Originally Posted by PhilBoogie
And there's the problem. I wonder what this will entail, exactly. Specialized software? From Apple, requiring a Mac? (Implementation) costs?
It's 'easy' to design some method on paper, but with all ramifications I have no doubt there are many great ideas, never to see the light of day because of the amount of work or costs involved.
This is very straightforward to implement and it can be done on any server. The data they are talking about is say 10-20 strings of text being encrypted in some way. It would take less than a single working day to implement and test a one-to-one transaction. Payment processing already does this, it's just changing the order things are done.
Originally Posted by EricTheHalfBee
iTunes Payment Processing (IPP or whatever Apple calls it)
While getting a cut of the money, I would doubt that Apple wants to be the single point of failure for every single retail transaction. If they wanted to do that, they could just use iTunes IDs because the credit card data is already in iTunes. They'd never get widespread adoption either if they tried this. There's no way Amazon would let another payment processor take a cut of transactions when they are trying to get prices as low as they can. Apple has to allow people to set this up their own way. Apple profits from the hardware sale.
That's not to say they couldn't offer an option to use Apple as the payment processor and smaller retailers would probably be happy with that but not exclusively.
Originally Posted by SpamSandwich
The "shared secret" mentioned in this story could in one or both cases be a TouchID scan.
It has to exist on the server. They keep fingerprint data in an isolated piece of hardware on the phone, they won't transmit scan data over a network. The shared secrets are described as symmetric or public/private keys.
The shared secret has to be something they can replace easily in the event of a security breach. TouchID would at most be used to authorize the use of the phone for a transaction but not to verify the transaction.
The ideal setup is not to transmit credit card data at all but the main issue has always been storing it. Someone has to store it at some point, the card-issuing bank has to. But no one else outside of the bank should need to store the card data. The reason they do is for faster transactions so that you don't have to enter card details every single time. With a computer validation process, entering card details manually isn't required so intermediates have no reason to store card data.
Originally Posted by SpamSandwich
I sure hope Apple's future Wallet includes crypto-coin integration. As some may be aware Apple has rejected some Bitcoin apps for undefined reasons. I was hoping they were rejected because Apple was developing something similar.
The thing with crypto-currency is that it's unregulated and unstable. It is used in illegal activity and lots of it can be stolen very quickly:
Given that the transactions are designed to be anonymous, it makes them hard to trace and almost impossible to prove original ownership. They are being banned from trading in a few places:
I think that the rise of crypto-currencies is a very clear indicator that some of the public now realise how valueless normal currency is and how it can be replaced by something almost equally worthless. However, normal currency works because it is backed by a guarantee of the government. At some level, the value in government-approved money comes down to a form of production. Their own securities are guaranteed by their ability to tax people. Crypto-currencies are not brought into circulation as a result of human labor and have nothing to back them - they are brought about by the processing power of computers and people have to assume that the algorithms generating them are sound.
It's basically, my computer made a random string of digits, how about you give me $1000 for it? It's ok, someone else will give you $1000 for it too.
But when everybody else says 'nah, it's not worth $1000, it's worth maybe $20', you have nothing to justify its value. The strength of a currency is in a central authority backing its value. This can't exist with crypto-currency because it's decentralized. There is zero correlation between the cost of goods and labor and crypto-currency. Maybe this can change by increasing the amount of transactions that happen using it and thereby giving it some stability but it has to be taxed like every other asset and the government won't accept a non-government backed currency for that.
The one thing crypto-currency has going for it is actually the illegal markets because for now at least, they can do illegal trades, not worry about taxes or money laundering. It's certainly not something Apple needs to be involved with though.
I'm not suggesting that I like the government-backed setup particularly as it's debt-based and financial institutions are allowed to be over-leveraged by crazy amounts:
There shouldn't really be so much inflation in currency. If you bought a house in 1950 for $50k, today it would be $480k if it retained it's value just because of how the currency changed. Economists have said this is a good thing because it gives people a positive feeling that their assets are increasing in value but it's fraudulent. If the relative value hasn't changed then the price should stay largely the same, at least over the course of a lifetime.
"Song Dynasty China introduced the practice of printing paper money in order to create fiat currency during the 11th century and, according to Daniel Headrick, "paper money allowed governments to spend far more than they received in taxes... in wartime, and the Song were often at war, such deficit spending caused runaway inflation." The problem of paper money inflation continued after the Song Dynasty. Peter Bernholz writes that "from then on, nearly every Chinese dynasty up to the Ming began by issuing some stable and convertible paper money and ended with pronounced inflation caused by circulating ever increasing amounts of paper notes to finance budget deficits."
