 Looks like we have a healthy audience already one more minute and I'll start can everybody see the screen. Yes, beautiful run now. I'm doing this on a laptop so I can only see the screen or the presentation. And I've already started recording. So, this is the plan, I'm going to present for about 20 to 30 minutes. And after that we can have questions, and hopefully some answers to start off. Some of some people have already seen part of this presentation, especially the beginning. But I promise you that as we go forward, it will become apparent why we have to start with these slides, all the time, when we talk about CBDCs. But before that, we have two other things that we have to take care of one is the hypo larger code of conduct that everybody is welcome. And we are committed to creating a safe and welcoming community for all, which means that we do not disrespect people, even when we are disagreeing with them. And the other is the anti trust policy, which, as you know, is being worked on right now by the FTC, which is not going to be just based on price competition. But that is a topic for a different discussion. But anyway, right now we have to obey the anti trust policy of wherever we are joining from. First, the agenda is very simple. We have three things that we're going to talk about one is what is CBDC, which many of you are already familiar with. But I'm going to take you down a very simple path so that it becomes more visible as to what it is. Then I have a section which is, let me say concepts concepts are usually contradictory functions functions that have contradictory requirements that we have to implement. And also the concepts include things like the complexity of the problem. And how we're going to deal with the complexity. And the third is a suggestion to have to discover some kind of common patterns for solutions. And apply it to the problem the concepts that we talk about. First, the patterns are going to be at a pretty high level. So we do not. You know, it's not like software design patterns, or even like architecture patterns. All of them are still valid. That means architecture patterns can be implemented using base design patterns. But I'm not going to talk about the theory of architecture patterns or software design patterns, just about patterns in general. So first, first off, this is a familiar slide, which is, I go to the local pizza shop. And I have cash in my hand. Of course, this is pre pandemic, but even now I can do it. So let me open the chat because I think somebody is asking. Well, there is no previous patterns, there was talk on CBDCs. Anyway, the I appear. I want to buy pizza. I go to the pizza shop Harlem pizzeria, New York pizza slices, not a full pie which I could have ordered online, but I just want to get a slice, a plain slice. So I go there. I have cash in my hand, and I pay the guy at the counter, I order my pizza, I get my pizza, I pay the guy, and I leave. So this is a simple transaction, but behind that simple transaction are lots of different things that are happening. One is, it is paid using legal tender. I am not paying him with Bitcoin, which you probably won't take. It is a peer to peer transaction in the sense that I, there's nobody but me and the pizza guy involved. There is no phone home there's no, the pay does not go have to go to the central bank and say is this valid money by one look. The person can say, yes, this is valid. And the cash when he, when the pizza person puts it into their into their vault in the back does not get garner any interest. It is completely anonymous I go and I pay the guy, and I leave. He doesn't know me. All he knows is he I came and bought a slice of pizza, and he obviously it's not going to keep track of that. It is a physical token and the physical presence is needed, and there is no recourse that means that I go outside the shop and I drop the pizza on the ground. It spills from my ground onto the onto the ground spills from my hand onto the ground. And I go back to the pizza shop and say, look, you know, give me back my cash because you're, you didn't pack it properly whatever. Depending on what the person feels like was manning the counter. They may or may not give me a new slice. There is no recourse your immediate settlement has happened. But suppose you're talking about the bank, which obviously does not happen too often, but once you see that you're using a check, all sorts of intermediaries enter the picture. The payers bank, which is my bank, the base bank with the pizza pizza persons bank and the settlement system. The most of intermediaries. And, of course, delays, because the pizza person does not get the money immediately. If you're using a card, there's even more intermediaries. In the end, the settlement happens inside the settlement happens in a safest possible form of currency, which is the central bank money. Now coming back to CBDC, which is central bank digital currency. The same transaction can happen as in cash. But there are certain differences between cash and this transaction. That is, it's a legal tender. We have to clarify that with the with legislation of some sort. It can be peer to peer depends on how the, how the CBDC is implemented. We have struck out no remuneration that that means no interest, because there's a possibility that can be interest. It's, is it anonymous. Depending on how the CBDC is designed. It can be anonymous or not. In the end, it is a digital token similar to cash that is in central bank liability and which is the safest form of liability in most countries, and there is no recourse. So we come to the, you know, so we see that the cash and CBDC have a lot in common. But there is a tension everywhere between the concept of cash and the concept of CBDC is because people think that cash is cursed. It should, it should be not be. It should be withdrawn because of problems. So the concepts, there are one, you know, let's step back a little bit, and we talk about these items here which are monetary policy. Like, like we saw with cash or CBDC is there's a whole host of concepts that underlies even a simple cash transaction, we don't even think about it, but it's