From: nobody@shell.portal.com
Date: Tue, 17 May 94 00:27:02 PDT
To: cypherpunks@toad.com
Subject: Makeing MagicMoney worth something.
Message-ID: <199405170727.AAA28724@jobe.shell.portal.com>
MIME-Version: 1.0
Content-Type: text/plain


  One problem with MM (or other digital coin like protocols) is
makeing the coins worth something.  What could I buy with a Tacky
Token today?  Does anyone know how much Diet Coke and aluminum a Digi
Franc is worth (*Nudge* *Nudge*).  GhostMarks?

  But suppose....

  I deposited $100 of _my_ money in a bank like the Pentagon Federal
Credit Union.  I published an account inquiry phone number (1 800 xxx
xxxx), an account number, and a PIN, which folks could use to call and
verify the amount of money in _my_ bank account.  Suppose also that I
ran a MM server.  And suppose that I promised, on the net via a signed
message, to trade MM coins for dolars.  Perhaps I would buy 1 of my
coins for 1 cent.

  I don't belive I would be running a bank: I would maintain no
deposits for anyone other than myself.  The money in the account would
be mine, and when it earned interest, _I_ would be responsible for
taxes due.

  I don't belive I would be issueing a currency: I would make no
claims about the MM coins being money, or tender for any debt.  They
would be like trading cards, casino chips, or gift certificates.  In
fact they would be like promissory notes, or personal checks made out
to cash.  The account inquiry phone number information would act a
little like a check garantee card.

  If other people chose to trade the coins around, that would be fine
with me.  I certainly couldn't stop them.  (And it would be their
responsibility to obey all aplicable laws.  Such as SEC, IRS, FDA, and
DMV.)  All I would offer is a digital veracity service, and a promise
to trade MM coins on demand for dollars.

  Would this sort of an enterprise run afoul of the law in any way?
Well, how about _besides_ the patents held by Chaum, PKP, et al.?
Would the person running the MM server be part of a criminal
conspiracy?

  Would you trust this kind of coin?  Would you accept coins 'worth'
1% of the balance, 10%, 100%, or more?  Would the coins circulate?
Would you accept coins from anyone other than their maker?  Could a
usefull economy develop based on an initial money supply of about
$100; or $1,000; or $10,000?

  Now, supose a bunch of folks were running similar services.  Someone
might be able to open up a clearing house which would accept coins
from any of a bunch of people in exchange for either other people's
coins or the house's own coin.

  Would the house be able to back their coins with the coins of the
many individuals?  What if people contracted with the house to run
their MM server for them?  Would anyone trust the house?  Would the
house be a bank?  If it were a bank, how would the powers offended be
able to get judgements against it or remedies from it?

   (Unlike the people involved, the clearing house has no 'real'
assets, and no physical location, and no promise to exchange coins for
money.)

  Does the game change if I instead publish the numbers to my account
at an English bank denominated in sterling; or to my EFHutton gold,
stock index, or other mutual fund account(s)?  What if I offered to
buy coins for an amount of money equal to a percentage of the accounts
worth -- say 1 coin is worth 1% of the account's value -- would this
run into SEC regulations?

  Cat Shoe