Date: Mon, 2 May 1994 13:55:34 -0700 From: Hal <hfinney@shell.portal.com> Why don't we brainstorm a bit to see if we could come up with a way to take this digital cash software and do something useful and interesting with it. It seems like too good an opportunity to just let it sit there and do nothing. I know there has been some abstract discussion about cash systems in the past, but now we have something concrete and we should be to discuss it more specifically. There have been several private-currancies in the recent past. One of them was written up in Utne Reader, quoting the Whole Earth Review. I've got the information squirreled away somewhere. That one was interesting because it had a zero-sum money supply. There was no scrip -- all trades were registered with a central authority. If I traded a thing of value to you, my balance went up and yours went down. Debt was repudiatable only by leaving the system, and your balance and trading rate was explicitly public information. No one could be forced to trade with anyone else, and trading with someone (or not) based on their balance and trading rate was encouraged. Inflation was not a problem because the money supply remained at zero. The most telling remark from the originator (a Canadian) was that the system worked best when you had someone with deep pockets who was willing to run up a big positive balance by trading away things of value for the private currancy. So to get digital cash going, (IMHO) we need someone willing to risk a bunch of bucks to get people in debt to the system. Maybe someone with some spare cash could print up a hundred Digital Cash T-shirts (maybe a bit-mapped image of Johnny Cash? :) worth, say, $7, and sell them for $10 bucks in digital cash. The profit that would (eventually, hopefully) bring would be their return on their risk. There are other schemes that would work. -russ <nelson@crynwr.com> ftp.msen.com:pub/vendor/crynwr/crynwr.wav Crynwr Software | Crynwr Software sells packet driver support | ask4 PGP key 11 Grant St. | +1 315 268 1925 (9201 FAX) | Quakers do it in the light Potsdam, NY 13676 | LPF member - ask me about the harm software patents do. en $729, as the money makes it's way through the economy. Right. Banks have to balance liquidity against uncertainty. So the money went around, and around, growing and growing, until it slowly became worthless. The only thing that keeps money growth in check is market discipline and faith. The whole house of cards doesn't come tumbling down, because Alice has faith that she has $1000. In reality the emperor has no clothes. In reality Alice's investment is nowhere near as liquid as she thought it was. Hers is only liquid if no one else's is. No, most major currencies are not on the Gold Standard. They float purely in relation to other currencies. So what gives money it's value? Purely, the loans which back it up. This is why it is practically impossible to stop, eco-disasters from continuing. If the countries that have "borrowed" this money default, the whole thing collapses. It collapses everywhere, simultaneously. Well, no. As long as banks can keep collecting and paying interest and *some* of the principal, they're mostly okay. They can rebuild the lost principal through lower profits. The place where the "faith" comes in is the confidence investors have that their investment in the bank is as liquid as they thought it was when they made it. Now we get to the problem with digital money. It's a stand alone system with no "faith" in it and with no growth built in. Faith is the only thing that keeps things working, that and legislating paper as legal tender, so people are forced to accept it. Not really, not at all. I can start issuing my own wealth receipts (digitally or not) as long as I can show people that I actually have the wealth that I'm issuing the receipts for. And yes, I'm subject to keeping a reserve, otherwise how would people trust me? Obviously, legislating digital money as legal tender is outside our power. Putting growth into the system without destroying faith is also very difficult. The only logical step is to make digital money repesent something. It must be convertable into something that people already have faith in. Otherwise I fear, that digital money may not fly. In the end, you have the right of it. Digital cash must be convertible to be accepted. -russ <nelson@crynwr.com> ftp.msen.com:pub/vendor/crynwr/crynwr.wav Crynwr Software | Crynwr Software sells packet driver support | ask4 PGP key 11 Grant St. | +1 315 268 1925 (9201 FAX) | Quakers do it in the light Potsdam, NY 13676 | LPF member - ask me about the harm software patents do.

You wrote: | Blanc Weber asks about the size of the money supply. Uni points out that | nobody paid him any Tacky Tokens for his list of state policies re ID's. | Somebody else also mentioned that nobody paid him any Tacky Tokens for | some .gif. | | It appears that the Magic Money/Tacky Token experiment is not succeeding | in producing an informal digital currency. People have offered services | in exchange for this money but have had no takers. It may be that there | is not much demand for their services, and the lack of offers simply re- | flects that. OTOH it could be a money-supply problem: there may not be | enough Tacky Tokens "in circulation" to allow them to be used as money. I think that this problem might well go back to the ease of use problem. I spend a lot of my time reading bad documentation. I really don't enjoy reading bad documentation. I want a money supply/remail service/mail privacy system that is as easy to use as those things I use every day. Or I want a strong incentive to use the system. For example, I do go through the hassle of using PGP to discuss things from time to time, but not often. If I could buy real things with tacky tokens, I might use them. (Maybe someone could sell copies of Applied Crypto, or the associated source disks, or even neat freebies (like Cray mouse pads) as a way of generating a demand for the tokens.) To make it worthwhile, there need to be enough tokens in circulation that someone saving up for something doesn't prevent other people from saving up tokens, but at the same time, there shouldn't be so many that they are valueless. Perhaps the next person selling t-shirts could offer a discount in exchange for tokens? Adam -- Adam Shostack adam@bwh.harvard.edu Politics. From the greek "poly," meaning many, and ticks, a small, annoying bloodsucker. Have you signed the anti-Clipper petition?

Sorry to sound stupid here, but I was off the list for a while and it looks like I missed the whole tackytokens thing... could somebody post a summary? Happy Hunting, -Chris. ______________________________________________________________________________ Christian Douglas Odhner | "The NSA can have my secret key when they pry cdodhner@indirect.com | it from my cold, dead, hands... But they shall pgp 2.3 public key by finger | NEVER have the password it's encrypted with!" cypherpunks WOw dCD Traskcom Team Stupid Key fingerprint = 58 62 A2 84 FD 4F 56 38 82 69 6F 08 E4 F1 79 11 ------------------------------------------------------------------------------