digital cash

Hal hfinney at
Wed Mar 16 13:24:19 PST 1994

From: Jim McCoy <mccoy at>
> [...]
> There will be nothing more liquid than information in an information
> society.  Nothing.

I'm not sure about this.  Liquidity refers to the ease of conversion to
cash.  Some kinds of information may be easily convertible, others may
not.  Even with digital cash the relevant definition of liquidity might
be acceptability or ease of conversion to other currencies.  Digital cash
is easy to copy and so there will always be a risk in accepting it unless
the bank is accessible or it is highly reputable and is known to cover
bad (duplicate) cash.  Communications problems, whether technical or
political, may make such access difficult.  And banks, being unable to
collect assets by force to cover their debts, may be vulnerable to some
kinds of failures that governments are not.

> Seriously, the secret is to remember that the net transcends geopolitical
> boundaries.  All you need is _one_ bank that can/will convert cash to
> digital money and then _everyone in the world who can get an internet
> connection can use it_.

Well, there are some more requirements.  The bank has to be in a setup
where it cannot easily be shut down, or more specifically it does not
experience any reasonable probability of being shut down in the near
future.  The net links have to be reliable, as I mentioned above.

The bank presumably has to convert digital money back to cash as well as
converting in the other direction.  The question is, how do you get your
cash to/from the bank?  Via an anonymous, private, electronic transaction?
If you can do that, you don't need digital money; your cash is already
electronic and private.  But if you have to send your cash the old-
fashioned way then you are still vulnerable to the same government pressures
you have today.

> That is the real danger digital cash poses to
> government authority over the monetary system.  Once I can get my dollars
> or dinars, or donuts exchanged into digital cash it is possible for me to
> do things to it never before dreamed of.  I can take my locally exchanged
> digital-donuts, put them on the net, and send them over to a bank in some
> small island nation with lax banking laws for instant conversion at the
> moments rate to some other international currency and transferal through
> several anonymous accounts, and then zip them over to a network gold server
> that will create a certified bullion deposit for me in a real bank.  

This is the point in these kinds of discussions that I always lose track
of things.  We are dazzled by the picture of monetary flows flashing all
around the world.  What I am always unable to pin down is, what exactly
prevents this kind of thing from being done today?

If you want to invest in gold, you can go down to the coin store and buy
some, right?  Or you can put your money into a gold-investing mutual fund
and use it as a checking account.  If you want yen, or marks, you can invest
in those.

If the point is to do so secretly, why is it easier to mail your paycheck
to the digicash bank in the Bahamas than to mail it to an existing bank

> I can untracably convert my paycheck into a gold deposit in a foreign
> nation while sitting in my living room wearing nothing but my socks. I can
> conduct intricate financial transactions that are completely outside the
> realm of my governement to regulate, imagine what would happen to the
> governement if _everyone_ could hide and launder assets as easy as criminal
> syndicates.  If this does not cause some federal banker an ulcer or two
> then they have no idea what the future will bring them, all the better for
> us... 
> jim

Perhaps my problem is that my financial affairs are too limited to really
benefit from intricate financial transactions.  Investing in a non-dollar-
denominated mutual fund would be a major adventure for me :-).

If avoiding taxes is the major goal, my problem is that by far the bulk of
my taxes are withheld from my paycheck.  I know, Sandy or Duncan said, "What?
You still have a paycheck?" but let's face it, most people do.

It seems to me that the weak point in these bypass-the-government digicash
schemes is the conversion between paper cash and digital cash.  That looks
like the choke point where the government can still keep control.


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