Mark W. Eichin wrote: | > But it sounds like "vitual money." I would like to see a | > description of the model for this. Sounds like a form of barter-script. | One reason they haven't caught on is that there *isn't* a model. There | is software (cypherpunks write code! :-) to implement banks and | exchange coins (the tacky tokens themselves) but noone (as far as I've | seen) has come up with an "economic model" within which they could use | them. Money has value because we agree it has value. As long as noone is willing to give me a meal, a nights lodging, or 30 minutes CPU time for some number of tacky tokens, they will be just that; tacky. This is not to flame the dude who wrote the code. Its a good things that its been written, but what he can't write is a framework for using the money in. (eg) If I knew that Derek Atkins was willing to write encryption code for 10 tokens an hour, I might start trying to accumulate tokens to pay Derek to do some useful work. But he would only be willing to accept those tokens if he knew he could get something useful for them. If he is the only one providing things for tokens, hes going to accumulate lots of tokens, and not be able to spend them, since theres nothing interesting to spend his tokens on. So, if we want to make tokens worth something, we need to start transforming them into real goods &/or services. This will reward those early adopters who grabed tokens when they were first published. To do this, we need to know how many tokens exist, ie, what the money supply is. If we don't know, the value of tokens would be subject to a painful misestimation. We would also need some sort of guarantee the bank isn't going to mint more on a whim. If tokens aren't going for a lot of dollars, this could be a simple personal guarantee from the bank. 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?

On Mon, 2 May 1994, Eli Brandt wrote:

Poll: assuming you had a use for FedNote-backed 100%-reserve digicash, what service fee would you be willing to pay, and how much money would you be willing to leave in the hands of some random individual?

I would be willing to pay 5% upon receipt of the digicash, and possibly some smaller fee upon redemption. A random individual? None at all. However somebody with a good reputation I might trust initialy with amounts less than $500. 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 ------------------------------------------------------------------------------

I would be willing to pay 5% upon receipt of the digicash, and possibly some smaller fee upon redemption. A random individual? None at all.

And a business? They'd laugh. For any system of digital cash to take off, it must be economical to use. Since credit card rates cost business 2 1/2% - 4%, digital cash must be more efficient in real terms in order to succeed. Eric

Eric Hughes wrote:

...

[...] but noone (as far as I've seen) has come up with an "economic model" within which they could use them.

Denominate digital money in dollars in a demand deposit account in a US bank.

Why reinvent the wheel, or, in this case, the unit of value?

Exactly, digital money must be fungible, with some other unit of value. But limiting it to USD, is not the way to go. Individuals should be able to pick and choose which currency they want their digital money to represent. U.S. banks are problematic. They tend to be unstable. I propose the following banks which currently have a AA rating or better: Alegemene Bank Netherland Credit Suisse Swiss Bank Corp Barclays Bank Union Bank of Switzerland J.P. Morgan The legal structure is also quite elementary and so is the software. (Although I don't profess to be a software expert.) I'll put the software issue aside for a moment, and concentrate on the structural part of the system. The appropriate structure is an "investment club" which in point of fact is a private mutual fund. The club has a trustee, I'd suggest an account run by either by a trust company or by a lawyer. The lawyer receives the funds in her trust account, and signs and acknowledges each receipt. She then invests the funds into deposits at approved institutions, or in Government guaranteed securities. In essence, it's no different than a money market fund. The fund itself is purely an international partnership, domiciled as a Liechtensteinian Anstalt. An anstalt has unique characteristics in that it is both a private foundation and a corporation, and receives unique legal treatment. I'll leave the discussion here, since the complexities are quite voluminous and move on to the software. The mm package, provides a jumping point. Of course it's the server module which should be used by the client. Each client uses the server to "create" their money. The money is then sent to the trustee, who upon receipt of funds in her trust account signs each unit of money. The coins can then be exchanged, as in the mm package. Now, if someone wants to redeem the coins, back into currency, they send the coins to the trustee with a request that funds be paid according to instructions with the signed coins. The trustee can then send appropriate amount of funds wherever the instructions call for. Faith in the system builds as coins can either be accepted by an individual or can be converted by the individual into what actually backs up the system, cash. All the trusttee has to do is differentiate between a message which is transferring coins, and a message which is redeeming coins. Easy as pie. A message which is transferring coins simply signs the new coins and removes the old coins from the list. A message redeeming coins, removes the coins from the list, and sends funds to the appropriate individual.

"Mark W. Eichin" says:

(In spite of perry's objections, the economic discussions *are* relevant here... many readers seem to not understand the complexities of money systems, without which *using* e-cash won't be practical, so we need some major cross-breeding here.)

In the context of digicash, economic discussions are relevant. However, I think that general questions on subjects like "is the Fed a conspiracy by the Bavarian Illuminati" and the like are probably not. The differences between free banking and central banking are likewise difficult to explain -- it would overwhelm this list to discuss them. We could discuss nothing else all day for weeks. Anyway, the real reason none of the test e-cash systems here have taken off is multifold. 1) The market is illiquid. 2) The currency is difficult to use -- more difficult to use than alternatives. 3) There is nothing of value to trade for. (I wouldn't take many of the offered items for free, so why would I spend time trying to figure out the digicash system to get them.) Basically, you need a commodity to be widely recognised as having value and widely tradeable for goods and services, or easily converted into something you can trade, before it can be used as money. Something people have to remember is that digital cash is not money -- its more like "digital anonymous bank drafts". Just as a check can be USED for money but is in fact a way of TRANSFERING money, so digicash isn't in and of itself the source of value -- its a bookkeeping system for something that is. That something could be dollars, gold, cocaine futures contracts on the Bogota Commodity Exchange, girl scout cookies, or anything else people decide is a good medium of exchange. The choice of medium largely depends on what people want to trade with. Right now, for whatever reason, thats generally dollars. The savvy digital banker, therefore, will likely set up shop to allow people to move dollars around. Even this will not guarantee success, unless the system becomes quite widely deployed. Of course, the incentives to do that come from the payoffs you would get for doing so in the free market. That also likely means that digital cash systems will involve fees -- either on the purchase of digital cash the way Travellers Checks are handled, or in some other similar manner. Perry