Making Money in Digital Money

[James A. Donald]

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On 25 Apr 2003 at 22:56, Tim May wrote:
> I think it may just not be possible for some bright
> programmer to develop a solid digital money (henceforth, DM)
> system and deploy it while still making money, avoiding some
> kind of prosecution or lawsuit (civil lawsuits for many
> different reasons).
>
> [...]
>
> * Real DM will likely be introduced in a guerilla fashion,
> much as Pr0duct Cypher anonymously released Magic Money a
> decade ago.

The mint cannot be anonymous.   Needs reputation, and sizable
wealth. Mint probably employs programmer, or is programmer.

If the code is public domain, then there will be multiple
mints, with some more willing to disregard hostile governments
than others.

I suggest the following introduction:  Introduce for
micropayment services (identity is too expensive for small
payments, which is why credit cards fail below five dollars)
Useful for antispam email charge, remailer user fees, file
sharing networks (solving the free rider problem), pornography
by the minute, and tips for videocam performers.

Need some legal and profitable application to get the software
fully developed, debugged, and people used to it.  When people
are using it for dimes, they will want to start using it for
large sums, and then things get interesting.  Dubai is
currently the banker for people evading third world currency
exchange restrictions.  Once it is working in the micropayment
ghetto, where credit cards are uncompetitive, there will be
demand to break out of that ghetto, and where there is demand,
there will be supply.

Of course there have been many attempts to fill the
micropayment niche, all of them miserable failures.  I think
this is due to the inherantly high costs of identity and
revocability.  If your payments are revocable, then you need
identity, which costs, and you get involved in arbitration,
which costs, and you cannot possibly afford to do that on a
micropayment service.

> * In my view, not necessarily the view of everyone in the DM 
> community, the Big Win for solid DM is in illegal markets,
> e.g., buying and selling child porn, bestiality, snuff
> images, etc.

Child porn and bestiality are, like MP3s, a micropayment
market.  My hard drive keeps getting usenet child porn on it
even though I try to prevent it.  I download what I think is a
Hellsing cartoon, and guess what?   Among the many unviewed
videos and images on my hard drive, there is probably enough
child porn to put me away for fifty consecutive life sentences.
My email spam is full of bestiality, even though I have
numerous filtering rules designed to delete it.  Surprisingly,
I do not think I have seen any snuff spam -- which does not
mean I am not getting it, it may be filtered by my anti porn
spam rules.

Just target file sharing, a legal market, according to the most
recent judicial ruling, and some significant proportion of the
files shared are going to be child porn etc.  That is the users
issue, not the banks.

> * Anyone releasing such a strong DM system should be
> targeting the high end applications, where the needs for
> untraceability are very high and the willingess to pay the
> costs (in training, in network resources) is also high.

I disagree.  Micropayments are legal.  Useful if the same
software has legal and illegal uses.   Strong anonymity and
consequent irrevocability has accepted legal, moral, and
economic purpose in the micropayment field.

> * In my view, most who have looked to enter the DM market
> (such as Digicash, Mark Twain Bank, etc.) have shied-away
> from precisely the areas where untraceability meets a real
> market need.

Mark Twain bank crippled their cash so they could stop
pornographers from using it.

> A digital money system where the DM may be "cancelled" will
> not fly. For various reasons.  (Imagine your bank telling you
> that if they think you are violating their use policies they
> may simply seize your money and you'll be out of luck.)

Revocability.  The various digital gold currencies are
compelled to have an AUP and seize the money of people using
their system when this AUP is violated, even though they very
much do not want to, because of the very high costs involved.

> * It may be that pioneers in this area just won't be able to
> make any money. This is not new. Many discoveries did not
> enrich the discoverer. Sometimes they were recognized in
> their lifetimes, sometimes not.

No money then crap software, crap software then lack of
critical mass of users.  Has to make money or no one will write
software the ordinary end user will accept. 

    --digsig
         James A. Donald
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