Short Summary: IBC is an Identity-Bound Currency System serving any Etherium-compatible cryptocurrency. The latter can be Central Bank or Privately minted. IBC is a "Gated Community," a "closed-loop system," but it can be huge. The same user can be inside the community, using its benefits, and, at the same time, can be outside the community for different purposes.
"A Roadmap for President Trump's Crypto-Crackdown" outlines what to do to keep "evil cryptocurrency genie" in the regulatory "bottle." This post argues that existing (Bitcoin) and future (Libra) cryptocurrencies are to be used by "Bad Actors" to harm the Society. Indeed - I agree with that! In fact - I've written on multiple issues and problems facing Libra. outlines how to keep the "evil cryptocurrency genie" in the regulatory "bottle." This post argues that existing (Bitcoin) and future (Libra) cryptocurrencies are to be used by "Bad Actors" to harm the Society. Indeed - I agree with that! In fact - I've written on multiple issues and problems facing Libra. outlines what to do to keep "evil cryptocurrency genie" in the regulatory "bottle." This post argues that existing (Bitcoin) and future (Libra) cryptocurrencies are to be used by "Bad Actors" to harm the Society. Indeed - I agree with that! In fact - I've written on multiple issues and problems facing Libra.
But does that mean the cryptocurrency concept is useless? What if cryptocurrency is re-defined to ensure that Bad Actors are kept away from using it? If this is possible, then Financial-based crime will suffer a severe blow.
In my previous post, I mentioned that the cost of financial-based crime to the world economy is staggering ~5% of Global GDP yearly! I believe we can improve our financial system by turning the crypto-currency "genie" into a society-preserving "superhero"!
The thing is that cryptocurrency, as property or token of Blockchain infrastructure, is programmable, i.e., we can add parameters of importance. The anonymity of money is what makes it a "genie." By adding Identity – binding, we can turn the "genie" into society's "superhero."
Money and Cryptocurrency.
Money is any item or verifiable record generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as a medium of exchange, a unit of account, and a store of value. Any item or verifiable record that fulfills these functions can be considered money.
The official AMLD5 definition of virtual currency:
“a digital representation of value that is not issued or guaranteed by a central bank or a public authority is not necessarily attached to a legally established currency and does not possess a legal status of currency or money but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”
Following these definitions, existing cryptocurrencies are no different from fiat money (including cash), and anyone in complete anonymity can use them. This, inevitably, includes thieves and criminals.
“Financial crime causes incalculable harm around the world. The proceeds of bribery, corruption, fraud, narcotics trafficking, and other organized crime have all been implicated in financing terrorism, human rights abuses such as slavery and child labor, and environmental crime. This has serious economic and social costs in terms of the lost revenues to national exchequers that could be invested in social development, and terms of the impact on individual lives" (source: Refinitiv).
Global estimate of lost turnover as a consequence of financial crime, including bribery and corruption; money laundering; fraud; theft; cybercrime; and enslaved person labor/human trafficking, stands at just over $1.45 trillion, while Global spending on fighting financial crime is ~$ 1 trillion (source: Refinitiv).
Cybersecurity companies are failing to protect our Bank Accounts, and our Banks are failing to protect our Society from Money Laundering.
Existing money fails in a socio-economic context. We need to add societal benefits to money function elements.
Fiat Money uses Banking infrastructure to provide a modern medium of exchange, store of value, and unit of account. Bitcoin uses Blockchain infrastructure as a medium of exchange and unit account but fails to provide a store of weight due to its excessive instability. Stablecoins, such as Libra, over Blockchain, add this value store by pegging Stablecoin price to another stable asset.
Fiat Money, BitCoin, or Libra has no limitations on money transfer. Therefore they require expensive Anti-Crime infrastructure with low efficiency in Theft & Crime Prevention. Identity-bound Crypto (IBC) imposes programmable restrictions on money transfers, resulting in real-time Theft & Crime Prevention.
IBC and Cybersecurity Risks:
Why would anyone want to risk his money being stolen? Many people do: according to the Wall Street Journal, more than $1.7 billion in cryptocurrency has been stolen over the years, most of which has come from exchanges and been centered around Asia. Mr. Schneier correctly wrote that:
“If your Bitcoin exchange gets hacked, you lose all your money. If your Bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there's a bug in your smart contract's code, you lose all of your money. If someone successfully hacks blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people.”
To adequately address these concerns:
IBC will be a closed-loop system similar to PayPal. Both sides of the transfer (sender and recipient) must be users of the IBC. If a dispute occurs between the sender and recipient- the IBC Service will resolve the dispute. For example, if the theft occurred, the Recipient account may be blocked, and stolen funds may be returned to the Sender. The IBC will be transferred using the non-custodian wallet. Therefore custodian-type exchanges will not be able to trade IBC. Even if the wallet or Blockchain security is hacked – there will be no harm to the person's money. IBC users will be offered insurance that, no matter what, their IBC will not be stolen.
But there are even more severe risks: existing cryptocurrencies are vulnerable to systemic attacks such as quantum computing, 51% attack, double spending, etc. These systemic attacks, if originated by nation-states, can cause significant damage to the financial system.
To adequately address these concerns:
IBC is designed to be resilient to the above attacks.
IBC KYC.
IBC will do KYC (Know Your Customer), where each client must provide verifiable and credible identification credentials to use a cryptocurrency service. Customer Due Diligence (CDD) is a basic KYC process where customer data, such as proof of identity, is gathered. Enhanced Due Diligence (EDD) is an advanced KYC procedure for high-risk customers prone to money laundering and financing of terrorism. Transaction monitoring is a critical element of EDD. IBC would perform, among other things, meticulously recording transactions; definitively knowing who customers are; and promptly and efficiently reporting suspicious activity to law enforcement.
IBC and Gatekeepers:
Gatekeepers, or so-called on/off ramps entities, to be used with Libra will include myriads of un-connected exchanges, making it impossible to create a single, real-time map of money movements.
IBC creates a single map to analyze, track, authorize, or prevent, in real-time, every transaction of every individual as opposed to multiple gatekeepers with questionable compliance and that will never be able to stop in real-time illegitimate transactions:
IBC will significantly enhance the Crime prevention of existing Financial infrastructure.
But what if "Bad Actors" will decide to infiltrate the "Good Guys Community"?
1. Indeed - any computer system can and will be attacked.
2. The Only exception is the "smart contract" computer code on the blockchain. IBC is defined as such and therefore is immune. Forever. Think about banknotes that cannot be forged. Ever.
2. Point attacks - there will be plenty. Since this will be an essential infrastructure in law enforcement - the single transaction map above will be used to extract criminals who will infiltrate the Community.
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