Security Notes: Re-Materializing Digital Money

Minting money has become a mouse click in the Federal Reserve’s computer. Ninety percent of circulated funds is never materialized in either coins or bank notes. And the recent craze for cryptocurrencies further cements the de-materialization of money.

The advantages of digital currency are clear and numerous: it stores on a pinhead; it is paid with the speed of light; it is minted in a jiffy; it may be made traceable and taxable. Alas, de-materialized money lacks the sense of assurance projected by a pack of $100 bills, a silver coin, or a gold bar.

Indeed, de-materialized money is a juicy target for counterfeiting. It also shakes our sense of privacy, and—most alarming—it depends on uninterrupted cloud services. Emergency planners are horrified at the thought of a network collapse that would invalidate the financial grid, with devastating consequences.

Is there a way to keep the overwhelming advantages of digital money while holding on to the salient advantage of metal coins?

Yes. Allow me to introduce chemical digital money, or re-materialized cyber currency. It comes in three types. Type I is a hybrid coin. Electronic money is stored in a micro SD chip, which in turn is fitted into a chemical shell that must be cracked like an eggshell to pull the micro SD (and the money) out.

The value of the digital money inside the coin is marked on the shell. If the shell is intact, the payee can be sure the micro SD was not tampered with, and so will accept the materialized coin for its face value. The holder of this hybrid coin can always crack the shell, and read the MicroSD to his phone to use the money digitally. More features and details appear in publications describing US Patent #9,471,906.

Type II (or “RockCoin” ) is based on a new technology recently published by Case Western Reserve University (Samid and Wnek: “The Rock of Randomness.”) This concept involves using modern 3D printing technology to construct a “rock” as a randomized combination of seeded composite plastics that projects a data signature in response to applying the rock to electro-chemical measurements.

Using this technology, the Fed can mint physical coins in any denomination, however large. The minted rock will come with a marked ID and a designated face value. The public ledger will also publish the coin’s signature.

What happens when the holder of this coin passes it as payment? The payee will fit the coin into a simple and commonplace RockCoin-Verifier, apply the electro-chemical test, and confirm that the rock is indeed the minted coin of the declared denomination.

Today’s level of scientific knowledge does not allow us to mint this electro-chemical rock per order. In other words, we have no way to manufacture a coin that would comply with given measurements. The mint has no idea, in advance, of how the measurements will read. That means that no counterfeiter can take coin measurements specified in the public ledger and build a compliant rock. Which in turn means that if a rock reads as the public ledger says it should, then it is 100% the real thing.

In one fell swoop, society can maintain a payment regime even if terrorists or a natural catastrophe have brought the Internet down. Each coin verifier will hold its own copy of the public ledger. So now we are back into cash mode, only now the fundamental advantages of digital money are intact. Since all the circulating coins are identified, they can be taxed. And they can be suspended, or even invalidated if the authorities suspect misuse or foul play.

RockCoins can come with expiration dates, and certain coins may include their custodial history. Privacy may be taken to the maximum, perhaps on small denominations, and to the minimum on large coins.

Using the BitMint money language, the RockCoin can be parceled out to tradable claim checks, which are purely digital. Much like a quarter or a dime, the RockCoin is robust and handy. Coins will vary in size, shape, weight, and color.

Type III? That posits use of the rock technology over the shell of a hybrid coin.

One thing is clear. Payment continuity is a must for survival. Purely digital finance is vulnerable to evil-doers and unfortunate mishaps. Chemical digital money may be the only thing between us and societal chaos.

—Gideon Samid • Gideon@BitMint.com