Apple details secure 'touchless' e-wallet strategy in patent filing

Posted:
in General Discussion edited January 2014
Apple has been coy in revealing its plans for a touchless payment solution, but a patent filing discovered on Thursday gives clues as to where the company is headed.

Payment


Tech companies like Google are looking to streamline real world payments with so-called "e-wallet" solutions based on touchless technology like NFC. Despite a market heavily saturated with smart devices that would serve as optimal platforms for such systems, a clear frontrunner has yet to emerge.

While Apple is said to be working on a mobile payments solution, it has taken a "go slow" approach to the still nascent market. Over the past months, the company has been quietly laying groundwork for a possible reveal, however, first with Passbook, and more recently iBeacon. At this point, the endgame is unknown, but a patent filing discovered today may play a role in Apple's grand design.

The U.S. Patent and Trademark Office published Apple's application for a "Method to send payment data through various air interfaces without compromising user data," which details a readily deployable digital system based on existing mobile hardware technology. Prior to today's filing, most of Apple's payment-minded patents have focused on use case scenarios, not backend infrastructure.

Payment


The patent language notes that the invention covers a commercial transaction method in which a purchasing device, such as an iPhone, finds and establishes a secure connection to a point of sale system via a first wireless interface. Following link up, the device identifies a second, different wireless interface to connect to a backend server for transaction completion.

According to the document summary, the first secure connection can be accomplished via near-field communications modules -- or like technology -- and is provided to initiate the sales process. Here, NFC is used as an example and the patent points out that other wireless protocols can be used as necessary. In addition, the invention notes that a "bump" may be used to start the connection sequence.

It should be noted that Apple has shown more interest in Bluetooth than NFC, especially given the introduction of iBeacon technology, which rolled out in Apple Stores across the U.S. in December. Based on the Bluetooth Low Energy protocol, iBeacon has the potential to combine the benefits of NFC's limited proximity operation with increased range if needed. Bandwidth is also higher than NFC, allowing for more complex security implementations and data transfer.

Because holding a phone next to a cash register may be uncomfortable, a second more robust wireless interface is used to complete the transaction.

Along with Wi-Fi, the patent application names Bluetooth as a candidate wireless protocol for the second secure link with a store's backend server. This secondary connection does the heavy lifting in Apple's invention, including credit card handling, transfer of cryptogrphical data and user verification.

Passing sensitive credit card information stored on board a device through to a POS or backend server is dangerous as rogue apps may steal the data as it moves through the applications processor. Instead, the invention calls on a "secure element" located on-board a device to generate an alias for customer account information, which is then sent to the server along with a shared secret, or crypto key.

Mentioned multiple times in the patent language, the "secure element" appears to operate in a similar fashion as the "secure enclave" found in the iPhone 5s' A7 system-on-a-chip. In its current form, the enclave serves to protect Touch ID fingerprint data from snooping apps, but the system could potentially be used to safeguard payment information as well. As it is, both the patent and the existing secure enclave create aliases for outgoing data.

Touch ID


Once the alias is received at the backend server, it is verified by crypto data. Examples of viable secure solutions include a digitally-signed combination of one or more aliases, random numbers, merchant identifiers or other values.

To verify that the alias and crypto data match, the purchase device and server may communicate a shared secret. A shared secret can be a symmetric key stored in the secure element when the device is manufactured, then transmitted to the server backend behind a secure firewall. Another example is a specific counter value known independently on the device and server.

When a transaction request is received at the server, it generates crypto data from its own version of the shared secret and compares it to the crypto data sent over by the purchasing device to confirm the alias. If a match is found, the transaction is allowed to go through. In the case of a no-match, the transaction is cancelled and the wireless connection is terminated.

A simplification of the process is as follows: A purchase device initiates a transaction with a POS device via a close-proximity wireless protocol like iBeacon or NFC. The phone then sniffs out and connects to the server backend via a second wireless protocol, sending an alias for credit card information alongside a crypto key generated from a shared secret. These sensitive assets are stored in a secure element on the phone. On the server end, the backend generates a crypto key based on the shared secret and compares it with the data provided by the phone. If everything matches, the transaction is a go.

Payment


At this point, it is unclear if Apple will ever institute the above described system in a payments solution, though the company's most recent hardware and software advancements do point in that general direction.

It can be speculated that users may one day be able to use Touch ID to complete transactions by accessing credit card or banking information stored in an on-board secure enclave. Of course, merchants would have to agree to modifications to POS and backend systems for the solution to work. From what can be gathered by early iBeacon adoption, however, it appears that retailers may be ready for an Apple-made answer to mobile payments.

