2013-03-29 Mastercard Insights blog: Bitcoin, Sovereigns and the End Times

[herzmeister]

somehow went quite unnoticed

http://insights.mastercard.com/2013/03/29/bitcoin-sovereigns-and-the-end-times-2/

Bitcoin, Sovereigns and the End Times

From currency analyst Christopher Vecchio, the quote of the day: “Personally it wouldn’t be my preferred vehicle to trade money because it’s unregulated. But people are deeming it legitimate even though it’s not backed by a sovereign. That could be the attraction behind it. There’s no sovereign credit risk to bitcoins.”
Unpack that: a digital scrip with nothing behind it but the full faith and credit of everybody else using it is preferable to currencies issued by sovereigns.

We’re in uncharted waters.

Several news outlets are reporting that the crisis in Cyprus has significantly increased the trading and value of bitcoins.  The value of a bitcoin has risen by 20 percent in the past week, with a one month gain of 41 percent.  Analysts report that much of this trading is coming from the stressed EU markets.  As consumers see what is taking place in Cyprus, some of them are looking for a safe haven for their money. One Canadian entrepreneur has even claims to be installing a Bitcoin ATM in Cyprus.

I have to admit it.  I have heard of Bitcoin and read a little bit about it, but I haven’t given it a lot of thought until now.  It was created in 2009 be a pseudonymous hacker named Satoshi Nakamoto, ostensibly to pay for goods online with digital currency.  There are about 11 million bitcoins in “circulation” with a market cap of about $1 billion.  Now that is far from the $4 trillion in daily trading of more traditional currencies, but it is growing.

The fact that an increasing number of people are looking for alternatives to national currencies and perhaps, ways to get their money out of the country is interesting.  Also of interest is the trust these folks have in a completely unregulated and mysterious currency.

Perhaps the old saying is true – “desperate times call for desperate measures.”

The surge in Bitcoin and the slump in Cyprus and their perceived link makes me think there are two stories that bear further investigation – alternative currencies and a watchful eye on the Euro crisis.

[Severian]

Nice! That's a rather worldshaking opinion to be on that particular blog.

[grondilu]

I have no idea if that is technically possible, but could a lightweight bitcoin client be integrated in a mastercard chip?

[SomeWhere]

“desperate times call for desperate measures.”

Well, there you go. He admits we are in desperate times.

[TiagoTiago]

I have no idea if that is technically possible, but could a lightweight bitcoin client be integrated in a mastercard chip?

I'm not 100% sure, but i think all that is needed is private key storage and transaction signing (and perhaps public key generation if you wanna check your balance on some third-party machine).

[Rincewind]

I have no idea if that is technically possible, but could a lightweight bitcoin client be integrated in a mastercard chip?

Not necessary. If you're using a vendor implemented ID-system, their point of sale system could access your wallet hosted within their network. It would be no different than what you do with a checking account funded Visa or MC debit card now.

[Peter Todd]

I have no idea if that is technically possible, but could a lightweight bitcoin client be integrated in a mastercard chip?

Essentially yes, but they can do something far more interesting than just a client - Mastercard or Visa have the trust and knowhow required to make that smartcard chip guarantee that it will A: keep the private keys secure, and B: never double-spend. Thus allowing for very safe zero-confirmation transactions, provided they come from such a card.

They can also go the next step beyond that, and make the whole system off-chain as well, allowing Bitcoin card holders to avoid blockchain transaction fees entirely. Of course this can be done as a hybrid system, with the card using either method to make a payment, depending on the circumstances.

There is no reason to expect any of Visa, Mastercard, PayPal etc. to stay out of Bitcoin forever. With the 1MB blocksize limit they can all offer off-chain transaction services, and at the same time, if the limit is raised they can also all offer zero-conf transaction services, as well as run the expensive validating nodes that will be required and mining pools.

[n8rwJeTt8TrrLKPa55eU]

I have no idea if that is technically possible, but could a lightweight bitcoin client be integrated in a mastercard chip?

Essentially yes, but they can do something far more interesting than just a client - Mastercard or Visa have the trust and knowhow required to make that smartcard chip guarantee that it will A: keep the private keys secure, and B: never double-spend. Thus allowing for very safe zero-confirmation transactions, provided they come from such a card.

They can also go the next step beyond that, and make the whole system off-chain as well, allowing Bitcoin card holders to avoid blockchain transaction fees entirely. Of course this can be done as a hybrid system, with the card using either method to make a payment, depending on the circumstances.

There is no reason to expect any of Visa, Mastercard, PayPal etc. to stay out of Bitcoin forever. With the 1MB blocksize limit they can all offer off-chain transaction services, and at the same time, if the limit is raised they can also all offer zero-conf transaction services, as well as run the expensive validating nodes that will be required and mining pools.

All this.  And by switching to a Bitcoin transport model, they could also get a nice windfall by getting rid of their (probably very expensive) fraud & identity theft overhead.

The question is whether their management is smart enough to allow or encourage some disruption to their existing businesses for the sake of a brighter future, or whether they will instead shortsightedly fight to keep the current comfy status quo in place.

Hopefully someone reading this thread knows someone high up in MC/Visa/Amex and forwards them your post.