Tim:
There are no digital coins.
Gold obeys a mass conservation law. Information as such does not. Everything unique about digital money stems from this basic observation. Here is a thought problem to illustrate. If money were required to be able to be xeroxed, would you be able to make a monetary system? The answer is yes, but it doesn't act the same way as a coinage system.
A problem with digital money has always been that there apparently is no close equivalent to a digital coin, a token which can be passed around freely, as a quarter or a dollar bill can be.
It is a problem only if you want to design a digital coin. Once you rid your mind of the need for that, it's not a problem but a design constraint.
It may be that Chaum, who is eager to actually get some sales to groups within Europe and elsewhere, is already responding to some pressures for "accountability" (the digital money version of "wire-tappability") by various European governments and the observer protocols are an effort to satisfy some of these concerns.
No. This is way off the mark. Chaum's complete and overriding goal is privacy, sometimes to the exclusion of other desiderata. The observer protocols sacrifice nothing in the way of privacy, but perpetuate and reinforce the subservient economic relationships between individuals and large financial institutions. The system is assymetrical; the central computer talks to its chip through the observer. There is no room here for person to person interactions. The barrier to entry to deploy chips is high, as well. In other words, the observer protocols preserve chasm of relative size of Big Business over and above the individual. This is a benign oversight, to be sure; all the individuals look alike. (You thought you were a number before? Now you're a _random_ number!) Nevertheless, the observers are not egalitarian; they are the model of cable TV as opposed to the telephone network, of newspapers as opposed to electronic mail. Chaums got privacy down, but I don't want the rest of his world. No way. Eric