From: Robert Hettinga <rah@shipwright.com>
Date: Tue, 29 Apr 1997 08:21:58 -0700 (PDT)
To: cypherpunks@toad.com
Subject: Re: Chaum steps down as CEO of Digicash
In-Reply-To: <199704281753.KAA00589@crypt.hfinney.com>
Message-ID: <v03020919af8b9e12df33@[139.167.130.246]>
MIME-Version: 1.0
Content-Type: text/plain


At 1:53 pm -0400 on 4/28/97, Hal Finney wrote:

> Chaum's orientation towards privacy has not been well accepted by the
> conservative banking community (a similar point was made by Peter Swire
> in his article about payments and anonymity).

Again, financial privacy is like flight. To the people who invented it,
flight was an inherent good. People died trying to create it. However, the
thing which made flight commonplace was commerce. Flying is not only the
fastest way for people and other important things to get somewhere, but,
over great distances, it is simply the cheapest way for people to travel.
People don't purchase "wow, we can fly". They purchase economy seats to
Cleveland. :-).

The same thing with financial cryptography, and, by extension, strong
cryptography in general. What will sell financial cryptography is not
financial privacy per se. What will sell financial cryptography is the fact
that digital bearer certificate protocols will prove, by virtue of their
very *anonymity*, to be many orders of magnitude cheaper to use than any
internet transaction method of equal security. Or any transaction method at
all, for that matter. Including, of course, the book-entry transaction
settlement methods (like checks, credit cards, securities clearinghouses,
interbank settlement) we use today.

It is under *that* proposition alone, the potential for radical cost
reduction in *all* transaction settlement processes -- and the prospect for
radical economic transformation that that brings -- that the blind
signature patent should be marketed and licensed.


Notice I said "licensed".

Cryptographers -- and that is who Digicash is, nothing else, no matter how
hard they try to be otherwise -- should invent, license, and validate the
use of cryptographic protocols. And, clearly, there is no better financial
cryptographer in the world than David Chaum, the man who created, from
whole cloth, everything we consider to be modern financial cryptography.

Digicash should not try to be a financial trustee, or a certificate
underwriter, or even a software developer. All three things Digicash, BV,
has tried to be in its many previous incarnations. Now, it appears,
Digicash, Inc., is going to try to become the internet equivalent of a
credit card association. However, once you understand what Digicash's
strengths really are, you can see why this current strategy is just the
next progression in, I'm sorry to say, the fool's market that Digicash,
Inc., has become in terms of investment return.


So, you can understand how, sometimes, I'm very much afraid we'll have to
wait until this round of funding is burned through -- say 3 to 5 years --
before we see any progress in the market for digital bearer certificates.
And, if Digicash keeps finding a "greater fool" when the money runs out,
we'll end up waiting until 2007, the expiration date on the blind signature
patent, in order for anything to happen at all.


Yet, most of rest of the time, however, I'm not so pessimistic. I'm
convinced that if Digicash starts non-exclusive licensing of the blind
signature patent, and the other relevant Chaum patents it now controls,
even as an experiment, I expect that they would very soon find that their
profit margins on those licenses would dwarf the profits on all their other
projects.  Maybe then they'll realize they should stop trying to be
something else, and be what they what they have been all along: the very
best financial cryptographers in the world.


Cheers,
Bob Hettinga

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