-----BEGIN PGP SIGNED MESSAGE----- [Standard disclaimer: all of this may be based on some misunderstanding of the underlying situation on my part.] I've been thinking about what Eric and others have written about the apparent problems Digicash is having hooking up with financial partners. I agree that it would be encouraging if some large banks or a credit card company were on board, but I'm not sure their absence is as big of a problem for a digital currency system like Digicash as it would be for other types of systems. If a transaction system uses credit card numbers to process purchases, then you need to have either a credit card company that's willing to participate, or someone with a merchant account to submit purchases to the system. Obviously, if the credit card company doesn't want to allow the online system, they can prevent people with merchant accounts from participating, so it's important to have them onboard. But digital currency is a commodity, or at least an incredibly lifelike simulation of one. If someone's willing to make a market for it, it will have value, assuming the system's secure and the mint behaves responsibly. Suppose Digicash opened up a digital currency exchange in Amsterdam. They agree to make a market in edollars. Specifically, they agree to sell edollars for $1US, and they agree to buy edollars for $0.99. This prices are good for all time, for all comers. The promise to sell is easy to keep, because they can mint as many edollars as they want. The promise to buy is backed up by cash reserves, which they create with revenues from sales. Let's suppose, just for the sake of argument, that the currency exchange doesn't even conduct business over the net. You have to walk into a storefront in Amsterdam with a floppy disk to buy or sell edollars. Edollars would still have value here in Lincoln, NE USA. I could find a partner and set up a local currency exchange here in Lincoln; my partner would set up shop in Amsterdam. We'd offer to sell edollars for $1.01 and buy them for $0.98. We'd keep reserves of both edollars and US dollars on hand, from which we'd do our trading. If we started to run low on edollars, my partner would go to the storefront and buy some more. If we started to accumulate too many, he'd sell. The prices are set up so that we'd always make a profit, assuming our volume was high enough to cover expenses. Now suppose that Bob, who runs a local business here in town, wants to sell widgets over the net. He decides to use digicash software. Alice lives in Hoboken, and she wants to buy a widget. She goes to a digital currency exchange in Hoboken and buys some edollars, and then she uses her digicash client to transfer the funds to Bob at Widgets 'R Us. Every day, Bob goes to the bank and deposits the day's checks at the drive through window. Once he started selling online, he stops at my drive through window every day on the way to the bank. He gives me the edollars, and I give him a check. Then he deposits my check along with all the others at the bank. If my check is good, the bank can't say much about things one way or another. You don't need Visa or Citibank or anyone else onboard. They're not part of the loop. You just (just?) need the government to agree to stay out of the way. Now obviously, things would work a lot more smoothly if you didn't need me or my digital currency exchange. It would be nice if Bob and Alice could buy and sell edollars from their banks online. But it's not essential. I could extend credit to Alice so that she could buy edollars from me online, without having to go out and physically buy them. If Bob and I have been doing business for a while, maybe he'll trust that I'll mail him a check after he transfers edollars to me online. I suspect that if I started to make money, banks would decide to put people like me out of the business by moving into it themselves. It seems to me that one of the main strenghts of the digicash system is that it can take off slowly as more and more people decide to use it. It doesn't need to be embraced by anyone except the regulators. If it's cheaper and provides a better service, it will win. == Alex Strasheim | finger astrashe@nyx.cs.du.edu alex@omaha.com | for my PGP 2.6.1. public key -----BEGIN PGP SIGNATURE----- Version: 2.6.2 iQCVAwUBLuKXVBEpP7+baaPtAQEaLwP+K0MU9agIOaLb9SI9Bwv9732P5ltsdeJ5 45z2IUPzOPRJn/o+ivXJv7sjP1hIlTXMKjA2Q0Lpy2gplDIa8/cqz9WmqSku837o nJc13tdsJevfNjtEUztC1kfrTsrZjwxW2L+hg0uL9GJSxFhU6G+eKqsXYH5nlEFZ b1w2wFbzf5c= =4/Jz -----END PGP SIGNATURE-----
Now obviously, things would work a lot more smoothly if you didn't need me or my digital currency exchange. It would be nice if Bob and Alice could buy and sell edollars from their banks online. But it's not essential. I
Isn't there a problem with net-based distribution of ecash? It would seem that Eve could intercept the ecash and spend it first. Encrypted email return of the ecash would seem to violate the anonymity of the ecash. Some sort of one-time encrypted return address would seem to be necessary, but better yet would be a vending machine that took a floppy disk and some currency and stuck the ecash on the floppy. Paul
From: Alex Strasheim <alex@omaha.com> Suppose Digicash opened up a digital currency exchange in Amsterdam. [...] Left unexamined here are the ways in which various things can go wrong. Edollars would still have value here in Lincoln, NE USA. How much? Not full value, that's for sure, because of the risk cost associated with getting the edollars back to Amsterdam. What happens when womthing goes wrong in Amsterdam? What happens? What effective recourse does a USA holder have with respect to a Netherlands company? Your basic idea, however, is right on target, that you don't need to be a bank to issue digital currency. On the other hand, with that realization your problems are only beginning. Eric
participants (3)
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Alex Strasheim -
eric＠remailer.net -
pstemari＠fsp.fsp.com