From: Robert Hettinga <rah@shipwright.com>
Date: Thu, 5 Nov 1998 07:46:56 +0800
To: Digital Bearer Settlement List <cypherpunks@cyberpass.net
Subject: Re: DigiCash Inc. to File Reorganization, Seeks Partners to DriveeCash Forward
In-Reply-To: <v04020a12b2666fb92bd4@[139.167.130.246]>
Message-ID: <v04020a13b26671c6a73b@[139.167.130.246]>
MIME-Version: 1.0
Content-Type: text/plain



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Okay.

Contrary to my own previous -- and painfully recent -- opinions on the matter,
Digicash, Inc., is, more or less, in play again, or it will be if there is
enough money chasing it. Whatever "enough" means.

Putting on my Gordon Gekko hat, here, I'm interested in finding out a few
things. Yes, I have seen the greater fool theory of the blind signature patent
operate more than a few times, but I am, nonetheless, driven to think about
this, and I might as well be public in my musing, at least for the time being.


For expenses of any new company, it should be pretty clear by now what I would
do with the DigiCash technology portfolio. I would put a real good
intellectual property lawyer on the payroll, keep the cryptographers who would
still consent to stick around, keep or improve whatever software test people
they have left, and do nothing but sell licenses and implementation
certifications, using the the underwiting model at
<http://www.philodox.com/modelpaper.html> as a roadmap.

For this imaginary company's revenue, aside from direct fees for validating a
developer's, and possibly an underwriter's, implementation of the protocol,
the trustee would be the only point of patent royalty collection and payment
from the underwriters and developers to the new patent holder.

As far as the current installed base is concerned, I would probably spin off a
company to support those customers, and give it a non-exclusive license as if
it were any other developer.

This assumes, of course, that DigiCash BV/Inc. didn't issue
exclusive-by-country licenses. While it appears on the surface that they have
done exactly this, I have been met with what seems like incredulity from
various DigiCash folks when I talk about it, so, for the time being, I'll take
them at their word when they tell me it isn't so. Actually, when I think about
it, it may be immaterial, as there are lots of countries on the internet to
park underwriters and trustees in, and they can denominate their bearer cash
instruments in any currency they want.

One way or another, the software side of DigiCash would be gone. We figure out
what the net present value is of the current licenses, and hope that a company
can be formed around that cashflow and spun off into a separate software
development company. If we're lucky, we make money on the spinoff and keep the
patent. If we're not lucky, DigiCash will probably have to get rid of it's
current obligations before *anyone* clueful would step in to pick up the
patents, and just the patents, alone.


Obviously, what has been spent so far building DigiCash, BV or Inc., is
immaterial to any discussion of the future. Just like what happened to Chaum,
et. al., when Negroponte and companies um, executed, the purchase of last
version of DigiCash, we have to completely forget the all the money which
has been spent on Digicash BV, now Digicash Inc., so far, and ignore the
howls of the current investors, as painful as that may be to listen to. :-).
They knew the job was dangerous when they took it, anyway...


Okay, that's a nice story. How about some actual data? I expect the best way
to get a handle of royalties is to start soliciting actual projected royalty
estimates from potential developers and underwriters, but, frankly, I think
that most developers and underwriters, like the rest of us, have no real idea
how much money they're going to make. Nonetheless, if anyone's interested in
telling me, offline, what they think they would would be fair royalty
payments, either as an underwriter or as a developer, I'd like to hear their
estimates. My PGP key is attached.

My own rule of thumb, for cash anyway, is that an underwriter can probably
charge no more than a bank charges to one of their non-customer ATM
transactions. That's probably no more than $3.00 a withdrawl. They also get to
keep the interest on the reserve account, if any, of course. Frankly, if the
royalties are low enough, that may be more than enough revenue to bootstrap a
business with, and   I would personally lobby for as low a royalty structure
as possible. That, of course, is driven entirely by the cost/revenue picture,
but it might be that a majority of the short-term operations can be
bootstrapped out of validation fees.


That leaves all the other potential markets for blind-signature macroscale
digital bearer settlement, everything from long-duration bandwidth purchases
for IP or voice dialtone on up to actual securities transactions themselves.
Most of these potential applications will occur after the patents expire,
but whoever owns these patents should allow not only licenses to all comers,
but, more to the point, should allow all *licensees* to worry about the
legal ramafications of the patents' use.

If a particular licensee can find a legal jurisdiction to offer utterly
anonymous digital bearer instruments backed by totally anonymous reserves,
then, as long as the licensee pays up, god bless 'em. The patents should be
licensed within the law, certainly, but, other than that, their use should be
considered value neutral, like all technology. As in all bearer markets
before them, the digital bearer trustee will be the point of maximum legal
compliance, and, as such, will be the functional "policeman" of the system.  I
leave the interesting solution of bearer-backed trustees for some other day,
probably after the patents have long expired.


Okay. There's lots more to talk about, of course, but I'm kind of tapped out
on this for the time being.

If you're an intellectual property lawyer, and you fancy yourself running the
DigiCash patent portfolio, contact me directly. I'm not sure exactly what I
can do, if anything, but I'd be very interested to hear your thoughts on this,
as the potential core person of this as yet imaginary enterprize, up to, and
including what it would cost for you to sign on for this much fun as at least
in-house counsel, if not the actual CEO. :-).

In addition, if someone has a reasonable non-proprietary(!) estimate of the
projected revenues on all those outstanding ecash contracts, that would be
nice to know as well. The terms of those contracts, are, of course, probably
unknowable at the moment, at least until someone has enough known scratch to
belly up to the table, sign an NDA and take a peek. Of course, then they
couldn't tell us anything anyway...

Isn't this fun?



Cheers,
Bob Hettinga

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Here are my PGP keys, for them as want 'em:


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-----------------
Robert A. Hettinga <mailto: rah@philodox.com>
Philodox Financial Technology Evangelism <http://www.philodox.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'