On May 17th 2012, we wrote about Mint Chip, the Canadian Royal Mint’s attempt to enter the digital money market. We predicted it was doomed to fail. It has now failed and the project is cancelled. Here is the original article.
Mint Chip is being thoroughly attacked from all sides, the technical, the philosophical and economic.
Via a post on Slashdot, we are reminded of Bruce Schneier’s warning signs of Snake Oil, which the Mint Chip suffers from.
What is ‘Snake Oil’ I hear you ask? In cryptography, snake oil is a term used to describe commercial cryptographic methods and products which are considered bogus or fraudulent. The name derives from snake oil, one type of patent medicine widely available in 19th century United States.
There are several parts of Mint Chip that cause even those with a casual interest in cryptography to smell snake oil.Mint Chip relies on these chips http://en.wikipedia.org/wiki/Secure_Digital for part of the money moving and storage process. These are open to attack by electron microscopes:
Mint Chip does not publish its specification in full. This means they are hiding something, probably some weakness. If there were no weakness, they would expose the whole system to scrutiny as a testament to its impervious design; it would be a strong selling point. Even if there is no weakness, the fact that Mint Chip is centralized with one issuer who can control the supply of the currency and potentialy mint an infinite number of currency units means it is fatally flawed by design in the monetary theory aspect, even if the cryptography and hardware are proven to be absolutely secure.
Here is the full list of the warning signs:
Warning Sign #1: Pseudo-mathematical gobbledygook.
Warning Sign #2: New mathematics.
Warning Sign #3: Proprietary cryptography.
Warning Sign #4: Extreme cluelessness.
Warning Sign #5: Ridiculous key lengths.
Warning Sign #6: One-time pads.
Warning Sign #7: Unsubstantiated claims.
Warning Sign #8: Security proofs.
Warning Sign #9: Cracking contests.
for a full rundown of each of these items. In the meantime, we can make the following observations from the off.
Mint Chip suffers from 7, since their claims that it is secure are unsubstantiated. It may suffer from 3 because we cannot see the source of the centralized server that manages what it manages. It may be hiding warning signs 1, 2, and it certainly suffers from 4 in two areas; the first being the centralized issuer and pyramidal issuer broker user structure (extreme cluelessness in the field of Economics), and the second security through obscurity. We don’t know if it suffers from 6 or 5; it might. It does not suffer from 8 yet, because they have offered no security proofs, though it is inevitable that they will fall to this, because if Mint Chip ever gets adopted widely, someone is going to ask them to prove that it is secure, because they are using security through obscurity, and they will refuse to divulge how it all works. There is no official cracking contest yet, but I guarantee you that it is in fact, under way right now in secret, so they get a pass on 9.
To sum up, Mint Chip is a failure in many aspects. It is a fundamentally flawed, hardware poisoned, centralized, fiat digital currency, that is inferior in every way to Bitcoin. It would have been interesting if the Canadian Royal Mint forked Bitcoin for their own ‘Canadian National Block Chain’, but of course, these people are Keynesians and accepting the gold like nature of Bitcoin would invalidate their inflationary policy re the Canadian Dollar.
There are some people who say that Mint Chip is better than Bitcoin because it is issued by a trusted authority. These people are completely insane for two reasons. The first is that Central Banks are the most untrustworthy authorities in history, that have already destroyed the value of every currency they have printed out of nothing, without exception. You can read a list of all the fiat currencies that have been inflated here:
In each instance listed in the link above, the Central Banks deliberately printed money and destroyed the value of the currencies in question, knowing full well what they were doing and that it constituted theft.
The second reason is that no cryptographic system should be trusted without the complete source being published for peer review. Mint Chip keeps the way it works secret. This means that they are hiding something, probably a fundamental weakness. The fact that the Canadian Royal Mint is the author of the software does not exclude Mint Chip from the rules of mathematics.
One thing is certain. Mint Chip is good for Bitcoin. It demonstrates that digital value exchange is a valid business idea whose time has come. It also demonstrates that Bitcoin is superior in every way to every other system out there. Bitcoin is transparent, free to use, does not rely on snake oil or secrecy and is not run by a control obsessed Central Bank.
There are a very small number of developers in the world who are able to develop good ideas and products. Mint Chip has barriers to entry that will exclude the bedroom hacker, the shooter of the ‘Golden BB’. This is a huge failing, because the ‘Black Swan Developer’ is the man who can change everything overnight. Just look at the story of Instagram and the many other runaway success stories built by non professional developers if you want to see what this looks like. A self taught developer working on his own with freely available tools is the most dangerous threat to established businesses, and because Mint Chip denies these people access, a negative pressure against it comes into being.
Bitcoin doesn’t suffer from any of this. All you need to develop with it are open source tools and an internet connection. Without writing a single line of code, you can run your own Bitcoin server instantly. Compare this with the Mint Chip, where there is only one central server, hidden away somewhere, obscure, unaccountable, printing money like a drunken sailor. This is the reason why Bitcoin or its successor will become the default way to move money on the internet. No one in their right mind wants a system like Mint Chip, not as long as Bitcoin is on offer.