Alex Strasheim <alex@omaha.com>: (?)

Yes, it is granted that Digicash is in beta, and not polished. But beta testing usually happens after all significant functionality is present. The Digicash beta isn't moving real money, and that's a significant functional deficit.

So far I haven't seen much discussion on the monetary effect of e-cash. The best (and only) analysis I've seen was in last week's Economist (no, I don't work there, I'm only a fan) of which John Young (jya@pipeline.com) was kind enough to offer e-mail copies. I excerpt: The Economist November 26, 1994, pp. 21-23 [NO INTEREST ON E-CASH:] The more disputed aspects of electronic money's future are those that relate mainly to money's other role, as a store of value. ... If, to command confidence, electronic money had to be convertible into legal tender on demand, then for every unit of electronic money there would have to be a unit of cash reserved in the real economy ^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ...which is pretty much how the fledgling CyberCash, for example, plans to operate, requiring banks working with it to hold money converted into e-cash in an escrow account. It follows that, in an efficient system, if each e-cash unit represents an immobilised unit of real cash, then positive balances of e-cash will earn no interest, ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ because the interest they might earn would be offset by the interest foregone on the real cash that is backing them. It also follows that, in such a system, there would be no purely virtual lending: for this would increase the stock of digital money without a corresponding increase in the stock of real money, and so undermine convertibility. The virtual economy in this phase of its development would be free from usury. [BYPASSING REGULATED CURRENCY MARKETS:] If you pay yen for electronic dollars in Tokyo and buy something from a merchant based in Paris who cashes them for francs, a currency conversion has taken place. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ That, however, is an activity towards which most governments feel highly defensive; and if e-cash started to bypass regulated foreign-exchange markets by developing its own grey market for settlement, then governments might be provoked into trying to clamp down on it. Probably, therefore, e-cash will, at least in its early forms, be denominated in single conventional currencies and exchanged at conventional market rates. [Which wouldn't be much fun. For example, in India it's not easy for _me_ to convert rupees into dollars; 75% of dollars I earn must be converted into rupees. Assuming DigiCash takes off; I sell copies of Electric Dreams and become an e-cash millionaire. I can then buy stuff in dollars, which according to regulations I am not supposed to have. Similar problems arise in even less tightly regulated countries. [ON A TOTALLY DIGITAL CURRENCY WITHOUT PAPER BACKING:] It is possible to imagine the development of e-cash reaching this point, and no further. But it is also possible to imagine that the temptation to move away from a fully-backed digital money would prove irresistible. Instinct argues that people will want virtual credit, and that it must therefore find a price. ...there will come a ... stage towards a single overarching monetary system in which convertibility into Legal tender ceases to be a condition for electronic money; and electronic money will thereby become indistinguishable from -- because it will be the same as -- other, more traditional sorts of money. Money will be money whether it is constituted as a string of digits or a piece of paper or an entry in a ledger. Some electronic money might be backed by governments, some by private issuers.... Ideally, the ultimate e-cash will be a currency without a country (or a currency of all countries), infinitely exchangeable without the expense and inconvenience of conversion between local denominations. It may constitute itself as a wholly new currency with its own denomination -- the "cyber-dollar", perhaps..... Either way, it is hard to imagine that the existence of an international, easy-to-use, cheap-to-process, hard-to-tax electronic money will not then force freer convertibility on traditional currencies. "We know everything about you that we need to know" - Coleta Brueck, IRS ----------------------------------------------------------------------------- Rishab Aiyer Ghosh "In between the breaths is rishab@dxm.ernet.in the space where we live" rishab@arbornet.org - Lawrence Durrell Voice/Fax/Data +91 11 6853410 Voicemail +91 11 3760335 H 34C Saket, New Delhi 110017, INDIA