Re: Physical to digital cash, and back again

Furthermore, I don't see why this system could not be as legal as
current credit cards.  All that really differs in this system is the
inability to track where users spend their money, and as far as I know
this ability was never an important legal aspect of credit cards.
Certainly nobody will admit today that the government has a vested interest
in moving towards an environment in which every financial transaction is
tracked.

Granted, this does not provide full anonymity.  It is still possible to see
roughly how much each person spends (although nothing stops a person from
withdrawing much more cash than he will spend in a given month, except per-
haps for interest expenses; but maybe he can lend the extra digicash itself
and gain interest on that to compensate).  And it is oriented around the same
customer/vendor model that Anonymous criticized.  But I maintain that this
model represents the majority of electronic transactions, today and in the
near future.

It's worth noting that it is not trivial to become a merchant who can
accept credit cards. I went through this with a business I had a couple
of years ago. We were selling software through mail order, and this makes
the credit card companies very nervous. There is so much phone fraud in
which credit card numbers are accumulated over a few months, then large
amounts of charges made against them. By the time the user receives his
monthly statement and complains, the vendor has disappeared. In order to
get our credit card terminal we went to a company which "helps" startups
with this. They seemed like a pretty shady outfit, themselves. We had to
fudge our application to say that we'd be selling something like 50% of
the units at trade shows, which apparently counted as over-the-counter sales.
And we had to pay about $3,000 up front, as a bribe, it seemed.  Even
then we probably couldn't have done it if we hadn't had an office in the
business district.

Under the digital cash system, this might be less of a problem.  The main
problem with digital cash is double-spending, and if you are willing to go
with online verification (reasonable for any business which is going to take
anything over several hours to deliver the merchandise) this can be
completely prevented.  So there is no longer any possibility of merchants
collecting credit card numbers for later fraud.  (You still have problems
with non-delivery of merchandise, though, so not all risks are eliminated.)
This might eventually make the system more widely available than current
credit cards.

I don't know whether this system could be used to support illegal actions,
tax evasion, gambling, or whatever. That is not the purpose of this
proposal. It does offer the prospect of improving personal privacy and
security, in a framework that might even be legal, and that's not bad.

Hal Finney
hfinney@shell.portal.com