[Cryptography] Am I missing something about CBDC ?

[Ray Dillinger]

On Fri, 2020-12-18 at 17:21 -0400, Robert Hettinga wrote:
> 
> 
> > On Dec 18, 2020, at 1:14 PM, John Levine <johnl at iecc.com> wrote:
> > 
> > small anonymous transactions
> 
> That might mean lightning, I suppose, because they’re supposed to use
> chaumian mixes and an arbitrary number of wallets, but that seems
> like kid-sister crypto to me, even though, um, others here, assure me
> it’s not.

The real issue here is the cost of clearing transactions.  If it's a
block chain with limited space available per day, like bitcoin, then
the cost of clearing a transaction is essentially an auction for that
space - which can be an enormous cost relative to the small
transaction.  Nobody will use Bitcoin to pay for a cup of coffee when
processing the payment costs ten times as much as the coffee.

And if the transaction goes through the credit card avenue here in the
US, it's much less expensive but not free; last time I knew what it
cost, it cost about a bit (1/8 dollar) to process.  Stores usually just
pay it. They take the hit and make that cost "invisible" to the user
because making it easy for customers to pay lets the stores sell more
stuff.

But if you're out there doing true peer-to-peer with a cost comparable
to the credit card system, it's going to be visible.  Someone's going
to have to come up with that extra bit, and so the transactions won't
be frictionless.  And below a certain threshold it won't be practical;
nobody's going to "take the hit" on that form of payment for non-
aggregated parking-meter payments for example.  If they can aggregate
and make one transaction a month on your account, that's going to be a
few dollars and worth it.  If they can't, the processing costs are
going to eat a large fraction of their revenue.

The other drawback of credit card payments for anything is that you
then get junk mail from every purveyor of any related or comparable
thing in the world, forever.  It's not clear yet whether the same
problem applies to these new digital tokens.

Bear