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Friday, February 01, 2008

Hyperinflation

Category: Issue 9

I believe the central banking system coupled with fiat currency ultimately leads to hyperinflation so I would like to provide tech money as a solution.  If you would like to know more about what motivated me to write this, watch this.  It is full of good info and suggestions for further education.

I propose a new kind of money called the “tech,” which is much better protected from counterfeiting and fraud than any other kind of backed currency that I know of.  The tech is really just a coupon for whatever an issuer wishes to back it.  The advantage is that it is anonymous and yet verifiable in real time.

Tech FAQ VERSION 1

What is a tech?
A tech is the base unit of a new kind of hard currency that can be issued by anyone who wants to issue it.

How much is it worth?

A tech is worth one ounce of gold.

If I have a tech, how do I redeem it?
Present it to the issuer.

What if the issuer refuses to redeem the tech?
This is the same as when anyone owes you money and they refuse to pay you.  Issuers will want to avoid the bad publicity of refusing to pay.

Why should I accept a tech if there’s a chance that the issuer won’t pay?
You shouldn’t.  When you receive a tech, you should verify it with a tech scanner.

What is a tech scanner?
A tech scanner is a credit card sized analyzer that communicates with the chip inside a tech and over the internet to the issuer in order to verify the legitimacy of the tech.

How do I get a tech scanner?

Find a company that makes them.  The specifications are public domain.

Where can I get the specifications to make tech scanners?
They are listed further down in this FAQ.

How does a scanner verify the legitimacy of a tech?
1) It gets the tech’s public key and its issuer URL using radio communications.
2) It submits the tech’s public key to the issuer URL and receives back a code.  The code is encrypted with the issuer’s private key and the tech’s public key.
3) The scanner sends the code to the tech, which knows its issuer’s public key.
4) The tech decrypts the code using public/private key decryption and gives the decrypted code back to the scanner.
5) The scanner sends the decrypted code back to the issuer and the issuer replies with the value of the tech, which is then displayed on the scanner.

What if the scanner doesn’t work?
You should not accept techs until you have access to a scanner *that you trust*.  For this reason, you should get the scanner from the issuer or from someone the issuer has vetted.

Is there a way to detect fraudulent scanners?
Issuers are encouraged to issue fake techs in order to catch people that fail to perform due diligence.  You can verify that a scanner detects fake techs by checking one of them.

What are the specifications for a tech scanner?
1) Same form factor as a credit card.
2) Recommended power source: light.  A flat supercapacitor should be able to collect enough energy to support the amount of work a tech scanner does.
3) Scanner should detect the presence of an RFID chip within 1 millimeters of its center on the SCANNING SIDE.  The other side of the scanner is called the DISPLAY SIDE.
4) Scanner should read two fields from the RFID chip when it is detected, issuer-URL and public_key.  These fields are broadcast in the presence of the ID radio frequency.
5) Scanner should submit public-key to the issuer-URL and receive back a code from the issuer.  Protocol TBD.
6) Scanner should broadcast the code to the RFID chip using the VERIFY radio frequency and read a third field, answer.
7) Scanner should submit the answer to the issuer-URL and display the data it receives from the issuer. Protocol should be the same as 5.

Shouldn’t the communications between the issuer and the scanner be encrypted?
The communications that matter are encrypted, either by the RFID chip or the issuer.

How do issuers make money?
As an issuer, I would make money by selling advertising on the paper/cotton surrounding the RFID chip.  I would also issue generic tech bills and charge 0.1% seniorage.

What is a tech bill?
Here are the specs for a tech bill:
1) Same form factor as a 2001 US dollar.
2) RFID chip embedded at the point in the lower left quadrant where the center of a credit card would be if the credit card were placed on top of the bill with the lower and left edges lined up.
3) RFID chip power source: tech scanner.
4) RFID must contain processing to do public/private key decryption.
5) RFID chip to contain its own public and private keys and the URL of its issuer.
6) RFID chip to detect two frequencies, ID and VERIFY (TBD), and repeat the corresponding behaviors until the detected frequency is no longer present:
  ID: broadcast issuer-URL (44 bytes) and public key (20 bytes)
  VERIFY: read data from radio frequency, decrypt it using public and private keys, and broadcast the result.
 
Does a tech bill solve the counterfeit problem?
Not entirely.  It is possible to reverse engineer the RFID chip in order to read out the data it has stored, and once that data is copied into another RFID chip, the counterfeiting is completed.  However, because every transaction should be accompanied by a verification, the issuer can put controls in place to detect it.

Isn’t this kind of Big Brother -ish?
Until your government makes it illegal for you to trade tech scanners with anyone you want, the transactions are anonymous.  It can be Big Brother -ish to whatever degree the issuer wants it to be.  It’s far less Big Brother-ish than the current banking system.

Why is this popular when we already have dollars?
Holders of dollars are implcitly taxed whenever the Federal Reserve lends money.  Tech bills hold their value in relation to the strength of their issuers, rather than the whim of the Federal Reserve.  We believe the central banking system coupled with fiat currency ultimately leads to hyperinflation and we would like to provide tech money as a solution.

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