is about is it's a new form of social organization. [INAUDIBLE] The umbrella is that I think it can be an important tool, but ... PM: Answering your points -- I don't entirely disagree with them, but I'll point out that the technology is actually very cheap. It's not free, but it's cheap enough that people we would consider to be extremely poor can afford it at this point. You can get a computer that can link you up to the Internet for maybe something on the order of $100 if you try hard right now. MALE: I could do it for $5. A VIC-20 and a VIC-20 modem are essentially free. PM: Well, you have to find one. That takes some time. MALE: It's in somebody's closet. PM: The other thing is Internet service is actually fairly cheap right now. For about $10 a month -- actually, if you count the cost of having to have a phone line around, call it $20 a month -- you can be on the Internet. And the price is only going to fall with time. It's admittedly not free, but it's not out of the capability of ordinary people to pay for. You're right that most people don't know this is an issue -- which is why we're here. It's not -- and I'll also agree with you that so long as the government has the capacity to shoot people en masse if it so desires, the State will continue to exist. This is not a panacea. It's just a tool. There are people out there who are extremely enthusiastic about it. It might be a really neat tool; a really good tool. But it is just a tool. However, if people did in fact pull out of the economy in a big way, at least out of the above-ground economy, or as De Soto refers to it, out of the formal economy -- as opposed to the informal economy, because after all, you know, why should you refer to it as a black market? It's a market for honest people, not a market for dishonest people. As more people enter the informal economy, being able to pay for the tanks and pay for the people to stand behind them becomes more and more difficult. Admittedly though, you're going to need to be able to provide alternate means of society organization. There are all sorts of issues that come up. This is not the answer to everything. It's just a really, really important tool you should know about. Yes. FEMALE: Just to get back to the issue of digital cash. When Leonard(?) talked to Chaum(?). What he wants to do is develop a card reader for your PC, so you can download cash onto your card in your home from your bank, wherever it is. DM: Citicorp already offers that service. PM: But it's not terribly secure. DM: It's admittedly not secure, but they do offer it. PM: It's also not anonymous. FEMALE: They have a debit card, do they? DM: They have a debit card. If you go to their Queensboro center in Long Island City you can see -- there are sample machines up there. They use it for all electronic transactions. FEMALE: And so they give you a sort of -- they charge you ... DM: It's like five dollars a month. FEMALE: You have to rent this? [INAUDIBLE; OVERLAPPING VOICES] PM: It's not purely abstract money in the sense that digital cash is not a form of currency. It's really just a way of doing anonymous transactions. You can be doing anonymous transactions against bank accounts backed in dollars or yen or gold or whatever else your heart desires. It's really just a way of simplifying the concept of doing anonymous digital transactions. It's not really in and of itself a currency. MALE: Right. That's the part that's hard to imagine. [INAUDIBLE] PM: It could not be. That's not the way that it's designed to work. FEMALE: How do you generate such a system without trust to begin with? I mean -- I've got $10,000 in my Swiss bank account, Perry, and -- alright, here you go. Turn it into digital cash for me. But -- I mean you have to act as a banker for me, right? And there's just... PM: Someone has to act as a banker for you. I suspect very soon it will be your Swiss bank, whom you already trust. Or it will be some -- you already have to trust someone. People ... FEMALE: But you've got the FDIC behind it in CitiBank... [Inaudible] PM: But there are people who trust their money to Swiss banks right now, and Swiss banks don't fail. And they don't, generally speaking, commit fraud. MALE: People lost money on FDIC-insured accounts because of inflation, so you can lose money on insured accounts. PM: Well, anyway, the point is yes, you're right. There is a question of trust involved. You have to trust some of the people that you are doing transactions with. If you have a banker, for instance... MALE: Use several banks. DM: We may develop methods -- protocols -- which will allow you -- I can't get into this, because it hasn't been done yet, but it's possible. You may be able to deal with a financial institution that has wide-open books. The books are published in electronic form, kept on the Nets, so that anybody can check their account and they can even check everybody else's account -- except they can't check the balance. They can just tell that nobody's screwing around with it -- in a way that cannot be easily defeated. PM: There are some neat protocols people have come up with for doing anonymous cryptographic auditing. Again, however, there are ways of committing fraud -- say, that the bank is actually dealing with something being backed by gold. You know, one day they could bring up trucks, take all the gold and leave everyone hanging. DM: There's always a way to do that. PM: You could do that with banks right now. If you go to the super- market you can hand the guy your dollars, he can pull back the groceries behind the counter and just refuse to give them to you. You know, you can go to the park and you can give the guy your money and he can fail to deliver what people go to parks for these days. Look. There are always issues of trust involved. I'm not