Apple's wireless interface payment patent application was first filed for in 2012 and credits Ahmer A. Khan, Brian J. Tucker, David T. Haggerty and Scott M. Herz as its inventors.
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Comments

  • Reply 1 of 25
    philboogiephilboogie Posts: 7,377member
    In addition, the invention notes that a "bump" may be used to start the connection sequence.

    Bummer
    ^ article

    Sounds like a secure system. Amazing that we have a mobile device that can do all the processing. How far we've come.
    Of course, merchants would have to agree to modifications to POS and back-end systems for the solution to work.

    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.
  • Reply 2 of 25
    In 2012 this filling was mentioning a secure device, released as touchid over a year later. Payment design is probably much more detailed by now at Apple's labs. Imho, this will turn out to be the biggest thing for Apple in the coming years. This is why they are piling so much cash.
  • Reply 3 of 25
    [QUOTE]And there's the problem. I wonder what this will entail, exactly. Specialized software? From Apple, requiring a Mac? (Implementation) costs?[/QUOTE]

    There are some iPad POS on the market.
  • Reply 4 of 25
    formosaformosa Posts: 261member

    Isn't this somewhat how Airdrop works? The BT link establishes connection, and the WiFi link does the high throughput. In this case, both links can be used for extra security (shared key). This dual link is a novel approach to throughput AND security. Can't wait to see how TouchID plays out with this.

  • Reply 5 of 25
    flaneurflaneur Posts: 4,432member
    mieswall wrote: »
    In 2012 this filling was mentioning a secure device, released as touchid over a year later. Payment design is probably much more detailed by now at Apple's labs. Imho, this will turn out to be the biggest thing for Apple in the coming years. This is why they are piling so much cash.

    I agree that making the world's commerce easier and more secure could be a very big market for Apple (or anyone else), but where's the need for the big cash pile? Serious question.

    I can see that Apple is going to need data centers around the world for this and other services like FaceTime, iMessage, iCloud, Siri, but e-commerce? Where's the need for large capital?
  • Reply 6 of 25
    I still don't see Apple doing this. As I posted before, this is how I think Apple will do things.

    Everybody is stuck in the current paradigm of passing payment information like CC or debit card information from your device to the merchants POS terminal. I think Apple will "reverse" things and your device will be the POS terminal and the merchant will pass information to you. This way no sensitive data ever gets passed over the airwaves for a crook to intercept. This is my method:

    - You buy something that cost $59.99 and need to pay for it.
    - The merchant POS terminal passes their merchant ID# and the dollar amount to your device.
    - Your device connects to iTunes Payment Processing (IPP or whatever Apple calls it) to verify the Merchant ID, then displays the merchant name along with a request to authorize the purchase.
    - Your device requests you to ID yourself (Touch ID) to approve the purchase.
    - Once you approve IPP sends back an encoded string which contains the merchant ID, dollar amount and reference number.
    - Your device passes this to the merchant which shows them payment information is received.
    - Merchant system checks the data from you to make sure they got paid.
    - You take your goods.

    No sensitive data ever gets passed between you and the merchant. Apple is the processor and uses information on file to pay the merchant. The advantage for Apple? They get a cut of each transaction just like payment processors do. The advantage for the merchant? With Apple's pull and huge CC database they can negotiate a better rate with CC companies than a small merchant could ever hope for. Advantage for me? No more possibility if someone scanning the airwaves to get sensitive data. Better security for everyone.

    Now done of you might look at this and point out possible flaws, but I have those covered too. Just didn't want to type a huge post so if anyone asks I'll provide the answer.
  • Reply 7 of 25
    solipsismxsolipsismx Posts: 19,566member
    I think Apple will "reverse" things and your device will be the POS terminal and the merchant will pass information to you. This way no sensitive data ever gets passed over the airwaves for a crook to intercept.

    Interesting "reverse" concept but note that NFC creates a secure loop that is very short. Even this patent lists the devices as needing to be 3 to 6 centimeters apart.


    PS: I can't see any flaws with your "reverse" concept so I'd like to know what obstacles you've thought of.
  • Reply 8 of 25
    Quote:

    Originally Posted by SolipsismX View Post





    Interesting "reverse" concept but note that NFC creates a secure loop that is very short. Even this patent lists the devices as needing to be 3 to 6 centimeters apart.





    PS: I can't see any flaws with your "reverse" concept so I'd like to know what obstacles you've thought of.

     

    What if someone writes an App to try "fool" the merchant that the transaction was approved? The App intercepts the data from the Merchant and sends back a string that tries to fake the approval from iTunes?

     

    There are two ways I can think of to get around this.

