Making Money in Digital Money

[R. A. Hettinga]

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At 10:58 PM -0700 4/30/03, Steve Schear wrote, at the end of a
rhapsody on amateurism:

>I see no reason why important security, crypto or financial crypto 
>developments must be linked with direct or immediate financial
>compensation. 

Guys, I'm not saying that people won't do cool stuff for free. I'm
saying that if actual markets emerge for that cool stuff, they'll
damn sure *not* do it for free anymore.

Your exemplar, Einstein, last time I looked, was a *professional*
physicist most of his life. Why? Because various institutions could
hire him, and make money in research budgets, endowment increases,
etc.



To bring this back to digital money then, creating a market, a market
for internet-delivered digital goods and services in this case, is
all bound up with transaction cost. It's literally too expensive to
move the money across the net in direct exchange for bits, so people
exchange those bits for other things, like, say grins, for lack of a
better word. :-). 


Right now, to pay for things over the net, even digital goods and
services, we literally send *signals*, instructions, to move money
somewhere *off* of the net: cryptographically tunneling credit card
instructions, or ACH records, for instance. Even PayPal really
happens off the net, and increasingly so -- try to *pay* money from a
PayPal account that's unlinked to a bank account or credit card
sometime. The gold transaction systems are getting closer, to the
extent that transactions execute, clear, and settle on a machine on
the net, even though at least one of those requires is-a-person
identity. Paradoxically, if PayPal were to allow "cul-de-sac"
accounts, accounts where people couldn't move money in and out of
PayPal, but were able to buy and sell stuff in PayPal nonetheless,
with a simple account/password, you'd be closer. e-Gold has done this
for most of a decade, now.

It won't be until we have the ability to get paid, and to be paid --
and, frankly, to invest and earn a return -- all without *ever*
needing recourse to off-net settlement that transaction costs will
fall. The ultimate form of that, and I would claim the cheapest, will
be transactions using internet bearer financial cryptography
protocols.

You put money that's cheap enough to pay for bits as they come down
the wire, and watch the world change.


Cheers,
RAH

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-- 
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'