TR EMERITUS

Within a few years, cryptocurrency has rapidly progressed from being just a digital fad to a billion-dollar innovation with the capacity to disrupt the traditional financial structure. Inflation and third-party risks motivate individuals to hold Bitcoin to hedge against inflation, securing their hard-earned money from losing value over time. It is now easy to buy crypto. Just over to a top crypto exchange and buy crypto, taking advantage of its inherent benefits. Fixed supply means your Bitcoin becomes more valuable over time, unlike Fiat which loses value. Investments and transactions involving cryptocurrencies have gained immense popularity, being utilized for purchases of various items ranging from software products to virtual real estate. The Evolution of Money From the earliest forms of primitive barter, money has transformed. At a point, the barter system was the norm and then came gold standards. The barter system was effective at the time to meet the needs of the day. Why is the gold standard not in use today? These earlier trade systems had their challenges. There was a need for a double coincidence of wants – both traders had to want what the other was offering for the system to work. To overcome these limitations, communities adopted valuable metals like gold and silver as the preferred solution. Their lasting qualities, simplicity of splitting into parts, and inherent value made them exceptionally appropriate for use in storing wealth and facilitating trade. Further along, this led to the development of coins. These coins, minted from valuable metals, offered a standardized unit of value, and governments set coinage standards to maintain uniformity across the economy. The gold standard was important for the money system because it linked paper money to a certain amount of gold. This ensured the economy was stable, kept inflation in check, and encouraged careful decisions about money. However, the time came when the gold standard became impractical. It had to give way to fiat currencies that have no physical assets for support. This allowed governments to create money when needed, which sometimes resulted in a large buildup of debt. Currently, central banks have control over the money supply and interest rates, which gives them significant influence on their country's economies. Excessive Money Printing Today we see the prices of most commodities in the open market increase within a short period. Some parts of Europe have inflation figures close to double digits. Suddenly, ordinary citizens who never worry about their money losing value are faced with reality when they discover they have to change houses because their salary can no longer pay their rent and other living expenses in their location. They suddenly have to calculate what they can afford. What has changed? Nothing! Only that their purchasing power became weaker. Fiat currencies are susceptible to inflation due to excessive money printing. When central banks create more money than the economy’s actual growth, the supply of currency increases without a corresponding increase in goods and services. The government prints money from thin air, not backed by any assets. As a result, each unit of currency held becomes less valuable. This erodes the purchasing power of money over time. Inflation means that the same amount of money can buy fewer goods and services, impacting people’s savings, investments, and daily transactions. By simply holding Bitcoin, you would save your money from losing value. This is because Bitcoin and other decentralized cryptocurrencies address this issue by having fixed supplies, ensuring scarcity, and protecting against inflation. Excessive money printing serves Federal Governments for various reasons. Faced with budget deficits, they must cover expenses like public services, infrastructure, and social programs. Governments view printing money as a simple method for financing these deficits without tax hikes or debt issuance. Deficit financing, achieved through the printing of money, boosts liquidity in the economy: it liberates government expenditure from dependence on awaiting tax revenues or bond sales. Furthermore–and significantly–the issuance of debt engenders an obligation to repay with interest. By printing money, governments avoid accumulating debt and interest payments. The Fall of the Gold Standard Collectively, trust issues, economic constraints, and changing global dynamics necessitated the decline of the gold standard. Indeed– in today's intricate economies it has become impractical. The reliance of this standard on governments and central banks for maintaining fixed exchange rates underscored its operation. The winning formula had to be a system that ultimately required an unshakable level of trust. Historically, events eroded this trust. This was a pivotal turning point in economic history. Economic crises led to wavering confidence. To address their pressing challenges, countries boycotted the gold standard. Moreover, the great depression had a hand in making individuals lose confidence in the Gold standard. In contrast, cryptocurrency operates on a trustless and decentralized network; its transparency and cryptographic security obviate the necessity for blind trust in financial institutions. Governments, however, found their flexibility limited by the rigidity of the gold standard. The inability to manipulate the money supply for combating recessions or stimulating growth presented a major issue: economic cycles demanded more dynamic responses than what was offered under the gold standard. Consequently, nations grappled with effective management of their economies; they were constrained in this endeavor. With a fixed supply and algorithmic issuance, Bitcoin provides an alternative. It adjusts to shifting economic conditions–all while maintaining unyielding stability. After World War II, a shift occurred in the global landscape: it was an era of reconstruction, technological advancements, and globalization that reshaped economic terrains. Nevertheless–amidst these transformative changes–the gold standard grappled to adapt; its traditional underpinnings were challenged by new realities. War-induced disruptions and new economic realities presented challenges to nations. However, Bitcoin, a currency transcending borders, operating continuously without ties to any specific nation-state has prospered in our interconnected digital age. Cryptocurrency as a Sound Monetary Alternative Cryptocurrency is a virtual or digital currency, which