CDR: Re: Amex supports CARNIVORE enabled Anonymity System

[Ray Dillinger]

On Mon, 18 Sep 2000, R. A. Hettinga wrote:

>(1) Okay, I *might* :-) excuse Mondex from this rule, I suppose, but only
>because the smart-cards themselves are physically swappable, and thus at
>the physical, card-to-card level, anyway, are bearer instruments, but I
>would only say so under a regime in which those cards *contents*, the
>balances therein, are exchangeable for, or better, denominated, in some
>*other* internet bearer instrument like Chaumian cash, which may, I'm
>afraid, defeat the economics of Mondex altogether. Obviously, Doug Barnes
>has pointed this out more than once or twice here and elsewhere.

In order for a currency to stand, it really has to be backed up by 
a commodity.  "Note may be exchanged for gold at any branch", followed 
by a short list of branches, and the guarantee of a company or organization 
with physical assets in *EXCESS* of its issued notes, is really about 
the only thing that can convince people of the validity of a new 
currency.

Banks are able to issue more currency than they have hard assets - 
but they also have massive insurance infrastructures backing them up
and the weight of tradition behind them.  A Digital Currency issuer 
wouldn't have that -- thus, a digital currency issuer could only be 
trusted to the extent of its assets. 

I've watched digital currency issuers come and go - E-cash, digicash, 
beenz, flooz, first digital, etc... Well, not all of them are out of 
business, but none of them really seem to be taking off either. 
Damn few of them toed the line on privacy, and all of them were 
beholden to massive venture capital with all the riskiness and 
pressure on the near term that that implies. Nobody limited their 
issue to their level of assets or backed up their notes with anything 
that would have value if the company folded - and so far nobody has 
been trusted by the markets.

Pepsico could issue a viable digital currency -- which you could 
use to buy Pizza Hut pizzas or KFC for delivery, or trade to someone 
else. But can some startup, without massive financial muscles, 
balanced on the razor edge of venture capital?  No way. 

				Bear