     

    1. The merchants POS terminal has an internal ID number that gets written only once when bought, and never gets transmitted. When iTunes sends back the reference number, it's encrypted. The POS terminal uses this internal ID number as the hash. Hashing the purchase amount with your internal ID should match the reference number. Since the crook would never know this internal ID number they could never fake the reference number.

     

    2. The merchant POS terminal contacts iTunes (over their wired network) using the reference number and iTunes responds if it's valid or not. Again, the internal ID of the POS terminal is used to hash the result so even if there was a man-in-the-middle attack (or if a hacker got onto your wired network) they still wouldn't be able to fake the reference number.

     

     

    With NFC, a hacker could still get data just like they do now. For example, crooks often modify POS terminals to capture swiped cards and PIN numbers. It would be easy to place another NFC antenna on the POS terminal or stand to capture data. And there are different levels of "security". NFC isn't very high up the chain.

     

    With this system, actual CC data is never passed around between anyone. All that's exchanged are payment amounts and reference numbers. The CC data is retained on Apple's servers and is never released to anyone.

     

     

    Again, Apple is too big not to become an actual payment processor. Having an iPhone pass CC data to a merchant offers no actual benefits to Apple or customers (why tap your phone when you can tap your CC card?). There has to be some incentive for Apple to get into this and I think the reasons I mentioned above are pretty good incentives.

  • Reply 9 of 25

    Loooooong story short ..... Larry was getting tired waiting for Apple to come up with something .... anything .... so the boys of goofle can begin copying it!

  • Reply 10 of 25
    flaneur wrote: »
    I agree that making the world's commerce easier and more secure could be a very big market for Apple (or anyone else), but where's the need for the big cash pile? Serious question.

    I can see that Apple is going to need data centers around the world for this and other services like FaceTime, iMessage, iCloud, Siri, but e-commerce? Where's the need for large capital?

    Apple iBank.
  • Reply 11 of 25
    flaneurflaneur Posts: 4,432member
    Apple iBank.

    Aha, headquartered in Ireland.
  • Reply 12 of 25
    I love it when people ask why Apple needs so much capital. ???? They do not run and maintain a successful multi-national corporation to give Apple the wisdom they have attained with not having so much capital. I look forward to the day someone in Tim Cook's position does this.
  • Reply 13 of 25
    flaneurflaneur Posts: 4,432member
    I love it when people ask why Apple needs so much capital. ???? They do not run and maintain a successful multi-national corporation to give Apple the wisdom they have attained with not having so much capital. I look forward to the day someone in Tim Cook's position does this.

    If you're referring to me, you're making an unwarranted assumption. I was asking the original poster and anyone else who wanted to speculate why or how in particular Apple's cash reserve would be helpful in e-commerce.

    I've never used a phrase like "Apple's sitting on their cash hoard" because I know very well that it represents an enormous head of actual and intellectual capital that is going to allow them to think big, very big, now and in the future.

    For comparison, I heard the other day that the International Space Station has only cost 100 billion. I look forward to Apple's own space program, as I've said a few times here before, somewhat seriously. Not to mention their own global data network.

    Other things you're saying I truly could not decipher.
  • Reply 14 of 25
    qo_qo_ Posts: 35member
    flaneur wrote: »
    Aha, headquartered in Ireland.

    Henceforth known as iReland.
  • Reply 15 of 25
    Quote:

    Originally Posted by EricTheHalfBee View Post



    I still don't see Apple doing this. As I posted before, this is how I think Apple will do things.



    Everybody is stuck in the current paradigm of passing payment information like CC or debit card information from your device to the merchants POS terminal. I think Apple will "reverse" things and your device will be the POS terminal and the merchant will pass information to you. This way no sensitive data ever gets passed over the airwaves for a crook to intercept. This is my method:



    - You buy something that cost $59.99 and need to pay for it.

    - The merchant POS terminal passes their merchant ID# and the dollar amount to your device.

    - Your device connects to iTunes Payment Processing (IPP or whatever Apple calls it) to verify the Merchant ID, then displays the merchant name along with a request to authorize the purchase.

    - Your device requests you to ID yourself (Touch ID) to approve the purchase.

    - Once you approve IPP sends back an encoded string which contains the merchant ID, dollar amount and reference number.

    - Your device passes this to the merchant which shows them payment information is received.

    - Merchant system checks the data from you to make sure they got paid.

    - You take your goods.



    No sensitive data ever gets passed between you and the merchant. Apple is the processor and uses information on file to pay the merchant. The advantage for Apple? They get a cut of each transaction just like payment processors do. The advantage for the merchant? With Apple's pull and huge CC database they can negotiate a better rate with CC companies than a small merchant could ever hope for. Advantage for me? No more possibility if someone scanning the airwaves to get sensitive data. Better security for everyone.



