Now, one cost of deploying any such system would be the expected (negative) value of the risk taken in losing the whole development investment to an adverse regulatory decision, let alone possible actual penalties.
True. That is a risk of deploying the protocol from the financial entity's standpoint. It's a risk, that risk has costs both direct and indirect, and therefore Chaum's systems are _more_expensive_ than they appear. These risk costs _will_ affect what gets deployed. Like most things in the banking system, a consensus (inside the beltway and out) would have to be reached. But this is a political, not a technical, challenge. Almost all the problems in deploying a digital cash system at this point are financial and political. re: IRS reporting I'm hard pressed to see the difference between $10K of paper money and $10K of e-cash. That's the point of the technology. If you treat it the same way, you can regulate it the same way. Smurfing is easier in the electronic domain by a long shot. Smurfing, for those, not in with the jargon, is sending out flunkies with a few thousand in cash each to fetch cashier's checks (i.e. non-cash instruments). Since the transfer of e-cash and the creation of nominal accounts is much easier, it's that much better for moving anonymous money. The Treasury Department will see this as a Bad Thing. It will most definitely be a regulatory hurdle. re: getting profitability If it is possible to sell, maintain and support software on the internet, there will be an incentive for sellers to use it to reduce costs. [etc.] I elided an important point. It seems clear to us that there's a large market available on the Internet. Will it be clear to the financiers? Not without a lot of education. If I had an e-cash-register coupled with a transaction-ftp capability, I could sell my software without knowing who bought it, and put the money in the bank more efficiently than if I had to deal with checks, credit cards, etc., I would jump at the chance. This is a feature of any all-electronic payments system, not only of electronic cash systems. There are alternatives which can work economically. Deployment of anonymous digital money is not an assured event. E-cash is critical because of it's efficiency. Almost all the efficiency comes from the fact that it's electronic, not that it's cash. It is true that cash systems more quickly consolidate receivables, but the advantage over paper is _relatively_ small. With it, I can sell software or computer-related services from any net-connected machine to customers Singapore, or Japan, or down the street [...] As soon as foreign exchange transactions come into play, life gets more complicated real quickly. I think there really is a large market available in low level foreign exchange, but it's much more likely that single currency money systems will be the first to be deployed. Suppose that all cash transactions had to be recorded and each party of the transaction had to be identified and reported to some other third party (the government, say). Besides the specter of big brother watching you, the economy would choke in administrivia (I *like* that word, Eric). Choke? I think not. Costs would go up a little, certainly, but all the reporting could be put into software. Ever heard of the term "compliance officer" in banking? It's someone who goes around and makes sure the firm doesn't inadvertently break any laws. Well, compliance for cash reporting would be in software from day one of the requirement. It might add a bit to computer system costs, but not appreciably to labor costs. After all, filing would be done electronically, for real-time monitoring. If the people who control patents to the "wallets" and "cash-register" technology would let that be available for all, The 'purchaser' package of DigiCash will be freely distributed. I don't think the 'merchant' package will be. I infer this from looking at the questionnaire for self-qualification of DigiCash's that got posted here. There was a one category for banks, certainly to be licensees, and one for merchants, therefore also to be licensees. In summary. Anonymous cash systems are not clearly better than identity money systems. It's not clear at all that one will win out over the other. In the USA, there are strong governmental forces against anonymity. The best we can hope for is that both get deployed. The market will then be able to choose. Eric