there. So monetary policy, monetary policy is a way of smoothing out the economy in a way that does not cause sudden upsets. And currently it's implemented as a balance between interest rate control and inflation. However, if you look at the feds mandate, it is not just to control inflation or unemployment, the interest rate. So coming to CBDC cash has what is called a ZLB which is a zero zero. I can't, I can't get my mind around it but it's basically, there is a zero limit in interest rate, that means cash can only be zero interest. It cannot be negative. Public utility, which means payment systems. Cash is a payment system, even even it's a physical payment system. And there is an argument that their payment systems in this country are well developed, and we do not need an alternative public utility. Like CBDC, a digital version of cash, because everything else is is, you know, private enterprise is doing pretty well with that. But there are argument counter arguments to that. The other aspect of public utility which is financial inclusion is also a problem. There is a persistent 3% or so gap. I mean, not 3%, 5%, 5% plus gap in being banked, unbanked versus banked. In terms of profitability, cash interoperates with other systems, but indirectly, only by depositing it. But the cash can also be used peer to peer so it has a life of its own. I don't see cash is very private, but when it comes to CBDCs, there is a fear of government surveillance of all transactions, which is seems to be happening in, in China, for example, is there is a fear that the government is going to surveil all transactions. So that is often raised as a problem. But it's also a tension, meaning cash can be used to remain private, but above certain amounts cash is still subject to control. If I go to the bank and take out $10,000 plus, then they start asking questions about why I need it. And this becomes part of some suspicious activity report. So all of that happens there. And then security in terms of physical security cash is difficult to secure CBDCs being a digital instrument is also subject to other forms of attack like cyber attack and so on. Operations cash has a huge substructure infrastructure behind it that supports the issuance and distribution of cash. So all of these can be seen as creating opposing action functional requirements, which are opposite poles, and we have to create a solution that has to satisfy either both of them, or some land somewhere in the middle that satisfies people who are clamoring at one end or the other. So there's complexity here, especially when it comes to CBDC. But also in in regular money, these are there but in CBDC it is thought that these become more prominent the technology becomes very prominent. The theory or crypto economics becomes very relevant. And economics, of course, is going to also be very relevant. Most of the people who have talked about CBDCs are from the economics profession and economics profession has not had a very good image. But economics, it is known as a dismal science, it is not exactly an exact science, even though they tried to make it an exact science. But one thing about economics is that it, it encompasses a lot. And classical economics, at least, takes into account political complexity, social complexity, and economic, the, the, what is thought of as economic complexity. So I'm going to talk about the various ways in which we can conquer this complexity, if we are ever going to get a CBDC that satisfies many, many of the different groups of people with different cultural and other expectations. I just wanted to bring up the concept of complex systems, which are characterized by a lot of, you know, basically, you cannot design or model a complex system simply in a very mechanistic way. Because of the behavior, the, the ways in which emergent emergent properties come out over scale, and they get self organized over time. So that's, that's about complexity. So our problem is going to be complexity. And if we come up with CBDCs, it will introduce a new form of complexity into the into money. And somehow we have to tackle that. So, here is about patterns. And there is one way we can try to conquer complexity because, for example, I mean this, you know, there is literature from the art from architecture that is conventional architecture of buildings. There is a class called pattern books that showed how to design openings like windows, doors, various other structures, how to design rooms, whatever the shapes, you know, so there is basically a list of recurring problem solution pairs. And these patterns happen at different abstraction levels in the classic gang of four book. You go into the code level where design patterns come about. Then you step one more level up, which is the level of, let's say, architecture patterns. And why do we study these patterns patterns occur at even higher level, like for example the pattern of government could be a democracy. You know, benevolent dictatorship, whatever, you know, there are several patterns. And why is that important because we can take that pattern at these various levels and reuse them. And these are problem solutions that have survived the test of time. And that's why patterns are important. Anyway, I see there's a lot of activity in the chat. Maybe I should go and take a look at the chat before I go forward. So I'm going to do that right now. Ron and I were just walking through the concepts of central banks and economic stimulus as part of the model with regards to CDBCs. Okay, so that's mostly a conversation between Jim and Ron. Well, I think, I think if I could, and this is a fantastic presentation. Thank you. When you mentioned ZLB and for the record I forget the acronym every single time but as you mentioned it it ties in very clearly to the conversation you're having about CBDCs versus the economics problem that Jim and I were chatting about we just wanted to share that with the group. I mean, the monetary policy implementation is like a kid with a hammer, the Fed is like a kid with a hammer, because the only thing they can really control is interest rates. Right. All the problems somehow result in