1994-08-22 - Re: In Search of Genuine DigiCash

Header Data

From: Jason W Solinsky <solman@MIT.EDU>
To: rah@shipwright.com (Robert Hettinga)
Message Hash: 128d8bcd8960ead51c0e915889667035864c02508212a61a2948b27a13aa7928
Message ID: <9408221417.AA11245@ua.MIT.EDU>
Reply To: <199408221240.IAA29673@zork.tiac.net>
UTC Datetime: 1994-08-22 14:17:48 UTC
Raw Date: Mon, 22 Aug 94 07:17:48 PDT

Raw message

From: Jason W Solinsky <solman@MIT.EDU>
Date: Mon, 22 Aug 94 07:17:48 PDT
To: rah@shipwright.com (Robert Hettinga)
Subject: Re: In Search of Genuine DigiCash
In-Reply-To: <199408221240.IAA29673@zork.tiac.net>
Message-ID: <9408221417.AA11245@ua.MIT.EDU>
MIME-Version: 1.0
Content-Type: text/plain

> I just think that it's easier all around to keep a constant notional value
> (a buck is a buck is a buck). Then to mess with a fluid pricing mechanism
> for something which is supposed to enhance convenience and liquidity in
> internet commerce.  Let banks and governments worry about the relative
> prices between their currencies, and let that price be the price of e-cash
> for now. An e-cash issuer has to worry about his competition and the price
> of their cash.  That's bad enough. Occam's razor, KISS principle, and all
> that.

A buck is NOT a buck. It keeps on going down in value. We should use the
introduction of digicash to finally create a monetary instrument that never
experiences positive inflation. Incorporate in a foreign land, invest the
money safely, issue and buy back shares according to a fixed formula that
depends only on the valuation of the company, publish your returns and
register the stock as securities in as many lands as possible. You now
have a perfectly legal basis for digicash. The shares will float in the
range of values specified by the stock issuance formula. They will
gradually go up relative to inflation and will be easily traded in multiple 
currencies. And it will be really difficult for most governments to attack
the "payable to bearer" nature of the currency because it would encroach on
the rights of all American corporations. No?

> In theory, though it probably won't happen, an underwriter could issue a
> greater amount of digital cash than regular cash paid for it (e$1.00 for
> $0.95, for the sake of argument).  The cash flow from the interest on the
> suspension account (due to long cash lifetimes on the net, for example)
> would be paying for operations, and profits, and a competitive market
> forces the underwriter to sell at a slight discount. See?  This is exactly
> the way you price bonds.  The case of zero interest digital cash is exactly
> like that of a zero-coupon bond. The ecash is then spent one or more times
> on the net at its "par" or face amount, and then the underwriter makes
> money or eats the difference when it is redeemed.

This will once again make the value of the digicash dependent on when it was
issued. An alternative formulation of this same scheme would have the value
od digi-cash be invariant with the data of issue, but have periodic
redemption dates on which the value of the digi-cash would jump. I find
neither to be desireable.

> >Seting prices based on convenience instead of value derived? *BLECH*. That
> >sort of thing is anathema to free markets.
> There's probably the hoariest old saw in economics which says "The cost of
> anything is the foregone alternative." Convience *is* value derived. Market
> liquidity is convience (more like necessity, actually, certainly not
> anathema, but who's quibbling).  Market liquidity is value derived.

Market liquidity is increased by convenience to the holder of the securities,
not the issuer of the securities.