FYI: Digicash bankruptcy
--- begin forwarded text X-Sender: "Nahum.array" <nahum.array@csci.ca> Date: Thu, 05 Nov 1998 14:32:51 -0500 To: ibc-forum@ARRAYdev.com From: Nahum Goldmann <Nahum.Goldmann@ARRAYdev.com> Subject: FYI: Digicash bankruptcy Mime-Version: 1.0 I believe this kind of information is invaluable. Personally, I do not subscribe to Agre's doom and gloom. For years I'm saying that there is a very little "i" and a very large "C" in iCommerce. Chaum might be many bright things but an entrepreneur he definitely ain't. But than it's quite difficult in this new paradigm for all of us. Of course, Bob Hettinga could have saved quite a lot of energy and avoid much disappointment if he did pay for that my trip to Antigua. I always believe that unpaid advice is not listened to, and here is a good prove of this concept. Have fun. I'm sure it will come. Eventually. Nahum Goldmann ARRAY Development http://www.ARRAYdev.com ======================================================= Date: Thu, 5 Nov 1998 10:36:52 -0800 (PST) From: Phil Agre <pagre@alpha.oac.ucla.edu> To: "Red Rock Eater News Service" <rre@lists.gseis.ucla.edu> Subject: [RRE]Digicash bankruptcy Sender: <rre@lists.gseis.ucla.edu> List-Software: LetterRip Pro 3.0.2 by Fog City Software, Inc. List-Subscribe: <mailto:rre-on@lists.gseis.ucla.edu> List-Unsubscribe: <mailto:rre-off@lists.gseis.ucla.edu> [With the bankruptcy of Digicash, it is time to assemble the definitive list of underperforming Internet technologies. The received wisdom is that the Internet lies at the vortex of a historically unprecedented era of intensive and disruptive technological change. A sober reading of the evidence, however, supports something much closer to the opposite thesis, viz, the Internet is a modest and useful new tool that, despite itself, has given rise to an astonishingly wasteful mania whereby perfectly good capital is plowed into one ill-conceived technology after another. Consider: interactive television, VRML, Active X, network computers, "push" technology, agents, "social" interfaces, resource visualization, cryptographic payment mechanisms (aka "electronic commerce"), and others that I hope you'll remind me about. Each of these has been the object of a frenzy that has compelled all manner of smart people, and a whole lot of dumb ones such as myself, to say things like, "boy oh boy, the world is going to be completely different a year from now". This has been going on continuously since the PR hype that accompanied the run-up to the (failed) Communications Act of 1994 and then the (passed but then catastrophically failed) Communications Act of 1996. It has been fanned by Wired magazine, whose capitulation to Conde Nast has ended an era that should never have begun, and now it is marked by the bankruptcy of David Chaum's Digicash. All right-thinking people were in favor of Digicash, whose technologies were as intellectually elegant as they were socially responsible. The problem is that the Digicash people were living in the world of Alice and Bob -- a place where a mathematical proof can change the world in perfect defiance of the dynamics (if you can call them that) of large, highly integrated institutions. Like many Internet-related startups, Digicash existed only to the precise extent that the press was writing about it, and now it doesn't exist at all. So right now would be an excellent time for us to renounce the false idea that we are living in a time of unprecedented technical change. Yes, the Web has been going through a period of exponential growth. But no, that growth is not at all unprecedented, and in fact it is running behind the penetration rates that earlier technologies such as the radio and gas cooking achieved once they started being adopted on a mass scale. (See, for example, Ronald C. Tobey's scholarly and absorbing "Technology As Freedom: The New Deal and the Electrical Modernization of the American Home", Univ. of California Press, 1996.) Nor has the underlying Internet changed at all quickly. The Internet protocols that we use today are unchanged in their essentials from about 1982. In fact, once the real history of this era is written, I think that 1982 will shape up as the true annus mirabilis, and 1994 will simply be seen as the era when the innovations of ten to fifteen years earlier finally caught public attention and reached the price point that was needed to achieve the network externalities required for its large- scale adoption. If we get out the rake and drag away all of the detritus of the underperforming technologies that I listed above, and compare our times on an apples-for-apples basis with other periods of technological innovation -- including the Depression era, for heaven's sake -- then