At 6:41 AM -0400 on 7/8/98, Ryan Lackey wrote:
Haven't you said in the past that the *consumer* can't be charged anything to use the system in the way of fees (consumer being the party bringing money into the system), and that all fees need to get charged to the merchant (or whoever the party is who removes money from the system)?
Nope, and, if I did, I was wrong. :-). You probably can't bootstrap things on seignorage alone, I don't think<double negative?>, but if you did, again, you would kill your digital cash issue anyway, because of lack of merchant acceptance, especailly in the early phases. Note, in my canonical example, cash, that people already pay a fee for "foreign" ATM withdrawls anyway, and people are used to doing things that way. That's great, because I expect that margins on a net.ATM withdrawl through an underwriter would be significantly higher than what a bank makes on their non-customer ATM transactions. Three orders of magnitude cheaper? I wouldn't be surprised.
Certainly, at first order, the fee *should* be on removing money from the system, from a selfish point of view on the part of Ivan the Issuer -- if you're making money on seignorage, you're making money when people add money to the system *and leave it there*. Thus, you want to provide incentives for people to buy money and leave it there -- charging no "on" fees and minimal "off" fees would do it.
Yup. But, oddly enough, that was Mark Twain's (final) fee structure, too. Didn't save them in the end, though. I just think that if merchants are the key to acceptance of digital bearer cash, much less fully anonymous blinded digital bearer cash :-), then you shouldn't charge merchants anything to accept the stuff. If a merchant can download a wallet or registerware free or very cheap, and instantly start taking cash payments for whatever they sell over the net, and, when it came time to take that cash and put it into their own bank it didn't cost them anything to do it, then they would probably accept the stuff a heartbeat. The cost of anything is the foregone alternative, three orders of magnitude, and all that and "free" comes pretty close to three orders of magnitude in cost reduction from merchant credit card fees in my book. :-). The other beneficiary, in terms of cost, of course, is both the underwriter, who's issuing cash for rediculously cheaper than a corresponding volume of noncustomer.meat.ATM transactions would cost, not to mention *some* seignorage :-), and the trustee, who's getting a share of both for something they do already for the mutual fund and stock/bond transfer markets. I see seignorage as a tasty long-view source of income, certainly, but I expect the half-life of a given dollar of digital cash to be measured in days, if not hours, in the early stages. Frankly, I don't see seignorage showing up significantly on the income statement of an underwriter until there are other bearer instruments (stocks, bonds, and especially mutual fund shares) to invest that cash in, keeping it on the net. I think that that's one of the reasons that the Fed, among other people, aren't too worried about the immediate macroeconomic effects of digital cash. That and that the Fed's seignorage income, in the overall scheme of Fed revenues, is pretty small, and probably dwarfed by other things like printing and handling costs, etc. Greenspan himself is/was a free banking advocate, certainly, and has said publically (see last September's Official Cypherpunk Forbes issue :-)) that he thinks that private electronic banknote issue is not a scary proposition at all. Anyway, by the time that there are other digital bearer instruments out there, and the money supply gets affected by digital cash seignorage, much less fractional reserve accounts, (which *will* happen as competition heats up and, someday even traveller's-check-type purchase premia on digital cash will go away [*some*day!]), then the central bankers will have other things to worry about besides just the impact if digital bearer settlement on their money supply. Problems like why have *national* instead of private, currencies, anyway. :-). Nice problem to have, I figure. Cheers, Bob Hettinga ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.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' The Philodox Symposium on Digital Bearer Transaction Settlement July 23-24, 1998: <http://www.philodox.com/symposiuminfo.html>