From: dwomack@runner.utsa.edu (David L Womack)
Date: Mon, 2 May 94 21:44:07 PDT
To: cypherpunks@toad.com
Subject: Virtual Cash
Message-ID: <9405030444.AA26531@runner.utsa.edu>
MIME-Version: 1.0
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>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. (In spite of perry's objections, the economic discussions *are*
>relevant here...  many readers seem to not understand the complexities
>of money systems, without which *using* e-cash won't be practical, so
>we need some major cross-breeding here.)

But, don't we have a good model?  Pre 1929, didn't most banks issue
their own version of US currency, backed by their own reserves?  If
an easily usable program existed to generate the tokens (please, in
decimal units, not in farthings, shillings, and binary!) any issuer
could distribute them.  Assuming the token signature couldn't be forged,
each issuers "reputation" would determine the fair market price of a
token.  Thus, 1,000,000 Rubles = $550 (US);  The market has determined
that the Russians don't have a strong financial reputation.  In the
cypher world, someone who issued tokens and redeemed them for pure gold
at 100 tokens per oz. would quickly have a very strong rep., while those
who turned out billions of the things backed by nothing wouldn't have 
much of a rep.  Merchants might (or might not!) accept tokens from an
unknown source, or from a known weak source.  This could even lead to
"central clearing houses", who would issue tokens under their own name
in behalf of others, based on a balance of good funds (i.e., gold, silver,
US Dollars, or whatever).  They might charge a fee for such services...
of course, in an unregulated environment, there would be risks of fraud.

If I might suggest, the key is widely ported, inexpensive, easy to use
software to generate the tokens.  Let people start to mint, distribute,
buy, sell, and redeem the things.  A market (with market values) will
develop....just as it does in countries that wind up using cigarettes
for currency.  

Would it not be possible to have a program that 

1.  Accepts a strong password
1.a Accepts an identity and address
2.  Accepts a denomination preference
3.  Accepts a quantity preference

then

4.  Generates tokens with a signature as in PGP

or, when tokens are received,

1.  Shows the issuer id and address
2.  Shows denomination and quantity of each
3.  Verifies signatures
4.  Stores tokens (perhaps with no way to extract or duplicate  them?)
5.  Displays storage by category, denomination, issuer, and so forth
6.  Can DESTROY tokens (i.e., take them off the market)

and, perhaps most importantly,
there has to be a way to prevent copied tokens from being
distributed without restriction.  (i.e., Sandy sends Dave 5 of
his tokens.  Dave, being unethical, copies the 5 tokens and
sends the same 5 tokens to everyone on the C.Punks list.  Now
Sandy has *_hundreds_* of people with the same counterfeit
tokens!  It would be as if anyone with a copier could
counterfeit US currency)  Can a program prevent such behavior?

Has this already been done with Magic Money?  Or is the
program still waiting to be written?

Regards,

Dave