDCs seem to be getting closer to reality, driven by central banks (rather than customer demand). But there are some harder questions that are still not (in my view) adequately explored.

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Money, Programmable Money and Central Bank Digital Currencies (CBDC)

Note: This article was first published on 19 Aug 2020 on the OpenNodes blog, republished here with permission.

The greatest trick played on modern society is calling a whole bunch of different instruments with different credit ratings and characteristics “money”, and conflating them.  It is a neat trick, and very useful in some situations, for instance when businesses invoice each other and make payments.

It is much more convenient to say “Please send me money” than to say “Can you tell your bank to reduce its debt to you, such that my bank increases its debt to me?”  But by using these more accurate words, we can already get a sense that no asset, or instrument, moves all the way from end to end, but rather there are some coordinated accounting adjustments that make the appearance of an asset moving.

Conflating these different instruments and bundling them into one called “money” has enormous positive effects – it has reduced friction and created a common language which is used across the world to enhance trade.

Yet, calling everything “money” can sometimes be unhelpful when we start thinking more deeply about money.  So in these cases, it is helpful to think about two things:

  1. The asset itself
  2. The medium of record
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The Sweet Spot for Programmable Money

Bank of Thailand just announced a project to develop a prototype system for a CBDC issued on a blockchain, accessible to businesses.

This is meaningful to me for two reasons:

  1. I was part of the original team that created the Inthanon series of projects in 2018, and it’s great to see that these early pioneering efforts continue to be built upon.
  2. I think that they have hit the near-term sweet spot for programmable money. They really seem to get it.
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The New Libra Coin – An Unofficial Explainer

I’ve been looking at the design of the new Libra coin (LBR) in the updated Libra Whitepaper. Here’s what I think the differences are between this new “synthetic” coin and the previous iteration of the coin as described in 2019. Hope it’s helpful!

Note, this is just my attempt to explain it with the information that is available. It is probably still subject to change. If you’ve found it useful, feel free to share!

Audiobook Launch – The Basics of Bitcoins and Blockchains

Happy news! (and some insights into the mechanics of authoring and publishing a little further down the page)

I’ve just been told that the audiobook version of my book “The Basics of Bitcoins and Blockchains” is now available for preorder on Audible. It’s a great use of your Audible credits! If you’re not already on Audible, you get your first listen for free when you sign up. Click it!

This means you can upskill on bitcoin, blockchains, payments, and money when you’re out and about (ha)… Or more likely, when you’re inside, trying not to go insane, and wishing you could be out and about. What a great use of lockdown time!

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Ray Dalio on What Coronavirus Means for the Global Economy

Ray Dalio is one of the best economic thinkers alive. On 9 April 2020, TED interviewed him about what coronavirus means for the global economy. Here is my summary. Any errors, omissions, misunderstandings are mine.

Ray Dalio on What coronavirus means for the global economy

Interviewer: Corey Hajim (TED)
Interviewee: Ray Dalio, Founder of Bridgewater Associates
Released 9 April 2020

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