From: Greg Broiles <gbroiles@netbox.com>
Date: Mon, 5 May 1997 10:54:55 +0800
To: Hal Finney <hal@rain.org>
Subject: Re: Bypassing the Digicash Patents
In-Reply-To: <199705041819.LAA00411@crypt.hfinney.com>
Message-ID: <3.0.1.32.19970504183109.02752718@pop.sirius.com>
MIME-Version: 1.0
Content-Type: text/plain


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At 11:19 AM 5/4/97 -0700, Hal Finney wrote:

>Presumably records are kept to protect against various risks.  Without
>that protection, you need other means to control the risk.  But if those
>means exist and they are cheaper than record-keeping, then again even
>without anonymity it should be cheaper to use those methods in place of
>the records.
>
>I think we would need to see a more detailed explanation of exactly why
>it is that people can't save money today by avoiding keeping records,
>when they could do so if it were impossible to keep records.

I think what's important here is that the risks which are controlled/reduced
by keeping extra information are tied to the payment method(s) selected - for
example, most merchants try to get location/contact information when they
take a check, because there's some risk that the check will be returned
(sometimes in as long as 2-3 weeks) after the customer and the merchandise is
long gone. If checks cleared instantly, this wouldn't be necessary - and I
think merchants would forego collecting this information (they do now, for
physical cash purchases) because collecting it costs extra employee time,
storing/indexing it takes space/time, it annoys customers, and it leads to
some lost sales (where otherwise qualified customers are rejected because
their [lack of] credit/payment history makes them look like a bad risk).

The situation is similar for credit card purchases - the merchant doesn't
need to worry about tracking you down (because they'll get paid anyway, once
the transaction's been approved), but they do need to comply with the
requirements of their bank and the card issuer .. which include, if I
remember correctly, retaining the customer's signature (or notes of phone
authorization) for at least 60 days following the transaction. Big retailers
spend an enormous amount of time/energy/money keeping track of millions of
little slips of paper with people's signatures on them, and now they're
moving to expensive/complex/scary to consumers digital signature capture
systems.

Neither of these databases/filing systems is necessary for cash transactions,
and I can't think of a merchant who's tried to make me comply with them while
making a cash purchase. I don't think merchants are in a special hurry to
keep more information which isn't really interesting to them, anyway. 

So why do merchants take checks and credit cards, if they impose extra costs?
Because physical cash can be more expensive. Physical cash is difficult
because it (1) there's a risk of loss or theft/robbery, (2) keeping change on
hand is difficult/annoying, (3) it doesn't easily integrate with
accounting/inventory systems, (4) it's difficult to deal with in bulk. For
the most part, digital cash doesn't have these problems, but it doesn't have
the risk associated with repudiable payment methods (like checks and credit
cards), so it's not necessary to keep extra information to offset or reduce
that extra risk. 

So that's why digital cash wins, or ought to, if it's deployed before we're
all part of the Borg and privacy is irrelevant. 


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--
Greg Broiles                | US crypto export control policy in a nutshell:
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http://www.io.com/~gbroiles | Export jobs, not crypto.
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