Excerpts from mail.nonpersonal: 4-Dec-95 Re: Meeting notes from ANSI.. Robert Hettinga@shipwrig (4665*)
MTB's cost on a Digicash trade is $.50, while the most efficient book-entry system on the net, First Virtual, has to charge, what? $5.00 to break even?
From a consumer standpoint, I think that the only reasonable thing you can do is to assume that the vendors are pricing their services at a level that they believe yields profit in the long term. FV charges 29 cents plus 2 percent, which means that you can put 50 cent charges
There are some interesting unspoken assumptions here. To calculate anyone's "cost" on a transaction requires the complex amortization of costs over many transactions, with assumptions/projections about the transaction volume. I have no idea where you came by either of your numbers, MTB's or FV's, but I can tell you that your guess about FV is off the mark. And I'm sure that MTB is no more eager than we are to publicly dissect all the underlying cost structures, so I have no idea what the 50 cents that you cite really means. through the system if you're willing to give up 30 of those cents. By pricing it that way, we have invited people to put 50 cent charges through the system. We wouldn't have done that if we didn't think we could make money on it. To be perfectly clear: our minimum service charge is 30 cents, not 5 dollars. If we didn't think it was worthwhile to take transactions that small, we wouldn't do so. Finally, on the more philosophical matter:
They don't get it. The network isn't a hierarchy. The network is a geodesic. You don't need offsetting book entries, you can trade digital certificates much cheaper. You don't need to control your software, you need to make it autonomous and set it free.
In terms of crypto-privacy, anonymous communication, and things like that, I agree completely. However, it's genuinely more complicated than that where money is concerned, because there are aspects of the translation between "bits and bucks" that have some extremely serious practical complexities. A true geodesic structure is self-supporting and self-structuring. A cryptographic infrastructure can and should be similar, I agree completely. However, a *monetary* infrastructure needs convertability, and the points of conversion are always the best targets of attack for criminals. (I've been casting about for an analogy to physical geodesics, and it's hard to find one. The best I can come up with is to imagine that in order to convert a carbon buckyball to a more conventional set of carbon molecules, you had to do it through a service bureau that was capable of error, fraud, or subversion by outside criminals. This would ONLY matter if you ever wanted to do such conversions, but it would matter a lot then, especially if you had to suffer a serious financial loss if you got the wrong carbon molecules at the end of the process.) IF you wanted to settle for a totally non-convertible economy (like rubles in the old Soviet Union, or like the LETS system on the net today, as I understand it) then you could build it geodesically. But if you want to be able to convert back and forth between Internet payment systems and non-Internet payment systems, it can never be truly geodesic. It will always be attackable at the points of conversion. (You may "trade digital certificates", but how do you know the ones you're receiving were obtained for legitimate real-world value?) Because of this, the underwriting financial institutions, who have a very reasonable desire to limit their own risk, will inevitably seek the protection-by-traceability offered by something less than perfect anonymity. We may not like it, but it's a very natural position to be taken by those who are actually bearing the financial risks at the point of conversion. The truth is that there's a natural tension between the consumer's desire for privacy and the underwriter's desire for financial protection. First Virtual has been worrying about this for 2 years now, actually. Our solution -- which I think has held up pretty well -- was to allow users to be pseudonymous (as opposed to anonymous), to limit the traceability-by-pseudonym to the service bureau (FV) that effects the payments, and to treat all such information with the highest possible standards of confidentiality. The fact that the information can be traced when absolutely necessary is actually a huge selling point with those who carry the financial risks. I'm not claiming it's a perfect solution, but I think that unless you are clear about the underlying tradeoffs, it's hard to talk seriously about how to build a better solution. -- Nathaniel -------- Nathaniel Borenstein <nsb@fv.com> | (Tense Hot Alien In Barn) Chief Scientist, First Virtual Holdings | VIRTUAL YELLOW RIBBON: FAQ & PGP key: nsb+faq@nsb.fv.com | http://www.netresponse.com/zldf