From: davidm@iconz.co.nz (David Murray)
Date: Fri, 20 Jan 95 13:22:09 PST
To: hfinney@shell.portal.com
Subject: Little ebanks -- a modest proposal.
Message-ID: <199501202120.KAA03412@iconz.co.nz>
MIME-Version: 1.0
Content-Type: text/plain



[Executive Summary -- The author proposes a system of stamps for remailers
as a way of starting up an ecash system. The stamps would be sold to the 
public as stamps, but be convertible by remailer operators into real money.]

Hal,

Many thanks for your comments. I'll try to make this less legalistically
impenetrable.

Despite the difficulties, I think anon corps are possible - and legal.
What I was trying to stress is that they are expensive and inefficient: so
you have to be really sure you want anonymity if you are going to use one.

The hurdles to ecash seem more formidable. The problem with moving off
shore and ignoring the SEC, for instance, is that your scheme loses some
credibility. Since the value of ecash is (in the short term, at least)
going to be based on the possibility of converting it into real cash (just
as the value of real cash is based on the possibility of converting it into
real things), a structure that operates outside the law makes that value
doubtful. A large-scale rollout of ecash for the average Netscape user (and
the people that service them) is going to need all the legitimacy it can
muster.

Perhaps, though, we can start small, and allow the forces of nature (greed,
envy and, with a bit of luck, sloth) to take their course and scale a small
scheme into a thriving e-economy.

What I have in mind is a service that provides estamps (you knew there had
to be an 'e' in there somewhere, didn't you) for use with remailers. Jo
Anonymous buys stamps, sticks them on her messages, and the anon-remailers
collect them. The remailer ops then get to cash the stamps in for actual
money, so they can pay their ISPs and lawyers.

At the heart of the scheme is a genuine (micro) ebank [a uebank?]. But, to
avoid problems with offering securities to the public (and the SEC hassles
etc), the ebank only sells estamps (little bits of ecash) to estamp-
vendors. The estamp-vendors sell the stamps (with a mark-up?) to the public.
[Perhaps using this new Netscape/Mastercard tie-in.] Because the estamp-
vendors are only selling stamps (you can tell by the beautiful stamp-like
gif-icons the vendor's Web page uses...) the SEC doesn't become involved.
[I'm relying on the fact that the numbers involved are really small, and
that the estamps *are* being sold for the purposes of postage. Perhaps 
the ebank and the vendor should be based off shore...]

This scheme breaks the credibility issue into two -- a large number of
people (anonymous remailer users) have to be convinced of something
relatively trivial (that the remialer will accept the stamps); a small
number of people (anonymous remailer operators) have to be convinced of
something relatively important (that the stamps are exchangeable for cash).
If the remailer operators are sufficiently involved in the scheme, this
should work.

One type of scalability comes when EITHER

A. Someone sets up as a Data Haven token vendor (the tokens being bought
from the ebank as slightly larger bits of ecash), and data haven operators
start to accept the Tokens, in the knowledge they can swap them for real
money;

OR

B. Data Haven operators start to accept estamps for their services, because
they can swap them for cash;

OR both.

[The first scenario obviously disguises the appearance of ecash as a medium
of exchange for a bit longer.]

Another type of scalability comes when other people start uebanks, which
then issue their own estamps/tokens/ecash to estamp/token vendors. If the 
new uebanks are as (provably) secure as the original(s), the uebanks could
agree to clear each others' ecash and settle up at the end of the day (or
some global equivalent - eg 12am GMT) using some kind of netting system.

As long as everyone played nice at the beginning (all the remailer operators
declared their estamp income etc ;-) the uebanks could go legit: and by 
backing their submissions to regulators with a proven record of service
(no need to stress that the remailers were *anonymous*), by wearing Al Gore
t-shirts and garbling about the I-way and electronic town halls, and by not
letting Tim May and his contract killers near the place, it might just work.

On the other hand, if the system is working well enough, there may be no
need to go legit. (Although if I was an ebank operator I would be wary about
entering into netting arrangements with an ebank the SEC etc could close
down). [But is netting needed with online clearing? Perhaps this would
only be useful across currencies...] With the ebanks in appropriate 
jurisdictions, operating in grey rather than obviously black areas (it
is not so much that this stuff is being offered to the public as that the
public is going out to *find* this stuff), with a proven track record in 
ponying up the cash, and with the approval of really cool people who get on 
the cover of Wired, Robin Public may not *need* any more assurance to par-
ticipate in the e-economy.

What R.P. *will* need is products. Most of the attempts at net-commerce I've
seen concentrate on offering things that can be delivered to people, either
physically (so that the Compuserve Electronic Mall is basically a mail order
catalogue) or electronically (hence the rather sketchy descriptions of 
anonymous markets, usually falling back on the idea that, because this is
the Information Age, consulting is the root of all value...), to be consumed
now (this tin of coffee, that movie-on-demand, the other set of nanotech
plans).

But of course a lot of people (not, unfortunately, myself :-) have
significant amounts of property that they do not consume right away. The
possibility of anonymous investment (through eg anon corps) offers huge 
scope for the development of the e-economy. [I'll mention one statistic -- 
according to tax haven experts (Ginsberg, Spitz), in 1989 50% of all money
processed internationally goes through tax havens.] After all, a capitalist
economy (even an anarcho-capitalist economy) is built by capitalists, not
wage slaves.

More later (unless you plead real hard...)

Cheers,

David