I think we will have a much healthier perspective going forward. As it is, people the world over have been propagandized into a state of panic, one that encourages them to abandon all of their experience and common sense and buy lots of computer equipment so that they will not be scorned by their children and left behind by the apocalypse that is supposedly going to arrive any day now. No such apocalypse is going to occur, and all of the TV preachers who have been announcing this apocalypse should apologize and give the people their money back. Yes, the world is going to change. Yes, information technology will participate, and is already participating, in a significant overhaul of the workings of most major social institutions. But no, those changes are not going to happen overnight. The sad line-up of underperforming technologies should be understood not as serious attempts at innovation but as a kind of ritual, an expensive and counterproductive substitute for the chants and dances that healthy societies perform when they are placed under stress. Maybe once we get some healthy rituals for contending with technological change ourselves, we will be able to snap out of our trance, cast off the ridiculous hopes and fears of an artificially induced millennium, and take up the serious work of discussing, organizing, and contesting the major choices about our institutions that lie ahead.] =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= This message was forwarded through the Red Rock Eater News Service (RRE). Send any replies to the original author, listed in the From: field below. You are welcome to send the message along to others but please do not use the "redirect" command. For information on RRE, including instructions for (un)subscribing, see http://dlis.gseis.ucla.edu/people/pagre/rre.html or send a message to requests@lists.gseis.ucla.edu with Subject: info rre =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= Date: Wed, 4 Nov 1998 18:02:08 -0500 From: Robert Hettinga <rah@shipwright.com> To: Digital Bearer Settlement List <dbs@philodox.com>, dcsb@ai.mit.edu, e$@vmeng.com, cryptography@c2.net, cypherpunks@cyberpass.net Subject: Re: DigiCash Inc. to File Reorganization, Seeks Partners to Drive eCash Forward -----BEGIN PGP SIGNED MESSAGE----- Okay. Contrary to my own previous -- and painfully recent -- opinions on the matter, Digicash, Inc., is, more or less, in play again, or it will be if there is enough money chasing it. Whatever "enough" means. Putting on my Gordon Gekko hat, here, I'm interested in finding out a few things. Yes, I have seen the greater fool theory of the blind signature patent operate more than a few times, but I am, nonetheless, driven to think about this, and I might as well be public in my musing, at least for the time being. For expenses of any new company, it should be pretty clear by now what I would do with the DigiCash technology portfolio. I would put a real good intellectual property lawyer on the payroll, keep the cryptographers who would still consent to stick around, keep or improve whatever software test people they have left, and do nothing but sell licenses and implementation certifications, using the the underwiting model at <http://www.philodox.com/modelpaper.html> as a roadmap. For this imaginary company's revenue, aside from direct fees for validating a developer's, and possibly an underwriter's, implementation of the protocol, the trustee would be the only point of patent royalty collection and payment from the underwriters and developers to the new patent holder. As far as the current installed base is concerned, I would probably spin off a company to support those customers, and give it a non-exclusive license as if it were any other developer. This assumes, of course, that DigiCash BV/Inc. didn't issue exclusive-by-country licenses. While it appears on the surface that they have done exactly this, I have been met with what seems like incredulity from various DigiCash folks when I talk about it, so, for the time being, I'll take them at their word when they tell me it isn't so. Actually, when I think about it, it may be immaterial, as there are lots of countries on the internet to park underwriters and trustees in, and they can denominate their bearer cash instruments in any currency they want. One way or another, the software side of DigiCash would be gone. We figure out what the net present value is of the current licenses, and hope that a company can be formed around that cashflow and spun off into a separate software development company. If we're lucky, we make money on the spinoff and keep the patent. If we're not lucky, DigiCash will probably have to get rid of it's current obligations before *anyone* clueful