Multi-signature in paper currency

Funny news about a granny who shred her cash stash to annoy her heirs. The local central bank will replace the banknotes!

Mattress safety

This bring interesting potential applications. How to make cash under the mattress safer? Just cut it in two and hide it under TWO mattresses in different locations. If you need to spend it, rejoin the two parts and redeem it for spendable currency at the central bank. (This doesn’t though cover the somehow unlikely scenario where the central bank ceases to operate but the banknotes still have some value.)

Paper multi-sig

This could also be used by a group of people who want to share a stash and only spend it when they all agree: cut each banknote in N-pieces where each party takes one. To spend, the parties must collaborate to reunite the parts and redeem them at the central bank. This is pretty similar to multi-sig addresses in Bitcoin — indeed it could be used to explain multi-sig to people who don’t get the explanation in cryptographic terms.

Shredded will

Back to the granny, a central bank representative is quoted as saying that “If we didn’t pay out the money then we would be punishing the wrong people.” I think it is the wrong attitude. Destroying a banknote is equivalent to making a donation to society, as the value of everyone’s remaining currency increases (there are fewer of them going around). From an accounting viewpoint it decreases the central bank, thus the state, liabilities as there are fewer banknotes to redeem (paper money in circulation show up as a liability on the issuer’s balance sheet). So, the act of shredding the notes was obviously a wilful act of spending on the granny’s side. She could have equivalently bought an expensive object and destroyed it so as to destroy its value.

Technicalities

The ECB says that they do not redeem banknotes damaged intentionally. The Bank of England seems more tolerant. Arguable if people started to use the procedure for mattress safety and paper multi-sig en masse, central banks’ damaged notes redeeming service could be overwhelmed, though economically or morally I don’t see a problem with operating the service, perhaps with a fee to cover direct costs.

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