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After reading about BitCoins, I can't help but contemplate the idea of the a government withdrawing paper money and bringing all currency transactions digital, via a bitcoin-like method where every unit (1 cent, US, for example) has an id and an owner.

This would theoretically help eliminate theft, tax evasion, money laundering, etc.

What I want to know is:

I've read articles about the capabilities of some extremely powerful mafia-style cyber criminals that can basically break into anything. Is an entity such as a government capable of maintaining the security of such a system?

AviD
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    Electronic money? You mean, like a bank account, with wire transfers? – paj28 Jun 03 '14 at 14:41
  • I mean like, a fully digital economy. No paper. –  Jun 03 '14 at 14:44
  • In the country I am from, it is no longer normal to pay with cash - which makes me wonder if the current system is already virtual, but with a fallback option if things break. Perhaps you should redefine your question to be about decentralized currency where there are no central nodes (banks). – Dog eat cat world Jun 03 '14 at 15:28
  • @Dogeatcatworld That's what I'm visualizing, but I think the usage part of this is irrelevant to the site. I'm only able to ask about the security of the concept here. Would that usage have different security implications? –  Jun 03 '14 at 15:56

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Consider what happens today with paper currencies - governments spend huge amounts of money evolving their currencies to prevent misuse. It's a never-ending battle to "secure" their currencies.

Most currencies are virtual to a certain extent, the time has long passed that they were backed by anything. For every dollar that is printed and in circulation there is more that exists only in bits and bytes. If you have a bank account the currency in it doesn't exist in a physical way, it's database entries in a system. Banks have an evolved infrastructure to move this money around, and they spend a great deal of time, effort, and money to secure these transactions. Governments are involved with banks already to secure these mostly virtual currencies in the form of regulators like the FFEIC, MAS, FCA.

Currency cannot be fully secured whether they are cowrie shells or crypto-currencies because they have to be able to be used. Any that has inputs and outputs will have vulnerabilities, and so cannot be fully secured.

So can a government maintain the security of a virtual currency? No. Can they make it secure enough to use on a day to day basis? They already have.

GdD
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