12. Digital Cash and Net Commerce

THE CYPHERNOMICON: Cypherpunks FAQ and More, Version 0.666, 1994-09-10, Copyright Timothy C. May. All rights reserved. See the detailed disclaimer. Use short sections under "fair use" provisions, with appropriate credit, but don't put your name on my words.

12.2. SUMMARY: Digital Cash and Net Commerce

12.2.1. Main Points

12.2.2. Connections to Other Sections

12.2.3. Where to Find Additional Information

12.2.4. Miscellaneous Comments

12.3. The Nature of Money

12.3.1. The nature of money, of banking and finance,

is a topic that suffuses most discussions of digital cash. Hardly surprising. But also an area that is even more detailed than is crypto. And endless confusion of terms, semantic quibblings on the list, and so on. I won't be devoting much space to trying to explain economics, banking, and the deep nature or money.

12.3.2. There are of course many forms of cash or money today (these terms are not equivalent...)

12.3.3. Many forms of digital money.

Just as there are dozens of major forms of instruments, so too will there be many forms of digital money. Niches will be filled.

12.3.4. The deep nature of money is unclear to me.

There are days when I think it's just a giant con game, with value in money only because others will accept it. Other days when I think it's somewhat tied to "real things" like gold and silver. And other days when I'm just unconcerned (so long as I have it, and it works).

12.3.5. The digital cash discussions get similarly confused by the various ideas about money.

Digital cash is not necessarily a form of currency, but is instead a transfer mechanism. More like a "digital check," in fact (though it may give rise to new currencies, or to wider use of some existing currency...at some point, it may become indistinguishable from a currency).

12.3.6. I advise that people not worry overly much about the true and deep nature of money,

and instead think about digital cash as a transfer protocol for some underlyng form of money, which might be gold coins, or Swiss francs, or chickens, or even giant stone wheels.

12.3.7. Principle vs. Properties of Money

12.3.8. "Can a "digital coin" be made?"

12.3.9. "What is the 'granularity' of digital cash?"

12.3.10. Debate about money and finance gets complicated

12.4. Smart Cards

12.4.1. "What are smart cards and how are they used?"

12.4.2. Visa Electronic Purse

12.4.3. Mondex

12.5. David Chaum's "DigiCash"

12.5.1. "Why is Chaum so important to digital cash?"

12.5.2. "What's his motivation?"

12.5.3. "How does his system work?"

12.5.4. "What is happening with DigiCash?"

12.5.5. The Complexities of Digital Cash

12.6. Online and Offline Clearing, Double Spending

12.6.1. (this section still under construction)

12.6.2. This is one of the main points of division between systems.

12.6.3. Online Clearing

12.6.4. Offline Clearing

12.6.5. Double spending

12.6.6. Issues

12.6.7. "How does on-line clearing of anonymous digital cash work?" - There's a lot of math connected with blinding,

exponentions, etc. See Schneier's book for an introduction, or the various papers of Chaum, Brands, Bos, etc.

12.7. Uses for Digital Cash

12.7.1. Uses for digital cash?

12.7.2. "What are some motivations for anonymous digital cash?" + Payments that are unlinkable to identity, especially for things like highway tolls, bridge tolls, etc.

 - where linkablity would imply position tracking

12.8. Other Digital Money Systems

12.8.1. "There seem to be many variants...what's the story?"

12.8.2. Crypto and Credit Cards (and on-line clearing)

12.8.3. Many systems being floated. Here's a sampling:

12.8.4. Nick Szabo:

12.8.5. "What about non-anonymous digital cash?"

12.8.6. Microsoft plans to enter the home banking business

12.8.7. Credit card clearing...individuals can't use the system

10.8.1. "What's the legal status of digital cash?"

10.8.2. "Is there a tie between digital cash and money laundering?"

10.8.3. "Is it true the government of the U.S. can limit funds transfers outside the U.S.?"

10.8.4. "Are "alternative currencies" allowed in the U.S.? And what's the implication for digital cash of various forms?

10.8.5. "Why might digital cash and related techologies take hold early in illegal markets? That is, will the Mob be an early adopter?"

10.8.6. "Electronic cash...will it have to comply with laws, and how?"

10.8.7. Currency controls, flight capital regulations, boycotts, asset seizures, etc.

10.8.8. "Will banking regulators allow digital cash?"

12.10. Prospects for Digital Cash Use

12.10.1. "If digital money is so great, why isn't it being used?"

12.10.2. "Why isn't digital money in use?"

12.10.3. "why isn't digital cash being used?"

12.10.4. "Is strong crypto needed for digital cash?"

12.10.5. on why we may not have it for a while, from a non-Cypherpunk commenter:

12.10.6. "Why do a lot of schemes for things like digital money have problems on the Net?

12.10.7. Scenario for deployment of digital cash

12.11. Commerce on the Internet

12.11.1. This has been a brewing topic for the past couple of years.

In 1994 thing heated up on several fronts:

12.11.2. I have no idea which ones will succeed...

12.11.3. NetMarket

12.11.4. CommerceNet

12.11.5. EDI, purchase orders, paperwork reduction, etc.

12.11.6. approaches

12.11.7. lightweight vs. heavyweight processes for Internet commerce

12.12. Cypherpunks Experiments ("Magic Money")

12.12.1. What is Magic Money?

12.12.2. Matt Thomlinson experimented with a derivative version called "GhostMarks"

12.12.3. there was also a "Tacky Tokens" derivative

12.12.4. Typical Problems with Such Experiments

12.13. Practical Issues and Concerns with Digital Cash

12.13.1. "Is physical identity proof needed for on-line clearing?"

12.13.2. "Is digital cash traceable?"

12.13.3. "Is there a danger that people will lose the numbers that they need to redeem money? That someone could steal the number and thus steal their money?"

12.14. Cyberspace and Digital Money

12.14.1. "You can't eat cyberspace, so what good is digital money?"

12.14.2. "How can I remain anonymous when buying physical items using anonymous digital cash?'

12.15. Outlawing of Cash

12.15.1. "What are the motivations for outlawing cash?"

12.15.2. Lest this be considered paranoid ranting, let me point out that many actions have already been taken that limit the form of money (banking laws, money laundering, currency restrictions...even the outlawing of competing currencies itself)

12.15.3. Dangers of outlawing cash

12.15.4. Given that there is no requirement for identity to be associated with money, we should fight any system which proposed to link the two.

12.15.5. The value of paying cash

12.15.6. "Will people accept the banning of cash?"

12.16. Novel Opportunities

12.16.1. Encrypted open books, or anonymous auditing

12.16.2. "How can software components be sold, and how does crypto figure in?"

12.17. Loose Ends

12.17.1. Reasons to have no government involvement in commerce

12.17.2. "Purist" Approach to Keys, Cash, Responsibility

Revision #1
Created 23 June 2022 03:56:17 by c0mmando
Updated 23 June 2022 03:56:45 by c0mmando