    Now done of you might look at this and point out possible flaws, but I have those covered too. Just didn't want to type a huge post so if anyone asks I'll provide the answer.

     

    Only thing I see that might be an issue is I don't think a CC company would go for this.  Due to Apple's cut, the CC could always simply lower their off to the merchant in order to cut out Apple.  

     

    For example: CC company initially charges a merchant 5% which is too high for the small merchant.  Merchant goes through Apple where Apple has a negotiated rate with the CC Company for 3% + 1% for Apple.  Now this rate is lower than the original offer to the merchant (4% vs 5%), but all the CC Company has to do is drop their offer to down to 3.5%.  CC Company gets a higher cut than they would going through Apple and merchant gets a lower percentage as well.

  • Reply 16 of 25
    mistercow wrote: »
    Only thing I see that might be an issue is I don't think a CC company would go for this.  Due to Apple's cut, the CC could always simply lower their off to the merchant in order to cut out Apple.  

    For example: CC company initially charges a merchant 5% which is too high for the small merchant.  Merchant goes through Apple where Apple has a negotiated rate with the CC Company for 3% + 1% for Apple.  Now this rate is lower than the original offer to the merchant (4% vs 5%), but all the CC Company has to do is drop their offer to down to 3.5%.  CC Company gets a higher cut than they would going through Apple and merchant gets a lower percentage as well.

    Maybe Apple drops their fee to 2% or 1%, but this also requires Apple to become a full-fledged credit company. Those billions in the bank are suddenly very handy.

    Hello, iBank / AppleCredit.
  • Reply 17 of 25
    I'm not clear on the enrolment process envisioned by either the patent or your ideas above.

    If Johnny grabs his iphone and wants to put his existing credit card into the "wallet", even if the secure enclave stores it and creates a proxy for it (like Johnny's fingerprint), at some point the credit card number needs to be passed to the merchant or the merchant's processor.

    Is the credit card number being "securely" entered into the phone number by hand? and "securely" injected into the secure element?
  • Reply 18 of 25
    formosa wrote: »
    Isn't this somewhat how Airdrop works? The BT link establishes connection, and the WiFi link does the high throughput. In this case, both links can be used for extra security (shared key). This dual link is a novel approach to throughput AND security. Can't wait to see how TouchID plays out with this.

    Exactly. The "shared secret" mentioned in this story could in one or both cases be a TouchID scan.

    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.
  • Reply 19 of 25
    MarvinMarvin Posts: 14,138moderator
    philboogie wrote: »
    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.
    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.
    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.
    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:

    http://www.theverge.com/2013/12/2/5167670/sheep-marketplace-bitcoin-heist-nets-at-least-5-million-owners-blamed

    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:

    http://rt.com/business/alibaba-bitcoin-ban-taobao-353/

    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:

    http://www.washingtontimes.com/news/2013/nov/13/bill-would-outlaw-us-dollar-russia/
    http://www.bloomberg.com/video/67122488-madoff-says-entire-u-s-government-a-ponzi-scheme.html

    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.

    http://en.wikipedia.org/wiki/Inflation

    "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:

    http://www.celebritynetworth.com/richest-businessmen/rothschilds-net-worth/

    http://en.wikipedia.org/wiki/Rothschild_family

    "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.
  • Reply 20 of 25
    Marvin, it's interesting that you both defend and undermine your own argument in the defense of the Federal Reserve and central banking in your own examples.

    The Federal Reserve was one example, of many, of the US government colluding with banks to circumvent their constitutional restrictions against creating a fiat currency.

    Fiat currencies backed by magical thinking ARE worthless and time is proving this to be the case. Bitcoin and other associated crypto-currencies have value because they are not centrally controlled. They are essentially 'distributed' open-source currency that gain in value because of their utility. The less valuable ones will flop, the better ones will succeed (we're seeing this with both Bitcoin and Litecoin). One of the central reasons for the design of Bitcoin (I refer to the Bitcoin network) was to remove the corruption of currency from the hands of the few bankers and their political counterparts and incentivize the miners with mathematically planned rewards and inflation and incentivize users with liquidity and low or no cost fees that existing money transmitters can't touch.

    By the way, the price of Bitcoin plummeted when China announced their banks could not get involved in any form, but it has recovered nicely as the value has been discovered and is rapidly rising as it continues to be adopted everywhere else, whether or not governments have a say so.

    Central banks have lost the world's confidence. Bitcoin is the "currency competition" we need to keep people honest.
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