[Marxism] Naked Capitalism comments on my IT/Grexit article

Louis Proyect lnp3 at panix.com
Thu Jul 30 06:46:31 MDT 2015


I invite Marxmailers and PEN-L'ers to check out the discussion, which 
for my money (pun intended) is about as interesting as any I have seen 
on a website in many a day. Although it is fairly technical and involves 
contributions from IT professionals, it is very useful in terms of 
coming to grips with the technical obstacles to a quick exit from the 
eurozone. I understand that many leftists feel that alluding to such 
problems is a red herring and a concession to TINA but you at least have 
to be aware that they exist. In this exchange, someone proposes a kind 
of Bitcoin solution and a Naked Capitalism editor named Clive who has 
many years experience in IT explains why it is not feasible.

http://www.nakedcapitalism.com/2015/07/more-on-the-it-implications-of-a-grexit.html#comments

Michael Clancy
July 29, 2015 at 11:44 pm
An immediate change to the drachma isn’t needed when a neutral ‘digital 
cash’, that acts as global trading currency, can be implemented within 
several months. The brick and mortar businesses can act as the ATM for 
their own benefit to receive euros in exchange for digital cash with no 
fees involved for either party. The people of Greece have mobiles so 
they are not separated from the world. It seems everyone is going around 
some of the issues like allowing the people of Greece to start 
correcting the economy from within their own environment, they can get 
some traction organically without any cost – the other issues can keep 
going for years.

There is more to what I’m adding here but it pains me to read some of 
the comments. An economic system has been developed over several years 
to avoid such issues that Greece is going through. An intro to it can be 
seen here http://qwickpic.com It’s been tested with billion dollar 
processes during some live processes before being placed hiatus to 
expand it more. I maybe sticking my nose in here but wanted to add 
something to the issues.


Clive
July 30, 2015 at 8:26 am
Your suggestions fall into the basic, broad category of “a digital 
currency would solve most, if not all, of the problems which Greece 
would face if it exited the euro”. The main issue with your suggestion 
is that it confuses two things which sound similar (a digital currency 
which you’re viewing like an alternative to physical notes and coins but 
which you envisage operating in the same way as the existing card 
payments networks because transactions are electronic and don’t require 
the exchange of a physical token like cash) and the function of the 
existing card payments networks themselves, which is to facilitate 
payments. It is important when analysing what might be feasible should 
Greece end up leaving the Eurozone to consider both needs (the need for 
a currency in circulation to replace the euro which for the sake of 
convenience I’ll refer to the drachma from here on in and the payments 
networks which would have to be adapted to cope with the new currency) 
separately.

If you roll out a drachma as a replacement for the euro to meet the need 
for a new currency, you can as you say use some form of digital currency 
in lieu of physical notes and coins. This gives the appearance of 
solving the problem of manufacturing (“printing”) the currency and the 
necessary distributions of the correct quantities and denominations of 
notes and coins throughout Greece. I would stress that this is indeed a 
major problem and one that is not easily or quickly solved because 
manufacturing a new currency and then distributing it needs planning, 
physical resources like secure storage and labor to do the cash 
management. So I can quite understand why creative minds would seek to 
find a simpler solution. A digital currency would not need that physical 
product distribution and so seems like it overcomes a big hurdle which 
Greece would face. But in reality, all it does is exchange one set of 
problems (manufacture and distribution of a physical item – notes and 
coins) for another (the design, build and testing of an infrastructure – 
smartphone apps, stored value cards or other mobile form factors) which 
would be needed to allow people to use the new digital currency in a 
retail / merchant environment or web-based payment interfaces to allow 
people to settle things like taxes, utility bills, rents and suchlike 
online using a digital currency.

Obviously, this “digital currency infrastructure”, if I may call it 
that, doesn’t exist in Greece on any scale. Indeed, it doesn’t exist 
anywhere in the world apart from a few niche examples used by early 
adopters of things like Bitcoin. Am I being harsh in describing these as 
“hobbyist” ? From my perspective, working in the traditional payment / 
big finance industry, that is what they seem like to me in terms of 
their maturity.

It is at this point that proponents of a digital currency-based solution 
for a Greek euro exit often get a bit hazy and start implying that the 
traditional card payments infrastructure can somehow bridge the gap. You 
seem to be suggesting this when you refer to “businesses can act as the 
ATM for their own benefit to receive euros in exchange for digital…” 
which would require a merchant to take payments in euros and exchange 
them for the new digital currency. If it wasn’t physical currency euros 
being paid to the merchant in exchange for digital currency it would 
have to be card payments – as Naked Capitalism has pointed out at 
length, card payments are vital to the tourist industry and the tourist 
industry is vital to Greece’s economy. Now, either you’re proposing that 
the existing card payment infrastructure EPoS terminals can take a card 
payment from one of the existing card networks’ cards (VISA, MasterCard 
etc.), hold the payment in the terminal, then credit the mobile form 
factor for the digital currency (such as a smartphone app or stored 
value card or similar). If not that, then the merchant has to take 
physical euros in cash off the customer and then use the conventional 
EPoS terminal to credit the digital currency mobile form factor. But 
this would mean that the digital currency mobile form factor would have 
to comply with exactly the same specification that conventional card 
networks’ cards have to adhere to.

Before blithely coming up with ideas for how some new-fangled digital 
currency could work, I really urge any reader to review how onerous the 
current standards for the conventional card payments networks are. 
Here’s MasterCard’s merchant guide: 
http://www.mastercard.com/us/merchant/pdf/SPME-Entire_Manual_public.pdf. 
And that is just for merchants. Card issuers have an equally detailed 
set of requirements to fulfil for card manufacturing. Adding support for 
a digital currency mobile form factor to the existing card payments 
infrastructure while being backwards-compatible with the existing 
standards for “conventional” cards is a huge undertaking. Just reading 
the standards takes days, let alone understanding it and then coming up 
with a set of designs.

The card payments industry has recently introduced a modest change in 
the form of additional feature – support for Apple Pay. If I tell you 
that this incremental advance (it really is merely a re-use of the 
existing facility to handle contactless NFC enabled cards) took over two 
years of planning and testing (plus co-ordination between the myriad of 
actors in the payments industry) to deliver. The only significant change 
to the standards was PAN tokenisation which was previously an “option” 
for the EPoS terminals, this became a “mandatory” to allow card PANs to 
be selected in the Apple Pay “wallet” and then transmitted to the EPoS 
terminal securely. Two whole years. Just for that. What you’re 
suggesting implies not only passing of the unique ID for the form-factor 
information but also the stored value position change too between the 
digital currency and the EPoS terminal. So it could hardly be developed 
and rolled out any quicker than Apple Pay support.

Now, I might well have misunderstood you here. If you’re not suggesting 
that the existing conventional card payments networks’ infrastructure 
(such as EPoS terminals) is being changed to support a digital 
currency’s mobile form factor, then you are presumably talking about 
some other, new, equivalent ? In which case, you land on the big snake 
and go back to square-one – having to introduce a new, parallel, 
infrastructure to support the digital currency in every merchant and 
every bank in Greece. I’m open to sensible suggestions for how long that 
would take to achieve, say, a 95% penetration rate.




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