Who Coined It First? The Advent of Digital Currency

When the Royal Canadian Mint (RCM) announced that it would be creating a digital representation of the Canadian Dollar in the form of MintChip, the digital currency sphere lit up with comparisons to numerous previous attempted forms of digital currencies – most notably Bitcoin, a decentralized electronic cash system developed by Satoshi Nakamoto. 

In an online article from Wired Magazine, RCM’s Chief Financial Officer Marc Brule defends MintChip as a novel path in the realm of digital currency. The exact path has not be thoroughly defined, as the RCM is still in the early stages of research and development. Instead, they have issued a Developer Challenge to the public in order to gather new ideas and directions (a video of the challenge can be seen here). However, stated within the rules of the Developer Challenge – any submission must be the original work of the developer, and cannot violate any intellectual property, proprietary, privacy, or moral rights or another person/entity (for the complete rules click here). And this is where the question arises of whether such a submission would be copying the idea of Bitcoin.

Firstly, the two concepts differ in how transactions are controlled. The driving force behind Bitcoin, according to Wired Magazine, was to create a form of money that was “convenient and untraceable, liberated from the oversight of governments and banks.” The creator, Satoshi Nakamoto, ensured that bitcoins would remain decentralized and out of government (or third-party) control by publicly distributing a real-time ledger of all transactions called a ‘block chain’. The public distribution ensured that all transactions were broadcasted to the network of bitcoin users to ensure legitimacy and prevent duplicate transactions. It was very clear that Nakamoto intended bitcoin to be an alternate form of currency – one that co-existed as a more attractive alternative than printed currency. On the other hand, the RCM’s intention is to create a centralized system of digital currency. In fact, the purpose of MintChip is not an alternative to printed dollars, but a substitute – Brule was quoted by Wired saying, “MintChip could be the digital equivalent for cash for online transactions.”

Secondly, the concepts differ in how currency is made. The Bitcoin economy relies on the network of its users’ computers. The release of bitcoins is predetermined – an algorithm releases new bitcoins into the network at preset intervals to ensure that the monetary supply grows proportionately with the number of users. Around the year 2140, the currency would reach its prescribed limit of 21 million bitcoins. Though Brule did not comment specifically on the creation of new currency, the system appears to retain the status quo – in which the Bank of Canada would be responsible for maintaining the monetary supply. Therefore, both the control and creation of currency differs.

It is, however, possible to argue that the bottom line is the creation of a digital currency. Each system intends to bypass a printed form and utilize a system of currency in digital form that would be used to purchase and sell goods and services. Though the bitcoin concept is a community-driven open source project, problems would arise governing the intellectual property rights. In reviewing the Open Source Initiative MIT License, permission is granted free of charge to any person obtaining a copy of bitcoin and its associated files to deal in the software without restriction or limitation with the condition that all subsequent copies of the software must contain the Open Source Initiative. This would run contrary to the rules in the MintChip Developer Challenge, whereby it states that any submission will forfeit all intellectual property rights to the RCM in perpetuity. The challenge would lie in determining whether the software submitted had copied the bitcoin system in any meaningful fashion.

However, there is a further complication. The problem lies in the creator of the bitcoin system itself – Satoshi Nakamoto. Since April 2011, he had claimed he had “moved on to other things”, and has not been heard since. All other attempts of ascertaining his identity through his posts in forums, email addresses, and website have failed (more on the identification of Nakamoto here). And while his legacy continues with the use of the currency, his identity remains a mystery.

Despite its infancy, I believe MintChip possesses fundamental differences from bitcoin – differences that mean it is unlikely to infringe upon the Open Source Initiative’s intellectual property rights. However, because of its infancy, it remains difficult to predict its outcome, and should be closely followed as it develops.

Byron Tse is a JD Candidate at the Western University Faculty of Law.