Robert Hettinga writes:
As someone who's been thrashing this a little bit, I've gotten stuck on exactly how to "*undercut*" the transaction costs of existing methods. Got any ideas? Are those transaction costs as a percentage of total cost meaningful enough to embue digital cash with the rocket-like competitive advantage we hope for?
It's pretty clear that credit cards don't work for some of the transactions people want to do: 1) one-cent and fractional-cent charges for connecting to a useful Web page or ftp site. A useful resource like this wouldn't have to charge much on a per-user basis to fund the equipment and people. 2) Transactions with individuals or small companies who are not VISA clients. It's not that easy for a mail-order shoestring startup to get the ability to accept VISA cards. Because of the danger of fraud, the credit card companies like to see a storefront and/or some previous history. Someone who writes a nifty PGP shell and wants to sell it for $10 per will have this problem. 3) People who don't like giving out their credit card numbers to an unknown email address. This is the flip side of the above. The danger of fraud is always present, and the more people I've given my card number to, the more chance that I'll get burned. Of course most states have protection laws in place, but it's still going to be a major hassle. Now, 2 and 3 can probably be addressed by electronic checks, and I think the secure Mosaic announcement included that possibility. I suspect that echecks are a considerably stronger competitor to ecash than today's credit-card infrastructure. For one thing, an echeck can be sent in the clear, while ecash has to be sent encrypted; an eavesdropper can spend ecash but not an echeck. Example 1, the fractional-cent transaction, will be tough to address by any technology IMO. Even with ecash, there are a lot of questions. Is it on- line or off-line? Does the server actually try to validate each half-cent or does it just trust people? If the latter, how much fraud is likely, and how would we track down and penalize the half-cent counterfeiters? Solving these problems is going to add overhead which will make it hard to deal with such small sums efficiently. How many cash businesses sell low-value items for pennies today? Not many.
Light dawns on Marblehead. (Massachusetts joke). Isn't the point of digital cash that you *can* send it through unsecure mail and buy things?
No, I don't think you can. Ecash can generally be cashed by the bearer so it has to be sent through secure mail. That is why I was saying that echecks might be better for those purposes. I don't understand the Telescript agent world well enough to judge whether it would drive a market for ecash. I have the impression that at least with the initial implementations the agents will not be on the Internet as we know it but rather on a separate AT&T network of special servers. So they may not have much impact for a while on the "net" as we know it. Hal