From: ph@netcom.com (Peter Hendrickson)
Date: Tue, 15 Mar 94 09:32:03 PST
To: cypherpunks@toad.com
Subject: Re: digital cash
Message-ID: <199403151732.JAA20816@mail.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain



hfinney@shell.portal.com writes:

> Perhaps a digital cash system like Magic Money could serve as the
> basis for digital promissory notes.  You send me money, I'll send
> you a certain amount of digital cash.  That particular denomination
> and issue date (determined by the exponent) will be redeemable in
> one year for X+delta dollars.  You can hold the note and redeem it
> in a year, collecting the interest, or you can pass it on or even
> sell it.

Issuers of scrip ("a certificate of a right to receive payment later
in the form of cash or stock") will get the attention of Treasury if
it is not convertible (by the issuer) to a fixed number of dollars.

An easy way for the government to make scrip less useful is to refuse
to enforce the contract.  It would be interesting to know if there are
also punishments and if they can be extended to digital scrip.

The laws regarding money can get pretty strange.  For instance, it is
illegal for a U.S. citizen to hold options in a foreign currency
market.  The only plausible reason for this is to prevent
U.S. citizens from buying insurance against government
irresponsiblity.  Option rights in a domestic options market are
easily abrogated.

Mark Hittinger writes:

> The global monetary system is notbased on immutable metals prices.
> You cannot guarantee that gold will track the inflation of the dollar,
> which itself can only be measured relative to other currencies.  Even
> during times of widespread inflation, some things don't track

Commodities have, historically, been more stable than currencies.
Over decades they become cheaper as improved means of discovery or
production are found, but currencies generally devalue more quickly
and unpredictably.

I don't have the numbers right here, but I believe even gold is more
stable than the dollar.  Gold has to be found and dug out of the
ground.  Currencies are devalued at the whim of the government.  A
basket of commodities would probably be more stable than government
currencies.

Unfortunately, governments don't seem to like it when you try to use
things other than official measures of value.

It would be nice to know exactly what kinds of laws govern the
establishment of a digital "bank" which doesn't lend money and which
doesn't pay interest.  If the only service provided is to make
payments, does banking law apply?  For instance, U.S. banks are
required by law to turn over transactions on an account if an
intelligence service wants to see them.  The employee of the bank
approached is not allowed to indicate in any way that this has
happened and the penalties for violation are severe.  Would this law
apply to a digital transactions bank?

Peter