Makeing MagicMoney worth something.

One problem with MM (or other digital coin like protocols) is
makeing the coins worth something.  What could I buy with a Tacky
Token today?  Does anyone know how much Diet Coke and aluminum a Digi
Franc is worth (*Nudge* *Nudge*).  GhostMarks?

  But suppose....

  I deposited $100 of _my_ money in a bank like the Pentagon Federal
Credit Union.  I published an account inquiry phone number (1 800 xxx
xxxx), an account number, and a PIN, which folks could use to call and
verify the amount of money in _my_ bank account.  Suppose also that I
ran a MM server.  And suppose that I promised, on the net via a signed
message, to trade MM coins for dolars.  Perhaps I would buy 1 of my
coins for 1 cent.

  I don't belive I would be running a bank: I would maintain no
deposits for anyone other than myself.  The money in the account would
be mine, and when it earned interest, _I_ would be responsible for
taxes due.

  I don't belive I would be issueing a currency: I would make no
claims about the MM coins being money, or tender for any debt.  They
would be like trading cards, casino chips, or gift certificates.  In
fact they would be like promissory notes, or personal checks made out
to cash.  The account inquiry phone number information would act a
little like a check garantee card.

  If other people chose to trade the coins around, that would be fine
with me.  I certainly couldn't stop them.  (And it would be their
responsibility to obey all aplicable laws.  Such as SEC, IRS, FDA, and
DMV.)  All I would offer is a digital veracity service, and a promise
to trade MM coins on demand for dollars.

  Would this sort of an enterprise run afoul of the law in any way?
Well, how about _besides_ the patents held by Chaum, PKP, et al.?
Would the person running the MM server be part of a criminal
conspiracy?

  Would you trust this kind of coin?  Would you accept coins 'worth'
1% of the balance, 10%, 100%, or more?  Would the coins circulate?
Would you accept coins from anyone other than their maker?  Could a
usefull economy develop based on an initial money supply of about
$100; or $1,000; or $10,000?

  Now, supose a bunch of folks were running similar services.  Someone
might be able to open up a clearing house which would accept coins
from any of a bunch of people in exchange for either other people's
coins or the house's own coin.

  Would the house be able to back their coins with the coins of the
many individuals?  What if people contracted with the house to run
their MM server for them?  Would anyone trust the house?  Would the
house be a bank?  If it were a bank, how would the powers offended be
able to get judgements against it or remedies from it?

   (Unlike the people involved, the clearing house has no 'real'
assets, and no physical location, and no promise to exchange coins for
money.)

  Does the game change if I instead publish the numbers to my account
at an English bank denominated in sterling; or to my EFHutton gold,
stock index, or other mutual fund account(s)?  What if I offered to
buy coins for an amount of money equal to a percentage of the accounts
worth -- say 1 coin is worth 1% of the account's value -- would this
run into SEC regulations?

  Cat Shoe

And suppose that I promised, on the net via a signed
   message, to trade MM coins for dolars.  [...]

     I don't belive I would be running a bank: I would maintain no
   deposits for anyone other than myself.  

Nope.  You're a bank in this case.  A bank is someone who accepts
demand deposits, that is, money they give to you which you give them
back when they want it.  It matters not how the value is stored.  The
large banks store their value in bank accounts at the Federal Reserve.

     I don't belive I would be issueing a currency: 

Correct.  Digital money is not a new currency.

   Would the coins circulate?

Only among people who had pre-existing financial trust in each other,
and only if the bank fee for deposit/withdrawal were high enough to
justify a secondary market in coin exchange.

It is not particularly difficult to find books about the regulatory
environment of the banking industry.  I would heartily suggest to
those who are interested that they hit the library.  I also feel
compelled to mention this--it's not online, and get over it.

Eric

First I'd like to announce that I'm back on the list.
Guess all the xcitement is over, huh?

--

Eric Hughes wrote:

> 
>    And suppose that I promised, on the net via a signed
>    message, to trade MM coins for dolars.  [...]
> 
>      I don't belive I would be running a bank: I would maintain no
>    deposits for anyone other than myself.  
> 
> Nope.  You're a bank in this case.  A bank is someone who accepts
> demand deposits, that is, money they give to you which you give them
> back when they want it.  It matters not how the value is stored.  The
> large banks store their value in bank accounts at the Federal Reserve.

I'll interject here.  You are not a bank, if you structure
yourself correctly.  What you are, is someone who is issuing
redeemable notes.  Or alternatively you are a trustee.  If I gave
money to my escrow agent, to be paid to me when I want it, she
would not be a bank.  And if you'll pardon me if someone has
missed this, (I have been absent for a bit), but the key element
in all of these matters is jurisdiction.  Who regulates all 
of this?

The answer of course is no one.  The idea of adding value to
money is very good.  But the methodology which should be utilized
is to have value added in one jurisdiction while redemption is in
another.  The actual storage of value could be in a third.  This
is the underlying mechanics.  BUT, THE LOCATION OF THE BANK is
nowhere, since it is in cyberspace (gads, I HATE that word).
Unfortunately, too many people are focusing on the net as a way
of communicating between locations rather than as an organism
unto itself.  