During the Mongol Yuan Dynasty, the government spent a great deal of money fighting costly wars, and reacted by printing more, leading to inflation. The problem of inflation became so severe that the people stopped using paper money, which they saw as "worthless paper." Fearing the inflation that plagued the Yuan dynasty, the Ming Dynasty initially rejected the use of paper money, using only copper coins. The dynasty did not issue paper currency until 1375.
Historically, infusions of gold or silver into an economy also led to inflation. From the second half of the 15th century to the first half of the 17th, Western Europe experienced a major inflationary cycle referred to as the "price revolution", with prices on average rising perhaps sixfold over 150 years. This was largely caused by the sudden influx of gold and silver from the New World into Habsburg Spain.
By the nineteenth century, economists categorized three separate factors that cause a rise or fall in the price of goods: a change in the value or production costs of the good, a change in the price of money which then was usually a fluctuation in the commodity price of the metallic content in the currency, and currency depreciation resulting from an increased supply of currency relative to the quantity of redeemable metal backing the currency.
This relationship between the over-supply of banknotes and a resulting depreciation in their value was noted by earlier classical economists such as David Hume and David Ricardo, who would go on to examine and debate what effect a currency devaluation (later termed monetary inflation) has on the price of goods (later termed price inflation, and eventually just inflation).
The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have taken place in a number of countries, producing hyperinflations – episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is a notable example.
Economists generally agree that in the long run, inflation is caused by increases in the money supply."
This may be one area where crypto-currencies excel because they appear to be designed to slow the easy injection of new money into supply over time. They will always be ultimately traded for fiat currency though so I'm not sure how that will play out in the long term. I guess the idea is to create a digital equivalent of gold, silver, diamonds etc.
A limited supply does have the problem that the population grows. If everyone owns some of a limited supply then it runs out eventually. The money supply has to keep increasing to balance out with increased population and production. The downside with what happens now is that there's too much debt-creation. It doesn't get paid off aggressively enough and is given out too casually. The interest on it also goes to private funds, which has made certain groups very wealthy:
"the new kind of international bank created by the Rothschilds was impervious to local attacks. Their assets were held in financial instruments, circulating through the world as stocks, bonds and debts. Changes made by the Rothschilds allowed them to insulate their property from local violence: "Henceforth their real wealth was beyond the reach of the mob, almost beyond the reach of greedy monarchs."
Another essential part of Mayer Rothschild's strategy for future success was to keep control of their banks in family hands, allowing them to maintain full secrecy about the size of their fortunes."
There's a quote attributed to one of them "Let me issue and control a Nation's money and I care not for who writes it's laws". Even if it's not accurately linked to them, the statement is true. Any entity that has control over currency that can be traded for any kind of assets or labor has ultimate power. If this control lands in the hands of private individuals motivated by greed then it has devastating effects.
The problem with the major banks for example. No punishments handed out, trillions exchanged on their own authority, they say publicly it was net zero effect but if you gave me $1t and I leverage it and pay it back and profit, how is that net zero? It's a reward for criminal activity. Maybe it's a case for decentralized currency but it won't fix it as long as the law-makers are backing them.
I think rather than crypto-currency, we just need to have a currency backed by a central authority that is regulated strongly. Low inflation, very tightly controlled leveraging and debt shouldn't be compoundable. If you make a loan, someone shouldn't be able to use that as capital for issuing a loan to someone else. Every loan given out by a business should be regulated so that it's only leveraged by a reasonable amount relative to their assets - Lehman's debt-to-equity ratio was over 30:1 when they collapsed, which is insane. When it's unpunished (because it's lawful of course), it just encourages it because if they win, they win big; if they lose, the losses are too big that it becomes someone else's problem.
Having a global currency isn't a bad thing either IMO. I know some people get very patriotic about currency and how great countries shouldn't be saddled by weaker ones but if everyone has the same guidelines for low inflation, reasonable leveraging etc then a low producing country just has less money. If they don't stick to the guidelines then the remaining group of countries takes measures to prevent them from trading in that currency. Crypto-currencies have no borders so act like a global currency but again, their value is held against fiat currency.