Making Money in Digital Money

[Anonymous]

Robert Hettinga writes:

> So, how do you do this? Easy. For software, the first copy is
> auctioned for cash. Then the second copy, wherever it is on the
> network, is auctioned for cash, and so on, until nobody's buying any
> more copies, across the whole network. This is the oldest model of
> trade there ever was. It's how red ochre from Maine ended up in
> Neolithic tombs in Ireland. It's how Homo Habilis traded raw rocks
> for finished hand axes across hundreds of miles of African savanna.
> The Agorics guys called it the "digital silk road" for obvious
> reasons.

I hate to get into this, because I tried to educate you on this last
year and you were totally impervious.  As usual you started firing
invective in all directions in an attempt at misdirection.

Let me explain it so simply you can't miss it.  This system does not
work, because by the time the content is in the hands of just a few
people, they will be bidding against each other to sell it on the net.
Such a state of competition will quickly drive the prices down to the
cost of reproduction, which is effectively zero.  Therefore you can't
sell more than a dozen-odd copies of the software at a non-zero price.

If most of the people buying this software are doing so with the
expectation of recouping their costs by re-selling, then no one will
buy after the first few, since they will not be able to make any money
selling at zero.  But this means that even those first few buyers won't
be able to sell at non-zero, since these second-wave potential buyers
were their customers.

Try to follow the logic here, Bob.  The inability to make a profit after
there are a dozen sellers *implies*, logically, that even the very first
seller can't make a profit, because his potential buyers will see that
they have no profit opportunities.

Therefore the only motivation anyone would have here is to buy the
software for what it is worth to them, and not to redistribute it.  So we
are talking about a private-contracting, custom-built software model.
But it's not a software sales model.

> For most digital goods, you just need to digitally sign the copies,
> and you're done. Look Ma, no lawyers. Okay, no legislators and
> regulators. No intellectual property attorneys. No "is a person", or
> "know your customer", or other mystifications of identity. Funny
> thing about this is, you'll notice the people who make the most new
> stuff the most often get the most money in a single product's value
> chain. Which is, oddly enough, exactly what we do now -- ask a movie
> star -- only we'll be doing it cheaper.

This is even more stupid.  So someone signs the software.  What difference
does that make?  It doesn't stop redistribution, it doesn't stop piracy,
it doesn't keep it from being used in any way.  It's irrelevant.