Let me give a quick example.  How difficult would it be to use a
system of anonymous remailers, as a large scale machine.  Each
mailer uses it's latency to communicate it's bit.  True each, bit
is on a physical machine as an electronic impulse, but that bit
is meaning less.  It is indistinguishable from any other.  This
would mean that the bank, would be everywhere simultaneously,
without being anywhere at all.  It shouldn't be too difficult to
ensure that no bit is critical, and that each bit is expendable

Comments anyone.  

--

Istvan

> Nope.  You're a bank in this case.  A bank is someone who accepts
   > demand deposits, that is, money they give to you which you give them
   > back when they want it.

   What you are, is someone who is issuing
   redeemable notes.

Issuing notes will not, _per se_, make you a bank.

   Or alternatively you are a trustee.  If I gave
   money to my escrow agent, to be paid to me when I want it, she
   would not be a bank.

If the value transferred is liquid, and the payment is made upon
demand, then, in fact, you are a bank, regardless of what else you
might call yourself.  This is the case in the USA.  Canada certainly
varies, as does the rest of the world.

   [...] but the key element
   in all of these matters is jurisdiction.  Who regulates all 
   of this?

   The answer of course is no one.

This is a rather hasty conclusion.  The real answer is that a country
will attempt to regulate this activity if it feels like it can argue
jurisdiction and win.  The easiest barrier to erect is to get some
country to claim jurisdiction; the others will then generally stay
away with their courts.

If there is no stated location, then a country can simply claim
jurisdiction if some of the facts of the situation give it an arguable
jurisdiction.  If, for example, the computers for a cypherspace bank
are known to be in the USA and the bank claims to be outside USA
jurisdiction, guess who wins.

   This
   would mean that the bank, would be everywhere simultaneously,
   without being anywhere at all.

One can imagine all sorts of things, but architectures that can be
built and economically deployed are much more important than
vague characteristics.

The problem of making a jurisdiction-less bank is a mighty difficult
one, and it behooves those who wish to discuss it to ground their
comments in economic and political realpolitik.

Eric

Eric Hughes says:
> If the value transferred is liquid, and the payment is made upon
> demand, then, in fact, you are a bank, regardless of what else you
> might call yourself.  This is the case in the USA.  Canada certainly
> varies, as does the rest of the world.

Well, there is ONE subtlety -- entities like mutual funds and
securities broker/dealers are not considered banks qua banks under
American law -- they are, of course, even more stringently
regulated anyway. There are various subtleties that say whether you
come under Fed or under SEC regulation.

Perry

Eric Hughes says:
   > If the value transferred is liquid, and the payment is made upon
   > demand, then, in fact, you are a bank, regardless of what else you
   > might call yourself.

   Well, there is ONE subtlety -- entities like mutual funds and
   securities broker/dealers are not considered banks qua banks under
   American law 

On the other hand, Fidelity, for example, the largest of the mutual
fund providers, does not offer demand deposits, because you can't get
back your money "upon demand".  They don't have to give it back to you
immediately, so it's not "upon demand".  Check the agreement or the
"checks" you get for your fund account.

It seems conceivable to operate a business that took non-demand liquid
deposits, but which promptly serviced most demands for withdrawal
because of the competitive environment.  A "banc" of this form would
not survive if the liquid deposits were, practically speaking, liquid.
("Banc" is an avoidance of the regulation which puts companies with
the word "bank" in them under banking regulation.  It's amazing at the
number of companies with names like "Bancshares" or "Banc Holding".)

Since no such institution exists now, it would be currently outside
the regulatory framework, but one should not expect it to remain that
way.  Pragmatically speaking, one's best strategy would be to get
successful rapidly and then hire lobbyists.

Credit card and charge card companies could do this themselves right
now, were they to pay interest on positive balances.  The contract
between card company and customer would have to specify that the
positive balance was not available "upon demand", per above.
Otherwise most of the relationships could be the same.

As an aside, issues of commercial paper, including promissory notes
and hypothetically digital "bancnotes", whose term is nine months or
less are specifically exempted from SEC regulation.  There really seems
to be a gap in the regulatory environment.

Legal hacking is a lot of fun.  Prerequisites are a humility to learn
the structure of legal argument and access to legal materials.  The
study guides for law students are generally excellent introductions to
the subject.  Access to a law library is also useful for looking up
statute and decisions, but not essential, although reading at least a
few decisions is necessary for ensuring an understanding of the social
process involved in the creation of law.

And if what you want to accomplish with your computer hacking
requires, for implementation, something outside the computer hardware
and networks, legal hacking is almost a necessity.

Eric

> 
>   One problem with MM (or other digital coin like protocols) is
> makeing the coins worth something.  What could I buy with a Tacky
> Token today?  Does anyone know how much Diet Coke and aluminum a Digi
> Franc is worth (*Nudge* *Nudge*).  GhostMarks?


	Well, once Community ConneXion: The NEXUS-Berkeley is running,
accounts and services will be available for half-price if the other
half is paid in NexusBucks (not yet available). (Eventually I'd like
to move to a full-payment in NexusBucks, but I want to verify that I
can meet my bottom line .. PacBell and The Little Garden don't take
payment in NexusBucks.)
	(TLG willing, this will be running soon)


	Does anyone have any pointers to where I could find out about
LETS? Thanks.