Saturday , February 24, 2024

Payments in a Time of Calamity

Last month, the well-known journalist Ted Koppel came out with a very alarming book, Lights Out, arguing that the cyber community agrees that the power grid in the United States is vulnerable to a devastating assault that would incapacitate the system for many months. In this scenario, a new generation of malware would take control of power-generation facilities, run them beyond their tolerance, and physically crash the turbines, the pumps, and the rotors with a destructiveness no traditional bomb could emulate (the Stuxnet legacy). In his book, Koppel reports on his pathetic meetings with government officials, who sheepishly acknowledged they have no plan to help Americans survive this calamity.

We are so dependent on the power grid that the prevailing estimates are that only one in 10 people would survive a prolonged power outage in our major urban areas. Countless people would remain stuck on their high-rise floors, unable to walk down the stairs. Others would dwell in their cars, unable to climb up the dark stairs. All medical devices would power down, food would rot in refrigerators, and armed gangs would roam around, robbing anything in sight.

We all remember super storm Sandy in 2012. Gas pumps remained operational through generators, but customers did not have cash, and could not pay electronically.

Urban centers are communities of strangers. Cooperation and collaboration happen through payment. When payment is dead, society dies. If you doubt this, consider that a positive community spirit will get many of us to help our needy neighbors, but for the long haul this won’t wash. Like it or not, people require the incentive of money to exert themselves indefinitely in favor of strangers.

“We lived without electricity for many centuries before Thomas Edison came along, and we can do it again!” argue the optimists. “Indeed so,” is the right answer, but even in those days we had money to lubricate our societal existence.

Some emergency guides advise the public to stash away a bundle of cash. That might be okay for a week-long blackout, but not for eight months of down time. Unable to pay or get paid, people will either wait around for some government official to offer help or resort to brute force. The only hope to avoid societal breakdown is to get people to help the weak, the lost, the needy. That requires payment. Payment will evoke the resourcefulness and ingenuity of the people through many months of darkness. But how?

Tethered money: Digitized dollars marked for use in emergencies only. Money that is worthless until some calamity disables normal payment networks. The government would stream this emergency money to people’s phones or dedicated devices, ready to be activated when needed.

In an emergency, payment would take place through battery-operated devices exchanging bit money. The identity of the payor and the payee, and the time of the transfer, would be recorded as an electronic tail behind the digital coin. When power is restored, people would be able to redeem their emergency dollars against nominal dollars.

Every redeemed digital coin would carry on it its entire history, who owned it and when. This per-transaction visibility will prevent fraud and abuse and expose negligence. For more, see my book, Tethered Money.

In a calamity such as the one Koppel describes, tethered money would send the young, strong, and able into the streets offering to help the old, the infirm, and disabled. People would go to work right away, rather than panic while waiting for some government agency to send someone over.

But in the pandemonium, wouldn’t crooks and fraudsters find the digitized money easy prey? Prey, yes. Easy, no! Digitized dollars are tethered to their owner, who will have to release them for payment via a sophisticated cryptographic handle. The recipient will have to countersign, and then sign for paying further. The deployed cryptographic protocols will require limited computational power and will readily run on battery-operated devices. Since the central mint will be unreachable with no power, its function will be assumed by local, geographically reachable sub-mints, ensuring the integrity of the money and its flow.

This is no more than a conceptual blueprint. A detailed design must follow. A task force composed of technologists, payments professionals, and crisis-management experts needs to be assembled.

—Gideon Samid •

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