controlling interest rates. Even the QE approach is about controlling interest rates. But the problem is the transmission of the monetary policy seems to stop somewhere between Wall Street and Main Street, because they are using only a hammer. There is a fiscal element to this, which is basically benefit payments, whereby during times of stress, you can always inject direct payments to people. But as you have as we have seen in the United States and other places, the payments are not done properly, takes time, and not everyone who deserves to get paid gets paid. Some people who do not deserve to get paid get paid. So, so that's another way of the right, you know, helicopter money right basically you're the helicopters are not flying just over Wall Street, but they are flying over the towns and villages and Main Street, showering cash, which is known to be a way to get out of real problems. In fact, Bernanke was a student of the revolution and he was the one who came up with, well, actually QE was suggested by guys in Japan before but he embraced it because of that. Anyway, that's one. Yes, just a quick comment here. I think that most central banks. One of their key tools is actually cash. It's not just for the release of contravene or buys securities, whatever way it's, it's generally trying to achieve a rate target, but it's doing so by injecting or removing cash from the, from, you know, from the capital markets, part of many supply. It's not cash. I mean, if you if you mean physical cash. for but it is, you know, they just, they do it just like the banks create money, which is, you know, basically, if I go to the bank for a loan, money is created when they loan me the money because they don't need anything. They just, you know, make a book entry against my name. The same way, the same way the feds make a book entry into the reserve accounts of a bank when they and or into their own reserve account and then they just use that to buy the various forms of paper they have been buying, like the tertiary and but and the theory is that all interest rates in the economy are somehow tied to these base interest rates, right. But in practice, that has not happened because because of the way in which like for example, the credit card rates have not gone down. You and I pay credit card rates have not gone down, you know, in step with the interest rates paid to the, you know, the fed interest rates. Anyway, that's another topic, another day, but it is relevant here. And I think I'm going to also start my video because I didn't realize I was absent anyway. So it's just I guess the point is that that the action that the central bank takes is generally with respect to money. It's not with respect to rate. The outcome is is the outcome is right. I mean, they may have a target when they're injecting or moving money, but they're not mandate. It's both. It's both. They they pay. There is a fed funds rate. There is a rate that they pay the the deposits of the banks. So that's an interest rate. So they. The interaction is also concentrated on that interest rate along with the fact that they buy paper, which is supposed to force interest rates down. So it is a indirect action. I agree with you. So there, you know, but Sorry to interrupt. The only reason I mentioned is it may make some of this conversation simpler. Because we don't we may not necessarily need to talk about the management of rate of return on CBD. I agree with you, Dan. I would offer it this way. Monetary policy to date has been, for lack of a better term, a slave to the architectural mechanisms for how cash and currency was was was transacted in the economy. Going back to, you know, paper and bars of gold and banks holding vaults and that sort of thing and and monetary policy around, you know, the Fed discount window rates and money in circulation were all driven by that architecture by shifting to a CDBC, just a digital coin architecture. You're not only trying to embody how cash flows right now between two parties, but fundamentally changing the means and mechanisms of the architecture for how that it changes. So that's why it starts forcing what I'd call extra dimensional considerations of policy. Because if you stimulate the economy, whether it was tarp back in 2009, or the stimulus plan now, it's still dependent on the Federal Reserve going to banks and saying, hand out a bunch of cash. Well, you know, now our mechanism for being able to distribute a value of currency digitally, you know, disintermediates all of that. And that understandably kind of screws with their head, I think from a monetary policy standpoint, because the old rules don't apply. That's just my thought. Well, I mean, you made the first point which I actually did before, which was basically the Fed has a hammer, and it's using that hammer. They don't have finer tools. Anyway, now back to our back to our concerns here, which is the patterns that we can use to conquer complexity, the arguments against for and against the CBDCs, the proposed architectural solutions, they all fall flat in one way or the other because of they are still trapped in some ways of thinking. So basically, we're trying to unjam that mode of thinking. I have to unjam it in my own head, too. I'm not saying that I have the solution. I'm just trying to propose different ways of going about it. So to that end, the complexity is looked at with, you know, from different viewpoints, like for example, the tripod of money. What is the thing about a tripod is if one of the legs is weak, the tripod is shaky. If one of the legs is not correctly placed. So all of the legs have to be there for stability. The unit of account, the store of value, and the medium of exchange. For a CBDC, that is not a big problem at this point because it is meant to be similar to cash. When I say cash, I mean real cash, not reserve accounts, not commercial bank accounts. So in that sense, it will satisfy all of these criteria. Without satisfying all of these criteria, it is very difficult for something to take the place of money. In fact, you can see that in the case of Bitcoin, for example, the medium of exchange problem is bedeviling