would step in to pick up the patents, and just the patents, alone. Obviously, what has been spent so far building DigiCash, BV or Inc., is immaterial to any discussion of the future. Just like what happened to Chaum, et. al., when Negroponte and companies um, executed, the purchase of last version of DigiCash, we have to completely forget the all the money which has been spent on Digicash BV, now Digicash Inc., so far, and ignore the howls of the current investors, as painful as that may be to listen to. :-). They knew the job was dangerous when they took it, anyway... Okay, that's a nice story. How about some actual data? I expect the best way to get a handle of royalties is to start soliciting actual projected royalty estimates from potential developers and underwriters, but, frankly, I think that most developers and underwriters, like the rest of us, have no real idea how much money they're going to make. Nonetheless, if anyone's interested in telling me, offline, what they think they would would be fair royalty payments, either as an underwriter or as a developer, I'd like to hear their estimates. My PGP key is attached. My own rule of thumb, for cash anyway, is that an underwriter can probably charge no more than a bank charges to one of their non-customer ATM transactions. That's probably no more than $3.00 a withdrawl. They also get to keep the interest on the reserve account, if any, of course. Frankly, if the royalties are low enough, that may be more than enough revenue to bootstrap a business with, and I would personally lobby for as low a royalty structure as possible. That, of course, is driven entirely by the cost/revenue picture, but it might be that a majority of the short-term operations can be bootstrapped out of validation fees. That leaves all the other potential markets for blind-signature macroscale digital bearer settlement, everything from long-duration bandwidth purchases for IP or voice dialtone on up to actual securities transactions themselves. Most of these potential applications will occur after the patents expire, but whoever owns these patents should allow not only licenses to all comers, but, more to the point, should allow all *licensees* to worry about the legal ramafications of the patents' use. If a particular licensee can find a legal jurisdiction to offer utterly anonymous digital bearer instruments backed by totally anonymous reserves, then, as long as the licensee pays up, god bless 'em. The patents should be licensed within the law, certainly, but, other than that, their use should be considered value neutral, like all technology. As in all bearer markets before them, the digital bearer trustee will be the point of maximum legal compliance, and, as such, will be the functional "policeman" of the system. I leave the interesting solution of bearer-backed trustees for some other day, probably after the patents have long expired. Okay. There's lots more to talk about, of course, but I'm kind of tapped out on this for the time being. If you're an intellectual property lawyer, and you fancy yourself running the DigiCash patent portfolio, contact me directly. I'm not sure exactly what I can do, if anything, but I'd be very interested to hear your thoughts on this, as the potential core person of this as yet imaginary enterprize, up to, and including what it would cost for you to sign on for this much fun as at least in-house counsel, if not the actual CEO. :-). In addition, if someone has a reasonable non-proprietary(!) estimate of the projected revenues on all those outstanding ecash contracts, that would be nice to know as well. The terms of those contracts, are, of course, probably unknowable at the moment, at least until someone has enough known scratch to belly up to the table, sign an NDA and take a peek. Of course, then they couldn't tell us anything anyway... Isn't this fun? Cheers, Bob Hettinga [Public keys ommitted] ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.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' --------------160D55EEEBD38D036F141A24-- --- end forwarded text ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.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'
