Re: e-gold

-----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 At 10:17 AM -0400 10/21/04, Somebody wrote:

"R.A. Hettinga" writes:

...

So, what kind of problems are you having?

I can't seem to figure out how one deposits or removes gold from e-gold.

They got out of the business of exchanging other forms of money into e-gold a long time ago. Think of them more as an on-line book-entry central securities depository, ala DTC http://www.dtc.org/dtcpublic/html/, CREST http://www.crestco.co.uk (now apparently part of Euroclear http://euroclear.com), etc. The minute they got out of the business and spun their own exchange department off into its own firm, literally tens of companies, if not hundreds since, popped up and started competing. As far as E-Gold was concerned, it was a hell of a lot better than taking in people's Kruggerands etc., and turning it into debits and credits into a database, and the size of their reserves went up accordingly. Imagine being an individual investor in the US, going to DTC and trying to figure out what they do or whether you can do business with them. Same problem with E-Gold, anymore. Actually, CREST *does*, last time I looked at them, have retail accounts, so maybe they're more applicable than the strictly-institutional DTC. The companies that do the in/out exchange (for a fee) are now called "exchange providers". There are lots of them, and they range from professional, like IceGold http://www.icegold.com, who I talked about, to, well, anyone who'll take your check in the mail, wait for it to clear, and then click you some gold to your e-gold account. The big ones do more different kinds of money from wires to credit cards etc., but not PayPal, because it's against the PayPal user agreement to buy and sell securities. PayPal freezes exchange provider accounts whenever they show up. In the meantime, expect to wait for the money you send them to completely and irrevocably clear before you see an increase in the account at E-Gold.

They post no information on that at all, and when I've asked them, they've more or less evaded the question. An operation like this, if it was on the up and up, would have to be taking bailments and permitting removals of gold on a frequent basis, but they're apparently set up to do nothing of the kind.

See above. They're taking large wholesale in/out orders only, mostly from the aforementioned exchange providers, who then click you retail amounts of E-Gold for a fee, sometimes less than E-Gold would on a hypothetical retail rate, sometimes less, depending on how they gold's moving that day.

Their online examiner shows exactly the same amount of gold in the system over a very extended period of time -- call it $25M worth -- and shows perhaps $1.5M a day in transactions. That transaction level is surprisingly high given that no gold comes into or out of the system at all so far as I can tell.

See above. The transaction level is surprisingly high given the transaction costs as well, but remember what I said about storing gold, etc., and, of course, the fact that they're doing book-entry transactions and their attendant, non-repudiation, auditing, etc., costs.

Overall, I'm wondering a lot about whether there is funny business of some sort going on -- but I can't tell what the nature of the funny business might be.

I don't think so. If you count up all the fees, they're making enough money on the throughput, storage, in/out exchange fees, and so on. Since they're only handling the depository management function anymore, they don't have nearly as much overhead as you would think. The larger and better firms in this business, like E-Gold and Goldmoney, have sufficiently complicated arrangements with their storage firms, governments where they're domiciled, and so on, that there is probably sufficient oversight for all this. They are doing book-entry trades, remember. They have to call the cops for enforcement themselves if someone rips *them* off somewhere. E-Gold and Goldmoney's officers are US citizens residing and working, for the most part, on US soil. Everyone knows who they are and where they are. We're a long way from TCMay's Cryptopia here, um, Toto. Obviously, caveat emptor, and all that. There's always lots of risk in any kind of financial intermediary business, up to, and including the risk that the entrepreneurs dodging off with the reserve assets, and all you have in terms of risk prediction -- in the absence of financial controls -- is what David Hume called "constant conjunction": they are honest today, were honest yesterday, and every other day so far, so we can, in theory, expect them to be honest tomorrow. As for the lack of growth of the reserve pool, after bursting internet bubbles, terrorism attacks, and wars on same, the bloom is certainly off the rose. We're way past the whizzy, "holy cow, we can do *gold* transactions, on the *internet*, isn't that *kewl*" stage, and the business is now cruising along on the people who actually find it useful, and/or profitable, to do business that way, and less on enthusiasts, privacy, theological, political, financial, or otherwise. Jesus didn't come, or he wasn't pissed, or the date didn't quake, or the state didn't collapse, or whatever. It's just a business now. For a while there were lots of scamsters getting paid in digital gold currencies, exploiting the "gee-whiz" factor for the rubes, but that seems to have died down a bit, between the efforts of various federales, the just-plain mundane ubiquity of the internet increasing the pervasivity of net.clues, and, I expect, the judicious expulsion from the system by an operator or two. Being more financial gold-bugs than um, apocalyptic eschatologists (libertarian, anacharcapitalist, or otherwise -- okay, a gold-bug, by definition, is a *financial* apocalyptic eschatologist, sue me :-)) Goldmoney is particular about the know-your-customer stuff, and about kicking potential scamsters off their system than e-gold is, but e-gold isn't about to lose their shirts by associating themselves with scamsters either, modulo an early investment in them by a cryptofundamentalist disaster-maven who ended up by the feds and/or in their custody, and, IIRC, much of whose investment in E-Gold has since been returned to the people who were originally scammed. Live and learn, and all that. Speaking of that, I think, in e-gold's case, at least, they have been more e-sheep than e-goat, certainly at the hands of various cypherpunks and fellow travellers, who saw them coming, proposed yet-another-crypto-currency, :-), managing to score some seriously nice temporary villa-digs in erst-Crypto-Paradise in the process, resulting in one now famous c-punk bailing out (persona-no-grata in hand on the ferry leaving Blowing Point) in the pure horror at the sheer complexity of the algorithm involved, and the rest literally suing each other off the island and into several other subsequent jurisdictions. Learning occurs, as I said before. So, sure, after more than a decade in business, E-Gold is, and has been, legitimate. Goldmoney's legitimate, too, though a little younger, and for the same reason. Doesn't mean that you shouldn't be careful, and, for the most part, you shouldn't be using *any* internet transaction method, including credit cards over SSL, unless you have an excellent business case for doing so. The cost of anything is the foregone alternative, and all that. Getting paid in E-Gold costs money for the seller and they buyer of the good or service traded for it, especially if your customer converts to E-Gold to pay you, and you immediately convert out of E-Gold to get actual dollars to buy stuff with. Cheers, RAH -----BEGIN PGP SIGNATURE----- Version: PGP 8.0.3 iQA/AwUBQXgXRcPxH8jf3ohaEQK6hwCfaYTqUCd6E5updBR7XueAcM/RbOIAoJ0d 8jzb8WbGQnc2eKhfIWIn9eWQ =eQAI -----END PGP SIGNATURE----- -- ----------------- R. A. Hettinga The Internet Bearer Underwriting Corporation http://www.ibuc.com/ 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'