it. The unit of account, of course, is bedeviling it. The only thing that seems to be true is the store of value sort of being there. But even that is very volatile. So when you have all those three, unfortunately, if Satoshi were around, I have a feeling she or he would be very dissatisfied at the way that peer-to-peer system of payment has now become this playground for hardlers, which is anyway. So these three have to be satisfied. And we'll see why, you know, if any one of them is under pressure, then we have problems. Then the other way to look at it is to look at the price of money, so to say, which is one is par, which nobody even thinks about, commercial bank money, reserve accounts, cash, everything is exchangeable at par. And to maintain par between these three forms of money is very difficult. And if the CDBDC comes about, it has to maintain par and stablecoins, of course, which are a private form of a stable form of money has problems with par at times. So that's par is when the exchange is happening on a spot basis. Then there is a forward price, which is of course tied to interest rates, which we spoke about a little bit. Then exchange with the other form, other currencies, other forms of other sovereign currencies. Then finally, this is where the medium of exchange becomes very relevant is the price paid for commodities, for any commodity or services. So these are the four ways in which we can think about money, money's functions, where we inject a time element, we inject a space element, and we also inject something that is outside the concept of money itself, but for money to function properly, there has to be a discoverability of a commodity price. And this is the lifecycle model, which has been looked at to reduce it to its very, very simple forms. It would be the, how does the money supply work? How do you produce mint and burn cash and burn money? In the case of CVDC, that would be the central bank's responsibility. Of course, you could probably burn cash right now, but yourself, instead of taking it back to the Fed, and the Fed destroys money only because it has worn out, physically worn out, but for a digital purpose, it doesn't have to be. And there are some other places where that burning happens. There is the other basic element, which is the movement of money, which is obviously the use of money, which is, one is the holding over time and the transfer. Now, I want to just go through these by saying that I'm trying to come up with the different patterns that we can use to satisfy the contradictory requirements, either of the design itself or of the concepts that we talked about before, that is monetary policy, public utility, interoperability, operations and so on. So this hybrid pattern will satisfy both. That means it can be both a token and an account. The central bank accounts and two tier accounts are possible. So one is the issuance of CVDC that is obviously got to be controlled by the central bank, otherwise it won't be called central bank digital currency, but distribution wise, suggestions are that it has to be done through the same channels as it is done today, which is through commercial banks. Hold on a second. So hybrid pattern satisfies both. So it can be both a token and an account based currency. The other way in which it could be done is you can have central bank accounts and two tier distribution systems where the accounts are at commercial banks. So this is very possible. That is a way of conquering one form of complexity. The other is rail pattern, which is what I call it. It's in addition to that means it's a parallel feature. That means when CVDC comes along, no country is suggesting getting rid of cash. Cash and CVDC will both exist at the same time. So I call this the rail pattern because I feel these are two parallel tracks that lead in the same direction. And then we have the tier pattern, which we have seen in the Chinese CVDC that we have seen in the wallets that they have released. That is the rules are based on holding, meaning the level of holding. That means if I have only 1,000 yuan in my account, they are not going to care. But if I have 2,000 or 5,000, then they might care. And there's another interesting idea, which is that interest payments would only commence after your holding passes a certain threshold or a KYC is only done after a certain limit. Additional features are available to you based on holding. This pattern has been seen in a regular bank account as well, where they might cross sell or give you more features based on your holding and the number of transactions. They might say you don't need to pay any fees if you do a certain number of transactions. So this is a familiar concept, familiar sort of pattern that will be also used in any CVDC that comes along is what I feel. And the other one that I call the leaf pattern, which is basically an edge computing pattern. Everything happens as many computations, as many checks as possible happen at the leaf, the leaf meaning not in a central location, but in the wallets or at the tips of a distributed system so that the wallet is aware of the limits and can check the limits. The wallet enforces privacy. There are some suggestions to use zero knowledge proves. There are other suggestions that involve the enclaves inside the edge devices that we own, but the leaf can also be used as a disconnected for disconnected exchange. That means you don't need to be connected to the internet, not even have electricity in the case of crypto notes. So the leaf does not have to be an intelligent device. It can be a smart note, which is, you know, there was a presentation about it here, a couple of meetings ago. And then there is of course the question of financial inclusion, which means that you might be able to use a card, smart card or something like that to do the exchanges. Anyway, I'm done with my presentation and I'm going to go to the chat to see if there are any interesting questions. Let me see what we have here. Aside from interest rates, wouldn't printing money be another type of hammer available? Well, printing money is meant to affect the interest rates directly or indirectly. There is