From: rah@shipwright.com (Robert Hettinga)
Date: Wed, 1 Jun 94 17:39:23 PDT
To: Hal <hfinney@shell.portal.com>
Subject: Re:  IMP (was Re: ecash-info (fwd))
Message-ID: <199406020038.UAA02040@zork.tiac.net>
MIME-Version: 1.0
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Hal <hfinney@shell.portal.com> wrote,

>> 1.) Chaum's e-cash coupled with WWW/Mosaic is a de facto internet
>> mercantile protocol.
>
>You're jumping the gun here a little, aren't you?  There is no evidence
>yet that Chaum's current proposals are going to catch on.  The CommerceNet
>idea seemed to have more backing judging from the press releases.  And it
>did not appear to support anonymous transactions.

While I don't see how the two technologies are mutually exclusive, you may
have a point about anonymity. But WWW/Mosaic's acceptance of e-cash may
make it more attractive (don't know how just yet, but I bet it has to do
with liquidity), with or without anonymity.

>
>> 2.) It seems to me that that e-cash, contrary to the status quo's thinking,
>> is *critical* to internet commerce. An anonymous cash market is most
>> unrestricted and efficient market there is, because privacy/security (more
>> than trust, I think) is the capstone of any serious transaction mechanism.
>
>I don't follow this argument.  You are suggesting that an anonymous cash
>market would be more efficient than one based on checks and credit cards?
>It would have lower transaction costs, so things would be available for lower
>prices?  Why is this?  The hypothetical discussions we've had here on "if I
>ran an anonymous bank" often talked about service charges.
>
While only increasing the velocity of the air around here with my all my
hand-waving, I expect that the service charges would be justified with
increased liquidity of e-cash, I believe that the increased liquidity comes
from not having to balance a bunch of customer accounts at the end of the
day, either at the issuer of the cash, or the vendor who received the cash.
When a retailer goes to the bank with checks, each check is specifically
identified.  When the check bounces (a straw man in an electronic market),
it has to be collected.  When a customer reneges on a credit card
transaction, it has to be traced back to the retailer.  That doesn't happen
in e-cash.  I expect someone's said all this here before, and I beg the
cypher.gods indulgence...

>Your use of the term "capstone" is unclear in this context.  Are you suggesting
>that retaining privacy is more important for most people than trusting a
>seller in most transactions?  Most people would rather buy from FlyByNight
>Corp if they could stay anonymous than from Sears using their credit card?
>I don't think so.  For some people, the kind who won't use checks today and
>get by with cash and money orders, this might be true.  But I don't see
>it as being the rule.

I think that the credibility of the issuer is important to the security of
e-cash. That security is upheld with cryptography and Chaum's technology.
I think that privacy is a by-product of a very liquid and efficient funds
transfer system. All the byproducts of the reduced paperwork.  So, I think
I got the chicken and the egg mixed up. Point taken.

>It seemed to me that the IMP list discussions degenerated into flame wars
>between Detweiler and cypherpunks.  Those in the middle, which included
>most subscribers, were shocked and disgusted by Detweiler's crude flaming
>and this made everyone uncomfortable about bringing up the topic of anon-
>ymity and cash.  With Detweiler on the list it was impossible to have a
>serious discussion of the matter.

True.  But Tim(?) had a point back there when he talked about them having
to work around Chaum.  I also think that something important did happen on
imp-interest. Most of the pertinent discussion delt with the need to put
something up and test it out.  I didn't *see* anything in that vein until I
heard here about Tacky-Tokens and Magic Money.  But as Perry aptly pointed
out, Unless you denominate them in *real* money, you're just trading
baseball cards (or coke cans).  It ain't real until the financial system
plays. TT and MM are important, because they address the operational
issues.  They're where the rubber meets the road. They aren't the engine,
however. That's a true player in the financial system (a bank or bank-like
entity), and the people who have the technology: Digicash

>
>Chaum is trying to make money off his ideas.  In doing so, he is being
>guided by the invisible hand of the market to try to find those niches where
>his technologies can be most profitable.  Maybe going after the bankers is
>the wrong idea,

not at all

>but it is understandably tempting to prefer trying to get
>millions of dollars from a few people than a few dollars from millions of
>people.  It does sound, though, like he is trying to branch out now and
>spread his technology around.  Perhaps he will follow the lead of RSA and
>make a "ChaumREF" free implementation of his cash technology.  The Commerce-
>Net model had RSA supplying free client software while charging the vendors
>licensing fees, I believe.  Chaum may be planning a similar approach.

I hope he goes after the banks, central and otherwise, and lets the
mercantile protocol sort itself out in the market.  When I started reading
about you folks, I ran into an article in one of Stuart Brand's
publications (The Whole Earth Review?).  It talked about the "fax effect".
That is, one fax machine is worthless, but millions are very valuable.  I
think this is what the whole PGP idea was about.  In this case, if the
ability to spend and receive money was cheap (or free) the franchise to
print money would be very dear indeed.  I think Chaum understands this. I
hope he does, anyway.

Cheers,
Bob Hettinga

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