From: Jim McCoy <mccoy@ccwf.cc.utexas.edu>
Date: Mon, 20 Sep 93 13:12:16 PDT
To: cypherpunks@toad.com
Subject: money money money...
Message-ID: <199309202009.AA17310@flubber.cc.utexas.edu>
MIME-Version: 1.0
Content-Type: text


I have been tossing some of the electronic money ideas around in my head,
and the two things that seemed to be the hardest problems were how to keep
the feds from stomping on such a bank and how to give its currency value.
Here are a couple of thoughts on these problems:

Legalities:

Why does it need to be a bank?  Actually, it seems to me that the first
step is to actually create the "currency" for use as a means of exchange
and let the net provide the banking structure.  Once currency exists
cryptography will allow for the banking structure to be created in whatever
manner the market demands.  The hard part seems to be the jump-starting
necessary to create the currency and get the system going.  So why not
approach this as a currency problem and not as a banking problem.  In other
words, how much easier is it to set up a "currency exchange and check
cashing" operation compared to a bank or credit union? 

All the digital currency exchange would need to take in the money from
users, and pay out digital coins in cash.  Once such an operation existed
the formation of a digital economy would be possible by just migrating
existing services to work with the system.  Such an operation could support
itself by charging a small transaction fee (e.g. $0.25 for deposits and
$0.25 for withdrawls plus the postage for sending the check...)

Products and Value:

I have only glanced over the papers available, but the IMP archive stuff
(internet mercantile protocols) might just provide the immediate market for
us to piggy-back upon.  The imp people seem to be oriented towards using
PEM for monetary transactions, but it seems to me that it would be possible
to subvert such a system for our own use by simply setting up a server
similar to an anonymous remailer that allows one to deposit electronic
currency from the previously mentioned currency exchange and then creates a
imp system PEM message coming from the remailer.  The remailer can ask as a
sort of purchasing agent, converting the digital coins created by the
currency exchange into whatever type of imp certificates the user wants and
it uses the purchasing agents identity to provide the anonymity that the
imp schemes seem to not care about... 


So, what say you fellow cypherpunks?


jim


p.s. Anyone coming to the crypto conference in Austin Wednesday?  If so and
you want a copy of my most recent draft of a "Musings on a Crypto-Secure
Linux" let me know and I will bring a few printed copies...