secures itself through cryptographic systems. This form of currency enables direct online transactions without intermediaries - a feature derived from the use of various encryption algorithms and techniques collectively termed "crypto." Notably among these are hashing functions; elliptical curve encryption; and public-private key pairs which improve security measures. Cryptocurrencies are revolutionizing the financial landscape by accelerating transaction speeds, streamlining cross-border payments, and elevating financial inclusivity beyond mere jargon. These digital currencies are unlocking opportunities for the unbanked and underbanked—a beacon of hope to those marginalized by conventional banking systems. These unsung heroes anchor the crypto world; their value, tethered to stable assets such as the dollar, forges a calmer voyage amidst digital currency's turbulence—a captivating expansion of global finance’s arsenal. Crypto's societal implications extend beyond mere financial gain; they embody empowerment. Decentralized finance, or DeFi, reverses the power dynamic. In this world, individuals wield greater control over their financial destinies–free from intermediaries' constraints; it's quite empowering, isn't it? The Role of Central Bank Digital Currencies (CBDCs) The advent of Central Bank Digital Currencies (CBDCs) serves as a crucial response by central banks to the rise of cryptocurrencies. These virtual representations of sovereign currencies address current challenges while introducing new complexities. CBDCs and cryptocurrencies differ significantly in terms of monetary governance, oversight, and core principles, despite both existing in the realm of virtual assets. CBDCs are backed by stability and government authority, while cryptocurrencies like Bitcoin prioritize individual sovereignty and trustlessness. The ongoing debate between these two ideologies is essential in shaping the future of monetary evolution, with CBDCs acting as a bridge between traditional values and emerging developments that are still not fully understood. Amid this transformative era, the constant drive for innovation and technological advancement propels society towards greater agility. Conclusion As we weigh in on the impact and prospects of cryptocurrency as digital gold, it becomes clear that its movements hold immense power. Just as gold is valuable, divisible, scarce, and fungible, crypto shares these qualities. In addition, it is trustless and free from manipulation by Federal Governments. One thing remains certain, the global financial landscape is going through disruption powered by blockchain and cryptocurrency.      Read More →

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"Public sentiment is everything. With it, nothing can fail. Without it, nothing can succeed." ... Abraham Lincoln Land Transport Authority of Singapore had eggs in their face in the aborted migration of card-based transit ticketing system (CBT) to account-based transit ticketing (ABT). CBT cards - Ezlink and NetsFlashPay, were to be replaced by ABT card - SimplyGo-Ezlink (SimplyGo for short) by1 June 2024. Barely two weeks after announcing the dateline, government walked back its planned move in response to public outcry. Transport Minister Chee Hong Tat went so far as to say the planned move was a "judgement error". The criticisms were centred on two main issues. The new SimplyGo card does not display fare charge and credit balance on the train and bus card readers and it cannot be used for ERP (electronic road pricing) and carparking. The public condemns SimplyGo as a retrogression, a backward move. In fact, a retro word doesn't quite capture the essence of the fiasco. The Germans have a better word -- verschlimmbesserung. This means making a change for the better but end up worse than before. However, people are seeing the card for the system. The SimplyGo system is the whole backend infrastructure, developed and managed by Acclivis Technologies, that enables payment by credit cards, bank cards, mobile and wearables, SimplyGo card, as well as cloud storage of commuters' accounts, transaction data, and big data analytics. It has been one huge PR disaster for the government and explanations so far have not been crystal clear. Chee's "end of life" speech at the press conference was obfuscating. He explained the June dateline to migrate to SimplyGo was due to the ROD (run out date) of the CBT system. A further S$40m for hardware and maintenance is required to allow the CBT system to continue till 2030. Folks are incensed additional $40m tax money to be spent is system design error but Chee seemed to place blame on the public. Because you complained, more spending is needed. The public has got it wrong. It does not cost anything to retain the use of EZlink and NETsFlashPay cards. What Chee meant was after a series of focus group discussions from 2020 to 2023 with about 1,000 commuters from different groups, they realised older generation folks have difficulties with the use of apps in SimplyGo. For this reason it was decided to retain the use of CBT Concession cards till 2030 and this requires additional spending of S$40m. The government felt this was necessary spending. So the S$40m additional cost is independent of the decision on the fate of EZlink and NETsFlashPay cards. Whether these cards are discontinued or retained, the $40m will sill have to be spent. The same card readers accept both CBT and ABT cards as well as mobile and wearable devices, so most folks are perplexed about the S$40m spending. What Chee did not explain is the topping up of stored values. SimplyGo cards are topped up via the app or Web. EZlink, NETsFlashPay, Concession cards require top up kiosks. In order to continue using CBT cards, S$40m is needed for additional kiosks for the new MRT stations being built, replacement of hundreds of existing aged ones reaching end of economic life, and maintenance. Why are top up kiosks required for CBT cards? This is because stored values are encoded into the microchips by these kiosks. The debit and credit computation of CBT cards are done in the microchips which is why card balances can be displayed on readers immediately. Stored value or balance is credited or increased when commuter tops up, and decreased or debited when commuter taps out. On the issue of non-display of fare charge and card balances, the revelation of focus group discussions in 2020-2023 is a shocker to many. A product review is normal. However, SimplyGo went live in 2019. Fundamental weaknesses