<https://financialcryptography.com/mt/archives/000894.html> Financial Cryptography Where the crypto rubber meets the Road of Finance... April 18, 2007 THE PLAN TO SAVE PAYPAL: SKYPE REVEALED... Dani spots:

From within the Skype client, there's a new choice among the forms of communication that a Skype user can initiate with a contact. In addition to being able to chat, make a VoIP call, send files and other contacting information, Skype users can now elect to send another Skype user money via PayPal. Skype and PayPal are both subsidiaries of eBay. So, now, we're beginning to see the bigger picture come together at eBay.

Basically, the mystery of why eBay thought Skype was valuable is now revealed. There was no apparent synergy between chat and auctions, and in fact Skype could be a danger to the centralised auctions model. The answer was elsewhere, in financial cryptography: Paypal, also owned by eBay, was hurting for fraud. To do real hard payments, we've known for ever that we need a real hard client. As fraud was already hard-baked into Paypal due to early, convenient but bad decisions, improving the Paypal fraud problem required drastic steps. The first drastic step is to move to a hard client. Skype is the best choice in the world today, as it has a lot of security built in through its crypto, it protects itself from attacks on the local client machine, and it has an already well-grown user base across major platforms. Putting money into Skype is something that any FCer could do; whereas fixing Paypal is a real challenge. So the plan is to migrate Paypal into Skype. (What took them so long?) This has other ramifications as it means that in time, Skype will become an identity platform. Paypal money is far too identity-driven at this stage to wind back its exposure to the classical regulatory money system, so Skype has to mold to suit. The good days of Skype privacy might be then over, as identity nexus will be demanded and stored in a US datawarehouse, available at a price. The good news is that now that the model is proven, others can come along and build it. The bad news is that those of us who did build it (Ricardo for example does chat/IM and hard payments in the same infrastructure) will never be able to catch up with the user base. Posted by iang at April 18, 2007 09:53 AM | TrackBack -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.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'