e$: Cypherpunks Sell Concepts

At  1:38 PM 8/6/94 -0700, Blanc Weber wrote:
>From: Timothy C. May
>* what's really holding back the spread of digital cash?
>
>        What is the status of the work on this?  I would like to keep
>        up with its progress, if there are sources for the information.
>        (besides The Economist)

e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$e$

I'll bite. I think that practically the only thing holding digital cash
back at this point is pure and simple hucksterism. The whole concept of e$
(shorthand for e-money, with apologies to other currencies) should be
promoted more.  People who Really Work for a Living in Finance should be
educated about the potential impact of strong crypto on money.  There was a
comment from Perry a while back which hit home with me. He said:

>The problem is not a need for a killer app -- there are dozens. The
>obstacle is regulatory problems, and finding a large and reputable
>sponsoring organization (like a big bank).

Now, that makes sense to me.  It would go a long way towards legitimizing
e$ and strong crypto if a largish bank put up a pilot project where they
were exchanging, that is, making a secondary market in, real e$; maybe even
DigiCash(tm).  Ethier they or someone else could actually underwrite it,
because you have to have both to make the market exist.

Having heard what Eric has said about potential regulatory problems, I
think that most of them are inadvertant obstacles, because they certainly
weren't put there to obstruct e$, which didn't exist when they were
written.  I think if a reasonable (i.e. not illegal) business case were put
to the regulators, they would (as usual) conform to whatever business
interests want.

I think that in order for the above to happen, some softening up of the
targets has to occur. I understand that there are people on this list who
are interested in selling seminars on strong crypto to the finance
community.  What about doing that in the context of a conference program to
a larger audience?  Get some famous heavies in the business world and in
cyberspace to salt the conference flyer with.  A certain EFFer comes to
mind, among others who may be sympathetic to e$.  Invite mostly
businesspeople, preferably those in finance and finance operations, but
also regulatory/political types. Teach them what e$ is and how it works.
In return, e$vangelists can learn what questions their potential market
actually need to have answered before e$ will be real.  Maybe a deal or two
happens, who knows?

Repeat the process every year or two, but start the first one off as a
"ground school" in the fundamentals.

This thing doesn't have to be affiliated with the cypherpunks list any more
than the original Computer Faire was affiliated with the Homebrew Computer
Club.

I wrote up an agenda when I was in the throes of the idea, and it's
somewhere around here (I *know* it is...). Off the top of my head, I
figured there'd be a schmooze reception the evening before, a brief primer
on strong crypto and e$ in the morning, a schmooze luncheon (with speaker),
a "where do we go from here" panel populated with business heavies in the
afternoon, and a schmooze reception (with product demos, if any) in the
evening to close.

Notice it's very heavy on the schmooze. I challenge you to do huckster
without lots of schmooze...

This is not to be a volunteer effort. People who worked on this would get
paid.  The conference wouldn't happen if the attendance numbers weren't
there. The participants will pay somewhat serious money to attend, and they
will be interested in making money with the information obtained and
contacts made at the conference.

I'm pretty sure I want to do this one. I'd like to do it on this coast
(Boston) because the money's over here, anyway, and there's still some
technology over here that hasn't been made obsolete in the Bay Area.
Besides, the east coast's halfway to Amsterdam, right? (yeah, I know, so's
Anchorage...)

So. Does anyone have any pointers?

Cheers,
Robert Hettinga






-----------------
Robert Hettinga  (rah@shipwright.com) "There is no difference between someone
Shipwright Development Corporation     who eats too little and sees Heaven and
44 Farquhar Street                       someone who drinks too much and sees
Boston, MA 02331 USA                       snakes." -- Bertrand Russell
(617) 323-7923

I'll bite. I think that practically the only thing holding digital cash
   back at this point is pure and simple hucksterism. 

It certainly needs that, but I don't think it's sufficient.

   Having heard what Eric has said about potential regulatory problems, I
   think that most of them are inadvertant obstacles, because they certainly
   weren't put there to obstruct e$, which didn't exist when they were
   written.

The obstacles are certainly not for electronic money, which the Fed's
been using for some time now, but rather for electronic cash, which
includes anonymity.  The USA provides a fair amount of financial
privacy to everyone but the government, particularly law enforcement.
So the _business_ case for privacy is largely felt to be already
satisfied by the regulators.

   I think if a reasonable (i.e. not illegal) business case were put
   to the regulators, they would (as usual) conform to whatever business
   interests want.

The Treasury department, among others, really _doesn't_ want
non-recorded transactions.  Unless the banking community as a united
front _does_, I don't think it will happen domestically (USA) before
other deployments.  If there's not a united front, it'll be divide and
conquer.

Eric

There are two legal problems that I could see being used against digital
cash.  The first is the civil war era prohibition on banks issuing private
bank notes.  This was done in an attempt to force people to switch over to
U.S. government notes, and was successful.  (Actually, it is not a pro-
hibition per se, but rather a prohibitive tax on the use of such notes.)
I don't have a reference to where this actually appears in the code, but
I have read about it in many histories of currency in the U.S.  It seems to
me that digital cash issued by a bank is functionally very similar to a
paper bank note issued by that same bank, suggesting that this law would
apply.

The second problem is the regulation of "scrip" and barter systems.  This
was pointed out on the list last year by someone who had actually been
involved in a private barter or scrip system which was shut down by the
government, at great cost to all concerned.  These regulations can be
found at 26 CFR 1.6045-1.  From subsection (f)(5)(ii), "Scrip is a token
issued by the barter exchange that is transferable from one member or
client, of the barter exchange to another member or client, or to the
barter exchange, in payment for property or services".  I think this one
will eventually get the "NetBank" people in trouble.  (You call a 900
number and in exchange for a charge on your phone bill they give you a
digital token you can exchange for property or services by participating
merchants.)  Barter exchanges are required to get the names and SS numbers
of all participants and report their transactions to the IRS.  This would
be inconsistent with the privacy we seek from ecash.

There are probably other regulations but I would think these two would have
to be addressed initially, at least by anyone thinking of setting up these
services within the United States.

Hal