The basic concept of bitcoin was (and still, to some extent, is) sound. The only flaw in the system was that storing the bitcoins on traditional PCs and online servers left the currency open for crime. Plus, bitcoin's value is not backed by any government. Money, even the dollar or euro, depends on a lot of collective belief in its value -- and also that, at the end of the day, there's a government somewhere that will back it up. This is something that bitcoins don't have.
But one government is stepping up to put its hat in the ring.
In the spring of 2011, even as the news cycles were pointing to Sweden as the model for what a cashless society would be, the Royal Canadian Mint launched their own venture in cashless infrastructure: the MintChip.
The MintChip represents a new step in the evolution of digital currency, and could be a real look at what a cashless world will look like. And in contrast with bitcoins, the MintChip system would be backed by an actual state-issued currency, the Canadian dollar.
MintChip, when officially launched, will use trusted hardware in the form of a chip that can be used on a smart card, USB stick, smartphone, or micro SD card. Consumers can get their money transferred to the MintChip device by a third-party broker and, unlike bitcoins, the value in Canadian dollars is easily stored within the MintChip.
The system is designed for what the Mint calls mini-transactions -- $10 or less -- so the risk of heavy fraud is minimized. Critics of the new MintChip technology praise the transportability of the currency, but see some potential problems with the system. Bitcoin analyst Vitalik Buterin points out that an integrated circuit could be a big hole in the system's security. "Such systems are nothing new, and time has shown them, like all other forms of digital rights management, to be far too insecure to build an economy around. About two years ago, the supposedly 'unhackable' Infineo chip was hacked by Christopher Tarnovsky using an electron microscope, needles, and acid, and one can only imagine how quickly such a feat would be repeated when doing so essentially gives you an unlimited license to print money," Buterin wrote.
There are other potential flaws. Buterin argues that because it will be the Royal Canadian Mint that will be inserting value into the system, the infrastructure will not be as decentralized as bitcoin. But this is a compromise MintChip users may be willing to work with, particularly given that once the money is on the MintChip, it becomes anonymous again. And, of course, the money is backed by a hard currency with understandable value.
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