From: Bill Stewart <stewarts@ix.netcom.com>
Date: Sat, 30 Mar 1996 15:35:25 +0800
To: cypherpunks@toad.com
Subject: Re: What backs up digital money?
Message-ID: <199603290555.VAA24804@dfw-ix7.ix.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain


At 03:25 PM 3/28/96 -0500, Black Unicorn <unicorn@schloss.li> wrote:
[a bunch of mostly correct things, except for]
>But instead of backing in gold, or some tangible asset, dcash is still 
>ultimately backed by the full faith and credit of the government who's 
>currency the dcash is denominated in.

Well, after dealing with the full faith and credit of the issuing bank,
you may acquire some pieces of paper which are backed by the dubious
faith, credit, and reputation of some government.  As you later say,

>it is still just a second tier bearer instrument.

>I think that the diet coke backed cash I tried to promote back when was 
>closer to a "currency" than d/ecash issued by a bank and drawable on 
>government currency.  (Maybe this is why no one was interested?)

I've used coffee-based currency, backed by my co-worker Joe.
Worked fine, and excess profits usually got turned into bagels and donuts.

>Real solid ecash, and the kind of cash I would like to see out there, 
>would be limited to a non-dilutable one time issuance and backed in some 
>precious commodity held on reserve.  A closed-ended share of a stock of 
>gold, for instance.  That would require no intermediation of a "currency" 
>based on the full faith and credit of an issuing sovereign.

Most of my money is usually in banks, where it exists as bits in a ledger
rather than as government-backed paper; my credit union at least has
private insurance in addition to the government insurance, so there's
someone honest backing the bank, even though it's only denominated in fiats.
Digicash of various sorts may be able to get some political support if
some bank wants to issue accounts denominated in ECUs, though ultimately
the issue isn't whether it's backed by governments, gold, or insurance agents,
but whether someone's willing to give you stuff for it when you want stuff.
If you're buying physical stuff, you're probably buying from someone nearby,
so it's usually useful to be able to _pay_ in local-flavored currency.
In Europe, "local" may include the currencies of several nearby countries;
in the US lower-48, that usually means US dollars, since Canadians will
usually take them and Mexican pesos can be trusted to devalue rapidly.

ObLinguaPunk: One cypherpunk-relevant use for speaking foreign languages
is that you sometimes need to speak local-talk long enough to find an
Internet connection when you've boogied overseas to retire on your digicash
earnings or run your consulting business to make the big bucks before
you go rent a cabin in Nevada from some Panamanian corporation that's
owned by several Caribbean bank accounts....
#--
#			Thanks;  Bill
# Bill Stewart, stewarts@ix.netcom.com, +1-415-442-2215 pager 408-787-1281

1995: Chat rooms, espresso, and Linux
1996: Exon, melatonin, and Java.