In Search of Genuine DigiCash

[Robert Hettinga]

At 10:17 AM 8/22/94 -0400, Jason W Solinsky wrote:

>A buck is NOT a buck. It keeps on going down in value. We should use the
>introduction of digicash to finally create a monetary instrument that never
>experiences positive inflation.

It's important not to pile on too many features, desires, agendas onto a
relatively simple financial instrument.  The point of digital cash is to
provide liquidity for internet commerce as cheaply as possible. Anonymity
is a happy benefit. Engineering it for anyother purpose reduces its
efficiency.

>Incorporate in a foreign land, invest the
>money safely, issue and buy back shares according to a fixed formula that
>depends only on the valuation of the company, publish your returns and
>register the stock as securities in as many lands as possible. You now
>have a perfectly legal basis for digicash. The shares will float in the
>range of values specified by the stock issuance formula. They will
>gradually go up relative to inflation and will be easily traded in multiple
>currencies. And it will be really difficult for most governments to attack
>the "payable to bearer" nature of the currency because it would encroach on
>the rights of all American corporations. No?

Or, you can take money in over the window and turn it into digital cash
denominated on a dollar basis, priced at that point with discounts or
primia as necessary. Occam's razor.

>> In theory, though it probably won't happen, an underwriter could issue a
>> greater amount of digital cash than regular cash paid for it ...
[snip...]
>
>This will once again make the value of the digicash dependent on when it was
>issued. An alternative formulation of this same scheme would have the value
>od digi-cash be invariant with the data of issue, but have periodic
>redemption dates on which the value of the digi-cash would jump. I find
>neither to be desireable.

That's true, but the difference in price reflects the estimated future
value of that money in a suspension account plus the operating costs of the
underwriter, not by some complex pricing methodology which makes the cash
more difficult to use.

>Market liquidity is increased by convenience to the holder of the securities,
>not the issuer of the securities.

I cash out my "digiDollar" today, it's a dollar.  I cash out my digiDollar
tomorrow, it's a dollar. I cash out my digiDollar the next day, it's a
dollar.  Looks pretty simple to use to me. (a digiDollar is a dollar is a
dollar is a dollar) :-).

[Oops. I went and concocted some more buzzy language. Occupational hazard.
Don't worry, I'll try not to use it anymore, and maybe it'll die
gracefully.]

Cheers,
Bob


-----------------
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