From: tcmay@netcom.com (Timothy C. May)
Date: Sun, 13 Feb 94 18:31:15 PST
To: cypherpunks@toad.com
Subject: Re: REAL WORLD ENCRYPTION
In-Reply-To: <940213233835_72114.1712_FHF71-1@CompuServe.COM>
Message-ID: <199402140229.SAA20882@mail.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain


(Initially a reply to Sandy alone, but his partners in crime^H^H^H^H^H
may wish to see my responses as well, and the issueof who will use a
"digital bank" are of direct relevance to Cypherpunks as well. Hence
I'm copying the list on this reply.)

Sandy, 

Good questions!

I may or may not open an account, but how much I put into would be
dependent on the degree of "Swiss"-type services. Probably not many
such services, I am surmising, so it would make little sense for me to
liquidate assets currently in the U.S. to move them into your bank
(if I remained in U.S., no protection. If I left U.S., no _need_ for
your bank).

I think this'll be a cultural problem you guys will face. You can't be
a real digital money bank, in the long-range sense we've talked about.
(Total anonymity, Lichtenstein "anstalt"-type anonymity, digitally
mediated.)

How many users, and of what type, can you expect?

Probably at least a hundred folks on the List will say they plan to
use your bank. Of these, 50 will actually open an account...the rest
will think twice about the repercussions, or will wimp out, or will
just not get around to it.

Unfortunately, most Cypherpunks are of modest means, being students or
just starting out in industry, so the average deposit will be--I
predict--less than $2000. (Most people have not much more than this in
their checking accounts...if they have more, they spend it.)

After the novelty of showing their friends their ATM card from "First
Cyberspace Bank," or whatever, wears off, expect folks to drop out.

The noncognoscenti, the cryptographically challenged, will likely balk
at the crypto aspects, unless they are so well hidden as to thus be of
little interest...you'll just be another credit union or bank. Good
luck, and maybe a reasonable career to pursue, but not a millenial event.

Maybe I'm missing something, but in the space of features that a
digital money system _could_ offer (somday), what I gather you plan to
offer is not sufficiently interesting for "high rollers" to take a
serious interest. Real tax avoiders will move assets in other
ways...the idea of an ATM card and a slight savings on checks or
debits by not having to process paper will not influence them on
matters of this importance.

(BCCI, Castle Bank, Nugan Hand, etc. were not started with deposits
from the proles. Just not enough money in that.)

So, I have a hard time seeing how you'll get a lot of members. But
then, you folks haven't talked much about your actual plans, targeted
classes of customers, plans for dealing with the existing banking laws
(including reporting of transactions), and so on. So perhaps I'm
completely offbase here. It's hard for us to give you feedback when we
know so little about your plans.

But from what I've gathered, I'll open an account just for the novelty
of it and may keep a few thou in it. Maybe less, depending on your
interest rates paid. (I currently write all my checks and do all my
VISA transactions out of an "Active Assets Account" that pays me
interest on a positive balance and charges me a very reasonable
interest rate, near the discount rate, on a negative balance. I use
this account for checks, debit card (VISA), and ATM. And I get a lot
of extra services, like fully computerized summaries of expenditures
and transactions--useful at tax time. Your system had better be nearly
as full-serviced, or the tax avoidance/money laundering services had
better be _damned good_, or why should I bother?

Other folks may have different priorities, but these are mine. (I'm
all for secrecy, but I want true secrecy. The fact that my bank has
full computerized records for me may be _superficially_ "counter
privacy" to some, but all U.S. banks maintain these records anyway,
and these can be inspected by the Feds at any time, without a search
warrant. So I'm happy to get the detailed records.)

Offer a "digital numbered account," with the massive
reputation-related safeguards that would be needed, and a whole new
class of depositors could appear. But also expect massive moves by the
Feds.

Just my honest opinions. I wish you guys well.

--Tim May

-- 
..........................................................................
Timothy C. May         | Crypto Anarchy: encryption, digital money,  
tcmay@netcom.com       | anonymous networks, digital pseudonyms, zero
408-688-5409           | knowledge, reputations, information markets, 
W.A.S.T.E.: Aptos, CA  | black markets, collapse of governments.
Higher Power:2**859433 | Public Key: PGP and MailSafe available.