should have been uncovered at much earlier product specification stage. Minister Chee explained SimplyGo does its computational work in the backend system and is thus unable to display fare charge and card balance at card readers. It has the info but to download it to the card readers take some delays not acceptable in a fast moving commuter traffic situation. Let's consider how the system works. When a commuter taps in, the card reader sends certain info via internet to the backend for authorisation. If it's a credit card or bank card, a message goes to the issuing bank via the processor's network, to confirm availability of credit. The issuing bank responds accordingly. If it's a SimplyGo card, the system checks for card balance in commuter's account. Whether approved or denied, the backend sends the info to the readers. In the case of trains, the turnstile is released for commuter to enter. If authourised, the system keeps the transaction open. When commuter taps out, certain info is sent over to the backend to allow the transaction to be closed. In the case of trains, the turnstile is released for commuter to exit. These messaging here and there takes place almost instantly. So the question is, when a commuter taps in, how long will it take the backend to check a SimplyGo card balance and send the info to display on the reader. And on tapping out, how long will it take for the backend to update and send the info to the reader so he knows the fare and balance upon exit. Is it nanosecond, microsecond, or millisecond? I can offer an explanation here but note it is speculative. SimplyGo is probably not updating accounts in real time. That is why Minister Chee is technically correct that SimplyGo can show balances on card displays but it takes too long. This also explains one of the complaints of many commuters that the system is slow in updating their accounts. In evaluating systems, outside of cost issues, we see features in two groups - 'must have' and 'nice to have'. For commuters, the SimplyGo card must have fare and card balances displayed on card readers immediately. All other features the government pointed out such as cancel lost cards, top up stored values on the go, topping up for someone else, checking travel expenses, dynamic pricing etc are just nice to have. For the government, it sets grand plans. In this instance it is all about 'smart city'. In the Smart Cities Index Org report for 2022, Singapore was ranked 26th. London holds top spot. Basically, smart city is about the application of Information Communication Technology in urban development. The government has road maps for various aspects. In transit ticketing systems, the envelope to punch is MaaS (Mobility as a System) which is one single platform for trains, buses, taxis, ride-hailing services, electronic road pricing, carparking and bike-hailing services. The road to this is via SaaS (Software as a Service) which is to use a cloud service provider, taking away the IT function from transit operators. This approach seeks to abandon monolithic closed loop proprietary systems for a fee-based system from a specialist service provider and allow transit operators to focus solely on running the trains and busses instead of ticketing technology. Acclivis Technologies, a Singapore SaaS wholly owned by Hongkong Telecom, designed, built, and manages the SimplyGo system. In his 27 Jan 2024 Gutzy article, Terry XU said SimplyGo is a classical case of technology for technology sake. Is this fair comment? What does the government want out of a transit ticketing system? In two words - Big Data. Transaction data captured by the system provides rich information on transportation patterns which serves urban planning and development. CBT systems do not capture transaction data. In the case of credit and bank cards, transaction data is captured by SimplyGo. For stored-value cards like EZlink, NETsFlashPay, and concession cards, transaction data is not captured. That is the underlying reason why CBT cards have to be phased out. It is not a problem to have SimplyGo do transaction data capture for CBT cards in same manner as for credit and bank cards. The problem is CBT cards are not personalised so the data has limited utility absence demographics and locations details. The simple solution is personalise EZlink and NETsFlashPay cards similar to credit and bank cards. However, this solution requires card value top up kiosks to be retained which carries a high cost (old ones need replacement, additional ones for new stations, maintenance). ABT or account-based ticketing provides the solution to doing away with the top up kiosks. Enter SimplyGo cards. Personalised. Transaction data capture. Top up on the go without kiosks. The only problem is SimplyGo cards do not display fare charge and card value balance on readers. As mentioned, transactions of SimplyGo cards are not updated in real-time. Will real-time update solve the problem? Perhaps. Another issue the public is concerned is the cost of SimplyGo system which LTA is not sharing. An SaaS project would mean LTA bears no development cost and the vendor recovers cost in a fee structure that is generally higher in the first few years and subsequently lowered thereafter. By accepting credit and bank cards, transit operators are merchants with several charges to take care off, such as processors' network charge, ACH (automated clearing house) charges, etc, on top of SaaS fees. Transit fares are super micro payments in very high volumes. Fortunately, the various card processors allow for aggregation which reduces volume and cost. In fact, without aggregation, it is economically not feasible to use credit and bank cards for transit ticketing. How much of these increased ticketing cost has been worked into fare increases is the question. For more than 50 years, the PAP has normalised a nanny state governance where, perhaps well-intentioned, tough regulations have been rammed down on the public. There is cocky confidence the public will bite the bullet and negative sentiments will be numbed with passage of time. This SimplyGo farce has been a plebiscite on the need for immediate display of fare charge and stored value balance on fare card readers. The admission of 'judgement error' is a big deal for Singaporeans. It is a paradigm shift in the government's policy execution that public voice matters. It is good this time the powers that be had chosen to heed Abraham Lincoln.   Patrick Low * Article first appeared on Down The Rabbit Hole.      Read More →