digital cash

Jim McCoy mccoy at
Wed Mar 16 15:20:47 PST 1994

Hal <hfinney at> writes:
> 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.  [...]  Even with digital cash the relevant definition of liquidity
> might be acceptability or ease of conversion to other currencies. [...]
> Communications problems, whether technical or political, may make such
> access difficult. [...]

This is true.  Reliable communications is important here and I was kinda of
waving my hand over them and assuming they will be there, but with the
current state of growth of the internet it seems to me that communications
will become more reliable and more widespread every day.

> 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.

I can send my money to the bank by checking a little box on a form in the
beneifts division of my employer instructing them to deposit my paycheck in
a specified account in the internet credit union I belong to.  Yes, the
governemtn can still see it going out and can try to do nasty things to it
at the "digital border", but once a path past this boundary is found then
whatever lies beyond this point it outside of thier knowledge or control.  

> 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.

Yes.  Digital cash does give you anythign outright that you were not able
to do before, but it lets you do it securely, anonymously, and untracably
(depending on the system design) from the comfort of your own phone using
equipment and software that a huge number of people have daily access to.  

I can walk down the street and purchase a chunk of gold, but I can't just
get on a plane and head off to switzerland or the bahamas at a moments
notice.  With telecommunication these options are available to anyone with
a phone and a computer and the transaction will be accomplished in seconds
instead of hours/days.

> 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.

Yes and no.  They can try, but it is getting harder for them to do so every
day.  A bank on the internet could also let me transfer some of my deposits
into a checking account that I can access from one of the millions of ATMs
around the globe that are part of the Cirrus or Pulse, or whatever system.
What if your bank card let you deposit money from any ATM location into an
account that instantly forwarded it off to a digital cash repository? Or
let you withdraw digicash funds into a debit Visa card or other such
instrument.  There is so little cash being used by most people now that it
isn't even funny any more; but the options available for converting funds
has prolifereated to the point where it is hard to throw a rock in the US
and not bounce it off something that will give you cash from your ATM card
or credit/debit card.


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