The Royal Canadian Mint announced some time ago a new solution called MintChip, which appears to share some similarities to Bitcoin. How do those two projects differ, and how are they similar?
Note: My information about MintChip is a bit limited and may be incorrect. Corrections are appreciated.
Authority: Bitcoin has no central authority. MintChip is run by a government agency.
Security: Bitcoin is secured by cryptography. MintChip is secured by tamper-resistant hardware. (The Mint says they'll support other models, but I'm quite puzzled how they'll make that work with their framework.)
Anonymity: Bitcoin is pseudonymous. You perform transactions through an account and transactions are public. You can have more than one account. MintChip transactions are only known to the participants and the system operator.
Currency: Bitcoin is a commodity that acts much like a currency. The supply of Bitcoins is fundamentally limited by the mathematics of the system. MintChip is a way to trade fiat currency that can be devalued by inflation and whose supply is limited only by politics.
From the developer website of MintChip, we can see that:
MintChip works online and offline, at the physical Point-of-Sale, on mobile devices, and enables easy person-to-person payments.
MintChip uses a secure chip to hold electronic value and a protocol to transfer it from one chip to another.
The emerging digital economy must be able to accommodate small-value transactions, such as micro transactions (under $10) and nano-transactions (under $1).
- Like coins, MintChip can be used by anyone. There is no age, demographic, banking or credit requirements. MintChip is available to all enabling anyone to transact.
- MintChip allows everyone to pay just like cash. No personal data is exchanged in the transaction, everyone can participate regardless of age or financial status, it is secure and it is instant.
- Unburdened by the need for a proprietary network, MintChip offers a cost effective solution to consumers and merchants and enables easy person-to-person payments.
MintChip payments are instant and irrevocable
There is no requirement for an external authorisation
The MintChip chip is a Tamper Resistant Module (TRM), sometimes also called a Hardware Security Module (HSM). The Value Transfer Protocol cannot be modified without detection.
The security of the chip (including firmware and software) is the greatest vulnerability in a MintChip system; therefore MintChip will use security-hardened chips with regularly planned security upgrades.
The MintChip system is deliberately designed for changes to both the chips and cryptographic mechanisms in a transparent fashion. It is even possible to force the expiry of a particular MintChip platform version.
From that information, one can speculate the following properties:
- The MintChip will store its value on the chip itself, rather than relying on any external system. This means that people would be able to exchange value between themselves without the need to be connected to the Internet. Bitcoin relies on the BlockChain and the Bitcoin Network.
- The MintChip chip will probably be easily bought and sold as any piece of hardware, and (hopefully) will not require users to provide any personal information that would link them to the chip. This would make the chip comparable to the Bitcoin wallet in a hardware form or a Physical Bitcoin. This would allow the chips to be traded by themselves rather than used to transfer value if one would wish to remain fully anonymous. As Bitcoin wallet in most cases can be easily copied, it would not be convenient to trade them like that.
- MintChip will be able to deal with transactions of less than $1, but the operation limits are not specified. Bitcoin, of course, operates down to a Satoshi at the moment.
- MintChip relies on hardware security. The hardware itself can be upgraded and old versions can be forced to expire. While this means that the system is not locked-in to one solution from the start, it can mean that MintChips could lose value with one upgrade, making them less desirable for storing of value. Moreover, should the hardware security details be leaked, the whole MintChip economy could potentially be rendered worthless. But again, this is just speculation. Bitcoin relies on the security of cryptography, which is transparent and predictable, and on the security of open-source software, being more transparent again. In the end the users control the Bitcoin network, and should any developers go against the system, their changes might not be accepted by the users. This is a double-edged sword, as some major Bitcoin players might try to execute their own agenda rather than undergoing changes when they are necessary.
This leads me to guess, that the MintChip model of operation would be similar to the one of Open Transactions (although I'm not an expert in either). How I think MintChip would work:
- Every chip would store some secured private key for generating signatures and possibly some authorisation that the key is legitimate (perhaps a public key signed by the Royal Canadian Mint or something). This would be like the wallet in Bitcoin.
- The chip will also store data on all the transactions it participated in. This will be akin to a transaction history in Bitcoin, only without any blocks.
- In order to send money the chip will create a new transaction based on unspent transactions it has, and it will be sent as a confirmation of transfer of value. Again, similarly to Bitcoin transactions.
- New money will be created by the RCM by creating transactions that don't have inputs and sign them with some special key.
Mintchip is designed to allow offline digital transactions. This is achieved by
- Using public key infrastructure with a hierachy headed by trusted certifying authorities to provide offline assurance that a particular private key owns a particular amount of currency
- and tamper-proof hardware to assure that a particular private key cannot be extracted from the Mintchip and used to transfer the currency it controls without creating a record of the debit on the authentic/original Mintchip
Bitcoin is designed to allow peer-to-peer online transactions without a central authority. This is achieved by
- Using proof of work and the economic incentive to provide the greatest amount of it to provide online assurance from untrusted nodes that a particular private key owns a particular amount of currency
They're similar in that they use public key cryptography to give a holder of currency exclusive authority to authenticate a transfer of their funds.
Besides the differences already listed, they also contrast in their government-backing. Mintchip, being government-backed, would likely see attempts to counterfeit Mintchip currency through extraction of the private key on the hardware prosecuted to the full extent of the law.
Mintchip is a payment system, and a wallet for multiple currency.
Bitcoin is a payment system, a currency, and a wallet for Bitcoin.
Mintchip greatest advantage over Bitcoin will come when Mintchip support payment in gold, redeemable for gold stored at the mint.
Bitcoin greatest advantage over Mintchip is being a borderless floating currency with a infinitely-divisible finite supply.
The two nicely complement each other.