From: jim@bilbo.suite.com (Jim Miller)
Date: Wed, 17 Jan 1996 16:02:15 +0800
To: maryl@efn.org
Subject: Re: Article on E-money
Message-ID: <9601170216.AA21093@bilbo.suite.com>
MIME-Version: 1.0
Content-Type: text/plain




> Hi-
> 

> I'm a journalist writing an article for an on-line
> magazine about emoney.Seeing your site on the web...
> 


Hi,

I have no Web site of my own.  You probably saw my E-Money FAQ on someone  
else's site and thought I was the site manager.  That's ok, you're not the  
first to make that mistake.


> I was hoping I might ask you a few very general questions
> about the future on emoney as you see it. My article is
> called a  "futureview" article, meaning it makes some
> guesses at what changes people can expect because of new
> technology. 

> 


I'll be happy to answer your questions as best I can.


> -How will the adoption of e-money or e-cash change the
> workplace? Will some kinds of businesses or practices
> prosper while others fail?
> 

> -How will emoney or ecash change people's daily lives at
> home? (More home shopping?)
> 

> -If you had to guess, what do you think the future of emoney
> will be? 

> 

> -Are there any words of hope/caution  you'd like people to
> know?  

> 

> Thanks in adviance for any help you can give. If you have
> more questions about myself or the artcle, feel free to
> call or write me.
> 

> Mary Leontovich xxx/xxx-xxxx email: maryl@efn.org 

> 


Rather than answer each question individually, I'll just ramble on about  
e-money for a bit and hopefully I'll convey some interesting opinions.

The first thing to recognize is that there are two arenas to consider when  
discussing e-money; the on-line arena and the "about town" arena.  I'll  
first discuss the "about town" arena.  It will take a decade or more, but  
eventually e-money purchases will be as common as credit card purchases.   
People will carry e-money cards right along side their credit cards.   
Rather than handing over a few dollar bills, people will insert e-money  
cards into readers.  ATM machines will provide an option to charge up  
e-money cards.  Credit card systems and e-money system will co-exist, and  
in fact you will be able to easily transfer value between credit cards and  
e-money cards.  It is quite likely that the major credit card companies  
will issue multi-purpose super-cards(tm) that can act as either credit or  
e-money cards, reducing the number of cards people carry.  Paper money  
will never go away completely (unless government stops backing paper  
money), but there are a variety of reasons most people will switch from  
using paper money to using e-money cards:

   1) The card can easily keep a record of all a person's e-money  
purchases.  The record can be up-loaded into popular PC-based money  
management software.
   

   2) The card can hold "change" and well as "large bills".  No need to  
carry around a pocketful of coins.
   

   3) The money in the card can't be spent unless the proper PIN number  
(or thumb print, etc) is provided.  Paper money can be spent by any thief.   
Some e-money cards may allow you get reimbursed for lost or stolen  
e-money.  Others may only be able to "void" the lost money.

   4) Some e-money system may allow you to make back-up copies of your  
e-money, in case the card gets damaged.

   5) Paper money wears out, gets torn, etc.
   

   6) Paper money, even in moderate quantities, is bulky.
   

   7) Paper money has to be counted, and people must wait around while  
change is tallied up.  Mistakes could be made.  E-money cards will be  
relatively fool-proof and will work as fast or faster than current credit  
cards.
   

And now the online arena...

People will be able to purchase inexpensive devices that can be connected  
to their PC to transfer e-money from card to computer, and vice versa.   
This device may become a pseudo-standard peripheral, much like a sound  
card is today.  People will be able to purchase items securely over the  
Internet using either credit card numbers or e-money.  A good question to  
ask might be "If people can make secure credit card purchases over the  
Internet, why would they use e-money over the Internet?"  There are a  
variety of reasons people might use e-money rather that credit cards  
online:

    1) The item may cost only a few pennies, or less.  Not enough to  
warrant using a credit card.
    

