The Bankwatch

Tracking the consumer evolution of financial services

Mintchip vs Bitcoin – the perfect test of Central Bank vs P2P money

We now have a brilliant comparison in front of us between a government backed electronic currency and an internet peer to peer based one.  May the best man win.

Royal Canadian Mint demos digital currency – Mintchip

The Mint hopes that eventually Canadians will use a ‘chip’ to load value onto a device such as a smartphone, PC, tablet, or store it in the cloud, and then buy physical goods in the real world or digital content online.

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Bitcoin is an innovative payment network and a new kind of money

Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.

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Relevance to Bankwatch:

I attended the release of MintChip in 2012 in Toronto, and while it was very loosely defined, despite that, I have greater confidence in it than the tightly defined Bitcoin.  Time will tell.  I have a lot of (ugly) experience with P2P.  The premise of wisdom of crowds for example is flawed. Bitcoin by its nature involves a degree of democratic vote as to things like relative power of miners.  I am immediately suspicious that my money is evaluated by other than commercial need;  that’s something I understand.

I do not see money evolving in P2P at all.  Money is fundamental and basic.  Utmost confidence is essential.

I’d love to hear views on the pros and cons here.  Weigh in please!

Written by Colin Henderson

January 14, 2014 at 00:42

Posted in Uncategorized

5 Responses

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  1. “Utmost confidence is essential.” Bitcoin went from pennies to a $1,200 in less than 4 years. I think I’d call that market confidence dude.

    “The premise of wisdom of crowds for example is flawed.” So you’re a communist??

    Jared Boice

    January 15, 2014 at 13:23

  2. @Jared; interesting perspective. Utmost confidence in cash today means that it is still worth the same amount in the future. Bitcoin has a degree of confidence, yes, but hardly the same as cash. Confidence is more like confidence in an investment in my view. An investment is subject to fluctuation.

    My observation on wisdom of crowds was unfair because I did not indicate why I thought that. I spent a few years in the P2P Lending business. One other such company in the US (Prosper) started off using wisdom of crowds as their approach to lending. It failed miserably with horrible losses. The crowds followed the great returns but did not take into account potential for loan default.

    My takeaway from the Prosper situation was that wisdom of crowds ought to be restated to read ‘wisdom of expert crowds”. A bad decision (to make a bad loan) is just as bad whether 1 person makes the decision or 1,000 people make the decision. There is nothing inherent in large numbers that will ever average that out This is in contrast with the one example I recall where a mining company laid out in detail all their data for a new location, and which they couldn’t solve internally. The ‘Crowds” of online experts who understood geology dived in and solved it.

    Back to Bitcoin. The folks investing in Bitcoin are believers but I still maintain as i did in the post that the two aspects of smart technology and investment quality are separate and we cannot let smart technology blind us to risks in investment quality.

    Colin Henderson

    January 15, 2014 at 17:21

    • quality is decide by the whole population, instead of a small groups [monopolies], eg. goverments

      Luke Wu

      January 16, 2014 at 01:43


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