a question about MakerDAO walls. Can CBDC issue bonds as digital assets too? I don't know what that means because CBDC means central bank digital currency, not any other type of digital asset. It doesn't mean that you should try to be more specific. So let me try. So I'm actually not familiar at all with the global currency and CBDC, but I'm familiar with some of the DeFi terms for having used them. And one of the things that I've seen is MakerDAO has a very straightforward scheme by which you can lock some Ethereum and based on the value of Ethereum, you can now get a die issued to it with some interest and some percentage of some reserves. If the value of Ethereum goes below what has been blocked and you issued too much die, then your money can actually be liquidated and you lose your if. If however, you can keep that going for a while. So the point that I'm trying to make is quite the equivalent where you would be able to match money being minted by CBDCs to the bonds that they have to mint to people who agree to the value that it represents. So for example, you would sell bonds on an open market and say, this is going to yield you some money from the US government. At the same time, you can mint digital dollars. I don't know if that makes sense. Well, I mean, okay, let me step back a little bit from this, which is CBDC is CBDC and bonds are bonds, okay? They don't have to mix, but the same concept that you just talked about, which is basically a way to burn CBDC is definitely in the mix. That means, let's say that, okay, let me step back and talk about why that is a possibility. First, you are targeting some wallet and saying, I'm going to issue, I'm going to send you some CBDC from the central bank. This is to stimulate the economy and you have to spend this money within one year. You cannot hoard it. So if you do not spend it within one year, you will lose it, which means a negative 100 percent interest will be charged on it. You can take it to various extremes. You can say, okay, 20 percent of the value will be lost every six months, whatever it is. So this scheme is there because of the fact that stimulus money is meant to stimulate the economy. People hoarding cash costs problems. This was actually suggested by a gentleman named Silvio Gissell in the 19th century in Brazil because he saw that people holding onto cash were causing economic harm by not spending it, putting it under the mattress. So he proposed that if you do not bring it to the authorities and pay a certain percentage and have a stamp on your money that that money will lose value. Basically it is a tax on holding cash. There are various reasons for it, including the fact that if you hoard anything, especially during times of economic stress where the natural impulse is to hoard, that is why the government steps in with buying treasuries, corporate bonds and so on. Because liquidity disappears and the true value of anything, any of those bonds start going down to zero. So you can actually charge negative interest rate on CBDC that will stimulate people to buy assets which are other than cash. So those proposals have been floated anyway. Any other questions, comments? These ideas are still in development as far as I'm concerned and my own thoughts are not very concrete at the moment about these. But I'm trying to apply, just like in complexity theory, a way to reduce the problem and to create a patterns that transcend the contradictions that are in every one of those items that we discussed, which is privacy, security, monetary policy, which we have sort of discussed a lot about, and interoperability and various other topics. Any other questions or comments? Yeah, somebody has asked about references basically. The thing is these are ideas that have been formed after a lot of different readings and I'm trying to put together something that will be useful to everybody. Antoine has asked, would all money be private? Can some of it be public? Again, I do not understand this question. Money is generated by public entities as well as by regulated private entities. In fact, most of the money generated by regulated private entities. So when I hear people talking about the Fed printing money and so on, even now, even after this whole exercise where they're buying lots of different types of instruments, the amount of money in the economy generated by private banks, commercial banks, is much, much more than the amount of money generated by the Fed. And I'll try if you want. I think it's a fun thought exercise but I have no idea whether it's applicable or not. So let's say we're working for the government as a government contractor, we get paid money. This money needs to be traceable and transparent because they have a duty to report to the taxpayers where this money is going. Would it then make sense for this money to be publicly its record and it's on the ledger to be public so any taxpayer may check and provide transparency as to how this money was spent. So we do this today. We have this use case today where we track the money and we track the allocation from Congress and other entities. Is that the practical use of CBDCs? Well, I mean this would raise problems here especially about privacy and surveillance even if it is just the government transactions that are being reported. I do not know how much transparency there is in this matter. It is only aggregations that are reported. I don't think you can find out how much money somebody is getting paid as a government contractor individually. Maybe you can get, I mean I don't know, maybe you can, maybe you cannot but in the end the CBDCs' aim should not be to do this kind of surveillance. You know, it's possible but anyway, so we are coming to the end of this hour and I hope I have been a little, you know, useful. You spend your time here and things have been useful because I get the feeling that sometimes, you know, it's very difficult to figure out whether any of this stuff is useful or not. Anyway, hope to see you here again and I'm going to stop the recording and also it and also get off the, you know, close the call. Thanks for showing up and see you here again in two weeks' time.