From: Adam Shostack <adam@bwh.harvard.edu>
Date: Mon, 2 May 94 22:01:21 PDT
To: eichin@paycheck.cygnus.com (Mark W. Eichin)
Subject: Re: Virtual Cash
In-Reply-To: <9405030246.AA01186@paycheck.cygnus.com>
Message-ID: <199405030501.BAA21247@duke.bwh.harvard.edu>
MIME-Version: 1.0
Content-Type: text/plain


Mark W. Eichin wrote:

| > But it sounds like "vitual money."  I would like to see a
| > description of the model for this.  Sounds like a form of barter-script.  

| One reason they haven't caught on is that there *isn't* a model. There
| is software (cypherpunks write code! :-) to implement banks and
| exchange coins (the tacky tokens themselves) but noone (as far as I've
| seen) has come up with an "economic model" within which they could use
| them.

	Money has value because we agree it has value.  As long as
noone is willing to give me a meal, a nights lodging, or 30 minutes
CPU time for some number of tacky tokens, they will be just that;
tacky.  This is not to flame the dude who wrote the code.  Its a good
things that its been written, but what he can't write is a framework
for using the money in.

	(eg) If I knew that Derek Atkins was willing to write encryption
code for 10 tokens an hour, I might start trying to accumulate tokens
to pay Derek to do some useful work.  But he would only be willing to
accept those tokens if he knew he could get something useful for them.
If he is the only one providing things for tokens, hes going to
accumulate lots of tokens, and not be able to spend them, since theres
nothing interesting to spend his tokens on.

	So, if we want to make tokens worth something, we need to
start transforming them into real goods &/or services.  This will
reward those early adopters who grabed tokens when they were first
published.  To do this, we need to know how many tokens exist, ie,
what the money supply is.  If we don't know, the value of tokens would
be subject to a painful misestimation.  We would also need some sort
of guarantee the bank isn't going to mint more on a whim.  If tokens
aren't going for a lot of dollars, this could be a simple personal
guarantee from the bank.

Adam

-- 
Adam Shostack 				       adam@bwh.harvard.edu

Politics.  From the greek "poly," meaning many, and ticks, a small,
annoying bloodsucker.

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