Because of the top level requirement for cheapness, the accounting model was designed for complete reliability, right up to the support desk level. Both backend and client keep a list of receipts as the sub-account.
This account is placed in the hands of a reliable professional source such as an accountant or lawyer, who will hopefully only have an interest in using the account under the probity of the governance regime. That is, to continue the example of gold, there should be separate parties responsible for the ingress and egress of metal into storage, and there should be independent verification of the number of bars currently placed in escrow.
The balance sheet of the currency, which is effectively the above numbers, and the total of user value outstanding. In order to meet Governance layer requirements for open auditability, some accounts must present balance sheets on demand, and select accounts must be examinable.
Sub-accounts manage a particular form of value within an account. With any payment system, there is an ability to create new assets, or misdirect existing assets, all with no more work than a few button pushes. Rather than being outside scope, their discussion here is simply a reflection of the claims that the total security of the system is a holistic issue, and governance is the layer where we solve the security challenges that remain after we have attempted to solve as many as possible in the lower layers.
The above are general techniques that are supported within the Ricardo system, but are as applicable elsewhere.
The sub-account is simply the intersection of ownership authentication the account with the value description the contract.
Note how these protection techniques that we use are partly outside the domain of the technical system. Then, a manager account is designated that receives any new float from the mint, and also returns any redemptions.
Each transaction settles in real time, as measured by the issuance of the receipt. This problem is normally handled by separating out management of day-to-day assets with the creation of assets in the system, and increasing the work required for any fraudulent transactions.
Total value of digital float: Finally, in dynamic governance, we provide for monitoring of key values by the user community, and thus share the auditing burden. Lower layers must provide some mechanism for these accounts. The general schema that is advised to Issuers is as follows [ 50 ].
Certain features get specific support, such as value caps on accounts and target account limitatons.
The result of transaction completion is the issuance of a signed receipt. Structural Governance Within structural governance, we consider the question of insider fraud, the theft of both digital value within the Financial Cryptography system and of any physical value that underlies the virtual value managed by the system.
It does this by employing a group of non-obvious techniques: These values can be audited in an issued currency within the Ricardo system: Transactions are movements of value from one account to another, within the sub-account of the instrument.
A user may create these on demand, and likewise dispose of them. Mirroring the Governance Model It is also worth noting that when a currency is reserved by an underlying asset for example, if a gold-denominated currency had physical metal escrowed to reserve it then the above governance features should be mirrored for the reserves.
From this account is drawn new value to be sold, or into this account, old user value is redeemed. Accounting In order to meet the conflicting objectives of privacy and flexibility, Ricardo uses a conventional accounting model with some additional features: In order to limit the creation of value, for each issuance, a special account is designated as the mint, or the creator of value.
The backend accounting engine is responsible for guaranteeing that each transaction is atomic and persistant.Financial Cryptography in 7 Layers Ian Grigg   - Abstract: Financial Cryptography is substantially complex, requiring skills drawn from diverse and incompatible, or at least, unfriendly, disciplines.
Caught between Central Banking and Cryptography, or between accountants and programmers, there is a grave danger that efforts to construct Financial Cryptography. Find the best accounting schools for undergrads in ranked by student preference, retention and success rates.
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