going to address that. That's a wide open issue. It's a huge issue. FEMALE: There's no paper trail involved. If I make a deposit and you give me the goods, what record do we have that this ... PM: I can -- there are paper trails. There are receipts. DM: No, there are. It's complicated. MALE: It's not paper. PM: They're not paper, but I can demonstrate to an independent auditor that I did in fact deposit the money and that these have been the transactions I've done. FEMALE: But then in fact does it not eliminate the beauty of ... PM: No. I would have to reveal -- only -- if I want to go to an auditor, I can choose to reveal my identity to some limited extent. I could for instance -- I could have an anonymous account. There can be nothing recorded on the account in terms of name or address. But I could show someone all the records for the account to demonstrate that the bank is lying and that there is a certain amount of money in that bank account and that they've not been telling the truth. There are audit trails possible. Yes, ma'am. Q: How can we sure that the software we use does not already have master keys included? Or get included as time goes on? DM: Because you can look at a PGP for example -- I don't know how much you know about computers, but there's source code. I mean you can look at PGP, this program that's public domain that's distributed all over the world. You can look at the program itself and see exactly how it works. It's well documented. PM: The program is distributed in source code. You can recompile it if you want. You can read all the codes. DM: You can. You can look at the codes. PM: Many people have read it. In fact the code is fully available. Many people have read it. You can compile the code yourself. However, I'll point out that there was an ACM Turing Award talk by Ken Thompson where he proved that there is no way ultimately to completely trust your computer systems. There is also no guaranty that when you lie down next to your lover this evening that they're not going to take out a huge steak knife and plunge it right into you. There are no guaranties, folks. However, to a reasonable degree of confidence you can be sure that the software is free of holes. DM: We only have a couple more minutes, so -- a couple of quick questions. Q: [INAUDIBLE] PM: Well, I don't know. So far as I know, the United States government has never brought a prosecution against a foreign bank for doing overseas transactions. They can't. It's not their jurisdiction. Presuming that you are doing your transactions with a bank in the Bahamas, I don't think that the government -- the government can charge you with RICO violations. It's unlikely that they can charge anyone else with them. Any other questions? Q: [INAUDIBLE] PM: You can start -- it's likely you're not, but if you were interested in started a digital bank and having a digital bank that, say, backed its currency using a basket of commodities or wheat or gold or anything else you wanted, you can do that. It's just a mechanism for conducting funds transfer. Admittedly, it's abstract, and people are probably never going to go up to a gumball machine and stick in their computer in order to get a gumball out. And in fact people are probably very unlikely to use it for everyday ordinary transactions. But I'll point out one thing. If you have an offshore bank account you can get an ATM card for it and you can walk into an ATM machine anywhere in New York, stick it in, withdraw cash -- your name, your true name, is not necessarily recorded anywhere. You can walk to an ordinary supermarket and pay in ordinary cash if you like. MALE: [INAUDIBLE] PM: Well, it is legal. MALE: [INAUDIBLE] You come into issues of how -- as the money forms develop towards that, how other things that were previously stable may become more and more unstable, you know, which suggests to me that the further this thing goes the higher level there is going to be of barter. PM: This is more an economics question than a question about crypto- graphic technology. I'll agree that there will be interesting effects as a result of the advent of digital cash, and that we can probably not predict what all of them will be. At the same time, we probably can't stop it. DM: I think we have to wrap it up in about two seconds. MALE: May I risk of delying the obvious -- at one time you were told that the only secure crypto was the one-time pad. What we're saying now is that here's a form of crypto that you can use all the time, every time, and that you should encrypt. DM: One-time pads are impractical, and you don't need -- you don't necessarily ... MALE: They're ancient history now. PM: They're still in use. DM: Well, maybe, maybe not necessarily. They're still used. I feel like I have to make just one comment to save my ass here before we break up, and that is -- Perry -- I've tried to avoid this because we probably agree on more or as much as we disagree. Perry considers himself an anarcho-capitalist. I am an anticapitalist. I have problems with the whole idea of digital cash, with the whole idea of money. I'm against money. I'm against cash. I don't like banks. We don't have time to get into that now, but I just wanted to mention that, and also -- for all my friends here who think that I'm a traitor -- also, that ... PM: They'd never think that about you, Dave. DM: That stuff is all controversial and you can debate about it, but -- I mean the basic -- I hope that we got the basic ideas across. The whole business about digital banks, digital cash and whatnot, you know, do what you want with that, but -- that's gonna vary with your particular political slant. I think that's probably it. Q: Do you want to share? DM: Yes, I do. [APPLAUSE] --------------------------------------------------------------------------