Security Notes: The Digital Dollar Claim Check

A claim check for a certain sum of money, X, which can be claimed 24/7 for its exact nominal value, with instant credit to the claimant account, is not exactly a box full of coins summing up to X dollars. It is like a key to a readily available box where the actual money is placed.

If you owe X dollars, then, by passing the key to your creditor, you satisfy your debt, because the new keyholder has the box contents at their disposal. And the new keyholder can pass the key on to satisfy their obligations. As long as these traders trust that the box is readily accessible and loaded, the key is a valid trading instrument, though it is only a claim check for money, not money per se.

Modern cryptography offers us the power to manifest this key-exchange vision in cyberspace. Digital-dollar claim checks are constructed from strings of bits. They store as bits, fly as bits, and are secured as bits by the robustness of cryptographic locks that can’t be picked or overcome by cyber thieves. The latest generation of these digital claim checks can have split value, and, most important, can be tethered. That is, cryptography can regulate their movement (see my book “Tethered Money” published by Elsevier).

Think about tethering. You will soon realize it is exactly what will be needed in the months ahead as society reorganizes itself following the coronavirus crisis. As with every crisis, some formerly ordinary items suddenly become universally coveted. Big money is unleashed, a privileged few pile up and hoard, prices go through the roof, shelves go empty, and the civil order is shaken.

This coronavirus crisis is no exception. Except that we now have a trusted technology—digital-dollar claim checks, also known as BitMint. Designed here and first built in China. The American version is due soon. How does it work?

Here’s an example relevant to the present crisis. An enterprising engineer who is also an MD and PhD develops a very effective facemask. If its design features are proven, a few deep pockets will likely buy the factory output for months to come, leaving the rest of us unserved. In response, the state government may enact an order that this product cannot be transacted against regular dollars, but only against digital-dollar claim checks at the listed price (no higher).

Anyone can buy these claim checks the way consumer products are purchased. Alas, the state will ask the buyers to identify themselves, and there will be a limit on how many such claim checks an individual can purchase. Once purchased, the buyer will cyber-pay these claim checks to the manufacturer, who in turn will claim their nominal value in nominal dollars.

The business is all the same as it would be without the purchase of the claim checks, only that the claim checks put the government in the middle to prevent hoarding and price gouging. It will be a matter of policy whether to allow hospitals to amass larger amounts, or whether to give preference to stateside buyers, etc.

The entire sequence is lightning fast. The mask buyer presses a single “buy” button on her app. That click activates the claim check purchase, which is instantly routed to the mask manufacturer, which on the spot redeems them and finds their value credited to its account.

Digital-dollar claim check technology can be extended to any and all merchandise where, without it, prices go sky high and shortages plague the ordinary consumer. It can be run by a mayor, a governor, or at a federal level.

—Gideon Samid, gideon@bitmint.com