    2) The vender may not accept credit cards.
    

    3) You may not wish to give the vender your credit card number until  
you have established that the vender is trustworthy.
    

    4) You may wish to pay in "cash" rather than add to your credit card  
balance.
    

    5) You may wish to avoid revealing your "about town" identity to the  
vendor.

Why might a vender accept e-money, but not credit cards?  Well, it costs  
money to accept credit cards.  It will probably cost less money to accept  
e-money.  Very small companies that exist only on-line may not want to pay  
the expense to hook up to the credit card infrastructure.  Cheap e-money  
will lower the barriers to entry for online business.  Huge numbers of  
very small players will come online.  The meaning of the term online  
"business" will change as it becomes easy and economical for individuals  
to charge very small amounts for data or services.  When something become  
cheap and easy (ala World Wide Web), it will become very popular.  When it  
is also a way to make money, it will become common-place.  Most everyone  
with a PC will find a way to make a little money on the side by selling  
something online.  Maybe people will sell idle CPU time or unused disk  
space on their home PCs to people using future Java-like distributed  
applications.  


All this new economic activity will of course be taxed.  That is, if  
government has any say in the matter.  And you can be sure government will  
do its best to have a say.  From reading my E-money FAQ you know there are  
two possible kinds of e-money systems: identified and anonymous.  For both  
tax reasons and law enforcement reasons, governments will do their best to  
insure that anonymous e-money systems fail in the marketplace. Perhaps by  
outright banning them, or by subsidizing identified e-money systems, or by  
not insuring bank accounts that accept anonymous e-money, or by mandating  
accounting or identification systems that preclude the use of anonymous  
e-money.  I'm sure there are other tactics government could use.

Should people care?  What's so bad about identified e-money?  What's so  
good about anonymous e-money?  Most people don't seem terribly upset about  
the personal information they reveal by using credit cards so it is  
reasonable to assume most people will not be upset about the personal  
information they reveal by using identified e-money.  I predict that  
anonymous e-money systems will not fare well in the marketplace for the  
following reasons:

    1) Government pressure against anonymous e-money.
    

    2) Identified e-money systems are easier to build.

    3) Certain technologies necessary for anonymous e-money are patented.   
E-money system builders will tend to roll their own identified e-money  
systems, rather than pay fees or royalties to the patent holders.
    

    4) The financial risks associated with anonymous e-money are more  
complex and harder to evaluate than the financial risks associated with  
identified e-money.  The conservative money will tend to back systems with  
the lower perceived risk, even if the risks associated with anonymous  
e-money are manageable.
    

    5) Identified e-money systems can provide the same external features  
and conveniences as anonymous e-money systems and will most likely become  
widely deployed sooner than anonymous e-money systems.  Once people become  
accustomed to identified e-money systems, it is unlikely they will push  
for a change to anonymous e-money systems.

It is hard for me to explain the reasons why anonymous e-money is  
preferred over identified e-money.  The reasons fall into the "Do you  
trust government, or not" category.  "Do you want the government to know  
about every penny you spend?"  These sort of concerns are easily dismissed  
as alarmist.  After all, say many people, if the government gets out of  
hand we can just vote in different law makers.  That's how democracy  
works.  Well, I don't believe it would be that easy.  Imagine how hard it  
would be to get rid of social security cards.  The information conveyed  
via identified e-money is directly useful to tax agencies and law  
enforcement.  The information has other governmental and commercial uses,  
too.  As with social security numbers, the infrastructure that utilizes  
identified e-money information will become larger the longer the systems  
are in use.  After a time, it will take a ideological revolution to  
convince government and business it must do without such detailed personal  
information.  And revolutions, ideological or otherwise, are never  
painless.  I hope I'm wrong and identified e-money is nothing to worry  
about.  And maybe big government can be trusted. :-)

Jim_Miller@suite.com

P.S. I CC'ed this reply to the cypherpunks mailing list.  You might get  
additional replies from people on that list.

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