Phil is right in much of what he says but in a couple of cases he is wrong. Regarding the 'vortex of buzz technologies', VRML, network computers and push are certainly not hot properties at the moment, neither is interactive TV - but the Web was designed as the antithesis of Interactive TV. The root failure of Interactive TV was the assumption that the world wanted to spend its time passively consuming the dross pumped out through a 1000 channel 120" TV which would dominate the home. I would also like to add Java onto the pile. Java today is simply what C++ should have been. It does not revolutionize the programming industry, it simply provides what some people think is an object oriented programming environment and removes some of the worst legacy clutter of C. Cryptographic payment systems are here - in the form of credit card transactions over SSL. The main problem with SET and its competitors is that SSL works a little too well. That is not to say that there is no future for SET. SSL and credit cards are unlikely to make the leap from the consumer market to the business to business market. SET provides an ideal platform to integrate the use of the credit card infrastructure for business payments. The other area where I would disagree is over protocols. HTTP is quite radically different to FTP in that it is a computer client to computer server protocol. The metaphor of FTP is rumaging through a filing cabinet. The HTTP and Web mechanism employs a locator. Admittedly there was nothing to stop a text mode Web being created in 1982 but nobody did so. What is true is that the time taken for Internet technologies to move to market is very slow. Much of the HTTP technology that just reached the market was proposed in '92 and '93. Finaly I have difficulty regarding Digicash as being all that socially responsible. Chaum's problems had a lot to do with the business terms he insisted on. What he had was a technology which allowed an improvement to a payment system. He imagined he had a monopoly on the only feasible solution. He was very baddly mistaken. The monopoly rents he demanded were more than the market was willing to pay for a working and deployed system - let alone for a patent license. Phill
Phillip Hallam-Baker Sent: Thursday, November 05, 1998 6:08 PM Subject: RE: Digicash bankruptcy
...
Finaly I have difficulty regarding Digicash as being all that socially responsible. Chaum's problems had a lot to do with the business terms he insisted on. What he had was a technology which allowed an improvement to a payment system. He imagined he had a monopoly on the only feasible solution. He was very baddly mistaken. The monopoly rents he demanded were more than the market was willing to pay for a working and deployed system - let alone for a patent license.
Where does the "monopoly rents" comment come from? In other words, on what basis are you making that statement? Scott
Finaly I have difficulty regarding Digicash as being all that socially responsible. Chaum's problems had a lot to do with the business terms he insisted on. What he had was a technology which allowed an improvement to a payment system. He imagined he had a monopoly on the only feasible solution. He was very baddly mistaken. The monopoly rents he demanded were more than the market was willing to pay for a working and deployed system - let alone for a patent license.
Where does the "monopoly rents" comment come from?
In other words, on what basis are you making that statement?
Chaum's reported demands for patent licensing fees were consistently above 10-20% of the service revenue plus a significant up front fee. Those levels are more usually associate with a monopolistic patent, hence 'monopoly rent'. The fact that Chaum didn't have the monopoly he appeared to imagine is probably why nobody was queuing up to pay his demands. Phill
Phill writes:
The fact that Chaum didn't have the monopoly he appeared to imagine is probably why nobody was queuing up to pay his demands.
Name some other deployable payer anonymous electronic payment systems that are in competetion with DigiCash. andrew
Andrew Loewenstern <Andrew.Loewenstern@wdr.com> writes:
Phill writes:
The fact that Chaum didn't have the monopoly he appeared to imagine is probably why nobody was queuing up to pay his demands.
Name some other deployable payer anonymous electronic payment systems that are in competetion with DigiCash.
Stefan Brands patents? Not sure if digicash would claim these infringe the blind sig patents. Ian Goldberg's HINDE/money changer with or without blinding -- in general notion that you can obtain anonymity by anonymous exchange from a trusted money changer, or with blinding from an untrusted money changer. As with remailers you can increase the strength of anonymity by chaining through multiple money changers. Or perhaps Doug Barne's proposal for a identity agnositic bank and blinding clients distributed from jurisdictions where doesn't have patents? (The client is the software which does the blinding). Pseudonymous approach to anonymity -- ecash accounts without an TrueName indentity bound to them. Others? (Ryan you suggested 5 but didn't list them explicitly?) Adam
participants (5)
-
Adam Back
-
Andrew Loewenstern
-
Phillip Hallam-Baker
-
Robert Hettinga
-
Scott Loftesness